Q1 2024 Radiant Logistics Inc Earnings Call
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This afternoon, Bohn Crain, Radiant logistics, founder and CEO and Radians, Chief Financial Officer, Todd May Comer.
We will provide a general business update and discuss financial results for the company's first fiscal quarter ended September 30th 2023.
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.
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 assumption of assumptions about the company that may cause the company's actual results or achievements to be materially different from the results or achievements expressed or implied by such forward looking statements.
While it is impossible to identify all the factors that may cause the company's actual results or achievements to differ materially from those set forth in our forward looking statements.
Such factors include those that have in the past and may in the future be identified in the Companys SEC 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 Radiant founder and CEO Bon Crane.
Thanks Angela.
Good afternoon, everyone and thank you for joining in on today's call.
Our results for the quarter ended September 32023 continues to reflect the difficult freight market is being experienced by the entire industry as well as our own operations.
The confluence of shippers continuing to manage through elevated inventories reduced imports and slowing economic growth has had a cascading effect across virtually every mode of transportation.
As in the prior quarter these market conditions negatively impacted not only our results, but also the year over year comparisons to our record results for the prior year period.
With that said, we remain optimistic that we at or near the bottom of the cycle and would expect markets to begin to find their way to more sustainable and normalized levels in coming quarters.
Notwithstanding the tough year over year comparisons were very proud to report that we generated $9 $2 million and adjusted EBITDA.
And almost $8 million in cash from operations for our quarter ended September 30.
In addition, we continue to enjoy a strong balance sheet, finishing the quarter with approximately $36 million of cash on hand, and nothing drawn on our $200 million credit facility.
And as we detailed on our press release, we continue to allocate capital in support of our stock buyback program as well as converting our agent stations to company owned stores.
As we did with our del Rey transaction in Florida.
As previously discussed we believe we are well positioned to navigate through these slower freight markets as we find our way back to more normalized market conditions.
At the same time, we believe our patient and disciplined.
Well be rewarded as market conditions become more conducive to our acquisition strategy.
And we have ample dry powder to become more active on the acquisition front.
The opportunity presented itself.
Looking ahead, we will remain focused on delivering profitable growth.
A combination of organic and acquisition initiatives and thoughtfully re levering our balance sheet through a combination of agent station conversions.
<unk> tuck in acquisitions.
Stock buybacks.
Through this approach we will continue to scale our business leveraging our best in class technology, our 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.
With that I'll turn it over to Todd may come to our CFO to walk us through our detailed financial results and then we'll open it up for some Q&A.
Thanks, Paul and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the three months ended September 32023.
For the three months ended September 32023, we reported net income attributable to radiant logistics of $2 million $622000 on $210 8 million of revenues or <unk> per basic and five per fully diluted share for the three.
Three months ended September 32020.
Right.
First for September 30 of 2022 reported net income attributable to radiant logistics of $8 million and $433000 on $331 million of revenues or <unk> 17 per basic and fully diluted share.
This represents a decrease of approximately $5.811 million of net income over the comparable prior year period or 68, 9%.
For adjusted net income, we reported $6 million $549000 for the three months ended September 32023, compared to adjusted net income of $13 million and $481000 for the three months ended September 32022.
This represents a decrease of approximately $6 million $932000 or <unk>, 51%.
For adjusted EBITDA, we reported $9 million $167000 for the three months ended September 32023.
Adjusted EBITDA of $18 million $669000 for three months ended September 32022.
This represents a decrease of approximately $9 million $502000 or <unk>.
The 59%.
With that I will turn the call back over to our moderator.
Associate any Q&A from our callers.
At this time, if you would like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star two.
Once again that is star one to ask a question, we will pause for a moment to allow questions to queue.
Our first question comes from Elliot Alper with TD Cowen. Please go ahead.
Great. Thank you guys. This is elliott on for Jason I was hoping you could put some more context around the revenue declined sequentially in the quarter, maybe between the different business units.
