Q3 2022 Radiant Logistics Inc Earnings Call
Ladies and gentlemen, thank you for your patience. This conference will begin momentarily again. Please remain on the line. This conference will begin momentarily.
Okay.
Yeah.
[music].
Oh, and radians, Chief Financial Officer, Todd Megan Barry will discuss financial results for the company's third fiscal quarter and nine months ended March 31st 2022. 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 $19 34.
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.
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.
Fee 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 pass the call over to radians founder and CEO .
L Bond train.
Thanks, Sean.
Thank you.
Good afternoon, everyone and thank you for joining in on today's call.
We're very pleased to continue our trend and report another quarter of record financial results for the March quarter.
It was nothing short of a spectacular quarter with us reporting New records for virtually every financial metric on which we report revenues net revenues net income adjusted net income EBITDA adjusted EBITDA EBITDA margin earnings per share and adjusted earnings per share.
All records.
Our business remains quite strong across our various service offerings with particularly strong showing this quarter and our project charter business in the first full quarterly contribution from our December 2021 acquisition of navigate.
Across the board in our forwarding operations at both our company owned and strategic operating partner locations, our Canadian operations.
And our U S brokerage operations, each and every group is making a meaningful contribution to our collective collective success.
We are particularly proud that during the quarter. The radio team had the opportunity to continue to assist in Covid relief efforts, providing mission critical support to move Covid test kits on behalf of the United States Department of health and human services.
The mission, including coordination of cargo at origin uplift and delivery involved the chartering of 24 aircrafts flying $85 4 million Covid test kits to the interior of the U S for final mile delivery and ultimate distribution.
The program details included over 474000 cartons of test kits on these 24 flights followed by the safe and speedy transfer of the kits to over 230 53 foot trailers for delivery to strict strategic centers in the U S with the ultimate destination and to the <unk>.
Hands of the American people.
In addition, we remain very excited about the opportunities made available to us through our acquisition of navigate in addition to solidifying our presence in Shanghai navigate also strengthens our international services offering, particularly in the areas of customs brokerage Ocean forwarding and drayage services and brings to us.
Our robust robust global trade management capability.
These new global trade management capabilities will be made available to the entire radiant network to provide our customers with a purchase order and vendor management tool that unlock SKU level visibility from the manufacturing floor and Asia through final delivery here in the U S.
With both the enhanced service offerings and proprietary global trade management technology. We believe we will further differentiate ourselves in the marketplace and be even better positioned to provide additional support for both current and prospective customers moving forward.
I will leave the detailed financial reporting to Todd, but it is worth noting that we have now generated $55 million and adjusted EBITDA on $1 1 billion, that's where the <unk> billion in revenues through the first nine months of our fiscal year.
This is a very exciting milestone for radiant and a direct result of the dedication of our employees and operating partners the diver.
<unk> of our service offerings and the durability of our scalable non asset based business model.
For the <unk> for the trailing 12 months ended March 31, excuse me.
31 of 2022, we have now reported a record $69 5 million in adjusted EBITDA on $1 3 billion in revenues.
We continue to deliver these record results with relatively modest leverage on our balance sheet with net debt of approximately $76 million almost $70 million in trailing 12 month adjusted EBITDA.
And while it is difficult to predict exactly what we should expect for next year. We do believe that radiates new normal is meaningfully stronger than what the market is giving us credit for and we believe this is contributing to the current disconnect between the underlying value of our stock and our current stock price.
As we've previously discussed we do not believe that our current stock price accurately reflects radiance intrinsic value our long term growth prospects, particularly given our unlevered balance sheet and therefore represents an excellent investment opportunity for both the company and our shareholders.
With our stock price being nonresponsive to our expanding earnings power. This disparity continues to grow.
Accordingly, and in addition to our continued acquisition efforts, we expect to be active in the repurchase of our stock and take advantage of the opportunity being presented to us in this disconnect between the underlying value of our stock and our current stock price in this regard we renewed our stock buyback program in February of this year.
With authority to purchase up to 5 million shares through December of 2023.
Hopefully our continuing strong performance and strong balance sheet, we will begin to register with investors and we will begin to close the valuation gap between radian and its peers.
Frankly, I believe we deserve it.
And we've earned it.
The demonstrated durability of our business model.
The challenges of the pandemic.
