Q1 and Q2 2023 Radiant Logistics Inc Earnings Call
Speaker 1: Oh.
Speaker 2: This afternoon, Bon Crane, Radiant Logistics, founder and CEO of Bon Crane,
Speaker 2: And Radiance Chief Financial Officer Todd Maycumber.
Speaker 2: We'll provide a general business update and discuss financial results for the company's first fiscal quarter ended September 30, 2022.
Speaker 2: And second fiscal quarter ended December 31st, 2022.
Speaker 2: Following their comments, we will open the call to questions.
Speaker 2: This conference is scheduled for 30 minutes.
Speaker 2: This conference call may include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Speaker 2: 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 risk uncertainties and assumptions about the company that may cause the company's actual results or achievements to be materially different from the results.
Speaker 2: achievement excuse me achievements expressed or implied by such forward-looking statements.
Speaker 2: 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 their website.
Speaker 2: Radiant website at www.radiantdelivers.com
Speaker 2: In addition, past results are not necessarily an indication of future performance.
Speaker 2: Now, I'd like to pass the call over to Radiance founder and CEO , Bon Crane.
Speaker 3: Thanks, John . Good afternoon, everyone, and thank you for joining in on today's call. First and foremost, I want to thank all of our loyal shareholders for being patient with us through this restatement process.
Speaker 3: It's fair to say that we've been battle-tested over these last few years.
Speaker 3: Driven first by the pandemic and associated lockdowns of 2020, we were all reminded of the essential role of transportation and logistics in keeping our economy moving.
Speaker 3: For us, this translated into the opportunity to play an active role in the fight against COVID.
Speaker 3: by, among other things, delivering PPE, food and beverage, consumer goods technology, and other essential products for our customers across North America and around the world.
Speaker 3: As the economy worked to recover from those initial lockdowns, we were presented with a different set of challenges and opportunities as we were able to help our broader customer base bring their supply chains back online in the face of an extreme shortage of transportation capacity, soaring fuel prices, and port congestion.
Speaker 3: In December of 2021, we experienced a cyber event that created its own set of challenges.
Speaker 3: And ultimately, we were put through our paces with the now completed rigorous review and restatement process.
Speaker 3: I will leave the detailed review of the numbers to Todd, our Chief Financial Officer, a little later in the call, but ultimately the numbers speak for themselves. In the face of some very difficult circumstances, we have delivered some extraordinary results, generating over $80 million in EBITDA on $1.4 billion in revenues.
Speaker 3: and have effectively paid off our bank debt along the way.
Speaker 3: We all know the cliche, that which does and kills you makes you stronger, but we've survived COVID, the cyber attack, and ultimately, we even survived the auditors.
Speaker 4: Two sets.
Speaker 3: All kidding aside,
Speaker 3: As everyone has a chance to digest the
Speaker 3: has a chance to digest the numbers. It's
Speaker 3: Why in the world would the company pay its accountants and lawyers millions of dollars?
Speaker 3: run the risk of being delisted, and undergo the organizational brain damage.
Speaker 3: to restate our financial statements for what amounted to one penny per share.
Speaker 3: particularly in light of the fact that the company was doing so well.
Speaker 3: Well, the answer is...
Speaker 3: Well the answer is not by choice, I can assure you.
Speaker 3: Restatements come in different flavors.
Speaker 3: In our case, as the numbers show, the impact on our financial results was very small, and the need for the restatement in the first place was very subjective, in my opinion.
Speaker 3: as disclosed in our public filings.
Speaker 3: The restatement related to our accounting for in-transit revenues.
Speaker 3: and for the accountants on the call, application of ASC 606.
Speaker 3: ASC 606 is a relatively new accounting pronouncement that provides the guidelines for recognizing revenue and a great source of incremental revenue for the accounting and consultancy firms out there.
Speaker 3: In the transportation industry, we historically recognize revenue on delivery day.
Speaker 3: That was until ASC 606 came along and changed the rules of the game that required companies to begin to effectively recognize revenue on a percentage completion basis.
Speaker 3: These new guidelines became effective in 2018 and require considerable use of estimates.
Speaker 3: in terms of expected margins and transit times, as these important inputs are not generally known until a shipment is ultimately delivered.
Speaker 3: These estimated in-transit revenues map to the face of our balance sheet as a contract asset.
Speaker 3: It is this individual line item on the face of our balance sheet that became ground zero for our restatement.
Speaker 3: Given the financial gearings of our agent-based business model,
Speaker 3: even a 10 to 20 million dollar swing in estimated revenue.
Speaker 3: relation to our 1.4 billion dollars in revenue.
Speaker 3: really doesn't have much of an effect on net income, even working capital for that matter.
