Radiant Logistics Inc (RLGT) 2024 Q3 法說會逐字稿

Good Day, this afternoon. Bohn Crain, Radiant Logistics, Founder and CEO; and Radiant Chief Financial Officer, Todd Macomber may come back, we'll provide a general business update and discuss financial results for the company's third fiscal quarter and nine-months ended March 31, 2024. Following their comments, we will open the call to questions.

This conference is scheduled for 30 minutes. This conference 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 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 Radiant website at www.radiantdelivery.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. Sir, the floor is yours.

Thank you. Good afternoon, everyone, and thank you for joining in on today's call. Our results for the quarter ended March 31, 2024, continue to reflect the difficult freight markets being experienced by the entire industry as well as our own operations. This extended period of weak freight demand, combined with excess capacity continues to negatively impact not only our current results, but also the year-over-year comparison to our record results for prior year periods.

With that said, we saw a very difficult January and then steadily improvements throughout the quarter, and we expect to report sequential quarterly improvement moving forward as markets find their way to more sustainable and normalized levels.

Notwithstanding the tough year-over-year comparisons, we continue to deliver meaningfully positive results and have generated $22.1 million in adjusted EBITDA and $16 million in net cash for operations for the nine months ended March 31, 2024. In addition, we continue to enjoy a strong balance sheet, finishing the quarter with approximately $31.2 million of cash on hand and nothing drawn on our $200 million credit facility.

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 remain focused on delivering profitable growth through a combination of organic and acquisition initiatives and thoughtfully re-levering our balance sheet through a combination of agent station conversions, synergistic tuck-in acquisitions and stock buybacks.

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. In this regard, we are very excited about our recent agent station conversions with the acquisition of Daleray in October of 2023 and the select businesses in February of 2024, which will combine to solidify our offering to support the cruise line industry in South Florida, along with our most recent acquisition of Minnesota-based Viking worldwide in April of 2024.

We launched Radiant in 2006 with a goal of partnering with logistics entrepreneurs who would benefit from our unique value proposition and the built-in access drought strategy available to the entrepreneurs participating in our network.

We believe these three transactions are representative of a broader pipeline of opportunities inherent in our agent base network. And we look forward to supporting other strategic operating partners when they are ready to begin their transition from an agency to company-owned locations.

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

And thanks, Brian, and good afternoon, everyone. Today we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the three and nine months ended March 31, 2024. For the three months ended March 31, 2024, we reported a net loss attributable to Radiant Logistics of $703,000 on $184.6 million of revenues, or $0.02 per basic and fully diluted share fee.

For the three months ended March 31, 2023, we reported net income attributable to Radiant Logistics of $4,183,000 on $244.2 million of revenues or $0.09 per basic and $0.08 per fully diluted share. This represents a decrease of approximately $4,886,000 of net income over the comparable prior year period.

For adjusted net income, we reported $3,586,000 for the three months ended March 31, 2024, compared to adjusted net income of $8,221,000 for the three months ended March 31, 2023. This represents a decrease of approximately $4,635,000 or approximately 56.4%.

For adjusted EBITDA we reported $5,208,000 for the three months ended March 31, 2024, compared to adjusted EBITDA of $11,560,000 for the three months ended March 31, 2023. This represents a decrease of approximately $6,352,000 or approximately 54.9%.

Moving along to the nine-months for the nine months ended March 31, 2024, we reported net income attributable to Radiant Logistics of $2,904,000 or $596.4 million of revenues or $0.06 per basic and fully diluted share. For the three months ended March 31, we reported net income attributable to Radiant Logistics of $17,452,000 on $853.3 million of revenues, or $0.36 per basic and $0.35 per fully diluted share.

This represents a decrease of approximately $14,548,000 over the comparable prior year period or 83.4%. For adjusted net income, we reported $15,632,000 for the nine months ended March 31, 2024, compared to adjusted net income of $32,845,000 for the nine months ended March 31, 2023.

This represents a decrease of approximately $17,213,000, approximately 52.4%. For adjusted EBITDA. We reported $22,083,000 for the nine months ended March 31, 2024, compared to adjusted EBITDA of $46,434,000 for the nine months ended March 31, 2023. This represents a decrease of approximately $24,351,000 or approximately 52.4%.

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

Thank you. (Operator Instructions)

Mark Argento, Lake Street Capital Markets, LLC.

Any kind of color on the environment right now continues to be a little tough out there, but have you seen any kind of green shoots out there, any sectors that are maybe starting to perform a little better across the platform?

Thanks, Mark. This is Bob and I guess I would start by kind of reiterating the prepared remarks, which was January, started off really slow. And we have seen kind of sequential improvement of February was better than January and March was better than February and kind of early indications of April's continuing to build on that trend.

