Radiant Logistics Inc. Q3 2023 Earnings Call
Speaker 1: And.
Speaker 2: This afternoon, Bohn Crane, Radiant Logistics founder and CEO and Radiant's Chief Financial Officer Todd Maycumber will provide a general business update and discuss financial results for the company's third fiscal quarter, ended March 31, 2023.
Speaker 2: Following their comments, we will open the call to questions. 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. The company has base 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 been in the past and maybe in the future identified in the company's SEC filings and other public announcements which are events.
Thank you.
Thank you.
Good afternoon, everyone, and thank you for joining in on today's call.
Let me start by saying it's never dull and straightforwarding.
The volatility that we've seen in the market as we come through the pandemic is unprecedented.
As you can see from the release, our results for the March quarter were heavily impacted by the rapid softening of the freight markets that has occurred in recent months.
These quickly evolving market conditions have negatively impacted not only our results, but also the year-over-year comparison to our record results from the prior year period.
While our core domestic forwarding services have been relatively durable, some of our smaller service lines, including ocean imports and intermodal and truck brokerage operations, have been particularly hard hit as a result of the dramatic fall off from the robust operating environment that we experienced last year.
The confluence of shippers continuing to manage through elevated inventories, reduce imports, and a slowing economic environment is having a cascading effect across virtually every mode of transportation.
where the balance of supply and demand has shifted from a tight market a year ago to one that has now oversupplied.
We do believe we are at or near the bottom of the cycle and would expect markets to begin to find their way to more sustainable and normalized levels over the balance of calendar 2023.
While our comparative year over year numbers are down significantly from the historically strong freight market created by the pandemic and associated supply chain disruptions.
Our results for the quarter ended March continue to turn meaningfully ahead of our historical financial results.
from the pre-pandemic era. I view the fact that we generated over $11 million in adjusted EBITDA in our historically slowest seasonal quarter and what everyone recognizes is a very difficult market environment.
as a very positive indicator for radiance and our prospects as we come through this cycle.
It is worth noting that we are in the strongest financial position in the history of the company.
and having generated over $76 million in cash from operations to the nine months ended March 31.
We remain virtually death-free and continue to make good progress with our stock buyback having acquired $5 million of stock through the nine months ended March 31.
and another $4.2 million of our stock between March 31 and May 5.
Our discipline approach to capital allocation and low leverage continues to service well and we believe we are well positioned to navigate through the slower period as shippers work through their remaining excess inventories and we find our way back to more normalized market conditions.
Looking ahead, we also expect to continue our balance approach to capital allocation through a combination of agent station conversions, synergistic tuck-in acquisitions, and stock buybacks.
Through this approach, along with our organic growth initiatives, we will continue to scale our business, leveraging our best-in-class technology and extensive global network, which we believe over time will continue to deliver meaningful value for our shareholders operating partners and the end customers that we serve. Through this approach, we will continue to scale our business, leveraging our best-in-class technology and extensive global network, which we believe over time will continue to deliver meaningful value for our shareholders operating partners and the end customers.
But that I'll turn it over to Todd Maycomber or CFO to walk us through our detailed financial results and then we'll open it up for Q&A Thanks, Bonn and good afternoon everyone today. We will be discussing our financial results including adjusted net income and adjusted to EBITDA for the three and nine months into March 31st, 2023
For the three-month-send March 31st, 2023, we reported net income attributable to radiant logistics of $4,183,000 on 244.2 million of revenues or 9 cents per basic and 8 cents per fully diluted share for the three months in March 31.
For the three months in March 31, 2022, we reported net income attributable to radiant logistics of $13,567,000.
On 441.3 million of revenues are 27 cents per basic inflow due to chair.
This represents a decrease of approximately $9,384,000 of net income over the the period, or 69.2%. For just net income, we reported $8,222,000 for the three months ended March 31.
2023 compared to a just a net income of $16,000,000 to the three months that had March 31, 2022. This represents a decrease in approximate $7,834,000 or approximately 48.8%.
For Justin EBITDA, we reported $11,560,000 for the three-month-end March 31, 2023, compared to Justin EBITDA of $22,573,000 for the three-month-end March 31, 2022.
