Radiant Logistics Inc
AMEX:RLGT
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This afternoon, Bohn Crain, Radiant Logistics Founder and CEO; and Radiant's Chief Financial Officer, Todd Macomber will provide a general business update and discuss financial results for the company's first fiscal quarter and ended September 30, 2024. Following their comments, we will open the call to questions. This conference is scheduled for 30 minutes.
This conference call may include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The company has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the company that may cause the company's actual results or achievements to be materially different from the results or achievements expressed or implied by such forward-looking statements.
While it is impossible to identify all the factors that may cause the company's actual results or achievements to differ materially from those set forth in our forward-looking statements, such factors include those that have in the past and may in the future be identified in the company's SEC filings and other public announcements, which are available on the Radiant website at www.radiantdelivers.com. In addition, past results are not necessarily an indication of future performance.
Now, I'd like to pass the call over to Radiant's Founder and CEO, Bohn Crain.
Thank you. Good afternoon, everyone, and thank you for joining in on today's call. While the slower freight markets persist, we continue to deliver solid financial results and generated $9.5 million in adjusted EBITDA for the fiscal quarter ended September 30, 2024, which is generally in line with results from the comparable prior year period as well as our most recent previous quarter ended June 30, 2024. And although we believe our industry will likely continue to face market headwinds into 2025, we do expect to benefit from project type opportunities over the near term that should fortify our results while we wait for a more durable broad-based recovery.
As previously discussed, we believe we are well positioned to navigate through these slower freight markets as we find our way back to more normalized market conditions. We continue to enjoy a strong balance sheet with approximately $10 million in cash on hand as of September 30, 2024, no meaningful debt and a virtually untapped $200 million credit facility. At the same time, we remain focused on delivering profitable growth through a combination of organic and acquisition initiatives and thoughtfully relevering our balance sheet through a combination of strategic operating partner conversions, strategic tuck-in acquisitions and stock buybacks.
Through this approach, we believe, over time, we will continue to deliver meaningful value for our shareholders, operating partners and the end customers that we serve. We made good progress in this regard over this last quarter with the acquisition of Texas-based Foundation Logistics and the conversion of our Michigan-based strategic operating partner location, Focus Logistics, which is combining with our existing Radiant operations in Detroit. We believe these 2 transactions are representative of our broader pipeline of opportunities, which includes both greenfield acquisitions, i.e., companies not currently part of our network as well as acquisition opportunities inherent in our agent-based forwarding network where we can support our current operating partners in their exit strategies. We look forward to providing further updates as we progress along these lines. With that, I'll now turn it over to Todd Macomber, our CFO, to walk us through our detailed financial results, and then we'll open it up for Q&A.
Thanks, Bohn, and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the 3 months ended September 30, 2024.
For the 3 months ended September 30, 2024, we reported net income attributable to Radiant Logistics of $3.376 million on $203.6 million of revenues or $0.07 per basic and fully diluted share, which includes a $1 million gain on litigation. For the 3 months ended September 30, 2023, we reported net income attributable to Radiant Logistics of $2.622 million on $210.8 million of revenue or $0.06 per basic and $0.05 per fully diluted share. This represents an increase of approximately $754,000 of net income over the comparable prior year period or 28.8%.
For adjusted net income, we reported $7.883 million for the 3 months ended September 30, 2024, compared to adjusted net income of $6.459 million for the 3 months ended September 30, 2023. This represents an increase of approximately $1.334 million or approximately 20.4%.
For adjusted EBITDA, we reported $9.452 million for the 3 months ended September 30, 2024, compared to adjusted EBITDA of $9.167 million for the 3 months ended September 30, 2023. This represents an increase of approximately $285,000 or 3.1%.
With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.
[Operator Instructions] Your first question is coming from Jason Seidl of TD Cowen.
A couple of quick questions here from my line. I guess, number one, you talked a little bit about that pop-up work. Where did it come from? Is this being generated from the retail side? Or is this maybe storm related?