I know last quarter, you pointed to kind of a slight uptick on the ocean booking side I guess, how did that play out and maybe what are you guys seeing on the ocean side of the business.
Okay.
Thanks.
Ocean remains.
Soft.
For us, particularly those compared to the prior year period.
Yep.
I think for everybody what the narrative would suggest as there is some.
Modest up tick uptick in imports that are a little more activity on the west coast, but on a comparative basis, its still down and I think we expect it to be down for you.
A good bit.
Yes.
Blank sailings from the steamship lines and they are under.
While their coffers are full of cash I think volumes are certainly down and they've got.
A lot of the excess equipment at this point that.
They'll have to figure out what to deal with on.
Kind of on that side of the equation, but.
We don't see any.
I think meaningful increase in ocean.
Near term the.
To call it a muted peak might be a little bit of an understatement.
But with that said.
We are seeing volumes come back ever so slowly or at least not continuing to decrease.
Our.
Looking at it on a division by division basis, or kind of that type of conversation.
Our kind of core forwarding operations continue to kind of carry the day as well as Canada and those offer in our operations up there.
Continues to be.
Meaningful contributors to what we're doing while our ocean and brokerage business.
Brokerage.
Again, just as a reminder, we define as both our intermodal and truck brokerage business.
That's obviously been soft in this market environment.
Having said that I would take us.
To just give a little bit of a shout out to the progress, we're making in Kansas City with the truck brokerage team that we were able to onboard there.
Coming out of the wake of what went on with yellow and they stood up a truck brokerage team in Kansas City.
And while that's a.
Effectively.
Yeah.
Organic start for us.
Starting that business from a standing start it's.
Kind of far out seeding expectations in terms of their kind of their growth and trajectory in the path to profitability with the team that we've put in place there so where we're really excited.
For that and what I would characterize as kind of expected incremental opportunities in the truck brokerage space Theres a lot of.
US in the marketplace right now and the.
The wake of convoy and others.
Others.
Who recently gone down and others that are kind of expected a rumored to be under under pressure and so we are.
We're.
Seeing what opportunities may present themselves out of some of those dynamics.
As we move forward.
So again to recap our core forwarding business along with the.
The team in Canada continues to.
Kind of lead the way for the organization.
And while our ocean and brokerage businesses are profitable.
Profitable like it would be a lot more profitable.
The market gets better.
Yeah, no absolutely and maybe going off an earlier point I know you guys do some LPL business I mean can you talk about how that performed in the quarter, maybe just your high level thoughts on how some of the LPL consolidation effects you're offering.
We don't do a lot of what I would call.
Pure deferred L. T L. Moore, our LTE al was more ex expedited time definite so we weren't necessarily impacted to the good or the bad.
Around what's going on in and just kind of within the L. T. L community. There's obviously, some clear winners and clear losers.
In connection with what kind of yellow.
After their so not a not a significant or meaningful kind of direct impact to us from that.
What's been going on in the L. T O space.
Understood and then maybe just last question and then I'll hand, it over I guess theres been a lot of mixed reporting on the Chinese economy. I know you guys have location in Shanghai will be curious to get your thoughts on maybe the outlook or anything youre seeing on the ocean bookings side in China. Thank you.
It still remains soft I think we're seeing a modest uptick and it kind of orders from our customers.
While at the same time, we're also.
<unk>.
Some of our customers' customers.
Begin to pivot to either southeast Asia, or Mexico, which we're all reading and hearing a lot about.
So the volumes.
Our.
You know are anemic relative to historical levels, but.
But yes.
Certainly China is not going away, but it remains soft.
Yeah.
But I think as everybody on this call knows either right now will typically be just the gogo time.
We would be in the absolute highest peaks.
Peak season right now.
And it's you know, it's muted as fast and they were gonna be into Chinese new year. So you know.
We're not expecting any.
Meaningful divergent from this.
Got it.
Dampen Ocean market.