This represents a decrease of approximately 11 million thirteen thousand dollars or approximately forty point eight percent
Moving along to the nine month results. For the nine month ended March 31, 2023, we reported net income attributable to the rate of logistics of $17,452,000 on 853.3 million of revenues, or 36 cents per basic and 35 cents per fold-in share.
For the three months it had March 31, 2022. We reported net income attributable to reading logistics of $27,715,000 on a hundred, on a hunt, I'm sorry, on 1.08 billion of revenues or 55 cents per basic and fully diluted share.
This represents a decrease in approximately $10,263,000 over the comparable prior period of 37%.
For just net income we reported $32 million $845,000 for the nine months ended March 31, 2023. The pair to just net income of $39 million $57,000, the nine months ended March 31, 2022.
This records at the decrease with approximately 6,212,000 dollars or approximately 15.9%. For just a debita, we reported $46,434,000 to the nine months it had March 31, 2023.
compared to adjusted EBIDA $54,534,000 for the nine months at March 31, 2022.
This represents a decrease for approximately 8 million 100,000 or approximately 14.9%.
With that, I will turn the call back over to a moderator to facilitate any Q&A from our colors.
questions. If you would like to ask a question, please press Star 1 on your phone keypad. A confirmation table indicate your line is in the queue. You may press Star 2 if you would like to remove your question from the queue.
So if you want to spend using any speaker equipment, it may be necessary to pick up your handset before you press the stockies. Please hold for a moment whilst we pull for any question.
Thank you. Your first question is coming from Jacob Steven from Lake Street Capital. Jacob, your line is live.
Hey, <expletive> , it's not from Mark today. Thanks for taking my question. So maybe I just want to kind of hone in on kind of your visibility into this path to normalization. You know, how much visibility do you guys have and maybe what does that look like?
as we enter into your fiscal year 24. I'm sorry, Jacob. One more time as we look into what, I'm not sure I cut your question.
Yeah, sorry, just as we look into your next fiscal year here crossing into June and the September of ????? see the Octoberusions.
What does that path in normalization kind of look like?
I think it's we kind of alluded to on our last call.
You know, the pendulum swings, right? So obviously we had a, you know, a particularly rough robust fiscal year in this prior year doing over 80 million in EBITDA.
And I think the pendulum is swung back kind of the other way disproportionately as we work through inventories and the swung economy and all those things that were relatively familiar with at this point. So to kind of get into the thrust of your question and kind of how we...
frame this on the last call is, you know, we're all trying to kind of figure out what the new normal looks like and kind of what that means for us.
and the economy more broadly.
But we think of the normalized run rate of our business to be in the $50 to $60 million range.
Okay, as we come to this, we can't kind of our own view of normal would be at a $50 to $60 million run rate.
Okay.
That's helpful. Thank you. Maybe just kind of looking at the M&A environment overall, have you guys seen your pipeline fill up with potential M&A targets, or are you guys kind of taking a wait-and-see approach as you just discussed, as you find out?
kind of what the new normal is. We're always actively looking, just trying to find deals that make sense. And, you know, in a lot of respects, our kind of view of the opportunity set hasn't changed. You know, we think that there's
what we sometimes describe as a built-in pipeline of potential tuck-in acquisitions as we support our existing agency stations and their exit strategies, and if they're ready. We call those agent station conversions.
So there's no integration risk. They're already on our system. For those that have been around our story for a while, appreciate the idea of
There's no integration risk there already on our system for those that have been around our story for a while. Appreciate the idea of the...
aging of our agestation owners and then ultimately approaching a point in their own lives and sets of priorities where they seek their their exit strategies. We're here to support them when they do that. No one's getting any younger. We think the rate at which those things will occur over time will continue to accelerate.
that will manifest itself in terms of as in the form of margin expansion, expressed as EBITDA as a function of gross margin. So that's going to one thematic. At the same time, we continue to look for other...
