Radiant Logistics Inc (RLGT) 2019 Q1 法說會逐字稿

Good afternoon. This is your conference operator. This afternoon, Bohn Crain, Radiant Logistics' Founder and CEO of Radiant; and Radiant's Chief Financial Officer, Todd Macomber, will discuss financial results for the company's first fiscal quarter ended September 30, 2018. Following their comments, there will be an open -- we will open the call to the 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, uncertainties and assumptions about the company that may cause the company's actual results or achievements to be materially different from the results or achievements expressed or implied by such forward-looking statements. While it is impossible to identify all the factors that may cause the company's actual results or achievements to differ materially from those set forth in our forward-looking statements, such factors include those that have, 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.radiantdelivers.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 Founder and CEO, Bohn Crain. Mr. Crain?

Thanks, operator. Good afternoon, everyone, and thank you for joining in on today's call. We are pleased to report strong results and the continued broad-based improvement in our financial performance for the quarter ended September 30, 2018. We posted revenues of $218.9 million, up $20.9 million or 10.6%; net revenues of $54.9 million, up $9.3 million or 20.4%; net income allocable to common shareholders of $2.5 million, up $2.2 million; adjusted net income allocable to common shareholders of $5.3 million, up $2.4 million or 82.8%; and adjusted EBITDA of $8.8 million, up $2.3 million or 35.4% over the comparable prior year period. Our net revenue margins also improved, up 210 basis points to 25.1% from 23% for the comparable prior year period. In addition, we also saw improvement in our adjusted EBITDA margins, up 190 basis points to 16.1% from 14.2% for the comparable prior year period.

We saw good improvement across the organization. And excluding intercompany eliminations, we reported U.S. revenues of $191.2 million, up $16.3 million and 9.3%; and Canadian revenues of $27.7 million, up $4.1 million and 17.6% for the comparable prior year period. For net revenues, our U.S. operations reported $47.1 million, up $6.6 million and 16.2%; and our Canadian operations reported $8.5 million, up $2.9 million and 51.8% over the comparable prior year period.

On the technology front, we also continue to make steady progress on the deployment of our new SAP transportation management system and have begun to deploy the application in several of our strategic operating locations. As we previously discussed, we believe our ongoing investment in technology provides us with the unique opportunity to deliver a state-of-the-art technology platform for our strategic operating partners and the end customers that we serve. At the same time, our new technology set will enable a number of productivity initiatives to streamline our back-office processes and accelerate the realization of back-office cost synergies associated with existing and future acquisitions and can ultimately help facilitate revenue synergies across the platform.

With that, I'll turn it over to Todd Macomber, our CFO, to walk us through some of our detailed financial results, and then we'll open it up for some Q&A.

Thanks, Bohn, and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the 3 months ended September 30, 2018. For the 3 months ended September 30, 2018, we reported net income allocable to common stockholders of $2,572,000 on $218.9 million of revenues or $0.05 per basic and fully diluted share. For the 3 months ended September 30, 2017, we reported net income allocable to common stockholders of $316,000 on $198 million revenue or $0.01 per basic and fully diluted share, which included a $300,000 gain on contingent consideration and $107,000 of transition and lease termination costs. This represented an increase of approximately $2,256,000 over the comparable prior year period.

For the 3 months ended September 30, 2018, we reported adjusted net income attributable to common stockholders of $5,376,000. For the 3 months ended September 30, 2017, we reported adjusted net income attributable to common stockholders of $2,938,000. This represents an increase of approximately $2,438,000 or approximately 83%.

For adjusted EBITDA, we reported adjusted EBITDA of $8,813,000 for the 3 months ended September 30, 2018, compared to adjusted EBITDA of $6,483,000 for the 3 months ended September 30, 2017. This represents an increase of $2,330,000 or approximately 35.9%.

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

(Operator Instructions) The first question is from Kevin Sterling, Seaport Global Securities.

