Radiant Logistics Inc (RLGT) 2009 Q4 法說會逐字稿

This afternoon, Bohn Crain, Radiant Logistics' Chairman and CEO, will discuss financial results for the Company's fourth fiscal quarter and year ended June 30, 2009. Following his 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 1934. 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 and 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 fourth in our forward-looking statements, such factors include those that have in the past and may in the future be identified in the Company's SEC filings and other public announcements, which are available on the Radiant website at www.Radiantlogistics.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, Bohn Crain.

Thanks, Doug. Good afternoon, everyone. And thank you for joining in on today's call.

I'm happy to report to you that notwithstanding the challenging economic environment in which we all find ourselves, we were able to continue our trend of delivering profitable growth. With the benefit of our recent acquisition of Adcom, for the year ended June 30, 2009, we saw revenues increase to $137 million, up $36.8 million and 36.7%, and our adjusted EBITDA accretes to approximately $3.7 million, up $1.9 million and 103%.

For 2009, we continue to execute our three pronged strategy, providing continuous improvement for our existing network participants in terms of technology, buy rates and enhanced service offerings, building upon the success of our organic growth initiatives by on-boarding additional agent stations, and opportunistically pursuing acquisition opportunities. Our organic expansion efforts continue to deliver positive results, and in June of this year we welcomed a new station in Indianapolis, and then again in July we welcomed a new partner in Atlanta. We also are in conversations with a number of additional candidates, which look promising in the relatively near term.

With respect to our acquisition of Adcom, we have successfully concluded our integration plan, and in June of this year, we completed our wind down of Adcom's back office operations in Minneapolis, and all Adcom stations are now being supported from here in Bellevue, Washington. Cost synergies from the back office integration are expected to be in the range of $1 million to $1.5 million per year.

I'll now shift my comments to our financial results, and then we'll open it up for Q&A. Today we'll be discussing our financial results for our quarter and year ended June 30, 2009. As we discuss our financial results, in addition to a discussion of reported net income, we also provide financial metrics in terms of EBITDA.

EBITDA, and more particularly adjusted EBITDA, which excludes the impact of stock based compensation and certain non-cash recurring items, is an important metric for us for a couple of reasons. First, we believe EBITDA is a useful measure with respect to understanding our earnings trends without the impact of certain non-cash charges associated with purchase accounting and the amortization of the acquired customer relationship asset, and adjusted EBITDA is used by our creditors in assessing debt covenant compliance.

For the three months ended June 30, 2009, Radiant reported a net loss of $57,000 on $32.4 million of revenues. For the three months ended June 30, 2008, the Company had reported $25.8 million in revenues and a net loss of $86,000.

For the year ended June 30, 2009, Radiant reported a net loss of $9.7 million on $137 million of revenues or a loss of $0.28 per basic and fully diluted share, and this included the non-cash charge of $11.4 million for the impairment of goodwill. For the year ended June 30, 2008, Radiant reported net income of $1.4 million on just a little over $100 million in revenues or $0.04 per basic and fully diluted share, and that included net non-recurring income of $1.3 million resulting from a reduction in estimate of liability assumed in the Company's acquisition of Airgroup.

As we discussed on our last few calls, although we continue to post solid results in the face of this tough economic environment, the capital markets and our stock price have just not been cooperating. Notwithstanding our growth in top and bottom line results, through the end of calendar 2008, our stock price continued to trend with the overall deterioration of the market. This decline in our stock price resulted in a market capitalization that was significantly below our book value as of December 31, 2008.

As a consequence, and in accordance with FAS 142 that deals with goodwill and intangible assets, we performed an analysis to determine any potential impairment of goodwill and other intangible assets, that resulted in the non-cash charge reflected in our numbers.

If you've been following us since our start in 2006, you'll know we have significantly grown the business since our initial acquisition of Airgroup. From an accounting perspective, through this growth we have also grown the value we would attribute to customer relationship intangibles, as we have added a great number of new stations.