Speaker 3: Even so, the auditors concluded that the misstatement of contract asset, when viewed in isolation, could be viewed as material to the reader of our financial statements.
Speaker 3: therefore require that we adopt their judgment as our own and restate our
Speaker 3: This is the world in which we live.
Speaker 3: the fact that we were delivering record results.
Speaker 3: The fact that the effect of the restatement on net income, EBITDA on working capital, was negligible.
Speaker 3: the fact that we were effectively debt-free and at no risk of breaching any of our financial covenants.
Speaker 3: None of that proved to be relevant to the analysis.
Speaker 3: So, why were our intrinsic revenues off in the first place?
Speaker 3: As previously mentioned, the accounting for in-transit revenues requires considerable use of estimates in terms of expected margins and transit times.
Speaker 3: as these import inputs are not known until a shipment is ultimately delivered.
Speaker 3: During the restatement periods, we experienced a cyber event and ultimately unprecedented shipment volumes that were subject to extraordinary congestion at our U.S. ports.
Speaker 3: These two factors frustrated our ability to accurately estimate our in-transit revenues. Even so, we recognize the need to improve our accounting for in-transit revenues.
Speaker 3: and have a number of initiatives under way to improve our process. And while this process was nothing short of mind-numbing,
Speaker 3: that's under way to improve our process. And while this process was nothing short of mind-numbing, now that we have it behind us,
Speaker 3: We look at it as a positive byproduct of our significant growth over these last several years, and a testament to the strong work of our talented accounting and finance teams.
Speaker 3: and the ultimate proof of the overall integrity of our financial systems.
Speaker 3: And of course, our need to always strive for continuous improvement in all that we do.
Speaker 3: Okay, so now hopefully that's enough on that topic. Let me turn my comments to the great progress that we've been making on a number of other fronts in addition to our record results.
Speaker 3: In August of 2022, we took the opportunity to refresh and expand our $150 million senior credit facility with a $200 million facility.
Speaker 3: Given what is going on now in the banking markets, we are really happy to have a new facility in place and fully available.
Speaker 3: This facility provides us with continued financial flexibility to access capital to support and accelerate our growth strategy, as well as the ability to repurchase the company's stock, should we choose.
Speaker 3: To that end, we continue to make good progress in our balanced approach to capital allocation through a combination of strategic acquisition and stock buyback initiatives. In October of 2022, we completed the acquisition of our longtime strategic operating partner, Cascade Enterprises in Minnesota.
Speaker 3: And for the 18 months into December 31, 2022, we purchased approximately $16 million of our stock at an average price of $6.64 per share.
Speaker 3: And as of December 31, 2022, we have for the first time in the company's history, even with the purchase of Cascade and the stock buybacks, no net debt with cash on hand of $62 million and total debt of only $53.7 million.
Speaker 3: And finally, our adjusted EBITDA for the trailing 12 months into December 31, 2022, sets at $82.8 million.
Speaker 3: And with the filing of these two most recent 10 cues, we have now completed the process of bringing our filings current with the SEC.
Speaker 3: And we're excited to be able to get back to the business of leveraging our best-in-class technology, robust North American footprint, an extensive global network of service partners to continue to build on the great platform we have here at Radian. As we previously...
Speaker 3: Previously discussed, while we remain very optimistic about our prospects for fiscal 23 and beyond, we are definitely seeing signs of a slowing economy and expect operations to return to more normalized levels and growth rates in the coming quarters.
Speaker 3: We believe we are well positioned with a durable, diverse service offering and strong balance sheet.
Speaker 3: to support our customers and continue to execute upon our broader strategic initiatives.
Speaker 3: With that said, I'll turn it over to Todd to walk us through our detailed financial results, and then we'll open it up for Q&A.
Speaker 5: Thanks, Bonnie. Good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and just EBITDA, the 12 months ended June 30th, 2022. Additionally, we will be providing financial results for the Q1 fiscal year 23, 3 months ended September 30th.
Speaker 5: 2022 and the Q2 fiscal 23 financial results for the three and six months ended December 31st, 2022.
Speaker 5: P4, fiscal year 22, yearly results are as follows. At 12 months into June 30, 2022, we reported net income attributable to radiant logistics of $44,464,000 on $1.46 billion of revenues, or 90 cents per basic and 88 cents per fully diluted share.
Speaker 5: the 12 months into June 30th 2021 we reported net income attributable to radiant logistics of $23,110,000 on $899.8 million of revenues or 46 cents per basic and 45 cents per fully-deluded share.
Speaker 5: This represents an increase of approximately $21,354,000 over the comparable prior year period, or 92.4%.