And our ongoing delivery of what is now four consecutive quarters of record results.
With that I'll turn it over to Todd may come for our CFO to walk us through our detailed financials and then we'll open it up to some Q&A.
Thanks, Brian and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income adjusted EBITDA for the <unk>.
Three and nine months ended March 31 2022.
For the three months ended March 31, 2022, we reported adjusted net income attributable to <unk> logistics, a $14 million $339000 on $469 million of revenues or <unk> 29 per basic and <unk> 28.
Per fully diluted share. Please note. This quarter included approximately $2 million gain related to change in fair value of the interest rate swap contracts and more meaningfully in the quarter was approximately.
With $62 million of Covid related charter business.
For the three months ended March 31, 2021, we reported net income attributable to iridium logistics of $4 million and $984000 on $236 5 million of revenues or 10 cents per basic and fully diluted share.
This represents an increase of approximately $9 million $355000 of net income over the comparable prior period prior year period or 187, 7%.
For adjusted net income, we reported $16 million $828000 for the three months ended March 31, 2022, compared to adjusted net income of $9 million $148000 for the three months ended March 31 2021.
This represents an increase of approximately $7 million $680000 or approximately 84%.
For adjusted EBITDA, We reported $23 million $596000 for the three months ended March 31, 2022, compared to adjusted EBITDA of $12 million $885000 for the three months ended March 31 2021.
This represents an increase of approximately $10 million and $711000 for approximately 83, 1%.
I'd also like to call out the increase in adjusted EBITDA margin as a percentage of net revenues something bartonite track regularly increasing 510 basis points from 22, 7% to 27, 8%.
Moving along to the nine month results for the nine months ended March 31, 2022, we reported net income attributable to radiant logistics of $28.366 million on.
$1 billion to $80 million Rep.
Representing 57 per basic and <unk> 56.
Per fully diluted share. Please note. This period included four months of our recent acquisition of navigate significant charter business captured in the current quarter slightly offset by a $1 million in the cyber event disclosed in December .
For the nine months ended March 31 2021.
Ported net income attributable to radiant logistics of $11 million $884000 on $631 2 million of revenues are 24 per basic and <unk> 23 per fully diluted share.
Presented an increase of approximately $16 million $482000 for the comparable prior year period or 138, 7%.
For adjusted net income we reported $39.708 million. The nine months ended March 31, 2022, compared to adjusted net income of $24 million $308000 for the nine months ended March 31, 2021. This represents an increase of approximately $15 million.
$400000 or approximately 63, 4%.
For adjusted EBITDA, We reported $55.396 million for the nine months ended March 31, 2022, compared to adjusted EBITDA of $34 million 640000 for the nine months ended March 31 2021.
This represents an increase of approximately $20 million $756000 or approximately 59, 9%.
With that I will turn the call back over to our moderator to facilitate any Q&A from our callers.
Yes.
Ladies and gentlemen, you have reached the question and answer a question of the call to ask a question. Please press star one on your telephone keypad at this time.
Again star one for any questions at this time.
First question comes from Mark Argento from Lake Street Mark. Please go ahead.
Hey, Bond Hey, Todd Congrats on.
The enormous quarter, so really really impressive.
I concur with your thinking about not getting credit.
Just help us parse things a little bit.
Could you give us.
Christine if you can give us.
What the Covid related project revenue and EBITDA contribution was in the quarter, and then remind us of the size and scope of navigators as well.
How much they contributed in the quarter and then kind of backing into the kind of the organic growth rate.
Yes.
The core platform.
Sure I'll take a first crack at that.
The Covid charter business, we don't take it to EBITDA, but I believe within the press release, there I think it was $62 million and change.
The revenue for the quarter.
That's in the press release.
<unk>.
Relative to.
Yes.
Navigate.
That we did not break that business out separately, so I don't want to get kind of.
The scope of it yes.
In terms of.
High level, so navigates a Minneapolis based company that we acquired back in December that transaction was valued at roughly $35 million purchase price on notionally $6 million of earnings power.
But we're happy to report they are outperforming are outpacing.
Those historical results and were really.
Excited to have them as part of the team moving forward.
Bring to us a significant competency and ocean freight forwarding and customs brokerage our presence in Shanghai.
Some.
Incremental technology.
We're excited to bring back to the broader network that will provide.
