Q1 2025 Radiant Logistics Inc Earnings Call
Speaker Change: This afternoon, Bohn Crain, Radiant Logistics founder and CEO and Radiant's Chief Financial Officer, Todd Macomber, will provide a general business update and discuss financial results for the company's first fiscal quarter ended September 30, 2024.
Speaker Change: Following their comments, we will open the call to questions. This conference is scheduled for 30 minutes.
Speaker Change: 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 Change: The company has based these forward-looking statements on its current expectations and projections about future events.
Speaker Change: 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 those results or achievements expressed or implied by such forward-looking statements.
Speaker Change: In addition, past results are not necessarily an indication of future performance.
Speaker Change: Now I'd like to pass the call over to Radiance founder and CEO Bohn Crain.
Thank you.
Bohn Crain: Good afternoon, everyone, and thank you for joining in on today's call.
Bohn Crain: While the slower rate markets persist, we continue to deliver solid financial results and generated $9.5 million in adjusted EBITDA for the fiscal quarter ended September 30, 2024.
Bohn Crain: Which is generally in line with results from the comparable prior year period, as well as our most recent previous quarter ended June 30, 2024.
Bohn Crain: And although we believe our industry will likely continue to face market headwinds into 2025, we do expect to benefit from project-type opportunities over the near term that should fortify our results while we wait for a more durable, broad-based recovery.
Bohn Crain: 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.
Bohn Crain: At the same time, we remain focused on delivering profitable growth through a combination of organic and acquisition initiatives, and thoughtfully relevering our balance sheet through a combination of strategic operating partner conversions, strategic tuck-in acquisitions, and stock buybacks.
Bohn Crain: Through this approach, we believe over time we will continue to deliver meaningful value for our shareholders, operating partners, and the end customers that we serve.
Bohn Crain: We made good progress in this regard over this last quarter with the acquisition of Texas-based Foundation Logistics and the conversion of our Michigan-based Strategic Operating Partner location, Focus Logistics.
which is combining with our existing radiant operations in Detroit.
Bohn Crain: We believe these two transactions are representative of our broader pipeline of opportunities.
Bohn Crain: House, which includes both greenfield acquisitions, i.e. companies not currently part of our network, as well as acquisition opportunities inherent in our agent-based forwarding network where we can support our current operating partners in their exit strategies.
We look forward to providing further
Speaker Change: With that, I'll now turn it over to Todd Macomber, our CFO, to walk us through our detailed financial results, and then we'll open it up for Q&A.
Todd Macomber: Thanks, Bohn, and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income, adjusted EBITDA for the three months ended September 30, 2024.
Todd Macomber: For the three months ended September 30, 2024, we reported net income attributable to radiant logistics of $3,376,000 on $203.6 million of revenues, or $0.07 per basic and fully diluted share, which includes a million dollar gain on litigation.
Todd Macomber: For the three months ended September 30th, 2023, we reported net income attributable to Radiant Logistics of $2,622,000 on $210.8 million of revenues or $0.06 per basic and $0.05 per fully diluted share.
Todd Macomber: This represents an increase of approximately $754,000 net income over the comparable prior year period, or 28.8%.
Todd Macomber: For Adjusted Net Income, we reported $7,883,000 for the three months ended September 30, 2024, compared to Adjusted Net Income of $6,549,000 for the three months ended September 30, 2023.
This represents an increase of approximately $1,334,000, or approximately 20.4%.
For Jeff Dibbadaf, we reported $9,452,000.
for the three months ended September 30th.
2024.
Todd Macomber: compared to adjusted EBITDA of $9,167,000 for the three months ended September 30, 2023. This represents an increase of approximately $285,000 or 3.1%.
Speaker Change: With that, I will turn the call back over to our moderator to facilitate a Q&A from our callers.
Speaker Change: Thank you very much. At this time we will be conducting our question and answer session. If you would like to ask a question please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions.
Speaker Change: Thank you. Your first question is coming from Jason Seidel of TD Cowan. Jason, your line is live.
Jason Seidel: Thank you, Arthur. Bohn, Todd, afternoon, gentlemen. A couple of quick questions.
Jason Seidel: A couple quick questions here from my from my line. I guess number one you talked a little bit about that pop-up work
Jason Seidel: Where did it come from? Is this being generated from the retail side or is this maybe storm related?