Sure. B is the answer to the question, storm related. So as in some previous quarters, we've had opportunities to kind of respond to humanitarian natural disaster type situations. And so the hurricanes that impacted the Southeast are creating some kind of -- it's turning out to be the recurring, nonrecurring revenue line item as those opportunities continue to present themselves over time. So I think one of the points to be made is there's still quite a bit of challenge out in the marketplace for a lot of the transports. But in part, thanks to the diversity of our portfolio and kind of all the different areas that we can play that we're kind of faring reasonably well in a tough environment. And we wanted to -- without getting into the details, wanted to foreshadow we were expecting kind of a stronger than might not otherwise be expected quarter into December. It's not necessarily reflective of the new run rate, but we're going to have some project type business landing in Q4 -- or excuse me, quarter ended December 31, our fiscal Q2. That's going to kind of help us show really well here in the coming quarter.
Okay. That makes sense. The other thing, and I was at a lunch with clients today and sort of expectations on the ocean side for pricing sort of came up. I wonder your thoughts because obviously, we were so high for so long with some exogenous events, I think, driving up some of the ocean pricing. What are your expectations as we look into '25?
It's going to be -- it's always interesting. It seems -- I think near term, prices are going to remain relatively robust due to people trying to get ahead of potential tariffs as well as some of the Red Sea activities. So I think relatively near term, I think there's a lot of things that would support prices, capacity will stay relatively tight, kind of how durable that is after we kind of get kind of past the tariff dynamics and hopefully things settle down in the Red Sea. I don't -- so I think short term, yes, longer term is a TBD.
Okay. Understood. And you brought up tariffs. I mean, is there any feedback from your customers as to was there any pull forward in anticipation of a potential Trump victory? What should we sort of expect going forward?
Yes. I think, generally speaking, there has been kind of a pull forward, and we'll see kind of how that plays out over time. But I do think part of what we're seeing, not just us, but just kind of more broadly, what we're seeing is people that were hedging their bets a little bit -- and again, who knows what part of all of that narrative is posturing versus something that's really going to be put into motion. So we'll try to stay nimble and support our customers as best we can kind of responding to those dynamics, which I'm sure will be lively.
Understood. And I want to get back to the quarter ending December here coming up. Given your project work, how should we think about EBITDA margins on a sequential basis?
I would expect margins to be down a little bit because of the nature of some of the project work we're doing. But on an absolute basis, our gross margin dollars to be going up.
Okay. So it's more revenue...
That's code for charters.
Your next question is coming from Jeff Kauffman of Vertical Research Partners.
Congratulations. It sounds like some exciting opportunities in 4Q. So good luck with that. I had just 2 questions that Jason didn't ask. Number one, Todd, I think you mentioned $1 million litigation gain. Was that in other income that explains the differential in other income?
Yes. That's exactly what that is. Correct.
And an add back in our adjusted EBITDA number. So we backed that out and that's kind of the numbers it has presented.
Yes. No, listen, some quarters, it's bad. Some quarters it's good. That's always nice to see. And then could you help me understand, it looked like there was a big move downward in commissions this quarter relative to kind of the run rate it was at in previous quarters and a small jump in personnel costs. It looked a little too big to be explainable by, okay, well, we've bought in some agencies. I was just wondering, agency commissions seem to be down almost 700 basis points versus where it was running. So what was going on with the agency commission line?
I mean that -- well, obviously, it's a mix of product is a piece of it. And the other piece of it is, as we bring in -- so not only do we do the conversions, right? But in addition to that, bringing in the other stations that were part of our network, for instance, Foundation is an example, where we're bringing in the revenue, bringing in the cost of sales, and there's no commission paid. So that's -- those are the big drivers in the reduction in the overall commission expense.