Seems like you really got things rolling. And along those lines, are you at a point, Bohn, where the model is you're growing double-digit top line, but your net revenue is growing faster than your top line? We saw that this quarter. Is that how we should look at Radiant Logistics now?

Yes. That kind of gets to the scalability of the business and kind of our -- the marginal cost of supporting incremental business across the platform. And that's kind of historically when people have asked about how we should think about modeling the organic growth of the business, we've said kind of mid-single digit top line growth but solid double-digit growth at the EBITDA line item. And that's really kind of what we've seen here. I think one point of clarification, as I'm hearing myself say it, is we like to hold the conversation at the gross margin line, right, the net -- or the net revenue line. But we've been investing in organic growth initiatives. We're seeing the benefits of those efforts manifesting themselves at the gross margin line. And then we're seeing kind of the leverage of the back-office amplifying that effect, getting more and more dollars to the bottom line. And in this quarter, we -- was the first quarter in a while where we've actually been able to report solid growth on the gross margin percentage as well. I think it was up right at 200 basis points worth of improvement on the comparable year-over-year period. So a lot of the repricing of contracts and some of the things that we've talked about on prior quarters, all of those things have come forward and materialized as we had previously described.

Yes. That's why I wanted to lead with that question because to me, it looks like it's beginning to happen. And just listen to you talk, I think that's how we need to think about it going forward. So the fruits of your labor are really paying off, so congrats.

Thank you.

You mentioned organic growth. Can you tell -- talk to us a little bit about what that was like in the quarter?

Yes. Well, this is a pretty clean quarter. We had one very, very small tuck-in acquisition, the Sandifer acquisition. That would have been in September of last year, but it is really insignificant in almost all respects in terms of the financial metrics. So the numbers that you're seeing here, for all intents and purposes, are organic.

Oh, wow. Okay. Let me ask you a big-picture question. Now that we've gotten a new, I guess you want to call it, NAFTA deal done with Canada, assume -- as we think about -- as your agents are out there selling business, is this an easy environment now to do so that we've got some of those headwinds out of the way? How should we think about the new deal with Canada possibly impacting your business?

Well, I think it will help -- people don't necessarily have the benefit of seeing our Q yet, which will be filed here in a little bit, so it's not necessarily jumping out in the form of the press release. But one of the good, new stories here is the performance of our Canadian segment. The guys up north have just done an outstanding job. And we were admittedly a little slow out of the gate in terms of our Wheels acquisition and the financial performance of Wheels because of a number of reasons beyond our control, but the bundling strategy that we've talked about historically and value-added services, in combination with kind of our core transportation service offering in Canada, has really gotten traction. And their kind of comparative year-over-year results are really exciting, and we just couldn't be happier with the performance out of that leadership team in Canada and what they've been able to do.

Well, great. Yes. It's awesome, the growth. It looked pretty phenomenal. And also here we are second week in November, can you talk to us a little bit about the trends you're seeing so far in the month of October as well as maybe early November, just from a freight perspective and impact on your business?

I think we and the others remain pretty bullish in terms of what we're seeing out there. So I think -- I don't want to get too far out over my skis, but we expect this positive trend to continue, at least into this next quarter in response to your question. We see nothing on the immediate horizon, which would suggest backtracking.

Okay. Same here. So last question for me, Bohn. It looks like you've paid down some debt in the quarter and maybe added $1 million to your cash position. So by my back-of-the-envelope math, it looks like you may have generated this quarter between $5 million to $6 million of free cash flow. Is my math right?

Yes. That's right. So cash from operations and the cash flow statement, which will people see in the Q, you'll see right at $5.8 million of cash from operations for the quarter.

Okay, great. If I'm looking at my model, that's probably one of the best numbers you've reported in a few years. So congrats.

Thank you very much.

The next question is from Jeff Kauffman, Loop Capital Markets.

Hold on. Got to get you off of mute there. Guys, can you hear me?

Yes, we can, loud and clear.