stand alone, tuck in type acquisitions that would be synergistic to us. Those could be in our core forwarding business. It could be in our brokerage and our modal business or it could be in our Canadian, supported by our Canadian platform. We have three platforms from which to support acquisitions and then ultimately buybacks. Our stock continues to trade that what we...
view to be below fair value rates. And so as we think about capital allocation, you know, we'll continue to look at you know, the acquisition opportunity set, you know, relative to just taking our money and buying back our own stock at this point.
kind of below fair value rates and so as we think about capital allocation, you know, we'll continue to look at you know, the acquisition opportunity set, you know, relative to just taking our money and buying back our own stock at this point. I'm not aware of
You know, any other plus or minus $60 million EBITDA run rate non-asset base 3PLs that you can buy it plus or minus the six times multiple with no integration risk.
So, you know, we.
view it as a very attractive use, and in many cases, highest and best use of our capital. That's why you've seen us kind of accelerate the rate at which we're doing that, about $5 million a quarter is what we've done most recently.
Yeah, and
I think people should expect more of that as we go while we continue to look for acquisitions.
Again, as we described before, kind of the baseline scenario is taking half of our free cash flow and using it for stock buybacks and the other half of our free cash flow to support our acquisition strategy. And of course, there won't be that precisely on an individual quarter basis, but in the aggregate that's kind of the underlying thematic.
how we're approaching the market. And then if we see something larger and more interesting that would cause us to deviate from that, obviously we'll look at it, but that's kind of our baseline scenario that we're gonna, the lens to which we're looking to do everything.
Okay, yeah, certainly necessary as active on the by-back, but thanks for the color. I'll hop back in the queue. Thank you very much. Your next question is coming from Elliot Laper of TD Cowan. Elliot, your line is live.
Great, thank you. I want to start on freight forwarding. I know you touched on it briefly in the prepared memory remarks, but if you could talk about a little bit.
between the difference in the domestic and international businesses in the quarter? Yes, sure. So a couple of different aspects of that. So, and to kind of re-epicize it, our core business, the heart and soul of our business is domestic-coring. Time definite expedited.
forwarding across North America. And as we look at kind of the relevant service lines, or look at our various service lines in their relative performance, our core business has actually proven to be the most durable, at least at this point, through the cycle.
But as we come back to forwarding more broadly than we're looking at domestic forwarding, which we just described as our core business as well as international forwarding, which we do, you know, several hundred million dollars worth of that business. But that is the business that has been more sensitive to this economic cycle. So I want to add that our democracy should be perceived as a independent and capitalism.
and ocean in particular on a comparative basis. And I'm going to divert here just for a second. Historically, ocean was the smallest.
service line within our business appeal of the kind of relative contribution.
It was really only through the pandemic and COVID and all the supply chain disruptions and everything that happened at the ports and and all of the challenges that came out of that is where we had this.
pop for lack of a better term that took place in and around ocean services over an 18 month period. So, you know, we had a, you know, a nice.
that took place in and around ocean services over an 18 month period. So we had a nice, you know.
opportunity set within what was going in the market that we were able to participate in significantly.
that within what was going in the market that we were able to participate in significantly. And.
So we were happy to have that opportunity and through that process, generated significant cash flows, delivered the business and it really set us up in the strongest.
position the companies ever have been in, kind of from a balance sheet standpoint and all of those types of parameters. So are our numbers down, kind of on a comparative year-over-year basis? Yes, and they're down significantly, the numbers show that. But if you put it in context.
Our March numbers are meaningfully higher for this quarter-ended March than they were for the quarter-ended March of 19, which was the last.
Pre-pandemic March quarter we have to look at.
pandemic March quarter we have to look at. So we're
you know, trending well ahead of where we were historically for the March quarter and in this interim anomalous period, you know, we generated a significant amount of cash flow that we were able to put to good use in de-levering the business and buying back our stock.
That's helpful. Thanks for that. I guess maybe you're just following up on the international side. Are you seeing anything that worth your any color on China reopening side? I think it is. You know, we're...
I guess I'll use a banking term out here sometime, green shoots, right? I think we're seeing some green shoots where we're optimistic, but I think we certainly have a ways to go as well. So we are, I think, cautiously optimistic, but we're certainly not going to return to the...
you know, it's not.
