Q3 2020 Earnings Call
[music].
Good day, ladies and gentlemen, this afternoon, Bon Crane, Radiant logistics, founder and CEO and Radiance Chief Financial Officer taught me cover well discuss financial results for the company's third fiscal quarter and nine months ending March 31st Twentytwenty. Following their comments, we will open the call to questions. This conference is scheduled for three.
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 1930 for 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 are 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 happened the past in may in the future be identified in the company's FCC filings and other public announcements, which are available on the radiant website at www Dot radiant delivers dot com.
In addition, past results are not necessarily an indication of future performance now I'd like to turn the call over to radians, founder and CEO Bohn Crain, Sir the floor is yours.
Thank you.
Afternoon, everyone and thank you for joining in on todays call.
I'm very proud of the radio network in our response to these unprecedented times.
We began the quarter looking to make use of our recently expanded credit facility to execute against a series of smaller strategic tuck in acquisitions.
While accelerating our stock buyback program and mostly looking for growth opportunities in which we could add value to our loyal customers and dedicated network of strategic operating partners.
Unfortunately, as we came to recognize the true magnitude of the Cobas 19 pandemic, we had to quickly pivot to a new set of priorities.
Since late March we shifted our focus to delivering against four key objectives.
Ensuring the health and safety of our employees.
Providing supply chain continuity for our customers operating partners and carrier.
Protecting the economic security of our people to the greatest extent possible and taking the steps necessary to mitigate the impacts of the slowing economy on our own business.
Confronted with an eroding demand within the global shipping community. During March we also had to make difficult decisions to initiate a series of workforce reduction measures impacting employees across our U.S. operation.
This included 20% salary reductions reduction in hours furloughs and in some cases terminations.
As part of this initiative I initiated a 50% reduction in my base salary and the balance of our U.S. base leadership team agreed to reduce their base salaries by 20%.
In addition, we all agree to forgo any bonuses under the company's discretionary quarterly cash bonus plan.
In support of these initiatives our board of Directors also agreed to a 50% reduction and their board cash compensation.
All of these concessions will remain in effect until our senior leaders and board conclude that the adverse effects of cobot 19 have subsided and the company regains its pretty cobot financial trends.
The impact of these cost reductions however.
Well not be morefield fully realized until the quarter ended June 30, given these initiatives were not launched until late in March of this year.
We have long espouse the benefits of our variable costs non asset based business model.
Those benefits have never been more appreciated as much as they have during these past months as the decentralized nature of our non asset and non and agent based business model have provided a clear advantage in an environment, where social distancing can disrupt businesses that operate on a more centralized basis.
Even so we have been exposed to an unprecedented combination of global reduction in demand in the output that has nearly tripled many of our customers in the airline retail trade show hospitality and travel and leisure businesses across the country.
While others could shrink under these pressures are extraordinary team of associates across the radio network have continued to deliver for our customers.
With mission critical teammates reporting for duty to over 100 operating locations across North America.
We keep essential freight moving.
We've been able to leverage our.
Industry, leading technology to allow the majority of our 550 U.S. based employees to work from home.
This initiative has helped to protect the health and wellbeing of our employees and their families.
Reduced the risk of community spread and substantially limited the potential for disruption to our operations.
I could not be more appreciative of the people that report to work each day, whether in person a remotely.
That makes this company that we started some 14 years ago especial place to work.
In addition, our business model has also shown to strengthen the diversity of our service offerings.
Although the pandemic has had a substantial negative impact on many of the industry verticals and customer that we serve.
The radio network is proud to be playing an active role in the fight against co with 19.
Delivering personal protective equipment food and beverage consumer goods technology and other sensor products for our customers across North America and around the world.
Notwithstanding this great effort by our team we anticipate the contraction in our business from the shelter at home mandates closing of manufacturing facilities and general economic slowdown will be more than offset by any near term benefit from our supportive essential businesses.
We are working hard to mitigate the negative financial impact of Cowen 19, with the number of initiatives.