Through our impairment testing and review, we concluded that our discounted cash flow analysis supports a valuation of identifiable assets well in excess of their carrying value. A good portion of the discounted cash flow is the result of the numerous new stations we've added. Because of the new value we ascribe to the DCF of our new stations, there is no residual value remaining to be allocated to goodwill.

However, FAS 142 does not allow us to recognize this value, and contribution of the new stations, as we consider impairment to goodwill. As a result, we were required to record the non-cash goodwill impairment charge. We do not expect this non-cash charge to have an impact on the Company's cash flow or compliance with the financial covenants in our agreement.

Let me now highlight our reported EBITDA numbers. For the three months ended June 30, 2009, we reported adjusted EBITDA of $730,000 compared to adjusted EBITDA of $392,000 for the three months ended June 30, 2008. That's an increase of $338,000, an 86.2% improvement, and a reconciliation of our adjusted EBITDA to our most directly comparable GAAP measures is available at the end of our Press Release.

For the year-ended June 30, 2009, and excluding the non-cash items, we also reported adjusted EBITDA of approximately $3.7 million compared to adjusted EBITDA of $1.8 million for the year-ended June 30, 2008. This represents an increase of about $1.9 million in adjusted EBITDA, a 103% improvement.

Let me also take a moment here to provide a progress report on our stock buyback program. As we have discussed, we do not believe our current share price accurately reflects Radiant's recent success and long term prospects, and represents an excellent investment opportunity for both the Company and our shareholders.

Under the terms of the program, we are authorized to repurchase up to five million shares through December 31, 2010. To date, we have spent approximately $529,000 to repurchase approximately two million shares of our stock through a combination of private and public transactions, at an average price of $0.27 per share.

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

Thank you, Mr. Crain. (Operator Instructions). Our first question comes from the line of Howard Halpern with Taglich Brothers. Please proceed with your question.

Good afternoon.

Hello, Howard.

Hi. On the income statement, with the non-cash charge and restructuring charge, that accounted for approximately $0.33, $0.34 per share?

That sounds about right.

Okay, so net-net excluding those, you would have been positive $0.04, $0.05, $0.06 on the bottom line. Okay, in terms of, I saw in the 10-K you had 70 Company owned independent agent offices. What was the growth from, I guess 2008 to the end of 2009, and could you give a rough estimate of what you might expect by the end of this upcoming fiscal year?

Yes, let me try to answer that in a couple of different dimensions. When we first acquired, let me kind of build the construct of how we got to the 70. When we initially acquired Airgroup, they represented about 34 stations and $50 million in revenue. Over the next 18 months, we grew that from 34 stations to 40 stations, and to approximately $100 million in revenue.

So, what I'll characterize as the Airgroup segment, on what I'll call a pre-recession basis was represented by 40 stations and $100 million in revenue. Then in September, we completed the acquisition of the Adcom Network, and that contributed notionally another $60 million of revenue and another 30 stations.

And to approach it slightly differently, of that 70 stations, the predominance of those are independently owned agent stations currently. We maintain Company owned offices in Newark, New Jersey, and Detroit. The balance are independent stations at this point in time.

So, although on an individual station by station basis, we definitely have been impacted by the recession like most other businesses have been, we've been able to, to date, more than offset that compression through the growth. Both on what I would call the organic side, which is adding these new stations, as well as the benefit of the acquisition of Adcom.

It's hard to give any precise granularity to the frequency or our success rate in adding incremental new stations to the mix. In some of my prepared comments here, we were able to on-board a new station in June, and then another one in July. Part of our daily activities is engaging with folks, and seeking other participants to join our network, and we're active as we speak with some potential opportunities in that direction.

As we think about models and forecasts and those types of things, I think it would be conservative and reasonably attainable for us to think over the next 12 months, we should be able to on-board a new station per quarter over fiscal 2010.

Okay, that sounds good. And the forecast of net income and EBITDA that you have out there for fiscal 2010, does that just assume the current economic environment or a slight pick up or-- .