Kind of enhanced.
In transit visibility tools down to the <unk>.
Oh level, which will.
Allows shippers to kind of.
Better manage their supply chains.
Down to the SKU level and with all the disruptions in supply chain and everything going on in Asia and around the world.
Customers are increasingly interested in these types of tools and visibility to be more proactive in managing their supply chain.
And.
When you think about the disruption of the supply chain.
It's kind of a catch up in the air freighting of components.
Is there any way to quantify or when you think about the growth.
Kind of we'll call it more steady state growth.
Do you think you guys have benefited disproportionately from more air freighting going on given this environment.
Maybe try to help us think about.
More normalized kind of run rate for the business.
If there is such a thing.
Yes, I don't know that well.
I appreciate the question I would say.
It's been the proverbial rising tide lifts all boats.
And literally.
As well as figuratively and in terms of modality, we've had significant growth in the ocean product notwithstanding.
Some of the port congestion and those types of things.
While also doing charters and other expedited freight as well.
But.
It's certainly a fair question and it gets to this kind of notion of new normal and kind of how do we think about the kind of the ongoing run rate of the business and we don't want to go so far out onto the proverbial limb in terms of providing guidance.
<unk>.
At this point realm.
Relative to upcoming quarters, but.
Yes.
At least I'm at least it's my perception that the way that people think about us in our business.
Is that consistent with the company that we are today, we've grown substantially and and while I think everybody expects there to be some level of softening.
As we move forward in a lot of these uncertainty even in kind of a downside scenario.
Still going to be meaningfully ahead of our historical levels of performance.
I want to leave that conversation.
Here for now relative to specific guidance, yes.
That's fair.
Todd just quickly could you just remind us.
The new I think you've got to put a new debt facility in place what.
Kind of what you have pulled down on it.
It looks like right now.
Yes, so I mean.
As of the period I think we're at 100 <unk>.
Have 40 million on the balance sheet as far as cash we paid down a lot the net debt.
Is 73 as of.
As of this we had 113 point.
Six which was really the facility in the IPD loans, but if you get more specific as far as the facility as of the balance sheet data as of $103 5 million as of.
I just have I'm sorry as of March.
So with the $40 million and like I said since then obviously post balance sheet, we paid down about $40 million.
Got it and then.
With the stock.
Router markets.
Because our stock.
Not really getting a whole lot of love, but.
Have you thought about.
Getting a certain percentage of your free cash flow to the buyback or kind of taking advantage of the situation I know you alluded to the buyback but anything more.
Yeah.
Got it.
Sure.
Yes go ahead, yes.
Kind of our baseline scenario remains intact, Mark which is people should expect us to effectively take half of our free cash flows and have those earmarked towards stock buybacks and the other half of our free cash flows targeted tuck in acquisitions, and then Opportunistically, we may deviate off of that.
Baseline.
In pursuit of one or the other but our intention is to continue to take a balanced approach. We believe we can progress both of both of those opportunities.
With stock buybacks being a meaningful.
And quite viable.
Place for us to deploy our capital.
In terms of tuck in acquisition size.
Would you consider like a navigate that.
Tuck in acquisition size now or what.
Talk to you in your world connect because you've grown quite a bit.
I'd say, yes, it's getting yet.
Another interesting observation, but I think youre right.
Historically, we would have thought of.
Our tuck in acquisitions are being plus or minus $2 million of EBITDA.
That's not to say, we wouldn't continue to do those and it's not to say that we won't continue to support our operating partners and their own exit strategy.
But we have a lot of dry powder and so.
It's at the end of the day, it's probably less about size and where we see good strategic.
Fit and the opportunity to create shareholder value.
But.
Certainly.
Probably.
I really havent had to think of it in these terms.
What's the size of a tuck in acquisition, but it probably.
We're at a run rate of $70 million.
<unk>.
Of EBITDA that number probably gets up closer to $5 million to $10 million.
Numbers.
Just to kind of build on that thought a little bit more.
Part of the notion of tuck in is having a platform and infrastructure and management team to tuck it in and be a good steward of that organization and we continue to build out really solid teams.
Here in Renton.
In Canada and in Chicago to support our acquisition activities. So tuck in is not only a function of balance sheet.
It also a function of the management teams that we continue to build out.
Yes.
Well again, congrats from fun to watch you grow this business over.
