Radiant Logistics Q4 2023 Earnings Call Transcript

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September 13, 2023

There are 4 speakers on the call.

Operator

Note this conference is being recorded. This afternoon, Bohn Crain, Radiant Logistics' Founder and CEO and Radiant's Chief Financial Officer, Todd Macomber, will provide a general business update and discuss financial results for the company's 4th fiscal quarter year ended June 30, 2023. Following their 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.

Operator

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.

Operator

Now, I'd like to pass the call over to Radiance Founder and CEO, Bohn Crain.

Speaker 1

Thank you, John. Good afternoon, everyone, and thank you for joining in on today's call. Our results for the quarter year ended June 30, 2023 continue to reflect the macroeconomic effects of the difficult freight markets on the entire transportation sector as well as our own operations. The confluence of shippers continuing to manage through elevated inventories, reduced imports and a slowing Economic growth has had a cascading effect across virtually every mode of transportation. As in the prior quarter, These market conditions have negatively impacted not only our current results, but also the year over year comparison to our record results from the prior year period.

Speaker 1

With that said, we believe we are at or near the bottom of the cycle and we would expect markets to begin to find their way to more sustainable and normalized levels in coming quarters. And while our results are down comparatively, I view the fact that we generated over $9,000,000 in adjusted EBITDA for the quarter in this very difficult market as a positive indicator for Radiant and our prospects as we continue through this cycle. In addition, and as we pointed out in the press release, we delivered a record $97,900,000 in cash from operations for our fiscal year ended June 30, 2023. During the same period, we have remained relatively quiet on the acquisition front and have instead focused our attention on paying down debt and deploying just over $11,000,000 to repurchase our stock. Through this disciplined approach to capital allocation, it is fair to say that we are in the strongest financial position in the company's history.

Speaker 1

And as of June 30, 23, we have approximately $32,500,000 of cash on hand and nothing drawn on our $200,000,000 credit facility. Having fortified our balance sheet, 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 believe our patience and discipline may be rewarded as market conditions become more conducive to our acquisition strategy and we have ample dry powder to become more active on the acquisition front should the opportunity present itself. Looking ahead, we will remain focused on delivering profitable growth through a combination of organic and acquisition initiatives and thoughtfully relevering our balance sheet through a combination of agent station conversions, strategic tuck in acquisitions and stock buybacks. Through this approach, we will continue to scale our business, leveraging our best in class technology and extensive global network, which we believe will over time continue to deliver meaningful value for our shareholders, operating partners and the end customers that we serve.

Speaker 1

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

Speaker 2

Thanks, Bon, and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the 3 12 months ended June 30, 2023. For the 3 months ended June 30, 2023, we reported net income Attributable to Radient Logistics of $3,143,000 on $232,200,000 of revenues or $0.07 per basic and $0.06 per fully diluted share. The 3 months ended June 30, 2022, We reported net income attributable to Radient Logistics of $16,748,000 on $382,900,000 of revenues for $0.34 per basic and $0.33 per fully diluted share. This represents a decrease of approximately $13,605,000 of net income over the comparable prior year or 81.2%.

Speaker 2

Adjusted net income, we reported $6,456,000 for the 3 months ended June 30, 2023 compared to adjusted net income of $19,188,000 for the 3 months ended June 30, 2022. This represents a decrease of approximately $12,732,000 or approximately 66.4%. For adjusted EBITDA, we reported $9,207,000 for the 3 months ended June 30, 2023, Compared to adjusted EBITDA of $26,383,000 for the 3 months ended June 30, 2022. This represents a decrease of approximately $17,176,000 or approximately 65.1%. Moving along to the 12 month results.

Speaker 2

For the 12 months ended June 30, 2023, we reported net income Attributable to Radient Logistics of $20,595,000 on $1,085,000,000 of revenues are $0.43 per basic and $0.42 per fully diluted share. For the 3 months ended June 30, 2022, We reported net income attributable to Radient Logistics of $44,464,000 on 1,459,000,000 of revenues were $0.90 per basic and $0.88 per fully diluted share. This represents a decrease of approximately $23,869,000 over the comparable prior year period or 53.7%. For adjusted net income, we reported $39,301,000 for the 12 months ended June 30, 2023, compared to adjusted net income of $58,246,000 for the 12 months ended June 30, 2022. This represents a decrease of approximately $18,945,000 or approximately 32.5%.