So I think we're effectively calling the bottom in terms of the slowness here quarter ended March is our seasonally slowest quarter as well. So we would expect perspective quarters too worked our way back to more normalized levels. I think, kind of our world is similar to other because others that calls that you might have participated in.

The international has been soft, but that seems to be improving. So we're seeing a little bit of life, I guess in terms of the international, what for the performance of the international services within the solution set. Canada who typically is really, really shine bright had their own struggles with the quarter ended March, but are making meaningful progress there. It's probably our one of our more most challenged areas has been in the intermodal space, but even that two were very we are optimistic on the trajectory of what we're doing in Chicago with our bimodal initiatives.

And for those that might remember, we have on a greenfield basis, opened a truck brokerage capability in Kansas City can in the wake of yellows of bankruptcy that we're pretty excited about. So we've got a number of things working, if anything I think what I would emphasize is know, notwithstanding the really tough market, we think we're in really good shape in terms of financial flexibility and no debt.

And we're kind of continuing to lean into this whole environment and trying to identify opportunities to take advantage of kind of in this market environment because while the numbers are not where anybody wants them to be on a relative basis.

Well, we think we're in really good shape and excited to continue to execute our strategy. And we've done it as I kind of telegraphed on some of our earlier calls, we see a big opportunity emerging in the conversion of our agent stations to company-owned stores. We've all talked about kind of the gray tail and kind of the inherent pipeline of tuck-in acquisitions that we would expect to come to us over time. And that's manifesting itself.

Happy and proud to be able to support our operating partners when they're ready to do that for us to kind of meet them, at that intersection and support them in that transition. So everything's playing out kind of the way we would have hoped or expected.

Yes, we're just, unfortunately in this and of a little bit of a global freight recession right now, but I'm pretty optimistic that the kind of the ultimate worst is behind us. And we'll kind of be rebuilding from here and have an opportunity to hopefully get some things done kind of more strategically in an environment where a lot of people are handcuffed.

That's helpful and I obviously the balance sheet's in great shape and then happily so but at the same time, any thoughts on incrementally getting a little more aggressive here or you just kind of whatever comes here? It comes to you and you know that is what it is at this point in terms of deploying capital?

Yes. Well, we we've always been around like the view, I think of ourselves as always being good kind of disciplined allocators of capital. So we never chase deals and we're not going to be chasing deals in this environment. But I think kind of our view about kind of valuation and structure that kind of work for us. I think that market's coming to us a little bit, if you will.

So I think we'll have more of an opportunity to get things done in a way that makes sense to us in terms of value and structure. And we expect to be active in our stock buyback moving forward. We more particularly active this quarter, knowing that it was going to be it was a soft quarter in our stock is thinly traded, and we didn't want to kind of step into it, if you will, so to speak. But kind of as the trading window opens up and all that type of stuff, we would expect to kind of be out there in the market beginning again, to reengage in our buyback.

So kind of continuing along the course we've been describing is kind of our baseline plan is a balanced approach of stock buybacks and these smaller tuck-in type of acquisitions. And you know, if something larger comes along, we'll certainly look at it, but we'll have to kind of meet these fundamental criteria that we look at as we think about how we're deploying our capital.

Great. Appreciate the color and good luck. Thanks, guys.

Kevin Gainey, Thompson, Davis.

Hey, Bob, Todd and good afternoon. On maybe just a kind of delve a little bit deeper into the question about end market. How are you. What are you guys seeing from maybe the manufacturing side or the retail side? Or what are you hearing from those customers as you kind of roll into the next quarter? And maybe the back end of the year.

I guess, I'll go first and then Todd can add in as appropriate. As has historically been the case with all these types of environments. We're certainly not losing customers. Our customers have just been shipping less in this environment. There was a lot of talk historically about COVID safety stocks and excess inventories and kind of chewing through those inventories.

And so we do, as we think about kind of the international component, I think that is effectively playing out in that we're starting to see -- some increased volumes and opportunities at the margin on our international shipments with some of the global conflict going on. That's active, at least as temporary catalysts on price in terms of ocean and airfreight, we're enjoying and at the same time, the underlying brand of near-shoring and what's going on in Mexico continues to play out and remains very interesting.

Another area of growth and opportunity for everyone is we spend a fair amount of time talking about how to support our our current and prospective customers that historically have sourced from China and how they're I mean, no one's abandoning China, but they're diversifying their sourcing strategies. And we want to be able to support our current and prospective customers as they're kind of executing against those diversification strategy. But some of the slowest markets to recover those that have been on some of our prior calls.

