Q2 2024 Radiant Logistics Inc Earnings Call
Participants
Bohn Crain; CEO & Chairman of the Board; Radiant Logistics, Inc.
Todd Macomber; CFO; Radiant Logistics, Inc.
Jason Seidl; Analyst; TD Cowen
Kevin Gainey; Analyst; Thompson, Davis & Company, Inc.
Jeff Kauffman; Analyst; Vertical Research Partners, LLC
Presentation
Operator
Good day, everyone. This afternoon, Bohn Crain, Radiant Logistics, Founder and CEO, and Radian's Chief Financial Officer, Todd Macomber. It may come or sorry, we'll provide a general business update and discuss financial results for the Company's second fiscal quarter and six months ended December 31st, 2023. 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 Acts 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 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 w. w. w. dot Radiant deliverers.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.
Bohn Crain
Thank you.
Good afternoon, everyone, and thank you for joining us on today's call. Our results for the quarter ended December 31st, 2023, continue to reflect the difficult freight markets being experienced by the entire industry as well as our 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 the prior year period. With that said, we remain optimistic that we're at or near the bottom of the cycle, and we would expect markets to begin to find a way to more sustainable and normalized levels towards the back half of calendar '24.
Notwithstanding the tough year-over-year comparisons, we continue to deliver meaningfully positive results and have generated $16.9 million in adjusted EBITDA and $12.1 million in cash from operations for the six months ended December 31st, 2023. In addition, we continue to enjoy a strong balance sheet, finishing the quarter with approximately $33 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 the 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 customers that we serve. In this regard. We are very excited about our recent agent station conversions with the acquisition of Del Rey and select businesses, which will combine So solidify our offering in support of the cruise line industry and South Florida. We launched Radian and 2006 with the goal of partnering with logistics entrepreneurs who would benefit from our unique value proposition and have built an exit strategy available to the entrepreneurs participating in our network. We believe these two 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 location.
But that said, I'll now turn it over to Todd Macomber, our CFO, to walk us through our detailed financial results, and then we'll open it up for some Q&A.
Todd Macomber
Thanks, Paul, and good afternoon, everyone. Today we will be discussing our financial results, including just net income, adjusted EBITDA for the three and six months ended December 31st, 2023. For the three months ended December 31st, 31, 2023, we reported net income attributable to Radiant Logistics of $985,000 on $201.8 million of revenues, or $0.02 per basic and fully diluted share for the three months ended December 31st, 2022, we reported net income attributable to Radiant Logistics of $4,836,000 on $278.1 million of revenues, or $0.10 per basic and fully diluted share. This represents a decrease of approximately $3,851,000 of net income over the comparable prior year period or 79.6%.
For adjusted net income, we reported $5,496,000 for the three months ended December 31st, 2023, compared to adjusted net income of $11,142,000 for the three months ended December 31st, 2022. This represents a decrease of approximately $5,646,000 or approximately 50.7% for adjusted EBITDA, we reported $7,708,000 for the three months ended December 31st, 2023, compared to adjusted EBITDA of $16,203,000 for the three months ended December 31st, 2022. This represents represents a decrease of approximately $8,495,000 or approximately 52.4%.
Moving along to the six month results. For the six months ended December 31st, 2023, we reported net income attributable to Radiant Logistics of $3,607,000 on $411.9 million of revenues, or $0.08 per basic and $0.07 per fully diluted share for the six months ended December 31st, 2022, we reported net income attributable to Radiant Logistics of $13,269,000 on $609.1 million of revenues or $0.27 per basic and fully diluted share. This represents a decrease of approximately $9,662,000 over the comparable prior year period or 72.8% for adjusted net income. We reported $12,046,000 for the six months ended December 31st, 2023, compared to adjusted net income of $[24,621,000] for the six months ended December 31st, 2022. This represents a decrease of approximately $12,575,000 or approximately 51.1% for adjusted EBITDA. We reported $16,873,000 for the six months ended December 31st, 2023 compared to adjusted EBITDA of $34,871,000 for the six months ended December 31st, 2022. This represents a decrease of approximately $17,998,000 or approximately 51.6%.
