This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: This afternoon, Bond Crane, Radiant Logistics founder and CEO, and Radiant's Chief Financial Officer, Todd McCumber, will discuss financial results for the company's second fiscal quarter and six months ended December 31, 2021. 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 meanings 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 possible 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 in the Radiant's 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, Bon Crane.
spk04: Thanks, Matthew. Good afternoon, everyone, and thank you for joining in on today's call. We don't have flowers or chocolates to offer today on Valentine's, but we do have some very good news to share as we continued our trend with another quarter of record financial results for the December quarter. We posted record revenues of $332.8 million, up $114 million, or 52.1%. Record net revenues of $71.6 million, up $16.3 million, or 29.5 percent. Record net income attributable to Radian of $6.9 million, up $3.1 million, or 81.6 percent. Record adjusted net income of $12.3 million, up $3.7 million, or 43 percent. And record adjusted EBITDA of $17.3 million, up $4.8 million, or 38.4 percent. In addition, we also saw improvement in our adjusted EBITDA margin, which increased 140 basis points to a record 24.1%, up from 22.7% in the comparable prior year period. These results reflect the benefit of our scalable non-asset-based business model, diversity of our service offerings, and our ability to quickly respond to changing market dynamics and support our customers in this capacity-constrained market. In addition, we delivered these record results while working through the challenges presented by our previously disclosed ransomware event that occurred on December 8th. Also note that these record results reflect only a one-month contribution from Navigate, given the fact that we did not complete the transaction until November 30th. With offices in the Twin Cities and Chicago, as well as Shanghai, The Navigate platform itself represents an exciting new opportunity for the Radiant network and the end customers that we serve. In addition to solidifying our presence in Shanghai, Navigate also strengthens our international service offering, particularly in the areas of customs brokerage, ocean forwarding, and drainage services, and brings with it a proprietary technology platform to facilitate global trade management. These new global trade management capabilities will be made available to the entire Radiant network to provide our customers with purchase order and vendor management tools that unlock SKU level visibility from the manufacturing floor in Asia through final delivery here in the U.S. With both the enhanced service offerings and proprietary technology, we believe we will further differentiate ourselves in the marketplace and be even better positioned to provide additional support for both current and prospective customers. In addition to progress on the acquisition front, we also continue to put capital to work in our stock buyback program and have now purchased $6.3 million in stock through the six months into December 31 of 2021. As we previously discussed, we believe that our current share price does not accurately reflect Radiant's intrinsic value or long-term growth prospects. And we expect to continue to deploy our capital through a combination of strategic acquisitions and stock buybacks. It is also worth pointing out that the record results that we've delivered over each of these last several quarters have been fueled almost exclusively by organic growth. Looking forward, 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 have built here at Radian. At the same time, we have begun to thoughtfully relever our balance sheet, and through a combination of strategic acquisition and stock buybacks, we believe we are creating meaningful, intrinsic value for shareholders that has yet to be recognized in our stock price. With that, I'll turn it over to Todd Maycumber, our CFO, to walk us through our detailed financial results, and then we'll open it up for some Q&A.
spk02: Thanks, Vaughn, and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the three and six months ended December 31, 2021. For the three months ended December 31, 2021, we reported net income attributable to Radiant Logistics of $6,948,000 on 332.8 million of revenues or 14 cents per basic and fully diluted share. Please note that this quarter included approximately $750,000 of expense related to the cyber event disclosed in December. For the three months ended December 31st, 2020, we reported net income attributable to Radiant Logistics of $3,812,000 on 218.8 million of revenues, or eight cents per basic and seven cents per fully diluted share. This represents an increase of approximately $3,136,000 of net income over the comparable prior year period, or 82.3%. For adjusted net income, we reported $12,317,000 for the three months ended December 31st, 2021, compared to adjusted net income of $8,642,000 for the three months ended December 31st, 2020. This represents an increase of approximately $3,675,000 or approximately 42.5%. For adjusted EBITDA, we reported $17,251,000 for the three months ended December 31st, 2021 compared to adjusted EBITDA of $12,531,000 for the three months ended December 31st, 2020. This represents an increase of approximately $4,720,000 or approximately 37.7%. Moving along to the six month results. For the six months ended December 31st, 2021, we reported net income attributable to Radiant Logistics of $14,027,000 on 618.9 million of revenues are 28 cents per basic and fully diluted share. Please note this period also included the $750,000 expense related to the cyber event disclosed in December. The six months ended December 31st, 2020. We reported net income attributable to RE logistics of $6,900,000 on 394.7 million of revenues, or 14 cents per basic and fully diluted share. This represents an increase of approximately $7,127,000 over the prior comparable year period, or approximately 103.3%. For adjusted net income, we reported $22,879,000 for the six months ended December 31st, 2021, compared to adjusted net income of $15,159,000 for the six months ended December 31st, 2020. This represents an increase of approximately $7,720,000, or approximately 50.9%. For adjusted EBITDA, we reported $31,798,000 for the six months ended December 31st, 2021, compared to adjusted EBITDA of $21,753,000 for the six months ended December 31st, This represents an increase of approximately $10,045,000 or approximately 46.2%. With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.