A number of years I've covered you guys.
Keep keep doing what youre doing and you'll get rewarded at some point.
Thank you.
Next on the line, we have Jeff Kauffman from vertical research. Please go ahead.
Thank you very much congratulations guys.
Quick question.
Now that you have direct Shanghai exposure can you talk about what's going on over there and how that may or may not be affecting your business this quarter versus last quarter.
Now that Youre doing more ocean than you used to have kind of a broader view.
What's happening in global markets I would just here be interested in hearing out March and April were comparing the January and February .
So thanks for your question Jeff.
Im kind of consistently.
Interrogating my own organization with that very question and we're still seeing good volumes I mean, I think it's fair to say everybody is having to work a lot harder than we might have had two in different times.
But freight is still moving we're still busier than heck.
And.
While there might be certain.
Little pockets, where.
Customers or accounts or it might be approaching inventory levels and it might be slowing down in their own their own purchases at the end of the day our ability to support.
Our customer's in sourcing capacity and moving freight continues so even though we hear about these lockdowns, which are true right freight is still moving.
<unk>.
And so we're working hard to get it done and.
Hi.
I think those opportunities.
We don't see them.
Diminishing in any material way for the foreseeable future.
Okay same question for your domestic network is it getting easier to find capacity.
Are there still challenges getting our available capacity in the places you need it.
I think capacity is loosening up a little bit.
Sure.
But in some respects. It's also shifting right. So it's been a little softer off the west coast, but demand has picked up in other geographies of the country.
On an absolute and AG basis, we're seeing.
I won't say I don't know if softness is even the right word I think we're seeing some.
And I won't even say reversion to norm.
But there is.
They are.
Less rejections on quotes and all that stuff going on so.
It's getting a little easier too.
To get to get at the capacity right. There is certainly a time.
Or you could be on the phone all day trying to secure a single truck for an account and folks are having to work.
Quite that hard.
But I think.
It still remains.
Here's a I guess another opportunity too.
To kind of ring the bell for the non asset based <unk> right. So.
Yes.
And I can't speak on behalf of how the asset intensive businesses are doing in this environment.
But as a non asset based <unk>.
Still very bullish about the market and the opportunities that it presents.
Thank you very much.
My question.
Alright, Thanks, Jeff.
Yes.
Okay and our last question comes from Mike Barnett.
Capital Newland capital Alright, Mike. Please go ahead.
Hey, guys how are you doing.
Okay.
Phenomenal quarter, yes, it's amazing being around this long and seeing what this company can do now.
And just following up on something.
Just saying what are you guys, saying about you have I guess three.
300 $400 million.
People shut in in China, right now and I know, we have obviously been Shanghai what are they.
Saying or what are they believing will happen once that starts to open up.
And I assume we're going to be flooded with freight when that happens.
How do you look at that for opportunity.
Well.
Only time will tell I guess, but.
Sure enough the folks in China are just as effective in working from home as some of US here in the states are right. So.
It's a combination of things.
Hi.
I think where it will be interesting I guess theres a couple of thematic one theres still boats at anchor trying to be ingested in la So I think we're having a.
<unk> to try to kind of work some of that through but the fact is there's still a backlog.
And as things open back up we would I'm kind of anticipating a second surge to a certain extent.
What I don't have particularly good visibility into what's happening on the manufacturing floor and Asia and what impact.
These shuttering are having on their ability to for production and their ability to kind of kind of ramp back up as they are able to come back in.
To do their work.
But but.
Yes.
I am anticipating.
Kind of.
Another wave right. Another surge continued disruptions continued capacity issues all of those things that make the work we do.
That much more valuable.
And supporting our customers.
Excellent.
Now getting getting too.
Ben.
With the company invest in the company for.
Quite a long time, and our stock price, but when you look at it now.
I'll leave you have done.
Below where we were five or six years ago, and we are consistently.
Putting up phenomena numbers, we're doing now about three times the EBITDA that we were.
Five six years ago, when our stock was higher so there is some massive disconnect and.
There comes a breaking point with management you guys are hearing.
Entire company is doing so well right now you have such free cash flow.
Low leverage that you say to yourself, it's not worth being a public company anymore right.
Alright, and you do the math even at $10.
The payback if you if you borrow 90% of that you could pay off that debt and seven years right. So.