Speaker 2

For adjusted EBITDA, we reported $55,638,000 for the 12 months ended June 30, 2023 compared to adjusted EBITDA of $80,918,000 for the 12 months ended June 30, 2022. This represents a decrease of approximately $25,280,000 are approximately 31.2%. With that, I will turn the call back over to our moderator to facilitate any Q and A from our callers.

Operator

Thank you. At this time, we will be conducting a question and answer session. First question comes from Jason Seidl with TD Cowen. Please proceed.

Speaker 3

Thank you, operator. Bon, Todd, good afternoon here. Wanted to start off a little bit and look at the overall macro environment. I think you indicated you think you were off a bottom here. I guess, what are you looking at, that shows we're heading into maybe a little bit of a recovery?

Speaker 3

And how should we think about Radiance EBITDA coming off of that $80,000,000 to $50 some million? How should we think about that for the current coming fiscal year?

Speaker 1

Thanks, Jason. We've got a number of different data points that we're obviously watching closely to try to glean And looking hopefully for green shoots. And so I think for us that's manifesting itself Ever so slightly, but we're seeing it in terms of some of our ocean bookings starting to see a little activity Picking up, which is encouraging because ocean volumes is everyone who followed this space knows has been anemic. So we're seeing some a little bit of improvement there and kind of hopping over to the kind of Over the road and intermodal space because of a number of reasons, I think including Loss of some larger market entrants whose names I'll leave out on the call have tightened up capacity a little bit, which is And to help the overall rate structure for the trucking community, which in turn will likely Help on the intermodal side of things as well, which although intermodal was small for us, we're still paying close attention to it and looking Some improvements on that side of things. So it's modest but positive and we haven't been able to Kind of say that recently.

Speaker 1

And so I guess those are at least some of the data points around that. And then kind of back to Kind of the earnings power of the business, I think we're always in the never ending Pendulum swing, it would seem and while we would never have held out that $80,000,000 was a realistic run rate kind of normalized EBITDA number. I don't believe $9,000,000 or $10,000,000 of EBITDA is a normalized EBITDA number for us. So I think And Jason, you know probably better than most given all the companies that you cover in the conference you just had and all of that. The narrative has seems to have shifted in that

Speaker 3

Here to 4,

Speaker 1

folks were hopeful that the last half of this year we would start to see meaningful improvement. People now seem to be pointing to calendar 2024 and not necessarily early in calendar 2024.

Speaker 3

I would agree with that.

Speaker 1

Yes. So I kind of I think we will do Got a better than plus or minus $10,000,000 a quarter on a normalized basis as we revert to the norm. But these next couple of quarters, that could well be indicative of where we're kind of trending as we kind of get back to Kind of norm, which and my, I guess, on mental crystal ball that kind of it's hard to articulate what the new normal is, but kind of In my mind for us that's more in a $50,000,000 to $60,000,000 run rate kind of would be In a more normalized environment as we kind of find our way back to normal. So that's what I would kind of Expect us to kind of work our way back to on a normalized basis. And then I would be Remiss to not just kind of call out as we try to kind of tee up In our press releases, we have literally a completely unlevered balance sheet at this point in time.

Speaker 1

And so we're optimistic and that this is a really good Time and opportunity for us. We've through this cycle have been very conservative and cautious and we had We played a lot of defense to have an opportunity to play offense, right. And so Given the right opportunities, we would expect to re lever our balance sheets and we think there's a lot of upside For us and our shareholders in terms of where we are and where we're going from here.

Speaker 3

Well, you really kind of walked into my next Line of questioning here, Bond. As we think about acquisitions for Radiant, historically, you did a lot of Sort of agent conversions and those were small enough where you didn't have a lot of competition. I guess What does the current economic situation look like for the agent conversions to start happening again? And Are you in a much better position for potentially acquisitions that are larger than that, those that might Exceed $5,000,000 of EBITDA, just because it's become a lot harder To finance these acquisitions for some of the maybe the financial backed players versus somebody who's very unlevered such as yourself. And then the quick follow-up to that is, where are you comfortable having your leverage at in the future for the right acquisition?

