Radiant Logistics - Q4 2023

Transcript

Operator (participant)

Please 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 fourth fiscal quarter and 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. 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.

Bohn Crain (Founder, Chairman and CEO)

Thank you, John. Good afternoon, everyone, and thank you for joining in on today's call. Our results for the quarter and 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. 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.

While our results are down comparatively, I view the fact that we generated over $9 million 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 $97.9 million 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 million 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, and as of June 30, 2023, we have approximately $32.5 million of cash on hand and nothing drawn on our $200 million 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. 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&A.

Todd Macomber (SVP and CFO)

Thanks, Bohn, and good afternoon, everyone. Today, we will be discussing our financial results, including Adjusted Net Income and Adjusted EBITDA for the three and twelve months ended June thirtieth, twenty twenty-three. For the three months ended June thirtieth, twenty twenty-three, we reported net income attributable to Radiant Logistics of $3,143,000 on $232.2 million of revenues, or $0.07 per basic and $0.06 per fully diluted share. For the three months ended June thirtieth, twenty twenty-two, we reported net income attributable to Radiant Logistics of $16,748,000 on $382.9 million of revenues, or $0.34 per basic and $0.33 per fully diluted share.

This represents a decrease of approximately $13.605 million of net income over the comparable prior year, or 81.2%. For Adjusted Net Income, we reported $6.456 million for the three months ended June 30, 2023, compared to Adjusted Net Income of $19.188 million for the three months ended June 30, 2022. This represents a decrease of approximately $12.732 million, or approximately 66.4%. For Adjusted EBITDA, we reported $9.207 million for the three months ended June 30, 2023, compared to Adjusted EBITDA of $26.383 million for the three months ended June 30, 2022.

This represents a decrease of approximately $17,176,000, or approximately 65.1%. Moving along to the twelve-month results. For the twelve months ended June 30, 2023, we reported net income attributable to Radiant Logistics of $20.595 million on $1.085 billion of revenues, or $0.43 per basic and $0.42 per fully diluted share. For the three months ended June 30, 2022, we reported net income attributable to Radiant Logistics of $44.464 million on $1.459 billion of revenues, or $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 twelve months ended June 30, 2023, compared to Adjusted Net Income of $58,246,000 for the twelve months ended June 30, 2022. This represents a decrease of approximately $18,945,000, or approximately 32.5%. For Adjusted EBITDA, we reported $55,638,000 for the twelve months ended June 30, 2023, compared to Adjusted EBITDA of $80,918,000 for the twelve months ended June 30, 2022. This represents a decrease of approximately $25,280,000, or approximately 31.2%. With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.

Operator (participant)

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A 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. 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. Once again, that's star one if you have a question or a comment. The first question comes from Jason Seidl with TD Cowen. Please proceed.

Jason Seidl (Managing Director and Senior Transportation Analyst)

Thank you, operator. Bohn, 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, you know, what are you looking at that shows we're heading into maybe a little bit of a recovery? And how should we think about Radiant's EBITDA, you know, coming off of that $80 million to $50-some million? How should we think about that for the current coming fiscal year?

Bohn Crain (Founder, Chairman and CEO)

Thanks. Thanks, Jason. You know, you know, we've got a number of different data points that we're, you know, obviously watching closely to try to glean, you know, and looking hopefully for green shoots. You know, and so I think for us, that's manifesting itself, you know, ever so slightly, but we're seeing it, you know, in terms of some of our ocean bookings starting to see a little activity picking up, which is encouraging because ocean volumes is, you know, everyone who followed the space knows, has been anemic. So we're seeing some, you know, a little bit of improvement there.

And, you know, kind of hopping over to the kind of over-the-road and intermodal space, you know, you know, because of a number of reasons, I think, including, loss of some larger market entrants, whose names I'll leave out of the call, you know, have tightened up capacity a little bit, which is, you know, gonna help the overall rate structure, for the trucking community, which in turn will, you know, likely, and, you know, help on the intermodal side of things as well, which, you know, although intermodal is small for us, you know, we're still paying close attention to it and, you know, looking for 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.

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, you know, we're always in the never-ending pendulum swing, you know, it would seem. And while we would never have held out that, you know, $80 million was a realistic run rate, kind of normalized EBITDA number.

... you know, I don't, I don't believe $9 million or $10 million of EBITDA is a normalized EBITDA number for us. So, you know, I think, and Jason, you know, probably better than most, giving, you know, all the companies that you cover and the conference you just had and all of that, that the narrative has seems to have shifted, in that, you know, heretofore, you know, folks were hopeful that, you know, 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. So-

Jason Seidl (Managing Director and Senior Transportation Analyst)

I would agree with that.