We have tabled any acquisition opportunities.
Suspended our stock buyback program.
Deferred discretionary technology investments reduced discretionary operating expenses and in late March initiated a series of what we hope will be temporary workforce reductions to mitigate our declining gross margin.
Until our business recovers.
At the same time, we've also taken steps to provide additional support to our strategic operating partners and our intensely focused on working with them to understand the underlying financial health of our legacy customers in the face of Cobot 19.
We anticipate providing our strategic operating partners with additional financial support in connection with slow a non paying customers for which they are responsible.
In addition in an effort to encourage our ongoing sales efforts. We've also launched the radiant spark program securing profitable accounts are reasonable credit.
To provide our strategic operating partners with a financial incentive to pursue new business, while taking a heightened interest in the underlying credit quality of potential new accounts.
The impact of Cobot 19 will likely continue to have an adverse effect on our financial results for the foreseeable future.
However, all things considered we're very fortunate to have been disciplined in our allocation of capital over the years and entered this economic downturn with very low leverage on our balance sheet.
Ultimately the economy will recover.
As this happens we believe this will create a great opportunity support our customers and bringing their supply chains back online.
In the interim we will continue to work to keep our employees safe.
And a central freight moving while giving our strategic operating partners the support they need.
At the same time, we will continue to flagstar non asset based business model and remain focused on the cost reduction initiatives that we have underway.
We believe that all these initiatives when taking together will ensure that we emerged from the pandemic as a stronger more vibrant competitor.
With that said I'll now turn it over to Todd May cover our CFO to walk us through our detailed financial results and then we'll open it up for some kuni.
Thanks, Bob and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the three and nine months ended March 30, Onest 2020.
For the three months ended March 30, Onest 2020, we reported net income attributable to common stockholders of $53000 on a 177.2 million of revenues or zero cents per basic and fully diluted share.
For the three months ended March 31, 2019, we reported net income attributable to common stockholders of $2.932 million on 206 million of revenues were six cents per basic and fully diluted share.
This represents a decrease of approximately $2.879 million over the comparable prior year period.
For the three months ended March 31 2020.
We reported adjusted net income attributable to common stockholders of $3.965 million.
The three months ended March 31st 2019, we reported adjusted net income attributable to common stockholders of $5.579 million.
This represents a decrease of approximately $1.614 million or approximately 28.9%.
We reported adjusted EBITDA.
$6.057 million for the three months ended March 31, 2020 compared to adjusted EBITDA.
$8.437 million for three months ended March 31st 2019. This represents a decrease of $2.380 million or approximately 28.2%.
Moving along those nine month results, which are as follows.
For the nine month ended March 31, 2020, we reported net income attributable to common stockholders.
Million $875000 on $579.7 million of revenues or 12 cents per basic and 11 cents per fully diluted share for the nine months ended March 31, 2019, we reported net income attributable to common stockholders of $9.270 million.
On $685.9 million of revenues or 19 cents per basic and 18 cents per fully diluted share.
This represents a decrease of approximately $3.395 million over the comparable prior year period or 36.6%.
For the nine months ended March 31st 2020, we reported adjusted net income attributable to common stockholders of $16.747 million for the nine months ended March 31, 2019, we reported adjusted net income attributable to common stockholders.
Teen million $110000.
This represents a decrease of approximately $2.363 million or approximately 12.4%.
We reported adjusted EBITDA of $25.110 million, but in nine months ended March 30, Onest 2020, compared to adjusted EBITDA of $29.749 million for the nine months ended March 31 2019.
This represents a decrease of approximately $4.639 million or approximately 15.6%.
With that I will turn the call back over to our moderator to facilitate any Q in a from our colors.
Thanks.
Thank you the floor is now open for questions.
You do have a question. Please press star one on your telephone keypad at this time, if you're using a speaker phone. So well closing your question you pick up your handset to provide the best sound quality again, ladies and gentlemen, if you do have a question or comment. Please press star one and your telephone keypad at this time.