With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.
Question and Answer Session
Operator
Thank you. At this time, we will be conducting our question and answer session.
If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue, you may press star two, if you would like to remove your question from the queue and For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we poll for questions. Thank you. Our first question is coming from Jason Seidel with TD Cowen your line is.
Jason Seidl
Thank you, operator, and good afternoon, Bohn and Todd. A couple of questions from me guys. If I stick on the acquisitions.
Can you talk us through sort of what to expect from a from an EBITDA basis? And is there going to be any ramp up cost to the outside private company?
That you onboarded at least for the current quarter?
Bohn Crain
Thanks, Jason. So this is Bohn to answer the question. I guess a couple of different ways here, which we've historically, we've talked about kind of the kind of the in the inherent agencies stations that at some point in time along the continuum are likely to seek their exit strategies and the rate at which that is occurring. We expect to continue to accelerate just based upon the demographics of our of our agency network and they they can vary in size from us.
Jim, you know painting with a broad brush anywhere from, you know, $0.5 million to $2 million of incremental EBITDA to the bottom line would kind of be that typical profile and as a reminder to maybe some folks that aren't as familiar with the mechanics of our agency stations when we buy in an agency station that ultimately manifests itself as margin expression defined as EBITDA divided by gross margin. So when we convert an existing agent station to a company-owned store, our revenues don't increase. Our gross margins really don't increase. It's just that the agent station commissions get eliminated and we onboard their local level well, you know, labor and SG&A cost, and that difference is effectively the profitability of that business that we have onboard. So there's really no incremental cost per se in terms of onboarding the acquisition and a little bit to the contrary, and we've talked about this at some of our calls in the past, in the early days when we were acquiring other agent-based networks, there was redundant back-office infrastructure costs that we were able to to capture. And so that was the cost synergy. We have a similar but slightly different opportunity at the node level of the network as we acquire in our agency stations still be redundant cost to facilities as an example of various facilities. So there should be some incremental cost synergies available to us at the node level of the network as we continue to kind of make good on our brand promise and supporting our agent stations, other exit strategies over time. And it wouldn't serve in open. We're not going to do one of these a month, but it wouldn't surprise me that if we were to do one a quarter type thing know here over the next year or so, just as our network folks are kind of approaching the point where they're ready to bring the bill and we're here to support them in that process as that occurs.
No, that makes sense.
Todd Macomber
I'm sorry, I thought before that one was an agent and one was one was not on bandwidth. When you take a step back and you look at the broader market on the forwarding side, a lot's been going on both from the macro and geopolitical side, how is that impacting results or how do you see that impacting results here in the current quarter was certainly slowed down.
Bohn Crain
I think for everyone in it. And I think the general narrative is it was obviously slow through December. I think it'll continue to be slow relatively the March quarter. And then I'm optimistic that that will start to see it's certainly sequential improvement. And after that, as we kind of find our way back to some sense of normalcy, both we've got it is, as you alluded to a number of kind of political or kind of geopolitical things going on out and kind of interest rates and all that. You know, there's any number of kind of headwinds, but I think where I would like to think and believe we've kind of have seen the worst of it and and I'm I'm pretty hopeful for improvement on the back half of the year. And for us kind of individually, I can assess fortunate to be where we are in terms of debt, free cash on the balance sheet. So And net-net, we're intending to just continue to execute our core strategy right through the store, so to speak and through the combination of kind of these tuck-in acquisitions, conversions and stock buybacks.
Okay.
Todd Macomber
Appreciate that color. One quick thing, maybe, Todd, this is for you, just so we could see you guys buying back stock looks like you did at under six bucks.
Yes, at current levels should we expect you to continue to support shares going forward?
Bohn Crain
Yes.
Todd Macomber
Well, the clarification, gentlemen, I have time as always with that.
Thank you.
Thank you. Our next question is coming from Mark Argento with Lake Street Capital. Your line is open.