That is basically our current platform today operating in the current environment, so it does not reflect the restoration to any sense of normalcy in the marketplace. Nor does it reflect any benefit or impact from any incremental acquisitions that we might do over the course of fiscal 2010.

Okay, and what economic indicator, leading or concurrent, that you look at to give you a hint that things will be picking up in the near term? Is there one particular one in the leading economic indicators or within the GDP reports that you try to focus on or--?

No, not particularly. We're kind of operating in real time with our stations, and we've got a pretty good pulse on a week over week basis, how our stations are doing. And our stations are so diversified in terms of geography and customer base, that our network itself for me is a pretty good indicator of how the economy is progressing. And there's, not unique to our business but generally speaking within the non-asset based world, there's a general seasonality in the business, where January to June are the softer months, and July through December are the stronger months.

And in fact, we are moving into peak now, and what I mean by that is our September and October and November months will be stronger than our January, February and March months, and that underlying trend holds true. We're seeing that every day in terms of how the business is performing.

Now, it's certainly down on a year-over-year basis but it does look like, what we would typically refer to as peak, we are going to have a peak season, which is a positive for us in the transportation and logistics space.

So you'll actually lead the economic indicators that we see out there?

In some respects, I think that we will. At least in terms of our visibility to how, and this isn't very helpful to your question of looking to some third party indicator, but I think ultimately for me, it comes back to consumer confidence and the consumer confidence indicators, because ultimately it's the consumer that drives the economy. Until the consumer's confidence comes back and they begin spending, everybody's going to try to keep their money in their wallets, and so the ultimate indicators around consumer confidence, I think ultimately will drive or be indicators of where things are headed.

And one last one. Almost a two parter. On the information technology that you have, how important is that to your growth, and is there any view or lookout like cloud computing to try to help reduce costs in the information technology area?

Well, we often talk about our business in terms of people, process and technology. They're kind of the three fundamental pillars of what we do, so technology is absolutely fundamental, not only to how we service our customer with web-based in-transit visibility tools, but also in our own back office efficiencies, and literally the headcount and labor dollars it takes for us to support our network.

And we have what I believe to be one of the most robust technology platforms out there, which is, SAP is our core accounting back office, which provides an incredibly robust scalable platform as we think about our deep back office process. And for an Operating System we use a third party software called CargoWise, which is web-based state-of-the-art technology. And it's a very scalable program, and it's kind of earned its wings if you will in the context of the Adcom transaction, and our ability to on-board those additional stations. And from an IT standpoint, it was inconsequential from the IT platform and our ability to process those incremental volumes.

So we feel really good about our IT platform and its scalability, not only in terms of what it did for us in terms of really how few incremental headcount we needed to support the Adcom transaction, and was a big driver in the cost synergies associated with that transaction. And as we think about opportunities moving forward, we think there's just that much more leverage in the model in terms of the scalability of the back office and how we can leverage our people, process and technology to support our partners.

Okay, and I have one final one. To get back to, you have the 70 stations. Do you have any idea how many roughly, either how many stations are out there or what percentage of the marketplace that you have?

I would be hard pressed to give you a precise number. In a kind of back of the envelope, there's got to be at least 20 agent based forwarding networks out there, and each of those networks probably averages 20 participants within their network.

Oh, okay.

Just to try to begin to dimensionalize, and that's just in the pure agent based forwarding networks. And our opportunity to do value-added acquisitions isn't necessarily limited to that universe of acquisition candidates, although it's a very good one and probably one of our most interesting areas that we continue to look at, but there are also what I'll call complimentary service offerings that we're also very interested in, ultimately adding to our portfolio of competencies. And those would include customs brokerage opportunities, as well as other US domiciled international freight forwarding companies that would typically be characterized as a NVO, non-vessel owner common carrier, that might have customs brokerage capabilities within their own organizations.

So there's two broad acquisition candidate thematics, if you will. One is the agent based forwarding network, the other would be these US domiciled international freight forwarders in the major gateways. That's another broad thematic where we think we could bring a lot of value to the sellers, as well as value to our network and to our shareholders by bringing those types of companies into the group.

