Radiant Logistics Inc (RLGT) 2009 Q1 法說會逐字稿

Greetings. This afternoon, Bohn Crain, Radiant Logistics' Chairman and CEO, will discuss financial results for the Company's first fiscal quarter ended September 30, 2008. Following his comments, we will open the call to questions. This conference is scheduled for 30 minutes.

Before we begin the call, I am going to review forward-looking statements. This conference call may include forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended. 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 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 of 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, including those identified in the Company's recent annual report on Form 10-K, which is available on the Radiant Web site at www.Radiant-logistics.com. In addition, past results are not necessarily an indication of future performance.

Now, I'd like to pass the call over to Radiant's Chairman and CEO, Mr. Bohn Crain. Thank you, Mr. Crain, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining in on today's call.

It's amazing how quickly things change. Less than three months ago, everyone was talking about the impacts of $100 a barrel oil. Today, that's not even part of the dialogue. It's the economy, the credit crunch, the bailout, and most recently, Detroit. Shifting sands are the norm in our world today. Although we are in no position to celebrate, I do believe we are relatively well positioned, well-positioned as a non-asset-base provider with a scalable business model and able to flex our cost structure much more readily than our asset-based counterparts. Add to this our growth strategy, access to capital in these difficult markets, and demonstrated results, we think this sets us apart in today's marketplace.

With that said, we are aggressively monitoring the financial health of the underlying customers that we serve, how they are faring in this business climate, and their ultimate credit quality. This approach, at least to date, is working and working well.

For the period ending September 30, 2008, we delivered another solid quarter with revenues of $32.4 million, up 26.7%, and adjusted EBITDA of $806,000, up 88.8%.

When we acquired Airgroup in January of 2006, we had 34 stations generating approximately $50 million in revenues. Today, with the benefit of the Adcom transaction, we enjoy one of the largest footprints in our industry with over 65 stations across the US and are on a run rate to deliver approximately $4 million in adjusted EBITDA on $160 million in revenues. This is before any cost synergies associated with the Adcom transaction.

Even in this tough economic environment, we believe we are executing a strategy that will continue to deliver substantial revenue and earnings growth, which is a direct result of our unique value proposition that we are bringing to the table. One, through our status as a public company, we give the logistics entrepreneur the opportunity to work as shareholders and participate in the value that they help create. Two, we provide a robust platform in terms of people, process and technology, which is translating into better purchasing power with our vendors and more sophisticated e-Business solutions for our customers. Three, we provide a unique opportunity in terms of succession planning and liquidity to our station owners. We believe this is a winning formula, as evidenced by our ability to consistently deliver profitable growth.

Today, we will be discussing our financial results for our first fiscal quarter ended September 30, 2008. Then we will open it up for some Q&A. As we discuss our financial results, we will make reference to EBITDA and more particularly adjusted EBITDA, which excludes the impact of stock-based compensation and certain other non-cash costs, which we believe is an important metric for us. It's an important metric because our earnings -- it's important to understand our earnings trends without the impact of certain non-cash charges associated with purchase accounting and the amortization of the acquired customer relationship asset, as well as adjusted EBITDA as used by our creditors in assessing debt covenant compliance.

For the quarter ended September 30, '08, we posted $32.4 million in revenue, an improvement of $6.8 million or 26.7% over the comparable prior-year period. For the quarter ended September 30, '08, we also reported $106,000 in adjusted EBITDA, an improvement of $379,000 or 88.8% over the comparable prior-year period. Excluding $220,000 in restructuring costs associated with elimination of redundant international personnel and facilities costs, our adjusted EBITDA for the quarter ended September 30, '08 would have been a little over $1 million, an improvement of approximately $600,000 or a 140% improvement over the comparable prior-year period.

Net cash generated by operating activities for the three months ended September 30 was also on the uptick, as we generated $[1.0] million in cash from operations compared to net cash used from operating activities of $2.5 million for the three months ended September 30, '07. This change was driven primarily by an approximate $2.5 million decrease in Accounts Receivable associated with our Detroit operations, and relief from the garnishment actions we encountered in 2007.