Our first question comes from Jason Seidl with Cowen. Please go ahead Sir.
Thank you, operator, or Hey, Bonnie Togs look you guys are doing well.
Can you talk a little bit about how you expect the business to trend as the economy slowly comes back online and then maybe you can give us some follow on what you've seen here early in the quarter.
Thanks, Jason I guess I would say ultimately you know we don't have there are certainly.
Some some good things developing but it is ultimately a mixed bag and we don't have a lot of visibility out there.
You know, there's certain segments of our business.
Have been in the right spot in terms of servicing food and beverage and you know, Canada in particular and some of the customers that they service.
They have fared better than others.
At the same time.
We support customers in.
Trade show in cruise line and some other categories that are that aren't fairing nearly as well.
In this market environment.
With all that said you.
You know at at some point in time.
Ultimately things will start to rebound and I think that will junior practically.
Cause customers need to reset their supply chains and kind of reposition.
Product in inventories that they havent necessarily been in a position to move around the way that they need to and I think that all.
Well.
So that whole landscape will give.
We will create an opportunity for us on companies like us better in the air freight and time definite time expedited space to be able to take kind of rise to the challenging support our customers as they try to come come back online. So that's all.
I'm not sure. That's entirely response of your question, we don't have a lot of visibility.
Yes.
In terms of near term improvement historically, the the quarter ended March is.
The seasonally slowest quarter of.
Of the year, but.
The kind of the full impacts of the shelter in place mandates really didnt.
Start to hit us than others full on until this quarter ended June 30, So I think thats the kind of the the underlying.
Dynamic that we're facing.
At the same time, we've been.
Fortunate that to have an opportunity to play a role and.
And the fight against Coven, 19 or are around PPD and other essential.
Tom products moving across the country. So that's going to somewhat we believe somewhat mitigate the dip if you will but we're not expecting it to the kind of offset the broad base weakness that we're expecting for the.
Quarter ended June you know, we're we're optimistic that the quarter. It in September things will turn and and we'll have all we can be a lot more constructive and definitive about what we're seeing.
But it's just too early to tell at this point.
Okay, and if we could just drill down a little bit on on the on the brokerage side that you guys have the spoke to you acquired some wheels, we're hearing from a lot of the brokers out there obviously with this downturn in the spot rates they've seen some of their margins expand what's your what's your percent of your mix of business between contract and.
Transactional business and the broker.
We're much more heavily weighted.
On the contract side is that as opposed to spot.
But I would.
I think the.
The call outs for us as it relates to our brokerage business and in the you on the U.S. side, what we would refer to as radiant clipper that business is predominantly intermodal with just a small bit of truck brokerage and the scheme of things So where our results are more tempered by watts.
Happening in intermodal and Intermodality shifts truck versus rail right.
So we're at brand the right commodity groups, but we're not necessarily enjoying some of the benefits of the other truck brokers or the folks that are more heavily on the truck brokerage side.
Having said that and again in Canada. They you know there probably are best example of kind of keeping in stride and kind of being in the.
Servicing the right accounts with the right value propositions in the right modalities.
To the hold up better than our other areas of our business through this cycle.
I understand let me ask one more question I'll turn it over to somebody else. So on Hong all the time, but you know how does how does this downturn caused you to.
Rethink sort of your your mix of business that you one going forward it and if so what should we look from you guys once you're raising your M&A platform.
Later down the road.
No I don't think it necessarily changes our view I think we are for at least from our perspective.
Very diversified, which we think is a good thing and so good news bad news of <unk> associated with being diversified where do you know in this market, we've got some winners and losers.
Effectively.
But.
Yeah, I think there are certainly areas of our business.
That are that we would expect to be slower to recover.
But that doesn't mean.
We are have any intention at abandoning them are abandoning our strategic operating partners that serve those.
Particular niches.
We continue to think over it but really kind of look on the horizon. We think the same value proposition in the same opportunities remain intact, we're uniquely positioned in supporting the Asia base freight forwarding community.