Yvonne And Todd, just quickly, just following up on kind of the M&A scenario of this conversation, I should say maybe could you just walk us through how many agent stations you have out there? What's realistic over time, the opportunity to buy those? And I know you mentioned kind of one a quarter. But what kind of over time, how do you envision this playing out? And does that pace continues to accelerate? I'm guessing from here on out and can you deploy enough capital there. You don't really need to look at anything outside of the core agent station market at this point. And maybe just walk us through kind of how you envision that playing out?
Bohn Crain
Yes, I think we have to begin with kind of recognizing or Knology. We're here to support our agent stations on the time line or time frame that suits them so we kind of stand ready to support our partners, but we're not out twisting their arms trying to compel them to sell. So it will ultimately depend on when they're ready and we'll be here to support them, right. With that said, none of us are getting any younger, right? And so we are kind of back to the demographics. Poach folks are just it's naturally coming to a point out there deciding to kind of raise their hand and kind of move forward with some of those conversations. So we have, you know, roughly 80 agent stations in the network. So there's a there's a big, I guess, in banker terms addressable market for freight of stations within our network that we can support over time.
It's hard to say kind of when exactly those would happen. But my sense is kind of the rate and frequency at which that happens will continue. I mean that will accelerate infinitely. But you know, I wouldn't expect us to do more than one a quarter. But that kind of feels kind of where we are right now in terms of what I could tell you kind of anecdotally as we're actively talking to more of our stations now than we ever have in the history of the Company. And I think it comes back to the demographics.
Jason Seidl
That's helpful. And just also maybe just remind us and if it's changed at all with the typical structure in terms of a part upfront and then the rest of them kind of earn out as they hit their bogeys in terms of performance post acquisitions.
Bohn Crain
Yeah. Typically 50% upfront and then we'll do a typically three year, which obviously targets the EBITDA targets.
Jason Seidl
Right answer for me. Thank you guys.
Bohn Crain
Yes.
Operator
Thank you. Our next question is coming from Kevin Jamie with Thompson Davis. Your line is live.
Kevin Gainey
Hey, Bohn and Todd, actually to kind of continue the M&A kind of piece of it for agencies, do you guys have maybe like a quantifiable EBITDA contribution that you went and acquired. Theoretically, all of those guys would it would add up to not?
Bohn Crain
It's not off the top of our head. I mean top of our head, no. So at least now and nothing that we're prepared to disclose or kind of talk about on the call today. But by the way, I'll take that as a homework assignment and maybe that was that we can work into some future disclosures and then we would be in a better position to talk about.
Kevin Gainey
Yeah, I just wanted to size of the opportunity for EDA. (multiple speakers)
Todd Macomber
We just don't know what their operating costs are, right. We know what their gross margins are, but we didn't know what their operating costs are. We don't share that with us until we get to a position where we're looking at the acquisition. So part of it's known but not the complete picture.
Bohn Crain
Yeah but least it placed at least fixed into at least dimensionalize that as you can look on the face of our income statement at that line item of operating partner commissions, right? That's our single biggest cost right and as we buy in the agency stations, that cost would go away as we as we convert them to agency stations. And then that will manifest itself as margin expansion for our EBITDA as a function, Chris, but those are not that there's our nonanswer answer to know how that works on.
Kevin Gainey
Also, maybe if we can talk about how you're thinking about the second calendar second half, on what conditions or factors would you think what lead to that pickup?
Bohn Crain
greater consumer confidence is part of it? Right. We I think generically we're starting to see it, ocean volumes start to pick up, pricing start to pick up a little bit. So that's encouraging, not just for the Ocean piece, but for the inland piece and just kind of supply and demand dynamics for the inland transportation side of things that hopefully that will continue to improve in and as though the geopolitical stuff will settle down. But again, that kind of remains to be seen. But we know we need a little better balance between a shipper demand and transportation capacity and some of the weaker hands are now being forced out, whether it's yellow or others, that's helping the market rationalize at the end of the day in the area of what I guess, what they call constructive destruction. That's going on.