And if I remember correctly, and maybe this would also be somewhat helpful to it, in the comparable year ago period, one of our agency stations actually had some significant charters themselves. And so there was some kind of non-recurring project charter type business at the agency level in the year ago period, and that would also explain kind of a part of that reconciliation that you're seeing this.
Okay. No, I just -- I know it jumps around a little bit quarter-to-quarter. I was just trying to reconcile. So the way I would interpret that is if you're doing more charters in 4Q, maybe this is a little elevated, and that goes to your point on higher gross margin dollars, lower revenue -- or I'm sorry, lower margin.
Yes, lower margin percentage.
Okay. And just one last question, if I can. So in terms of what you see, and I saw the commentary, hey, it's still a tough environment. We're holding in and doing everything we can while we're waiting for the turn. There's been some talk of green shoots in different industry segments or different parts of the supply chain this past quarter, maybe not enough to move the whole needle but encouraging nonetheless. Where would you say you're seeing more green shoots, whether it's a geography or a vertical or something like that?
Well, I think we're definitely seeing kind of a tightening of capacity on the West Coast, largely influenced by the kind of the ocean import activity that's going on. So I think we're definitely seeing a little bit of capacity tightening, which hasn't been part of the narrative for several quarters now. The real -- I think the ultimate question we don't have a good answer for is just kind of the durability and whether this is going to be short-lived or whether this will be more sustainable. I'm hopeful that kind of a more business-friendly tax environment will get corporate America investing and kind of growing again and all that kind of stuff, but it's kind of way too early to start to draw conclusions about that. But if you lean just right, you can kind of see a path to hopefully that type of environment.
And the next question is coming from Mark Argento of Lake Street Capital.
Just wanted to follow up. It looks like you made a couple of incremental tuck-in acquisitions. You guys have done a handful this year. It looks like you're continuing that pace. Any kind of incremental thoughts, Bohn, about what you're seeing in the marketplace. What are you -- these guys are kind of getting to the point where it's just time to back it in or value proposition is high. What's the thing that seems to be tipping these over for you?
I think it's a combination of things, Mark. You've been involved in the story a long time now and kind of this notion of the gray tail or kind of our agency partners as they're getting older and kind of approaching retirement age, just that whole pipeline is maturing, no pun intended. And so just the frequency is kind of natural -- kind of -- those conversations are accelerating, and we expect that trend to continue. So we remain actively involved with a number of operating locations, and we're excited to support them kind of when and if they're ready to transact. So that's part of what we're doing.
And then kind of the other part, which is equally exciting is the -- we've been pretty disciplined over the years in terms of our own thoughts around valuation and structure. And while we were -- while we've always been kind of open for business, the market kind of had moved away from us for a period of time. But the market, generally speaking, has kind of come back to us. So we haven't necessarily changed what we're doing or our approach or our thoughts or our philosophy, but the markets have just kind of come back to us in a way where we can get deals done. And so we're really excited about that, particularly if you think about the fact that we have an unlevered balance sheet. Many of our competitors' balance sheets are actually out of whack and they're kind of in a little bit of a penalty box as they're having to kind of recapitalize and do a number of kind of awkward things to kind of steady themselves.
And so in my mind, we can effectively double our EBITDA within our existing capital structure. And so that's really exciting. And I think it's -- at least I think that message is starting to sink in and why we're starting to see some positive and hopefully durable lift in our stock price.
Right. And just to refresh memory in terms of the general structure that you guys have is some upfront and then an earn-out, but maybe just refresh me and the audience on that.
Yes, yes. So we would typically use an earn-out structure or almost exclusively use earn-outs in terms of our structure where we would value a business. And again, just for the benefit of the conversation, we typically -- most of our transactions have been what I'll characterize as plus or minus $2 million EBITDA type transactions. And we believe we can value and structure those in a way that is a win-win for everybody, and that includes the use of earn-outs where the sellers continue to have skin in the game for several years post closing to ensure that the business continues to perform, and that helps kind of structurally mitigate against overpaying for a business in the case of underperformance.