I want to kind of follow up Kevin's line of thinking because it's interesting. If you look at the stock market, they seem to be predicting the end of days here, and there's a lot of uncertainty. We got a lot of levers moving around with trade and tariffs. Some people are saying there was early shipping and because people want to avoid the tariffs and just all kinds of speculation. I think you said from where you stand, this feels real, this feels solid. But are you able to look at your businesses and get a sense for maybe where the strength might have been stronger? Are you seeing any acceleration in certain industries or certain geographies? Are you seeing any deceleration? Can you try and put a little bit of context around kind of what parts of the business have been moving forward, what parts of the business are kind of sitting in place?

Yes. At a high level, certainly one of the most exciting aspects of the story, I think, is just organic growth, and it's come from almost every aspect of the business in a meaningful way, both in Canada and just our base, what I'll call, our core forwarding operations, which is really the heartbeat of the financial health of the organization. We're doing really well. The -- kind of the area that had been the weakest most recently was the Clipper operations, by operation we mean what was going on with capacity and kind of the whipsawing effect and rail service and the ability for us to recapture market share in terms of the intermodal traffic and the repricing of contracts. So we've been kind of working our way through that. So if we had a laggard, it was Clipper. And Clipper, itself, is starting to kind of -- one, it's the smallest component part in the mix. So we're kind of down a little bit in the weeds, probably talking about a piece of the business that represents 10% of the pie to begin with. But even that group is doing better on a year-over-year basis is heading in the right direction. We've been able to reprice the contracts that we've talked about historically. And so there, too, I think we certainly believe are heading up rather than sideways in terms of the performance of that particular business.

And I think both you and Todd had alluded to productivity improvements. Can you talk a little bit about what you're seeing there and kind of gave us an idea what inning you are in terms of the rollout of your technology platform?

Yes. Well, it's certainly still early innings. But as we think about productivity improvements per se, like I believe this quarter -- and then just to kind of frame the conversation a little bit, we like to talk about it in terms of EBITDA as a function of gross margin. I think we printed 16.1% this quarter. That may be, if not the highest in the history of the company, it's right up there in terms of the performance of the business. And I think there's lots of incremental opportunities as we continue to move forward. We have and continue to invest in SAP, and there's a couple of different aspects of that. One is the TMS operating system, which we're working through the deployment of; and the other is more back-office oriented in terms of financial accounting and processing and some of those areas. And we're kind of fully installed on the accounting platform for SAP having gone through that upgrade. And there's any number of productivity initiatives that we have underway, whether it's trading partner connectivity, or electronic invoicing or quick pay and OCR technologies to streamline processes here in our back office that we're really excited about. So we kind of have a kind of this very robust foundation now from a technology standpoint and back office to kind of head down a lot of different very interesting rabbit trails that each in their own right can drive kind of incremental value and leverage to the platform. So some of that may not sound too sexy. But in terms of financial drivers and kind of just making the back office a lean, mean fighting machine, we're really excited about where we sit and what our opportunities are within that frame going forward.

It's funny you mentioned the lean, mean, fighting machine. I was just told that my reference to Tommy Boy was 23 years old, but I think lean, mean fighting machine...

We're showing our age. We're showing our age.

(Operator Instructions) Mr. Crain, there are no further questions at this time. Can I turn the conference over back to you?

Absolutely. Let me close by saying that we remain very excited with our progress and prospects here at Radiant, and we remain very bullish on the growth platform that we've created. We are encouraged by our improving results and remain committed to our long-standing strategy to deliver profitable growth through a combination of organic and acquisition growth initiatives. Our now more than 10-year, first-to-market advantage in executing our multi-brand strategy and consolidating agent-based forwarding networks, ongoing investment in technology and low leverage on our balance sheet puts us in a unique position to further support consolidation in the marketplace. We're patiently persistent in the pursuit of this long-term vision which we believe, over time, will deliver meaningful value for our shareholders, our operating partners and the end customers that we serve.

Thanks for listening and your support of Radiant Logistics.

This concludes today's conference. Thank you for dialing in.