At least.
Looking to next year's peak season here in the next fall to see what next fall looks like.
Helpful. Thanks, Bob.
Alright, you bet.
The next question comes from Mark Argento with Lake Street. Please go ahead.
Hey, guys, Yeah, just a couple of quick ones, one I guess and.
Our balance sheets in fantastic shape.
Are you starting to see any opportunities out there do you think we need a little more distressed set in before.
You'll start popping, but any kind of.
Overview on the M&A market right now.
Well I think there is.
We're certainly as engaged as we can be and we're.
We're hopeful.
Hopeful.
We'll have an opportunity to get some things done.
Sure in the coming quarters at the same time we're.
We're going to continue to be.
Got it.
Thoughtful in our approach.
Yeah.
But I think there is going to be a lot of opportunities.
Hopeful there'll be lots of opportunities.
You know that we can consider.
The fact is I think you know.
At least a fair number of people in our space.
<unk> had were levered up and has there been any at their balance sheets geared at kind of higher earnings levels.
And so as everything softened up.
While they might have thought they were three or four times levered. They may now find themselves at 5% or seven times, Levered, which isn't a particularly.
Particularly good place to be in.
And the current bank market. So there is really just not as many folks.
Out there that are actionable to do deals and so.
We're quite.
Happy are appreciative to be in the position we are with the financial flexibility.
That we have.
At the same but having said that.
We still believe our stock represents a pretty compelling.
No.
Use or a place for us to put our capital as we think about capital allocation. So while we're looking at a number of things and we will you know we're.
Certainly.
Rent ready.
The action if things line up right.
Work.
Our feelings wont be hurt if we're continuing to buying our own stock at what we think are really attractive valuations.
Okay.
Maybe Todd can you just remind me kind of whats the typical.
Conversion of EBITDA.
EBITDAR or adjusted EBITDA to free cash flow given the capital structure you have right now.
Well I mean.
I think the best if you are trying to track yet I mean I think.
Adjusted net income is a good proxy for free cash flow.
Probably the best the best.
The best metric.
Yes, I think the.
Probably.
Plus or minus at Craig Todd, but.
I think what he was asking for is effectively what are we going to be spending on capex, which is for us is largely technology.
Plus or minus <unk> $5 million handle would be kind of.
Normalized technology.
Being capitalized.
$5 million, a year or over what period, yes.
<unk> 5 million a year.
Okay. So like this quarter you guys did adjusted EBITDA at 9.2, I'm looking for adjusted net income just make up six five.
As you know.
And in a quarter or whatever five divided by for us.
So kind of 5 million Bucks roughly would probably be a good kind of free cash flow.
So just over half of EBITDA, you're turning into free cash.
Yes, yes, I think that I think that.
That's about right.
That's fair.
And kind of where we are.
I guess I'll put a big accurate by that just in the context of I don't think anybody would characterize the current environment as being normalized but in the kind of in the current.
Where we collectively are in the cycle I think that's reflective of.
The profile and kind of cash flow characteristics of the business.
In this down market, but we would expect it to be.
Yes, obviously higher than that.
But.
A little less of a headwind.
Yes, I mean, if you can make $15 million to $20 million in free cash or generate 15 to 20 million in free cash in this environment.
And obviously, you've got a great balance sheet. So you guys are in great shape, but I appreciate it thanks for the questions guys.
The answers on it.
The next question comes from Jeff Kauffman with vertical research partners. Please go ahead.
Hey, gentlemen, how are you.
Yes, Jeff.
Alright, good couple.
That's fair.
Could you talk a little bit about what the impact of the <unk> acquisition is going to be to the financials I guess since it's an agency or former agency tuck in that we're not going to see a revenue impact, but we will see more of a margin impact can you set me straight.
That particular transaction is.
Pretty small in the scheme of things so I wouldn't look for you.
Any meaningful impact to that particular transaction.
But I think it is indicative of kind of.