Speaker 5: For adjusted net income, we reported $58,246,000 for the 12 months ended June 30, 2022, compared to adjusted net income of $34,548,000 for 12 months ended June 30, 2021.
Speaker 5: This represents an increase of approximately $23,698,000 or approximately 68.6%.
Speaker 5: increase of approximately 23,698,000 dollars or approximately 68.6%.
Speaker 5: For adjusted EBITDA, we reported $80,918,000 for the 12 months ended June 30, 2022 compared to adjusted EBITDA of $49,003,000 for the 12 months ended June 30, 2021. This represents an increase of $31,915,000.
Speaker 5: are approximately 65.1%.
Speaker 5: Moving on to Q1.
Speaker 5: For the three months ended September 30th, 2022, we reported net income attributable to radiant logistics of $8,433,000 on 331 million of revenues or 17 cents per basic and fully diluted share.
Speaker 5: For the three months ended September 30th 2021 we reported net income attributable to radiant logistics of seven million six hundred nine thousand dollars on two hundred and eighty nine point four million of revenues or 15 cents for basic and full leadership
Speaker 5: This represents an increase of approximately $824,000 of net income over the comparable prior year period, or 10.8%.
Speaker 5: For adjusted net income, we reported $13,365,000 for the three months ended September 30, 2022, compared to adjusted net income of $11,090,000 for the three months ended September 30, 2021.
Speaker 5: This represents an increase of approximately $2,275,000 or approximately 20.5%.
Speaker 5: For adjusted EBITDA, we reported $18,515,000 for the three months ended September 30, 2022, compared to adjusted EBITDA of $15,247,000.
Speaker 5: for the three months ended September 30th, 2021.
Speaker 5: This represents an increase of approximately $3,268,000 for approximately 21.4%.
Speaker 5: Moving along to Q2, for the three months into December 31, 2022, we reported net income attributable to radiant logistics of $4,836,000 on $278.1 million of revenues or 10 cents per basic and fully deleted share.
Speaker 5: For the three months ended September 31st, 2021, we reported net income attributable to radiant logistics of $6,539,000 on 335.8 million of revenue or 13 cents for basic information for the deleted share. This represents a decrease of approximately 1.7 million of net income.
Speaker 5: Over the comparable prior year period.
Speaker 5: year period for 26%.
Speaker 5: For adjusted net income, we reported $10,497,000 for the three months ending December 31, 2022.
Speaker 5: compared to adjusted net income of $11,908,000 for the three months ended December 31, 2021.
Speaker 5: This represents a decrease of approximately 1.4 million or approximately 11.8 percent.
Speaker 5: For just EBITDA, we reported $15,349,000 for the three months ended December 31st, 2022 compared to just EBITDA of $16,709,000.
Speaker 5: for the three months ended December 31st, 2021. This represents a decrease of approximately $1,360,000 or approximately 8.1%.
Speaker 5: Moving along with six month results. For the six months ended December 31st, 2022, we reported net income attributable to radiant logistics of $13,269,000 on $609.1 million of revenues or 20 cents per basic and fully-deluded share. For the six months ended December 31st, 2021, we reported net income.
Speaker 5: attributable to reading logistics of $14,148,000 on $635.2 million of revenues, or $0.28 per basic and fully deleted share.
Speaker 5: This represents a decrease of approximately $879,000 over the comparable prior year period, or 6.2%.
Speaker 5: For adjusted net income, we reported $23,861,000 for the six months ended December 31, 2022 compared to adjusted net income of $23,000,000 for the six months ended December 31, 2021. This represents an increase of approximately $860,000.
Speaker 5: or approximately 3.7 percent.
Speaker 5: For adjusted EBITDA we reported $33,864,000 in the six months ended December 31st, 2022 compared to adjusted EBITDA of $31,961,000 for the six months ended December 31st, 2021.
Speaker 5: This represents an increase of approximately $1,903,000 or approximately 6%.
Speaker 5: With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.
Speaker 2: Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker 2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker 2: One moment please while we poll for questions. Once again that's star one on your telephone keypad if you have a question or comment.
Speaker 2: Our first question comes from Mark Agento with Lake Street.
Speaker 2: Our first question comes from Mark Agento with Lake Street. Please proceed.
Speaker 6: Hey, Bonnie, Todd, good to hear you guys get on a call. Congrats on finally getting all that rigmarole behind you here. It was a long slog for you guys, but good to see the business continue to perform.
Speaker 6: I just wanted to drill down a little bit on some of your comments in particular. You mentioned, you know, obviously, the environment is normalizing here a little bit post-COVID and just with the economy.
Speaker 6: slowing down a little bit, or hopefully slowing down a little bit. Can you just maybe give us a little more color on what kind of a more quote, unquote, normalized environment means for you guys in particular, both at the revenue level, or at gross revenue level, but also what's a good kind of thoughtful run rate even to offer your business today?