Well, keep up the good work. I'll let someone else jump in.

Thank you.

Our next question comes from the line of JJ Gonzalez, who is a private investor. Please proceed with your question.

Mr. Crain, good afternoon.

Good afternoon, sir, how are you?

Good, and unfortunately Lewis isn't on the call, so I guess I'll have to say congratulations on a wonderful quarter.

Why, thank you very much, I appreciate that.

I wonder if you could talk a little bit about the Adcom and Airgroup, in terms of the type of service that each provides. Are they complimentary? Are there some areas where Adcom does one type of program and Airgroup does another?

They offer very similar solutions in that, in the broadest sense they're very well rounded. Both groups provide both domestic and international freight forwarding services. If I kind of fall back to the numbers for a second to give you some sense of it, Airgroup, this is all kind of pre-acquisition, pre-recession as kind of a disclaimer, but it will get you the right metrics. Airgroup was a $100 million Company, $70 million domestic services and $30 million international services. And on the other hand, Adcom was a $60 million Company doing approximately $30 million domestic and $30 million internationally. So on a combined basis today, we would kind of pro forma out at $100 million domestic services and $60 million international services.

Now, within the international services component as a group, we are predominantly air as opposed to ocean today, and within the air product we are probably more export than import, in terms of the services that we provide today. But all in all, they're very comparable, and one of the things that, one of the consequences of that is we, our relative buy rates and purchasing power with the underlying carrier base was improved dramatically, which allowed us to go back to the underlying carrier base and negotiate better rates for the benefit of our stations. So that was a real positive.

And if we think about the tools that we do have versus the tools that we don't have, and where we would like to, kind of coming back to one of my prior comments, the solutions in and around ocean services, and to really grow our NVO business, remains a very interesting area for us. If we could find the right partner at the right valuation, who shared our vision for where we're going as an organization.

That's always the tough part.

Yes, it is.

Do you have any overlaps on the Airgroup and Adcom? Do you have more than one station in one particular area, or are they all unique to their own areas?

In a few places we do. There were a number of places where there was no overlap. I forget the precise number but I think there were 12 of the, remember Airgroup was 40, we added 30, of the 30 new stations I think there was overlap in 12 markets.

And do you maintain the overlap or is that a consolidation going forward?

No, we maintain, that duality continues to exist. What we have found is that, at the station level, our station owners generally are niche players with deep customer penetrations and very strong relationships, and the two don't compete. Our two stations within a given market don't compete.

One of our more interesting overlap scenarios was Chicago. In Chicago, Airgroup was principally a domestic forwarder, and Adcom was principally an international forwarder, so there was an example where they started using each other for their own--. So there was a lot of synergy there, and we found in a number of other locations, where these quasi-competitors are starting to share facilities, share trucks, build consolidations together.

So rather than, from a distance it might be perceived as a complication, in reality it's been an asset. It's been an additional tool in the toolkit for the local station owner to have some more resources available to him, and somebody to help share cost and infrastructure and so on. It's been a real positive, and in keeping score, I'm happy to say we haven't lost a single Adcom station in connection with the transaction and the integration.

Good.

One of the big things for us was, we had from a back office standpoint is we had to effectively reposition Bellevue to not be viewed as Airgroup's back office, but be perceived as a neutral back office to support both the Airgroup and Adcom networks. And it took us a little while to work through that process, but I think we've got that worked through.

We also had a series of regional meetings over the past few months, we had a meeting in Chicago, a meeting in LA, and a meeting in Atlanta where on a regional basis we brought the two groups together. And this next summer we'll have our full annual meeting, and we'll have one annual meeting with the entire group coming together because we are working as one.

We've got an Airgroup station using an Adcom station for cartage, as an example and vice versa, so it's, they're really working together because again, it just makes the overall network stronger as we bring additional participants to the table.