Speaker 1

Okay. So there's a lot in there. Let me I'll kind of Well, I'm not necessarily going to take those in order. I'll take but let me just try to pick them off as they're coming to me here. I think we would think of Normalized leverage of being plus or minus 2.5 times, if we were kind of modeling For ourselves over the longer term, so that's kind of where we would think of that number.

Speaker 1

As we And I'm sure everybody's facts and circumstances are a little bit different. So I'm going to paint with A bit of a broad brush here, but it's at least my perception that a lot of companies were levered up and expecting the go go days to last Longer than they have and as the markets have retraced and come in, they're either in conversations with their bankers about compliance or at a minimum, they're tapped out and kind of going to part of your question. Some of the folks who might naturally be acquisitive in the marketplace, they're tapped out under their current credit facilities And they're really the debt markets aren't necessarily friendly right now. Platform type companies would be pretty reluctant all things being equal to kind of go open up their credit To create more capacity because they're not going to be able to replicate their existing deal in today's market environment. So I think there'll be there's a lot of people on the sidelines or more than kind of normal, kind of given some of those dynamics.

Speaker 1

So there's Less there's less people that are actionable and people who have been on these calls over the years know I Talk a lot about or have historically talked about the premium we assign to be in actionable, Preserving our financial flexibility to be actionable. Well, so here we are, right. So again, this doesn't mean we're going to be You know, I was going crazy by any stretch. We're going to continue to follow our same disciplined approach. But I think in this environment, we're going to have an opportunity to put some points on the board following our disciplined approach.

Speaker 1

And so I see you're in

Speaker 3

a good position for sure.

Speaker 1

Yes. But at the same time as we Even as we look at larger deals, they're still going to have to stand up to kind of Our alternative use of capital, which is buying back our stock, which continues to remain an attractive use of capital for us. And then kind of coming back to your first question, we have always and remain At the ready to support our agent stations to convert them to a company owned store when and if they're ready. So it's really never been A question of our interest or financial wherewithal or access to capital or any of that kind of stuff. We're here to support our partners On their timeframes, when they're ready.

Speaker 1

And with that said, just biologically, none of us are getting any younger. And so the demographic of our agent based network is aging out. And so the kind of That opportunity set has always been there, but I think that the rate and opportunity for conversion will Continue to accelerate just because of Father Time.

Speaker 3

That makes sense. It sounds like you're in a good position for both sides of Real quickly on the non agents, the more the platform acquisitions, what are you seeing in terms of the multiples? Are they starting to come in a bit?

Speaker 1

Yes. I don't want to get too far out over my skis there, but the short answer is yes. That's certainly Than the case. And just to kind of call it out, we've ended up passing on a number of deals over the years because People were wanting a higher portion of cash rather than earn outs and because of kind of market dynamics, We ended up passing on some deals because we just couldn't find A meeting of the minds with sellers around the earn out structure. Well, in this environment as we're talking to more sellers, people are more You know, willing to accept that aspect of the structure In part because of the market competition and just kind of who's in the marketplace, but also it's just been a roller coaster ride in terms of economic cycle and peaks And what is normal and how do you value businesses in this environment.

Speaker 1

It's kind of Acknowledging or kind of embracing an earn out structure makes all of that more digestible From our side as an acquirer.

Speaker 3

Makes sense. Well, listen, I appreciate the time. As always, I'll turn it over to somebody else.

Speaker 1

Thank you.

Operator

Okay, it looks like we have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.

Speaker 1

All right. Thanks, John. Let me close by saying that we remain optimistic about our prospects opportunities to continue to leverage our best in class technology, robust North American footprint, an extensive global network of service partners to continue to build on the great platform we've created here at Radient. At the same time, we intend to thoughtfully relever our balance sheet and do a combination of agent station conversions, Synergistic tuck in acquisitions and stock buybacks. Through our multi pronged approach of organic growth, acquisitions and stock buybacks, we believe we will continue to create meaningful value for our shareholders, operating partners and the end customers that we serve.

Speaker 1

Thanks for listening and your support of Radian Logistics.

Operator

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

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