Your next question is coming from Kevin Gainey from Thompson, Davis.
Congratulations for the quarter. Maybe I wanted to see if you guys could remind us how you guys reacted with the first -- and maybe how your customers reacted with the first round of tariffs that came back in the first phase of that administration and how -- what that did to your business and how we might think about what it could do moving forward?
Well, I think we saw -- there were a few things going on at the time, right? So there was a kind of a natural pull forward where people trying -- well, any time that these things happen, there will be winners and losers, right? And some particular products will be subject to tariffs and others might not. So it's not a one-size-fits-all question. First, you have to kind of look at businesses or industry groups that are the subject of the tariffs to begin with. So that will be part of the analysis. But for those affected players, they're going to be trying to construct solutions to mitigate their own exposures to the tariffs. So that may -- there's a number of different things that can happen. It can take the form of trying to just beat the clock and kind of get product moved in advance of the effective dates of the tariffs and other scenarios that might cause kind of a reconfiguration of the supply chain and cause raw materials and subassembly workflows to get repositioned into different parts of the world to try to navigate those exposures as well.
And so we try to help execute those strategies. Kind of last time that all this was also happening in the face of kind of the huge congestions and kind of post-COVID hangover and all of that type of stuff. So I don't know that what we're going to see next is going to be -- I'm not sure history is a perfect kind of reflection of what we would expect here because that was such a unique kind of moment in time back when we were kind of dealing with the shutdowns and the tariffs concurrently. But it is going to create challenges for shippers, and we'll be here to help however we can. And we'll see kind of how long the pressures remain on the West Coast ports in particular to kind of digest the volumes. And I really haven't heard much of it as of late, but I would expect warehousing capacity to get tight again, right? It had loosened up a little bit, and we were kind of going through a little bit of a destocking exercise. But if people are pulling forward, they got to find some place to put all their stuff, right? So I would see at least near-term kind of warehousing capacity getting precious again.
That makes a lot of sense. Maybe you could also talk a little bit about maybe specific end markets, whether it be retail, consumer, maybe industrial or something along those lines, what you're hearing from them, especially entering peak season, I guess, for the retailers.
Yes. I don't have a lot of color to add on an individual industry vertical. I would say, all in all, the market remains pretty darn soft. Outside of e-com and e-com exposures, you don't hear a lot of chest-thumping from many of the players out there, ourselves, including. We just happen to have kind of through the portfolio effect I was alluding to earlier, some opportunities to kind of do some -- and be involved with some really interesting project type work. But across a lot of -- even things like food and beverage and CPG, which are normally pretty steady on a comparable basis, even those markets have been -- have proved to be soft, at least through our lens.
I appreciate the color. And Todd, I know the queue will come out. I just wanted to see what you guys had for operating cash flow in the quarter. I could think about free cash flow, really trying to get the free cash flow, but...
Yes. I mean it's really -- I mean, overall cash flow, I mean, we spent a lot, right, with the acquisitions. That was the biggest driver. So I mean, the net cash -- what did we come in...
I think cash from operations for the quarter was near breakeven.
It was $205,000. And then we had big outflows, of course, with the acquisitions.
Thank you very much. Well, we appear to have reached the end of our question-and-answer session. I will now turn the call back over to Bohn for closing remarks.
Thank you. Let me close by saying we remain optimistic about our prospects and opportunities to continue to leverage our best-in-class technology, robust North American footprint and extensive global network of service partners to continue to build on the great platform we've created here at Radiant. At the same time, we intend to thoughtfully relever our balance sheet and through a combination of agent station conversions, strategic tuck-in acquisitions and stock buybacks, continue to create shareholder value. Through this multipronged approach, we believe we will continue to bring good value to our shareholders, operating partners and the end customers that we serve. Thanks for listening and your support of Radiant Logistics.
Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.