We continue to try to build a back office and infrastructure that can support.
A larger enterprise.
And at the end of the day.
You know.
Yeah.
Notwithstanding our government's efforts not everybody is going to make it through this thing right.
We're going to have customers. They go bankrupt and go away. Unfortunately.
And I expect we'll have some competitors go bankrupt and go away and so this is for better or worse, a bit of financial survival of the fitness.
I think we were fortunate to be.
Have a strong balance sheet and be under Levered as we came into this cycle you know a lot of our competitors might have been levered at four or five times before this cycle started we were levered at less than one times as the cycle started so this certainly doesn't feel good for us and we're experiencing our own.
Fair share pain.
I can't imagine what those folks are going through that are levered.
We are levered at five times coming into this cycle. So we.
We think were in as good a shape as we possibly can be or making the tough decisions were being aggressive with our.
Working capital and cash management.
And shut down.
Acquisitions near term shutdown stock buybacks.
To make sure that were come out of this this other side you know the.
You know and especially because we can't.
But clearly that's been Fortunately for Radian and do you think that you know as you do come out of this that's some of the people that may make it out but make it out of a bit injury or do you think that will create more opportunities on the M&A side.
But this is potentially I mean, I certainly don't.
View ourselves as.
Predatory in this environment you know, it's we want to make sure we come out of this with all of our fingers and toes intact on the other side of this and then you know if where there is partnering opportunities will be.
Eager to engage with folks and create win win situation to the extent we can.
Sounds good eight listen Bon stay safe out there.
All right. Thanks.
As a reminder, ladies and gentlemen, if you do have a question or comment. Please press star one on your telephone keypad at this time, we'll take our next question from Mark Argento with Lake Street Capital markets. Please go ahead Sir.
Hey, Bonnie Todd Swatted do.
For two I think in the in the press release and also in your prepared remarks, but.
Some of the things you're doing to work with your customers I think you announced.
An offering or some type of a program maybe could oh.
Talk little bit about what you're doing the work with.
I don't work with your customers entity to you the.
Kind of value chain participants to to try to keep them and good work in shape, but did you called.
Spark is it but yes, yes.
I would call out two things so.
In our agent based business model basically our AR.
Strategic operating partners.
Our in a first loss position and bad debts right. So we literally spend two hours a day on conference calls with both within the various regions, making sure we understand the financial health of our underlying customers.
How they are faring through the pandemic.
To make sure that we that we're making good businesses decisions supporting customers, where we can but also making sure we get paid for the work that we're doing or when and if we have to putting people on credit holds because we.
We have to continue to pay our carriers timely.
To keep our freight moving.
And while we can provide a.
A little relief, we at the end of the day, we can't move freight for free. So so that's a big part of our conversation and focus.
At the same time, we launched.
This new program called the Spark program, an acronym for securing profitable accounts at reasonable credit.
And well you know naturally people are a little more defensive in this environment, but we wanted to try to create an environment or incentive for our agent stations to be thinking ahead thinking aggressively and going in looking for new business. So we effectively rolled out a program to give them a hot.
Today on the corporate fees associated with them, winning new business, so long as they they onboard the new business.
Following a very prescriptive.
Onboarding process that we could really understand their credit quality of the customers that we were onboarding because in this environment slow and non paying customers can get fired from one service provider and they'll start ricocheting across the transportation community.
And we want to to make sure we didn't end up taking up somebody else's problem for us for a nonperforming customer. So this bar program and so it's really work we've had a lot of.
New.
Customer adds here in this environment, where the where our stations are taking advantage of the spark program, but we're doing it in a kind of thoughtful proactive way around credit.
And that's going to serve us well over time and give us.
The stations, a little more leeway to be aggressive in pursuing new business at the same time.
Got it Okay. That's helpful description.
You know, obviously nobody has a crystal ball to know when when the economy is going to come back on mine to greater degree but.
Would you do think about the opportunity to be maybe aggressors, not the right word but.
Opportunistic from.