Talk about Company owned stores, I didn't hear too much on this call, you had mentioned Newark as being one of them. I think a few calls back, a few quarters back, we were talking about the possibility of having more of these stations become Company owned stores. Is there something that's causing you not to be able to do that? Is it share price? Is it the unwillingness of the owner partners?

Well I don't think it's either of those, per se. Part of our underlying value proposition to our agent stations is that, when they're ready to walk through that door, we're there and eager and willing to support them in that program, but there's no cram down theory where, as part of joining the network you're committed to selling. That's not the value proposition. So I think the reality is, the economy softened and this would not be an ideal time from the seller's perspective to convert for a Company owned store, in terms of the owned valuations that they would achieve in connection with the transaction.

So we have had in depth conversations and kind of due diligence if you will, with a number of the stations, confirming valuations and structure and mechanic and things are kind of teed up if you will. And everybody knows the program, whenever we say go, it's just people aren't quite ready there but we're fully capable and willing to keep our end of the bargain on that as people in their own time are ready to take that next step.

And how about the credit line? Is it still at $15 million?

Yes, our credit line remains at $15 million. We have approximately $6 million drawn on that line, so we view ourselves as being somewhat unique in terms of capacity to actually do a transaction if we find a transaction that makes sense.

Okay. That's all from here.

Thank you.

Our next question comes from the line of Doug Danhard from Danhard Investments. Please proceed with your question.

Hi, Bohn. Good quarter, especially in these economic times. Appreciate all your hard work.

You've answered most of my questions, but I do have a question for you, and really, this is more of an opinion from you. You've bought a lot of stock personally, the Company has bought a lot of stock and continues to buy. What do you think the market is missing, in your opinion, as to the value of the Company?

That's a good question. What I candidly believe is what the market lacks is confidence, and not in us per se, but in their, I can only presume or I would have to presume given what's going on, that investors are trying to figure out whether they should own shares of Banc of America and GE right now, and not an emerging microcap stock. So I guess that's part of my answer.

I think the second part of the answer would be people's concern about, what does this recession and slowing economy mean for a Company like us. And I don't know what more we can do than show that our model is working and continues to work, even in these distressed times, in terms of, I think we can line up the last eight quarters and I think you'll consistently see double digit revenue and EBITDA growth, even in the face of these strong headwinds.

And as a Company and as an individual, I'm putting my money where my mouth is and buying the stock back, and we will continue to do so for the benefit of our long term shareholders.

Well that's part of the reason that I asked the question is because you are performing. You're doing what you say you're going to do as a Company and as a person. I mean, you're going out and putting your money where your mouth is, and you're accumulating a lot of shares, and it should be an example to the marketplace I would think. And maybe it's because your audience just isn't wide enough yet, and maybe there should be some thought given to seeing if you can widen that audience somewhat. I think that's part of it too, frankly.

Well we'll certainly consider that. I mean, as you can expect, we get calls from IR companies all the time, and in my mind, I would rather spend a dollar buying back a share of stock than spending a dollar to some IR firm. Maybe that's short sided on my part, but at least here to date that's how we viewed it.

Well I just want to let you know that I appreciate your efforts, and thank you very much. Congratulations, again.

Thank you.

Mr. Crain, there are no other questions in the queue at this time. Would you like to make some closing remarks?

Yes, thank you. Let me close by saying that we remain very excited with our progress and prospects here at Radiant. We continue to make good progress in executing our strategy, leveraging the Radiant platform to bring value to the agent forwarding community.

We remain very excited about the opportunity for continued organic growth available through expansion of our network, and believe that we remain uniquely positioned to bring value to our network's participants. One, leveraging our status as a public Company to provide our partners with an opportunity to share in the value that they help create. Two, providing 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. And three, offering a unique opportunity in terms of succession planning and liquidity for our station owners.

We believe the economy will remain difficult through 2010, but believe we are relatively well positioned to continue to deliver profitable growth even in this down market.

Thanks for listening and thanks for your support of Radiant Logistics.

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