Cruise line is certainly coming back, trade shows coming back quite strongly. So those are definitely some some positives and we continue to do a lot of what I'll call well retail store rollouts kind of big distributions to the big box retailers, some of our underlying customers that are vendors to those big box retailers, that businesses is, I wouldn't say red hot, but it's certainly still there and moving along nicely.

We do a fair amount of work in kind of high value servers and kind of the high-tech space and moving servers around here in the US and around the world for some of our account,. that continues to do well. Our kind of humanitarian aid, disaster relief, though continues to see opportunities given what's going on in the world environment so that those are some kind of areas or thematics that we observed within our own business.

That sounds really good. And maybe you can also at least what we've heard is there's been a lot more push back from a pricing standpoint, at least in the tire transportation industry. And I'm wondering if you guys are encountering that as well when it comes to your service offerings that people are pushing back on pricing?

Well, I'd say for the benefit of the listeners, I think what you're describing is we've been in an environment where kind of the pendulum of power has shifted to the customer and they've been kind of doing their best to extract in the best pricing they can out of the carrier base. But I think the pushback is coming is that there's just effectively nothing left to give from the asset base guys.

We kind of build on that concept a little bit further as a non-asset base, principally non-asset-based 3PL, when the asset base guys have excess capacity sitting idle, they effectively begin to offer service at irrational unsustainable pricing because they've got some cost and they would rather keep their of their fleets rolling than sitting idle. And so that environment is a very tough environment for everybody.

But including the non-asset based guys because the asset based carriers are effectively taking as much rate as they can. And so there's not as much left over to enjoy if you will, for the non-asset based players. But if we look at that over time, the end of this window and the freight cycle is a very small window in time within what I would call it normal rate cycle. You hear a lot of people talking about and elongated recovery because just this window, it's taking longer than usual to kind of work its way through and that there's obviously a lot of contributing factors.

But when COVID was going on and there was it has such a rich margins to be enjoyed by the transports everyone out without investing in capacity. And then so we know what kind of happens at the end of that movie or in the down part of that cycle, which we're working through now.

Yes, I'll echo that. I mean, we're seeing increases in domestic and international incrementally per quarter. And with those, I'm looking specifically at our net margins, you know, it's volume. The volumes started to pick up. And at some point in time, obviously we'll get back to more of that equilibrium and that all sort of the scenario that we're bonds describing will obviously be behind us.

So it's, I'm thinking Donald change and, you know, hopefully next quarter here this quarter, we're in and the dynamics of what you're discussing, I think will be you'll be back to a more normal healthy environment for everyone.

Thanks, guys. I appreciate all the color, and I'll hand it over to you.

Jason Seidl, TD Cowen.

Thanks. Operator. Hey Bohn, Todd how you guys are doing?

Thank you. Good.

So I wanted to sort of get an idea about 4Q given just how slow 3Q started. Can you sort of walk us through EBITDA per month so we can get a better feel of what the run rate is as we head into the quarter?

No, we're not going to get that granular in terms of the detail of our numbers, I think that would be problematic in terms of just disclosures. [So I don't have the federal and willing to actually issue and are well on the backside of this call.]

Right. So let me ask you this. So were you guys profitable on an EBITDA basis subject?

Yes.

Okay. That's fair enough. From how should we think about the current mix between sort of your international air business and your more domestic stuff versus and your ocean as well. I'm just curious where you guys ended the quarter on a mix basis.

Yes, I want Todd to hop in because I'm painting with a broad brush. But historically, our core business as a domestic time definite straightforward. So again, painting with a really broad brush if we're normally $1 billion-dollar revenue company, maybe $350 million or $400 million might be international. And then we can kind of peel that apart between air and ocean. But the bigger piece of the pie is on domestic.

And when I say domestic, I mean, including North America, so I'm including our Canadian business and Canadian cross-border and our Mexico and Mexico cross-border business is kind of domestic and the international being true international air and ocean It's coming to North America. (multiple speakers)

(inaudible - microphone inaccessible)

But I agree with what you're saying.

-- I guess, Jason, I will add alittle bit more for you. So on the certainly historically, we were as we thought about international, we were much more airfreight than ocean freight. And then during COVID, we ended up doing, a fair amount of ocean, kind of during the peaks of of COVID, given all the constraints and everyone looking for space. So that was a little bit anomalous kind of the spike in Ocean and kind of during during the height of -- . But you would expect us to be more heavily leaning towards airfreight and ocean freight and perm of market in UK.

So as I think about the additional capacity coming on in the ocean space, you guys are going to be less impacted than your typical freight forwarder might be.