Speaker Change: Sure. B is the answer to the question, storm related. So, you know, as
Speaker Change: in some previous quarters, we've had opportunities to respond to humanitarian, natural disaster type situations. And so the hurricanes that impacted the Southeast are creating some
Speaker Change: It's turning out to be the recurring, non-recurring revenue line item as those opportunities continue to present themselves over time.
Speaker Change: So, you know, I think one of the points to be made is, you know,
Ed- This show.
Speaker Change: quite a bit of challenge out in the marketplace for a lot of the transports, but in part, thanks to the diversity of our portfolio and kind of all the different areas that we can play.
Speaker Change: That, you know, we're, we're kind of bearing reasonably well in a, in a tough environment.
Speaker Change: And we wanted to, without getting into the details, we wanted to foreshadow what we were expecting.
Speaker Change: You know, a kind of a stronger than might not otherwise be expected.
quarter end of December.
Speaker Change: You know, it's not necessarily reflective of the new run rate, but we're going to have some project type business landing in Q4.
Speaker Change: excuse me, quarter ended December 31, our fiscal Q2 that that's going to help kind of
Help us show really well here in the coming quarter.
Speaker Change: That makes sense. The other thing, you know, I was at a lunch with clients today and sort of expectations
Speaker Change: on the ocean side for pricing sort of came up. I wonder your thoughts because you know obviously we were so high for so long with some exogenous events I think driving up some of the ocean pricing. What are your expectations as we look in the 25?
Speaker Change: It's going to be, you know, it's always interesting. It seems, you know, I think near term prices are going to remain relatively robust.
Due to, you know, people trying to get ahead of.
Speaker Change: potential tariffs, as well as some of the Red Sea activities. So I think relatively near term, and I think there's a lot of things that would support prices, you know, capacity will stay relatively tight, kind of how durable that is after we kind of
Speaker Change: Get kind of past the tariff dynamics and hopefully things settle down in the in the Red Sea, you know, I don't so
I think.
Short term, yes. Longer term is a TBD.
Speaker Change: Okay, understood. And you brought up tariffs. I mean, is there any feedback from your customers to was there any pull forward in anticipation of a potential Trump victory? What should we sort of expect going forward?
Speaker Change: Yeah, I think generally speaking there has been a kind of a pull forward.
And.
Speaker Change: and we'll see kind of how that plays out over time. But I do think part of what we're seeing, not just us, but just kind of more broadly what we're seeing is people, you know, that were hedging their bets a little bit.
Speaker Change: And, and again, who knows what part of all of that narrative is posturing versus something that's really going to be put into put into motion.
Speaker Change: So, you know, we'll try to stay nimble and support our customers as best we can, kind of responding to those dynamics, which I'm sure will be lively.
Speaker Change: understood and what want to get back to the quarter under ending December here coming up giving your project work how should we think about EBITDA margins on a sequential basis
Speaker Change: Thank you very much your next question is coming from Jeff Kaufman of Vertical Research Partners. Jeff your line is live.
Thanks. Hey guys, congratulations.
It sounds like some exciting opportunities in 4Q.
Speaker Change: So good luck with that. I had just two questions that Jason didn't ask. Number one, Todd, I think you mentioned a million dollar litigation gain. Was that in other income that explains the differential in other income? Yes, that's exactly what that is. Correct.
Speaker Change: All right, and an ad back in our adjusted EBITDA number. So we back that out and kind of the numbers as presented.
Speaker Change: Yeah, no, listen, some quarters is bad. Some quarters is good. That's that's always nice to see And then could you help me understand it looked like there was a big move Downward and commissions this quarter relative to kind of the run rate It was at in previous quarters and a small jump in personnel cost It looked a little too big to be explainable by okay. Well, we've bought in some agencies I was just wondering, you know agency commissions seem to be down almost 700 basis points Versus you know where it was running. So what was going on with the agency commission line?
Speaker Change: I mean that well obviously it's you know it's a it's a mix of product is a piece of it and the other piece of it is is we bring in you know so not only do we do the conversions right but in addition to that we bringing in the other stations that weren't part of our network for instance foundation is an example where you were bringing in the revenue bringing the cost sales
and there's no, you know, there's no commission paid.
So that's.
Speaker Change: Those are the big drivers in the reduction in the overall commissioning events. And if I remember correctly, and maybe this would also be somewhat helpful to it, you know, in the
Comparable year ago, period.
One of our agency stations actually had some significant charters.
themselves.
Speaker Change: and so there was some kind of non-recurring project charter type business at the agency level in the year ago period and that would also explain
Speaker Change: kind of a part of that reconciliation that you're thinking of this.