Let me also spend a few minutes providing an update on our integration plans with Adcom. As I mentioned on our last call, both Airgroup and Adcom use the same transportation management system called Cargowise with Adcom integrated to Great Plains and Airgroup integrated to SAP for financial reporting. After benchmarking the alternative systems in terms of cost, functionality, and operational efficiencies, we have decided to move forward with SAP. In this regard, we are now making the necessary programming and business process changes that are required for us to support the Adcom stations from our central offices here in Bellevue. We expect to complete this work by year-end, and then we will be taking a phased approach to transition the 30 Adcom stations into the common operating environment which we expect to complete during the first half of 2009. Once this transition is complete, we will have migrated the back-office functions from Minneapolis to Bellevue, and we expect to achieve at least $1 million in annual cost synergies by managing the combined businesses centrally.

With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator Instructions). Luis Martins, Taglich Brothers.

Good afternoon. Congratulations on a solid quarter. It's refreshing to see a company posting good results in this difficult environment.

Can you just elaborate on the revenue for the quarter between Radiant and that of Adcom, what it contributed to the quarter and the growth rates, the respective growth rates?

Sure, Luis, thanks. From the revenue side -- well, I guess let me back up for the benefit of the caller. We closed on the Adcom transaction effective September 1, so we really have Adcom reporting in for 30 days in the quarter that we were reporting on. So we just got a sliver of kind of what we would expect the impact being on a more normalized basis. Within the $32 million of revenue reported, Adcom contributed approximately $5.5 million of revenue and approximately $139,000 of EBITDA to the overall numbers that were reported.

On a more normalized basis, you know, we would expect them to contribute, on an annualized look, approximately $60 million in revenue and approximately $2 million of EBITDA. Again, that's before any cost synergies that we would hope to and expect to achieve and kind of commencing July 1, 2009 as we start to see the benefits of the centralized back-office operations.

Just on the net revenue line, the margin there, from the historical filings that you did on Adcom, it looks like the gross profit there on net revenues was substantially lower than yours, yet with the contribution of that month in the quarter, your margins stayed relatively healthy, in the mid-30% range. I guess, in comparison to historics, that's pretty good. So in terms of what you're doing to improve the gross profit net revenue line at Adcom, you can you speak to that?

Yes, I will take a crack at that. As we've discussed before, when you look at net revenue, we ultimately have to look at the mix between domestic and international services as the international segment typically carries a lower margin characteristic than the domestic.

On a comparative basis, Adcom has more international business. Out of their $60 million book of business, they are relatively equal 50% domestic/50% international. So as we roll them in on a full-quarter basis, I think I would generally expect to see our overall margin, as reported, to decline modestly as a result of that mix, the slightly heavier weighting on the international side.

Having said that, Luis, we really think about our ultimate profitability in terms of our ability to manage our controllable cost as a function of bet revenue, which is why we really organize our P&L the way we do between agent commissions, the personnel, the other SG&A costs and then the depreciation and amortization on the non-cash line item.

So as long as we can grow our net revenues, both domestic and internationally, and effectively manage our controllable costs on the personnel and other SG&A line items -- which really gets to the variable cost structure that we enjoy as a non-asset 3PL -- that's where we will get the leverage, that's where we will get the synergies as we move forward.

So, in terms of your expectations for that gross margin line, you know, with a full quarter of Adcom, what are your expectations in terms of the margin there? Having said that, you know, what you said in terms of perhaps the international business affecting that margin number a little bit?

I think we would expect, on a blended rate, to stay somewhere north of 30%. It will depend on a given quarter and the relative components of each segment as to whether it's 30% or 34%. But I do expect it will stay towards or within that range.

Yes, okay.

I guess just as another element to kind of bringing everybody's attention to is, because of the nature of our agent-based forwarding environment, ultimately we take those gross margins and pay out the agent commissions for all of the work they are doing out there in the field. So, to really get to kind of a net/net number we need to deduct or subtract the cost for the agents to really get to that residual number that really represents kind of what kind pf comes to our bottom line, and we have an opportunity to retain based upon how we manage our personnel and other SG&A costs.

Can you just provide some market commentary in terms of your industry, in terms of the trends that you're seeing? Obviously, your numbers speak for themselves and you performed very solidly in the quarter. You know, in terms of managing growth or really just going out and doing business and trying to capture market share I guess, what can you do to maintain this level of business?