It has to give.
Eventually right.
We're saying it was trading at the same spot we were six years ago and we're <unk>.
Generation three to four times EBITDA.
When does management start to say this can't can't sustain itself, we have to do something I understand buying stock maybe you expedite the buyback or is there a point where <unk>.
Let's go and try to do something strategic here because it doesn't make any sense. There is no other company in our space trading.
At these valuations are even close on the non asset basis. So I'm just trying to understand where you guys are thinking it's not sustainable.
I mean it is valuation.
So thanks for your questions I share your frustration your frustration and your observation.
We.
We continue to believe that we're creating shareholder value every day, when we get up and come to work in that kind of bears it out on our financial results.
Our stock price.
There's a number of things that were.
We will continue to do because we think it's kind of fundamentally they are sound and help us get where we want to go.
<unk>.
Part of that.
At its heart a part of the trade off is ultimately financial flexibility. So if we go and.
Meaningfully lever up our business to do a stock buyback.
<unk>.
Will negatively impact our financial flexibility to do some other things.
Great example was all this charter business that we just had the opportunity to do had we done a significant stock buyback in one lump sum.
We would have really.
<unk> not been able to take that phone call and said, yes, we are here to here.
Here to support.
Yeah.
Everything the government was trying to do around Covid relief in all of those types of things. So part of this equation is.
Financial flexibility and dry powder.
To take it.
Take advantage or support opportunities as they present themselves.
Whether it's project work, that's going to on a short term basis consume a lot of working capital or whether it's to be there to support our operating partners and their own exit strategies. These are all things that we've got to keep on our peripheral vision as we think about capital allocation. So.
We're not.
Yes.
Thinking around <unk>.
Taking the company private which I think is kind of it was at the heart of your question.
I think we are.
Believe we are creating long term value.
And I think management team has.
Long term view of horizon around what that looks like and we're happy to continue to.
Create shareholder value take a balanced approach in terms of capital allocation.
And.
And to the extent this disconnect is going to continue to exist.
Likely do more than less of the stock buyback.
While trying to preserve our financial flexibility due to also grow the business strategically.
In terms of acquisition and the incremental capabilities and alike.
Excellent.
I was really saying it in management is creating all the value for the company and it's not being.
Rewarded in the marketplace. So there.
This disconnect is unsustainable at some point in time, Alright, that's all I'm, saying is that you are creating the value.
Just not being recognized so there are opportunities out there in and accelerating the buyback is one of them if it if it stays at these levels for sure. So yeah I'm wondering.
One of the things that we've talked about before is kind of this notion of.
That our stock price seems too.
Kind of unlocked value in a step function type way right as we are.
It's kind of a microcap and kind of been working our way through institutional discovery in that whole process and so ever so often the cumulative weight of the evidence.
<unk> allows some acknowledgement of all the work we've done and.
I don't know how many consecutive quarters, we have to put together for that tipping point, where we get one of those kind of step function unlocks.
But I am hoping.
One or more analysts or investors.
On this call are out there.
We'll do the work and put out a report that kind of highlights the disparity in kind of implied multiple of our stock relative to.
Effectively the rest of our peer group because.
While.
Generally speaking most of the transports have had a nice run up we never did right. So while while there may be.
Some perceived downside.
And some of these other transports that have run up.
It's hard for me to see.
Anything but upside in investing in radiant logistics at these prices.
Fully fully agree Greg.
Got it eventually it'll fixes up or you'll get the buy in more and more stock yourself.
Keep it up.
Thanks, Mike.
There are no further questions at this time.
Alright. Thank you operator, let me close by saying that we remain optimistic about our prospects and opportunities to continue to leverage our best in class technology.
Robust North American footprint extensive global network of service partners and recent acquisition of navigate to continue to build on the platform. We've created here at radiant.
At the same time, we've begun to thoughtfully re lever our balance sheet and through a combination of strategic acquisitions and stock buybacks. We believe we are creating meaningful intrinsic value for shareholders that has yet to be recognized in our stock price.
Through this multi pronged approach of organic growth acquisitions and stock buybacks. We believe we will continue to create meaningful value for our shareholders operating partners and the end customers that we serve thanks for listening and your support of Radiant logistics.
Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect. Your lines at this time and enjoy the rest of your day.
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Yeah.