Speaker Change: Okay, no, I just I know it jumps around a little bit quarter to quarter. I was just trying to reconcile. So the way I would interpret that is if you're doing more charters in 4Q, maybe this is a little elevated and that goes to your point on you know higher gross margin dollars, lower revenue.
or I'm sorry, lower margin.
Yeah, lower margin percentage.
Okay, and just one last question if I can.
Speaker Change: This past quarter, you know, maybe not enough to move the whole needle, but but encouraging, nonetheless, where would you say you're seeing more green shoots, whether it's a geography or a vertical or something like that?
Speaker Change: I think we're definitely seeing kind of a tightening of capacity on the West Coast largely influenced by
Speaker Change: The kind of the ocean import activity that's going on. So I think we're definitely seeing a little bit of.
Speaker Change: Capacity tightening which you know has been part of the narrative for several quarters now.
The Roll.
Speaker Change: I think the ultimate question, we don't have a good answer for just kind of the, the durability, you know, whether this is going to be short lived or whether this will be more sustainable.
Speaker Change: You know, I'm, I'm hopeful that kind of a more, you know, business friendly tax environment will get, you know, corporate America investing and kind of growing again and all that kind of stuff, but it's
Bohn Crain, Todd Macomber, Unknown Executive
All right, well, thanks so much and congratulations.
Thanks. Thank you, Jeff.
Speaker Change: Thank you very much Jeff and the next question is coming from Mark Argento of Lake Street Capital. Mark your line is live.
Speaker Change: Hi, good afternoon, guys. Just wanted to follow up. Looks like you made a couple incremental fucking acquisitions.
Bohn Crain: You guys have done a handful this year. It looks like you're continuing to that pace. Any kind of incremental thoughts, Bohn, about what you're seeing in the marketplace?
Bohn Crain: These guys are kind of getting to the point where it's just time to back it in or value proposition is high What what's the thing that seems to be tipping Tiffany's over for you?
Speaker Change: I think that, you know, a combination of things, you know, Mark, you've been involved in the story, you know, a long time now and kind of this notion of the gray tail or kind of our agency partners as they're getting older and kind of approaching retirement age.
Just that whole
Speaker Change: The pipeline is maturing, no pun intended, and so just the frequency...
Speaker Change: is kind of natural, kind of that all those those conversations are accelerating. Uh, and we expect that trend to continue, you know, so we remain actively involved with, you know, a number of
Speaker Change: Operating Locations and we're excited to support them kind of when and if they're, you know, ready to transact. So that's part of what we're doing. And then kind of the, the other part, which is, you know, you know,
But as equally exciting is
the
Speaker Change: We've been pretty disciplined over the years in terms of our own thoughts around valuation and structure. And while we've always been kind of open for business, the market kind of had moved away from us for a period of time.
Speaker Change: But the market, you know, generally speaking, has kind of come back to us. So we haven't necessarily changed what we're doing or our approach or our thoughts or our philosophy, but the markets have just kind of come back.
Speaker Change: to us in a way where we can get deals done. And so we're really excited about that, you know, particularly if you think about
Speaker Change: The fact that we have an unlevered balance sheet, you know, many of our competitors balance sheets are actually.
Speaker Change: Out of whack and they're in, they're kind of a little bit of a penalty boxes. They're having to.
Speaker Change: kind of recapitalize and do a number of kind of awkward, you know, things to kind of steady themselves.
Speaker Change: And so, you know, in my mind, we can effectively double our EBITDA within our existing capital structure.
Speaker Change: And so that's really exciting. And I think it's, you know, at least I think that message is starting to sink in and why we're starting to see, you know, some, some positive and, you know, hopefully, durable, you know, lift in our stock price.
Speaker Change: All right, and just just to refresh memory in terms of the general structure that you guys have is.
Speaker Change: and some up front and then an earn out, maybe just refresh me in the
Speaker Change: Audience on that. Yeah. Yeah. So we would, you know, typically.
Our structure where we would.
Speaker Change: and we believe we can value and structure those in a way that is a win-win for everybody. And that includes the use of earn-outs where the sellers continue to have skin in the game for
Speaker Change: several years post-closing to ensure that the business continues to perform, and that helps kind of structurally mitigate against overpaying for a business in the case of underperformance.
I appreciate the update. Thanks, guys.
Thank you.
Speaker Change: Thank you very much. Your next question is coming from Kevin Gainey from Thompson Davis. Kevin, your line is live.
Hi, Bohn, Todd, recorder.