Kevin Gainey
I appreciate the insight. That's all right.
Bohn Crain
All right. Thank you.
Operator
Yes, thank you. Once again, if there are any remaining questions and comments, please press star one on your phone at this time.
Our next question is coming from Jeff Kauffman with Vertical Research Partners. Your line is live.
Jeff Kauffman
Thank you very much.
Good afternoon, guys.
Hey, you know, it's strange as I as I sit here and kind of listen to all these earnings calls and everybody's forward outlook, I think the consistent theme is we feel we're getting close.
But the fog is a little thicker and visibility. Isn't that great right now?
Would you disagree with that comment?
Todd Macomber
No, I think that's very fair.
Jeff Kauffman
So when you talk about we feel like things could be turning or is it more just where we know the inventory destocking done? We see trade starting to flow I assume is getting better or are you actually seeing things may be in some sub industries or some parts of your network that lead you to believe that we could be bottoming on the curve here?
Bohn Crain
We're seeing some early indications of things improving on the ocean kind of on the ocean side in particular. So that's helpful.
I would say intermodal and truck brokerage is still probably the toughest area at least for us and a good news, bad news. It's the kind of the smallest piece of our business, but that's been a certainly a tough go in this environment again at a high level. Our core forwarding business continues to do reasonably well. Canada continues to do reasonably well and international ocean is starting to improve modestly. In other areas. It's slow going in late November and December and early January. As we're watching kind of weekly postings in February, things are starting to kind of lift off of those off of those lowest levels and so hopefully that there's obviously some seasonality in that that we would expect net-net of that quite revolutionary, right? That's kind of what we would generally expect. But but I think that's kind of the dynamic. So I don't have any kind of hard evidence to offer into the courtroom today, but --
Jeff Kauffman
But if there were other things in the court room today.
And so just following up on that, we are starting to see a little bit of a shift from goods coming into the East Coast to goods going into the West Coast and some of that Suez Cement, some of that's Panama Canal. Some of it's a whole bunch of other things doing care, which coast it comes in on I mean, I know you've got nationwide operations, but is traffic coming in on the West Coast different for you than traffic coming in on the East Coast.
Bohn Crain
Historically we've had much more significant trade flows in the transpacific trade lane.
So we would like we've got more exposure to Transpac and transatlantic, not that we don't do both, but we certainly have a bigger exposure on the transpac sites. So I think as we see those trade flows improve for any number of reasons, I think that will be a net positive for us.
Jeff Kauffman
Okay. And then one last oddball question here. Just kind of given the news coming out of the Supreme Court today from what happened to your business, the last time a President Trump was in power and we had these tariffs on Chinese goods. Is that anything that affects you positively or negatively due to the good still flow, but just a different way? Or does that negatively impact some of that Transpac business for you?
Bohn Crain
Well, I think the short answer is the more complicated global trade gets the more value we can provide our customers. So in tariffs and those types of things could and it impacts some of that stuff. But that doesn't mean trade stuff happens, right? So things might flow a little differently, but you have COLA and there certainly could be individual commodities that get impacted. So it really is kind of a facts and circumstances to know kind of what specific tariffs are being impacted. And if that's kind of I'm thinking of you Sundi battleship, right, it will be 47, right? If it happens that right of a particular commodity that we're servicing that we could be impacted, but it could build that business out of the same breadth. It could just as easily be helping come up with alternative solutions or alternative sourcing strategies that create incremental opportunities as well.
So
Jeff Kauffman
All right. Awesome and we'll thank you both very much and congratulations.
Todd Macomber
Thank you.
Bohn Crain
All right. Thank you.
Operator
Thank you. As we currently have no further questions in queue. I will hand the call back over to Mr. Crain for any closing comments.
Bohn Crain
Thank you. 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, extensive global network of service partners as we continue to build on the great platform we've created here at Radian. At the same time, we intend to thoughtfully relever our balance sheet and through a combination of agent station conversions, synergistic tuck-in acquisitions and stock buybacks. It is a 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 radiologists.
Operator
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