Certainly because. Well, I think the answer to that is yes, because most people when they say freight forwarder they think international freight forwarding. And again, the majority of our business is actually on the domestic side. I want to make sure we are thinking about the ramp yet?

You know, I mean, historically our gross margins, you know, 65% of it, if you go back to the prior year was domestic. So that's the and that will continue to be. We'll have it will be absolutely the majority, either the vast majority of our networks.

Perfect. And Bob, you talked a little bit about usage of cash. And I understand it's going to be spread out depending upon where the market is. But at least for the near term, should we expect you guys to sort of just stay in that buyback and agent tuck-in mode because right now, given where your stock is trading, it might be just difficult to do any sort of other outside transactions for the multiple type.

I always want to choose my words carefully because I never say never right, but certainly it will continue to look, with a great deal of scrutiny around the multiples that we pay and the relative trade-offs, relative to the stock buyback, we really look at that in and around every transaction.

So certainly that's the what you described is definitely the baseline case and kind of what we would generally expect to happen. But I don't want to paint myself into a corner where a transaction came along that we really felt was compelling. We would look at it. And so I don't want to say anything on the call that would leave us at another conclusion than that.

Fair enough. Guys. I appreciate the time zone. Thank you.

Thank you.

Jeff Kauffman, Vertical Research Partners, LLC.

So a lot of my questions have been answered. So let me go in a different direction. The last two years from third quarter to fourth quarter, we've been dealing with this inventory destocking and what ended up being almost negative seasonality in a quarter that should be displaying more positive seasonality. Do you feel like that's going to be a little different this year?

Like do you think we're past the worst of the storm and we're going to see more normal 3Q to 4Q seasonality? And then if you could just remind us because only we've seen it in three years. What does normal 3Q, 4Q seasonality look like?

I mean, I personally I mean, it's too early to tell, right, but I do think it's going to be much more normal. I mean, we're seeing increases on fracking through tracking each month, the universe each quarter and we mentioned earlier. I mean, April has been stronger than March, et cetera. So and typically our Q3 is our weakest quarter.

So, you know, we are fully expecting Q4 is going to be certainly much stronger than than our existing Q3. So it's, I think it's I think we're going to what we saw in the past. I think that is, in my opinion, not going to I mean, we're going to we're going to be back to a more of a normal, Q4 increase over historical Q3.

All right. And I know there's not a cash flow statement in the release. But if I was looking for the first nine months of the year at an unaudited our cash flow statement, what would be my year-to-date use of cash on that acquisitions and share repurchase.

And so obviously that is in the queue that should also be filed by now. But Todd looking here to give you that number?

-- So share repurchases, Jeff, for the nine months was little with $3.1 million. That's what we purchased through for the nine months ended March 31, 2024.

For all the shared earlier this quarter.

Yes. And then as you also asked by acquisitions and payments to acquire businesses for the nine months was just under $2 million.

All right. So is there a certain kind of I know you're being opportunistic and you're sitting on a powder tag of liquidity here for opportunities. But is there a certain cash level that you just don't want to go below given the environment?

Not necessarily I mean, I would answer I'll come at that a slightly differently, which is we would target probably plus or minus 2.5 times funded debt to EBITDA in terms of leverage while leaving kind of cushion within our capacity. So we would be comfortable up to 2.5 times.

So that's kind of an answer, but we would, only with the kind of benefit of the cash we generated through COVID, are we sitting in a net cash positive position. We almost always through the history of the company. We've been a net borrower and had amounts outstanding under our credit facility.

So it's not that we're not prepared to we're not seeking are intentionally targeting some targeted level of cash. At the end of the day, we're looking more at what are we comfortably carrying as kind of a net debt our position relative to our borrowings our financial covenants and all that kind of stuff.

One last question, if I can. So shares outstanding started the year around 49 million. And I'm talking fiscal year and currently they're right around 47 million. So they're down about 2 million share, but you've only repurchased 0.5 million shares. I think I know the answer, but can you help me understand what that other 1.5 million share differences and is a situation where if you return to profit and the stock goes up or two, are we looking at 48 million to 49 million in shares as opposed to 46 million or 47 million. -- I'm just trying to model here.

So I'm sorry to say the is that we've yes, we start well, the treasury shares were 4.3 million at the beginning of the year, June 30, 2023. And so we have repurchased 500,000 shares. So our treasury shares are up 4.8 million.

Right, but the fully diluted shares finish the fiscal year at 49.1 million and they're currently 47 million. So that's a 2 million share difference in reported shares outstanding on a 0.5 million shares repurchase. I'm just wondering.-- ?

I think, dilution has to do with the fact there was a net loss in the quarter.