You know?
If not this calendar year, next calendar year, but I think we'll be working in the right direction. It's just the rate at which we achieve that recovered. Whatever.
If not this calendar year, next calendar year, but I think we'll be working in the right direction. It's just the rate at which we achieve that recovered. Okay, Greg. Thank you. Appreciate it.
Thank you very much. Your next question is coming from Mr. Jeff Kaufman from Vertical Research Partners. Jeff, your line is live.
Thank you very much. Che Bon, hey God, how are you? Good, thank you.
Well, first of all, congratulations in the challenging operating environment. I want to ask two questions if I can. One kind of general market and want a little more financial specific product. You know, bottom, just kind of curious. We all talk about normalization and kind of where we're going back to and nobody's really sure. But I'm just kind of curious, your view, you know, is the flood waters are receiving here.
and we're going back to some semblance of normality. I'm just kind of curious how the coastline looks different to you, whether it's industry specific or product specific. You know, what's different on the other side of normalization now from where we started?
Well, that will be interesting to see. I mean, I think there's certainly a higher sensitivity to...
Well, that'll be interesting to see. I mean, I think there's certainly a higher sensitivity to...
Asia sourcing strategies, there's a lot of talk and narrative around nearshoring, you know, more business and, you know, potentially in and out of Mexico. But, you know.
assuming all those things are true and assuming even everybody wants to go execute those strategies.
You know, it's not going to be binary. It's not going to be a flip of the switch. That's even those strategies are going to take a long time to evolve and even if people want to diversify, I don't think that means they're going to, you know.
We need Asia, you know, that seems pretty extreme, you know, maybe, you know, some shippers will, but on an aggregate basis, you know, I just don't think that's reality of how things will play out.
But that's certainly an area of interest, right? To kind of watch that happen or to see how quickly and deeply there's a return. You know, whether the action follows and they're right, you know, whether we're going to see more manufacturing return to the states, you know, obviously that would be a big An, the extension of Art, the same as we do now.
a positive for us I think in terms of our you know that would really be kind of in our sweet spot in terms of our domestic foreign business so I think that would you know I'll be a positive for us to the extent those types of dynamics unfolded.
Okay, and then more of a detailed question for Todd. You know, this was one of those rare quarters where earnings looked great and EBIT dialed a little light relative to what we were hoping for. And the source of it was the DNA part of it, which was a couple million dollars less than the run rate you'd had.
the previous couple quarters. Could you talk a little bit about that? Sure, sure. You know, we, you know, basically was trademark names that we ended up writing off. We've been converting stations from their, you know, previous, you know, clipper. It was, you know, wheels.
But you know, as we bought those companies to begin with, we kept their names for a while. And as we transition them and over to radiant stores, you know, and that takes a period of time and we end up like relabeling the trailers and things like that. We end up writing off the trade names associated with that. With the conversion to radiant stores.
to the rating. Right, and apologies, I'm just going through the release as we speak, but where would that write-off have shown itself? Well, it's in the amortization.
It's the it's the amortization the trade
Yeah, right, right. So the DNA is black. The DNA line is exactly, huh? Okay, I got you. All right. No, that was that was my questions. Congratulations guys. Thank you. Well, thank you so much.
Thank you, Jeff. And the next question is coming from Mike Vermut of Newland, capital Mike, your line is live.
So when we compare ourselves to 2019 versus current, how do you look at it? I guess the limit to look at is what?
What's your opinion of the freight market now versus 1919 wasn't a bad freight market and you know anecdotally
you've heard.
You know comments that this is one of the worst straight markets currently that you know that that many can remember so
What comparable freight market would you say were in now to get a good understanding of how we're really performing in a specific market?
Yeah, I don't know that I can tell you to another specific order because there's some season now. So I think March versus March is the right.
Kind of framework, but I think the point that you're pulling on Mike is worth re-emphasizing which is
you know, if this is our seasonally worse quarter historically and this is everyone acknowledges, you know, a pretty rough
freight market, if within that context, we're still doing $11 million of EBITDA and are debt-free. If this is the bad, well, that's pretty good for Radiance.
in terms of where we are. So as the market improves and as the economy improves.