Not in terms of dollar value, but we do expect.
To have an opportunity to convert more agent stations to company owned stores.
It's a great question, Jeff because I was going to tease you a little bit so for everybody on the call. Jeff is notorious for modeling in M&A transactions into this guidance. So he's always high on guidance because this model against M&A transaction itself.
So don't model any M&A transactions, Jeff just give us the baseline.
Well I am just skating to where the puck is going to be not where it is.
Yeah.
So I guess on that topic.
Normally in a normal environment.
Second quarter seasonality.
I see revenue is up about 4% to 5% sequentially from first quarter.
And a little bit of deterioration on the net revenue margin because of mix.
Given your comments.
On the kind of math peak season that we're seeing.
Would you guide is the wrong word, but would you convince us to be above or below that normal range or do you think we should think about this is <unk>.
Muted, but normal transition from from fiscal <unk> to fiscal <unk>.
We're in such kind of four and territory I am not sure I would rely on kind of those historical trends.
Right now.
Mhm firstly.
Yes.
We'll see how it plays out, but I would kind of anticipate.
US being relatively flat on a sequential basis.
Here through the end of the year, and then likely a softer quarter ended March.
Okay and then.
Building back from there.
Maybe maybe give you something fun to talk about here.
Been a lot of discussion about near shoring and re shoring and companies kind of moving supply chains around.
I know in Asia, It's resulted in some some Chinese based manufacturing going to say Vietnam.
Or or Thailand, or Cambodia.
Can you talk about where you're seeing the impact of re shoring, whether it's on the international side, whether its say things going into Mexico, and then coming into the U S through your networks.
Just give us an idea of what you're seeing on that side.
Yes, I think I think the short answer is yes right.
Both the both of them.
And.
Even before Covid and all in kind of the more recent challenges those trends were occurring there.
We're always kind of historically have been in this environment, where manufacturing is seeking.
Lower cost labor and all of that type of stuff.
So.
Mexico and Southeast Asia.
Ben.
Okay.
Ever so slightly taking share away.
From China over time.
But I think what we're seeing is.
An acceleration of some of those strategies.
That kind of tipping more.
Even more heavily towards Mexico.
In.
And.
Got it supply chain strategies.
With that said.
No.
I don't want to give the impression.
We would expect the turning off the lights in China in a straightforward if theyre going to summarize it is still going to be.
An extraordinarily large market.
Jordan early large opportunity set that we would expect to continue to participate in so.
Our conversations right now are more around what do we need to do to be to.
B in South East Asia, B in Mexico to support.
Our existing and prospective customers as their as they are executing those types of strategies.
Alright, and then one last one if I could.
There's been a lot of movement.
I'm going to focus more on the domestic freight market the domestic forwarding domestic brokerage.
Okay.
Yellow.
Went down you were opportunistic came and swept up.
Their logistics and brokerage.
We've seen some trucking companies and brokers go out of business.
In recent weeks a lot of stress in the marketplace.
Where is this created new opportunities for you that maybe six or eight months ago, we might not have been talking about.
Well I think for us it really does create a little bit of an interesting.
Environment and it's.
It's kind of.
Too early.
No.
It's way premature to be.
Dancing in the end zone, if you will but but we seek.
We've got a strong balance sheet, we've got the technology platform, we have carrier relationships.
And so as you know.
You know as.
Some of these folks are.
Coming on hard times, we're in a great position to.
Hopefully receive some of them and some of that business into our into our platform.
And we even.
Knock on wood have a great Little case study in terms of what we were able to do in Kansas City with that team and how quickly we were to bring that.
Bringing that team on board and begin to support those customers. So.
We've been spending.
Yeah.
I have.
Recently been spending it.
Unusual amount of time on zoom calls.
With.
Individuals looking for a new home right and.
And so we will see kind of how that plays out over time.
Sure.
At the same time, we're not the only platform out there to seize that opportunity set so.