I think that has more to do that. There's out of the money security that wouldn't be counted in that because share outstanding basis. I think its a point that given that.

So I guess my question is in terms of modeling, if you swing to a profit, will that drive it back to 48.5 million shares or is it something more to do with stock price?

Well, it will drive it back. You know, obviously we'll recast calculations. And as those numbers change, it's going to obviously impact the overall, fully diluted shares for the calculation. So the answer is, yes.

Okay. Thank you for that and congratulations. Hopefully, some part of it gets better soon. And thank you for answering my questions.

Mike Vermut, Newland Capital.

Couple of quick ones for you. And obviously a lot of your competitors are you seeing a lot of reports are hurting pretty bad right now. And I believe some of your direct competitors do have a lot of leverage on that. They've been thinking of private equity own.

Have you seen any concern from their customers coming to you? Are you winning any new business? I guess what I'm getting through, [are we going to come out of this stronger than we went into them, forgetting about acquisitions, but just on the pure organic win data] (inaudible - microphone inaccessible)

So I don't want to take advantage of the softball, you're throwing out there to talk negatively about our competitors.

I'm talking more positively about -- .

Yes, I think we are in a good relative position. Everybody's got their own set of constraints and their own strategies to address those issues, and we're going to do all we can to take advantage of the opportunity sets that come our way. And I can't I don't know what some of those if I don't know what financial flexibility, some of those folks have to go recapitalize their balance sheets or whether it's going to cause some other types of our creation of other types of opportunities that I don't know if I did I wouldn't be in a position to say.

So anyway, right. But but your observations aren't. We're kind of candidly, we're kind of curious as well to see kind of what's going to happen out there because, we're certainly not having a lot of fun in this market, but we are kind of topical last month putting you know around the around the situation -- ?

On that topic, though, are you seeing more deals come to market? Not necessarily the ones that we want but are there more distressed companies shopping themselves around that may or may not be an interesting thought, but are you seeing more?

Absolutely. And candidly, particularly on the truck brokerage side, right. There's been a really tough, tough place for folks. And we've certainly without any specifics, we certainly here have heard and continue to hear. There's a quite a few folks out there that are just go and kind of payroll, the payroll trying to fight another day.

So they're see that underway and I think we're not done with the constructive destruction that got to take place. Over on the trucking side of things in particular has returned some more rational pricing to the marketplace.

And then and then one last one for you. I know over the past couple of years, we think we had a peak earnings, I don't remember we did $70 million $80 million of EBITDA. Now we're down year and you had always said, forget about the ups and downs are normalized is somewhere between, let's say, $50 million and $60 million. I think you said, maybe if I remember correctly, somewhere in that area, is that still a good bookmark?

In normal time we should be in that range and hopefully everything that we're doing during the downturn, bringing in some of the a gen, maybe some by acquisition, maybe that creeps up over time, but has anything changed in your mind that normalized type EBITDA run rate the company?

Yes. I mean, I think the only thing that's changed is just this is the elongated nature of this slowdown, right. So that the time is going that it is taking us all collectively to get back to that norm. It is being extended kind of beyond what people were expecting. But in terms of how we think about the business, the opportunity set, the strategies there are areas of focus, None of that has changed.

Probably what has, not directly responsive to your question. But we were in some respects fortunate, we didn't go do a lot, take all of our cash and go do a lot of M&A and pay higher multiples for businesses, you know, or go do a tender offer for a bunch of our stock at $6 and $7 a share or whatever it was at the time. When we would get those questions from time to time.

I'm really glad we didn't do those things because we were as cautious as we were just to put us in a better situation or better position to some people are kind of burning the furniture, and we're not at all doing that, right.

We're continuing to invest in the business and continue to grow and focus on organic growth and salespeople and supporting ours, making good on our brand promise and supporting our agent stations and those conversions. So we are largely business as normal, notwithstanding the fact that this isn't really tough one.

Right back from while we're happy with the balance sheet, happy with the continuation and positive cash generation. So it will get better and you're doing a good job.

Thank you. That is our last question. I'd now like to turn it back to management for any closing remarks.

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 extensive global network of service partners to continue to build on the great platform we've created here at Radiant.

At the same time, we intend to thoughtfully relever our balance sheet and through a combination of Asia station conversions, synergistic tuck-in acquisitions and stock buyback. Through our multi-pronged approach of organic growth acquisitions and buybacks, we believe we will continue to create meaningful value for our shareholders, operating partners and the end-customers that we serve.

Thanks for listening and your support for Radiant Logistics.

Thank you. This does conclude today's conference. We thank you for your participation. And you may disconnect your lines at this time and have a wonderful day.