Maybe, I want to...
to see if you guys could remind us how...
You guys reacted with the first
Speaker Change: Or maybe and maybe how your customers reacted with the first round of tariffs that came back in the
Speaker Change: The first phase of that administration and how what that did to your business and how we might think about what it could do moving forward.
Well, I think we saw, you know, it's.
Speaker Change: there were a few a few things going on at the time right so
You know, there was a kind of a natural
Speaker Change: Pull forward where people try, you know, well anytime that these things happen there will be winners and losers right in some, you know particular product
Speaker Change: We'll be subject to tariffs and others might not. So it's a, it's not a one size fits all question. First, you have to kind of look at businesses or industry groups that are, you know, the subject of the tariffs to begin with.
Speaker Change: So that'll be part of the analysis. But for those affected players, they're going to be trying to construct solutions to mitigate their own exposures to the tariff. So that may
and there's
Speaker Change: A number of different things that can happen. It can it can take the form of trying to just
Speaker Change: Beat the clock and kind of get product move in advance of the effective dates of the tariffs. In other scenarios it might cause kind of a reconfiguration of the supply chain and cause
Speaker Change: you know, raw materials and sub-assembly, you know, workflows to get repositions into different parts of the world to try to navigate those exposures as well. And so we try to, you know, help execute those strategies.
Speaker Change: You know, kind of last time that all this was also happening in the face of
Speaker Change: the huge congestions and post-COVID hangover and all of that type of stuff. I don't know that what we're going to see next is going to be.
Speaker Change: I'm not sure history is a perfect kind of reflection of what we would expect here, because that was such a unique kind of moment in time, back when we were, we were kind of dealing with the shutdowns and the tariffs concurrently.
Speaker Change: But, you know, it's going to create challenges for shippers and we'll be here to help, you know, however we can.
And we'll see kind of how long the.
Speaker Change: The pressures remain on the West Coast ports in particular to kind of digest the volumes and
Speaker Change: I really haven't heard much of it as of late, but I would expect.
Um,
Speaker Change: We're housing capacity to get tight again, right? It loosened up a little bit and we were kind of going through a little bit of a, a D stocking exercise, but.
Speaker Change: If people are pulling forward, they got to find some place to put all their stuff, right? So, so I would see at least near term kind of warehousing capacity getting.
you know, precious again.
Speaker Change: That makes a lot of sense. That makes a lot of sense. Maybe you could also talk a little bit about...
Maybe specific in markets.
Speaker Change: Whether it be retail, consumer, maybe industrial, or something along those lines which are hearing from them.
Especially entering peak season, I guess, for the retailers.
Yeah.
Speaker Change: I don't, you know, I don't have a lot of color to add on an individual industry vertical, you know, I would, I would say, all in all, the market remains pretty darn soft.
Speaker Change: You know, outside of EECOM and EECOM exposures, you don't hear a lot of
chest thumping for many of the players out there.
Speaker Change: Ourselves including. We just happen to have kind of through the portfolio effect I was alluding to earlier.
Unknown Speaker You know, some, some
Speaker Change: Some opportunities to kind of do some some and be involved with some really interesting project type work.
Speaker Change: But, you know, across a lot of, you know, even things like
Speaker Change: Food and beverage and CPG, which are, you know, normally pretty steady, you know, on a comparable basis, even those markets have been approved to be soft, at least through our lens.
No, I appreciate the color. And Todd, I knew that.
Speaker Change: Q will come out. I just wanted to see what you guys had for operating cash flow in the quarter.
Unknown Speaker Good day.
Speaker Change: Think about free cash flow really trying to get the free cash flow, but yeah, I mean, it's really I mean, well, you know, I mean, I mean
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Speaker Change: and that cash would have become one of my blood. I think cash from operations for the Corps was near where it was $205,000 and we had big outflows of course with the acquisitions.
Speaker Change: Make sense? Appreciate the time guys. All right, thank you. Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now turn the call back over to Bohn for closing remarks.
Okay.
Thank you.
Speaker Change: Let me close by saying 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.
Speaker Change: to continue to build on the great platform we've created here at Radian.
Speaker Change: At the same time, we intend to thoughtfully re-lever our balance sheet and through a combination of agent-station conversions, strategic tuck-in acquisitions, and stock buybacks, continue to create shareholder value.
Through this multi-pronged approach, we believe we will continue
Speaker Change: to bring good value to our shareholders, operating partners, and the end customers that we serve. Thanks for listening and your support of Radiant Logistics.