Hopefully, we get kind of our share of opportunities. We think we've got a unique.
Value proposition and I guess, one other aspect of this that I will call out because I think it's really interesting.
Lot of these.
Folks that might be looking for a new home out there they've got their historical customer relationships.
Where they presumably we're selling truck brokerage services.
If they.
Cash there are lots with radiant not only can they sell truck brokerage capabilities, but they can sell international forwarding. They can sell intermodal like yourself customs brokerage they can sell Mexico and Canadian Cross border. So we.
Thank you.
It represented an attractive platform for some of these folks who are coming out of these distressed truck brokerage operations with kind of a broader platform.
A more robust suite of solutions.
They can offer back into their account.
Alright, Thank you very much and congratulations.
Thanks, Jeff.
The next question comes from Kevin <unk> with Thompson Davis. Please go ahead.
Hi, Bob Hi, Todd Kevin on for David You guys.
Good thank you.
Actually no.
Maybe one thing that I wanted to kind of dive into was.
Looking at adjusted gross margins for you guys.
Pretty much been a consistent.
Consistent step up in the last few quarters and I was wondering how.
How do you guys think about that and what.
At least visibility that you guys can maintain these levels moving forward.
Sure.
Well I mean, a lot of it.
We're comparing against prior year right and in the year ago period Ocean was a bigger piece of our business and ocean revenues, which had been small margin.
Went from around <unk>.
<unk> 9003, eight for shipment this last year over year quarter.
It's really the product mix. So there is a much bigger piece of domestic which is higher margin characteristics.
Results in the overall margin.
We don't want to say composite margin.
So I think what Youre seeing now will continue to see this.
First margin characteristics.
And this slower market.
Jim maybe a slightly broader answer to that question you know.
We always try to think about the business in terms of growing our absolute gross margin dollars and getting as many of those gross margin dollars to the bottom line as we can.
So you know in our comparative prior year periods, we had.
Lower margin.
Ocean, and we had lower margin air charter business.
And so with that.
Not in this current quarter.
What we're seeing is something that it does.
The domestic.
Margins less dilutive by some of these lower.
Margin modes or service lines.
But at the same time, our absolute gross margin dollars are down so I would although it may sound a little counterintuitive I.
I would rather have lower gross margin percentages of more gross margin dollars to get to the bottom line.
So that's kind of about kind of a long way of giving them more.
I guess comprehensive response to your question, but.
Got it.
If your questions were targeted towards how should we be thinking about modeling kind of upcoming quarters in terms of margin characteristics. I think this quarter's margin characteristics are indicative of what we would expect for the next several quarters.
Until we see some lift in ocean.
Or if we get some surge in <unk>.
Project.
Which is entirely possible given the state of global affairs with ongoing dynamics in.
Israel in Ukraine.
No. That's that's very helpful.
And maybe just to kind of circle back one last time on kind of just the macro as well.
I think you guys Express site.
We're pretty much along the right at the bottom and I was wondering.
Do you see that gives you that indication may be that we're kind of at the bottom.
Yeah.
So I hope.
Every Monday staff calls with each of my operating divisions.
Hi.
Asking these very questions every literally every week, so I think I've got a pretty good pulse on got it.
How they are feeling kind of what kind of feedback they are getting with our end customers.
Yeah and.
So I think thats, what I'm, giving you is the best reflection based upon.
Or kind of the team and their engagement with the end customers and in feed.
Feedback.
So I think that's the.
Got it.
The best answer I can give you.
Oh, that's right.
Appreciate the time guys.
Yes. Thanks.
It appears we have no further questions at this time I will now turn the program back over to our presenters for any additional remarks.
Alright. 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.
An extensive global network service partners to continue to build on the great platform. We've created here at radiant.
At the same time, we intend to thoughtfully re lever our balance sheet and through a combination of agent station conversions synergistic tuck tuck in acquisitions and stock buybacks.
Through our 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.
For listening and your support of Radiant logistics.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
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