I guess let me respond in a couple of different dimensions. First, just what we're seeing in this environment, as it always is and now more than ever, cash is king. So, you see customers slow-paying, everybody holding onto dollars as best they can, so we are watching that very closely as we go.

You know, up until recently, currencies were such that we were getting a lot of exports. Now, with the dollar strengthening, we've got to wait and see what impact that's going to have to the US exporter, so we will be watching that here in coming quarters to see what the implications of that turns out to be and if we see kind of the opposite side of that with some of the imports starting to pick back up as the valuations change.

From kind of a continued growth standpoint, you know, we really had -- our timing I think was very good in terms of the Adcom transaction in that we have the opportunity for the cost synergies that will be available to us over the next six to nine months as we work through the transition. Once that's $1 million (inaudible) money that will get to the bottom line, or that we expect to get to the bottom line, so in this environment, we are particularly happy to have the opportunity to do that.

Then when we look back at the larger value proposition, you know, we think all that we're trying to do still remains a valid proposition for the folks out there that would consider joining our network. We are significantly larger than we were in the past. There's strength in numbers. We've got better buying power to make available to our network participants and believe that we provide the best option for folks looking for a partner moving forward. Even in this environment, we continue to find ourselves in multiple interesting conversations with folks who are considering and weighing their alternatives and potentially making a change and coming to our network.

So, we think we will continue to have opportunities to do some things organically. We still have a fair amount of capacity under our bank line, although there's nothing eminent. We are still acquisitive, and in this marketplace, we think it's a particularly interesting time to be acquisitive. So, we are cautiously optimistic, but we will be very cautious, as everyone is being in this environment.

Okay, great. Congratulations again and keep up the good work.

(Operator Instructions). [Norman Botanksy], RBC Wealth Management.

Congratulations. It was a very good quarter.

The only question I have is basically in regards to the price of the stock. You've stepped up and bought shares on the open market, which is far and few between right now with various companies. Are you doing anything on that side of the ballpark to try and get your stock to the price that it should be selling at? Because it seems --

Norman, I wish I had the answer to that question. You know, we've tried to take the long-term view and believe that, if we execute, do what we say we're going to do and deliver the earnings, that ultimately the market will find us.

To your point, I've at least tried to put my money where my mouth is, and I've probably bought close to 0.5 million shares over the past month or two to further express my conviction that we believe we are doing the right things and we have a huge opportunity here. With that said, we can't ignore the elephant in the room, which our stock price seems to have been moving inversely to our success as the overall market is in disarray.

Yes.

I don't know whether this is good or bad, but most of my transportation career started in the railroad industry, so I come with a bias of taking a view towards the longer term. You know, we haven't been inclined to go out and engage a bunch of what I will call promoter types, because I just don't think that creates long-term value for the shareholders.

So we are going to continue to focus on the blocking and tackling, building the business. I have gotten out and done a few more investor conference-type programs to present our value proposition. I've gotten a few calls recently from other folks who expressed an interest in me coming to present in their venues, because I do think we are a little bit unique or have a very interesting story to tell in the context of what's going on within our economy, that little old Radiant Logistics has found a way to make money and grow in this environment.

Now, it's very impressive. I just wish the stock would show the -- would reflect that, but I appreciate your effort. I guess, if you keep building it, eventually they will come. Hopefully, you can keep building and going the way you're going.

Thank you.

(Operator Instructions). Mr. Crain, we have no further questions at this time.

All right, thank you. Let me close by acknowledging the reality of the challenging economic environment in which we all participate. Even so, we hope to do better than survive, but thrive, even in this market. With our non-asset based business model and a disciplined approach, we believe this is within reach. We believe that profitable growth in these challenging times will set us apart at the marketplace.

Our acquisition of Adcom could not have come at a better time, and we look forward to leveraging the combined strength of the Airgroup and Adcom brands to bring value to the agent forwarding community while at the same time enjoying the synergies associated with a single back-office to expand our ultimate earnings power. We are more excited than ever with our progress and prospects, and we look forward to continuing to deliver in the months, quarters and years ahead, delivering for our customers, our stations, and ultimately our shareholders.

Thanks for listening in, and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.