Obviously, we see that it's some opportunity to get some left and the overall results as we continue to move forward.
So I'm not sure if that's entirely responsive to your question, but I think that's the best way I can come at it.
Yeah, that was when I was getting up after. And then on customer wins, how's the pipeline looking right now?
You know, there are puts and takes. So we are certainly winning new customers and new larger customers.
which is really great to see. At the same time, there are certainly customers, particularly in the ocean segment, that when things were so, when the market was so, so tight and what I'll call, you know, some of the larger service providers out there.
weren't servicing their accounts and shippers were.
or kind of seeking new service providers, you know, in the firefight to cover their loads, you know, we picked up some incremental customers, but it turns out they just wanted to date and not get married. So, we dated while they were in the dating mood, but as the market has softened, some of those types of customers have.
kind of retransed back with their historic trading partners. And you're aware a lot of the asset based at, in this market environment, a lot of the asset and intensive companies.
have excess capacity, right? So they're, you know, they're, they're kind of price takers right now. And is what's keeping the pricing, you know, press down in this environment. So, you know, until we can get a little better supply demand balance between volumes and capacity.
you know, we're going to bounce along here, but.
you know inevitably these things, you know, right themselves over a relatively short period of time and that's what we would expect here.
And then last question, do you feel like you get the sense of pricing is bottoming out here? Give or take.
So looking forward to the next few comoders.
Can I just clarify a few things here, just sort of on the balance sheet, the double negative here. So you're talking about a debt of 17 million, that means like positive net cash of 17 million, right?
Correct. So yeah, so at least for us net debt means debt less cash. So we had more cash than debt. Well that's how I read the balance sheet. I just wanted to make sure I wasn't missing anything.
seasonal trough quarter and what you seem to be saying and I seem to be hearing from other people is a is a trough
macro, to the extent that you guys were able to do 11.5 million EBITDA and 17 cents share in adjusted net income, is it fair to say that in some future 12 month period not very far out that you guys would be comfortable annualizing that or is there, you know,
a little more macro managing to do? Well, I would say in a normalized environment, we would be annualizing as something north of that.
Okay. Okay. No, I mean, look, it's great. I'm looking at 60 cents in earnings and 47 million and you're saying normalized 50 to 60.
in a normal environment. I think a normal environment might look a lot better than this. And just on the acquisition side, I'm not sure if we covered it here, but what's the receptivity of your targets? Like, do they have unrealistic multiples? Are they saying, geez, you know, we made a mint in the last couple of years, and we're ready to...
to call it a day. I know people are getting older, but are people just like after how relatively easy it was for two, three years of they sort of just don't feel like fighting the fight? Well, I think I have to go back to my pendulum analogy, right? So it was more difficult to, at least for us, it was more difficult to...
power is, you know, was kind of centered to any of those types of conversations. And, you know, here we are back to our pendulum again. Well,
Similarly, these near-term quarterly results for businesses likely aren't representative of normal outside of our own world just because of the dynamic and what's going on. So it's not necessarily the...
These haven't necessarily been the easiest markets to transact in. With that said, I would say I'm really happy with the disciplined approach we have had and we didn't go do a lot of acquisitions at high multiples and really leverage up our balance sheet because we would likely be having a significantly different conversation on this call.
and sitting here today, I'm really glad that we've...
sitting here today, I'm really glad that we've taken the slow and steady wins the race approach.
Well, it's up 10 times earnings and six and a half times evit dye. I think we can be patient. Yes. Don't need to push anything to make money here, hopefully. Yeah. Well, I mean, to your point, you know, buying back our stock is just a great option. I already bought your stock. Everyone on this call bought your stock. So we all agree.
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.
extensive global network of service partners to continue to build on the great platform we've created here at Radiant.
tuck-in acquisitions and stock buybacks.
continue to create shareholder value. With that, I'll offer my thanks and thank you for your continued support of radiant logistics. Thank you everybody. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.