Speaker 6: I know the business has changed since 19, 20, 21. You did 80 million last year in EBITDA, or last fiscal year on a run rate basis. Something I think even greater than that. But maybe if you could just kind of point us around a little bit on what the new normal is. That's getting harder and harder to answer.
Speaker 3: place. So bear with us.
Speaker 3: further frustrated by labor inflation that I think everybody is feeling but my
Speaker 3: labor inflation that I think everybody is feeling. But my kind of
Speaker 3: my best shot at kind of a
Speaker 3: normalize
Speaker 3: run rate EBITDA would be in the $55 to $60 million range right now.
Speaker 3: But I would put an asterisk by that.
Speaker 3: which would be
Speaker 3: I think that the first half of calendar 23
Speaker 3: might not be reflective of that run rate. As the pendulum was swinging really strong, I think these first couple of quarters. So, I guess the thing, the ultimate way to just boil it down is, if you were using 60 to model, I wouldn't necessarily put 15 million of EBITDA on Q1 and Q2.
Speaker 3: I mean, obviously the seasonality that you know about, but there's some, just like we were in a period of unusually strong times.
Speaker 3: I think at least the first half of this year is also going to be unusually weaker times. As you know, and everybody's read a lot of the kind of the market reconnaissance, but there's, you know, excess inventories that people are chewing through or trying to work through. And so.
Speaker 3: international trade is at an unusually low.
Speaker 3: point right now. So when we, there's a difference between saying what do you think normalized is and what do you think your results are going to be for fiscal year end of 2023 which I'm not prepared to answer.
Speaker 6: Hopefully that's responsive to your... Yeah, that's very helpful. And then when you guys are thinking through that a little bit, and that's obviously an incredibly healthy clip and all above where you were running.
Speaker 6: before I even got into the pandemic environment. But obviously, the stock where it's trading, and we could talk reasons why broader market overhang, I was having to deal with the time to get the restates done, whatever it might be.
Speaker 6: What are you doing? Kind of cranking through. You guys are in a net cash position.
Speaker 6: I know you've been active with the buyback, but would you ever think about potentially a dividend or any other types of opportunities, either crank up the buyback here a little bit more aggressively or institute a dividend? Because if you're generating, call it 55 to 60, I know you're a taxpayer now, but you don't have any interest expense.
Speaker 3: Seems like you guys are going to be a cash flow machine. So any further thoughts on what you're going to do with all that cash? I'm not envisioning that we would move to a dividend. I think we'll, as we kind of alluded to, kind of get back to our core business strategy, which we've been kind of taken off task somewhat by this restatement process, unfortunately. But.
Speaker 3: So, you know, that would manifest itself as continuing to, you know, look for acquisitions that are more likely to be tuck-in type acquisitions and doing our stock buyback, taking a balanced approach to both.
Speaker 3: and, you know. as
Speaker 3: we kind of think about some of those things. One of the very early on...
Speaker 3: kind of think about some of those things. One of the very early on...
Speaker 3: thesis is, if that's a word, for RADIANT was providing exit strategies for our agent stations and kind of the built-in pipeline of potential tuck-in acquisitions of our agent stations. Well, you know, that opportunity remains very real and vibrant and...
Speaker 3: And I think one of the trends we're expecting to find is ultimately an acceleration of conversion of agency stations to company-owned stores because the fact is people aren't getting any younger. And so I think those opportunities will present itself.
Speaker 3: And it's good to have financial flexibility, right, and not to be overlevered because of all of the uncertainties. You know, had we, you know, been super aggressive in a buyback and been in this restatement period, you know, that could have gotten...
Speaker 3: a lot more uncomfortable and believe me it was uncomfortable enough as it was. So.
Speaker 3: So normalized leverage kind of two and a half times, you know, trying to get back.
Speaker 3: to our knitting, you know, of taking our free cash flows.
Speaker 3: notionally putting half of that to work on the buyback and half of it to work on transactions that we believe are accretive in a strategic value.
Speaker 6: It's super helpful again. Good to hear back from you guys and look forward to see how things play out here moving forward. Congrats on the great execution.
Speaker 3: in the capital structure, right? And if others aren't willing to pay for this, then the company should. So you guys have done an amazing job. The valuation is absurd and for what you've done with the company. So congrats on everything. All right, thanks, Mike. Yep. We have reached the end of the question and answer session, and I will now turn the call over to Bon Crane for closing remarks. Thank you. 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 and extensive global network of service partners to continue to build on the great platform we have here at Radian. At the same time, we expect to continue our balanced approach.