Playing a role as a consolidator or even you know within your own agent base station base.
Groups in terms of more M&A, what do you need to see in the market.
I would give you the confidence, but you can start to.
Yes, Okay resumed the strategy that is really guide you to where you are today.
Well I think we'll want to.
See our own the kind of the health of our own underlying business, you know and improve.
Huh.
I would.
Certainly I think we're going to let you know I don't think june's can I tell us anything right June is.
It is a bit of a pass at least for me mentally and I do.
You know.
Not Greg I guess not grounded in a lot of hard facts, but just perhaps.
From my own mental sake, I think of June as being the.
The darkest of it and as we get through June and into September you know hopefully, we'll have better visibility into some positive developments.
Both in terms of what's happening with a with Asia and international freight starting to pick back up.
As well as the health of some of our underlying customers you know as we think about the cycle.
Our numbers are down, but we know it's not that we've lost any customers right.
Our when we tell everybody to go home and Ses business will that certainly slows down.
The freight volumes so.
At the end of the day, we're going to have to get people back to work and get.
The consumer back out there they're spending.
So I don't I don't think I have any hard per script of.
Data points.
But we we we've got very good visibility kind of comparative week over week numbers, we we've got a pretty good handle on a weekly basis in terms of what's happening by individual operating location, both company owned and aid agent stations that across the country.
And I don't think it's going to be.
I don't think is going to be a light switch.
I think it's going to be.
Grind right.
To to bring the business back on back online so.
It makes it may take longer than any of us would like but hopefully the darkest days are here and here in the quarter ended June.
Well I'm showing the maybe for Todd on the you guys just redid your credit facility, just about 150 million dollar facility.
What what kind of liquidity do you have in terms of that facility. Yeah. In terms of do you know as it is a part.
No receivables.
Factored or were you know what maybe you could just talk through.
And what kind of liquidity profile you have there yeah. Yeah. This one's cash flow based as oppose the you know asset side. So it's a multiple.
It's a multiple of EBITDA.
And it's three times is what it is and then we theres a fixed charge coverage to but you know.
So that's that's kind of the difference between the two two programs.
Yes, so that I'll, just want to embed embellish on that a little bit. So you know on our.
Coming into this we were 38 $40 million of EBITDA. So we wouldn't have been in a position to to tap that full facility on a standalone basis. It was really put in place at anticipation of being able to support M&A.
So as we think about kind of are the base amount of the facility is 150, but our ability that access funds under that facility will really be limited by three times, our trailing 12 months to EBITDA. So theres two principal covenants ones the funded at the.
EBITDA, which is it three times and there's a fixed charge coverage ratio of 1.25 times.
Great. That's helpful. Thanks, guys and good luck.
Thank you export.
Well, it's more ladies and gentlemen, if you do have a question or comment. Please press star one on your telephone keypad at this time.
Again this star one of your telephone keypad at this time to ask a question.
Oh.
Third or appear to be no further questions at this time.
Alright, thank you.
Let me close by saying that we remain very bullish on our prospects.
And and the scalable non asset based platform that we created a radiant.
Our unique multi brand strategy and consolidating age embrace freight forwarding network.
Industry, leading technology platform and low leverage on our balance sheet puts us in a unique position to navigate these uncertain markets and position ourselves to emerge from this pandemic as a stronger competitor.
Ultimately the economy will recover as this happens we believe this will create a great opportunity to support our customers in bringing their supply chains back online.
In the interim we will continue to work to keep our employees safe and the essential freight moving while giving our strategic operating partners the support they need.
At the same time, we remain patiently persistent in the pursuit of our vision to leverage our multi brand strategy and scalable back office infrastructure to bring our unique value proposition to the agent based forwarding community, which we believe over time, we'll continue to deliver meaningful value for our shareholders our operating.
Partners and the end customers that we serve.
Thanks for listening and your support Radiant logistics.
Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
[noise] [noise].
[noise] [noise].
[noise] [noise].
[noise].
[noise] [noise].