Bohn Crain (Founder, Chairman and CEO)

Yeah. So I kind of, you know, I think we will do kind of better than ±$10 million a quarter on a normalized basis as we revert to the norm. But these next couple of quarters, you know, that could well be indicative of where we're kind of trending as we kinda get back to kinda, quote, unquote, "norm," which, you know. And my, I guess, own 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-$60 million run rate, kind of would be in a more normalized environment as we kinda 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, to kind of tee up in our press releases, we have literally a completely unlevered balance sheet at this point in time. And so we're, you know, we're optimistic and, you know, that this is a really good time and opportunity for us. We've, you know, through this cycle, have been, you know, very conservative and, and cautious, and we had you know, we, we, we played a lot of defense, you know, to have an opportunity to play offense, right?

Given the right opportunities, you know, we would expect to relever 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.

Jason Seidl (Managing Director and Senior Transportation Analyst)

Well, you really kind of walked into my next line of questioning here, Bohn. You know, as we think about acquisitions for Radiant, you know, historically, you know, 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, you know, are you in a much better position for potentially acquisitions that are larger than that, you know, those that might, you know, exceed $5 million 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?

Bohn Crain (Founder, Chairman and CEO)

Okay, so there's a lot in there. I'm not necessarily gonna take those in order, 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 ±2.5x, you know, if we were kind of modeling, you know, for ourselves over the longer term. So that's kind of where we would think of that number.

Jason Seidl (Managing Director and Senior Transportation Analyst)

Right.

Bohn Crain (Founder, Chairman and CEO)

You know, I'm sure everybody's facts and circumstances are a little bit different, so I'm gonna 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, you know, longer than they have. And as the markets have retraced and come in, they're either, you know, in conversations with their bankers about covenant 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, you know, the debt markets aren't necessarily friendly right now.

So, you know, platform-type companies would be pretty reluctant, all things being equal, to kind of go open up their credit facility to create more capacity, 'cause they- they're not gonna be able to replicate their existing deal in today's market environment. So I think there'll be... You know, there's a lot of people on the sidelines, or more than kind of normal, kind of given some of those dynamics. So there's less, you know, 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 I've historically talked about, the premium we assign to being actionable, you know, to preserving our financial flexibility to be actionable. Well, so here we are, right? So a- again, this doesn't mean we're gonna be, you know, out going crazy by any stretch.

You know, we're gonna continue to, you know, follow our same disciplined approach, but I think in this environment, we're gonna have an opportunity to put some points on the board following our disciplined approach.

Jason Seidl (Managing Director and Senior Transportation Analyst)

... No, I see you're in a good position for sure.

Bohn Crain (Founder, Chairman and CEO)

Yeah. You know, but at the same time, as we, you know, even as we look at larger deals, you know, they're still gonna have to stand up to kind of our alternative use of capital, which is buying back our stock, you know, which continues to remain an attractive use of capital for us. And then kind of, I think, coming back, coming back to your first question, you know, we, you know, we, we have always and remain, you know, 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 time frames when they're ready.

And with that said, just, you know, 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.

Jason Seidl (Managing Director and Senior Transportation Analyst)

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

Bohn Crain (Founder, Chairman and CEO)

Yeah, you know, I don't wanna get too far out over my skis there, but the short answer is yes. That, that's certainly been the case. You know, and just to kinda call it out, you know, we've, you know, we've ended up passing on a number of deals over the years because people were wanting, you know, a higher portion of cash, you know, rather the earnout, rather than earnouts. And because of kind of market dynamics, you know, we ended up passing on some deals because we, you know, we just couldn't find a meeting of the minds with sellers around the earnout structure.

Well, in this environment, as we're talking to more sellers, people are more, you know, willing to accept that aspect of, of the structure, you know, and, you know, in part because of the market competition and just kind of who's in the marketplace. But also, it's just been a, you know, it's been a rollercoaster ride in terms of economic cycle and peaks and valleys and what is normal and how do you value businesses in this environment. You know, it's, you know, it's kind of acknowledging or kind of embracing an earnout structure makes all of that, you know, more digestible, you know, from our side as an acquirer.

Jason Seidl (Managing Director and Senior Transportation Analyst)

No, makes sense. Well, listen, I appreciate the time, as always. I'll turn it over to somebody else.

Bohn Crain (Founder, Chairman and CEO)

Thank you.

Operator (participant)

Thank you. Ladies and gentlemen, if you have a question or a comment, please indicate so now by pressing star one on your touch tone phone. Once again, that's star one if you have a question or a comment. 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.

Bohn Crain (Founder, Chairman and CEO)

All right. Thanks, John. 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 Agent Station Conversions, synergistic Tuck-in Acquisitions, and stock buybacks. Through our multipronged 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. Thanks for listening and your support of Radiant Logistics.

Operator (participant)

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