spk01: Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone. Your first question is coming from Jason Seidel from Cowan. Your line is live.
spk03: Hey, operator, thank you. Bon and Todd, congrats on a very strong quarter. I have a couple questions. One, could you give us an update on the ransomware. Should we expect any impacts here in 1Q? If so, how much? I guess the second question I would ask is navigate to help us out in terms of modeling it on a quarterly basis. Is there any special seasonality we should think about and what sort of growth levels are you looking for in 22? And then I have a follow-up question sort of on the overall market.
spk04: Okay. I guess we'll take up more of the time here. So first, relative to the cyber event itself, that is largely behind us now at this point in terms of any incremental costs. So I mean, there might be some straggling costs that could come, but it should be really immaterial and nowhere in the magnitude of the plus or minus $750,000 that we accrued into the quarter, into December. So it was a challenging time, but that is largely behind us at this point in time relative to the cyber event itself. The second was navigate. You know, we're still early into the process, you know, ourselves in terms of integration. I don't believe we're not expecting, you know, significant seasonality. I mean, as I think we would expect, we would be modestly, you know, slower in the quarters and quarter-ended March and then continuing to build over the calendar year like a lot of the traditional business is. So pretty standard in that form. So I don't think there's anything unique we need to do in terms of modeling as it relates to seasonality.
spk03: It's a little early.
spk04: They can grow off the numbers? I am. It's early days in terms of our integration, but the technology itself we're really excited about in terms of detailed PO management, SKU-level tool, particularly in today's environment with all of the frustrated supply chains and everybody's appetite for increased Visibility to what's happening, you know, not only on the water but on the manufacturing floor, you know, with the global challenges of COVID and managing workforces, et cetera, there's just a heightened interest in that type of visibility. And while historically we could always provide shipment-level visibility, we've never been able to offer back to our own customer base this PO-level visibility. skew level in transit visibility. So we think it's going to be really powerful and kind of an incremental opportunity within our installed customer base as well as just an opportunity to go out and further differentiate ourselves in the marketplace and win new customers. We always look for transactions that we think we can value and structure in a way that makes sense relative to our own kind of trading multiples, and for the Navigate transaction, we certainly achieved that, but we have this real nugget that we perceive in the technology set that was embedded within the business that we're excited to kind of bring to market in a more robust way.
spk03: Yeah, seems like it's going to be a good one, Don. I wanted to, my third and final one here, you talked a little bit about organic growth Um, clearly we see the revenue side, but maybe you could parse out sort of the shipment growth that we're seeing because there's, there's been a lot of positive noise on the pricing front given sort of just sort of a global congested supply chains and what's going on with ocean rates and air rates and trucking rates is just across the board. So how, how has the organic shipment growth been for you across your different business lines?
spk04: I think, generally speaking, it's been really positive. I mean, obviously, we've got, you know, increased rates, but, you know, in this environment, it's really created an opportunity for us, you know, open up relationships with new customers who are craving capacity. So, effectively, if you have capacity, you know, you have opportunities. So, and I'm, you know, So kind of the opportunity to accelerate engagement with customers and new customers around capacity has been, you know, very interesting for us. And, you know, it's been kind of a continuing theme as we've continued to grow up. But just kind of the size and sophistication of the customers that we have an opportunity to serve continues to increase. and kind of back to some of the technology angles of some of these conversations, I think that's only going to continue to increase.
spk03: And, Bon, would you put it in sort of the low single-digit, mid-single-digit, upper single-digit growth rates in terms of the shipments?
spk04: You know, there's always a bit of a tricky question when we start thinking about mix in terms of modalities, but I think, you know, we continue to – you know, to think about baseline organic growth in terms of growing our gross margin dollars, which we would think of in, you know, conservatively the 4% to 6% range, and then getting the benefit of our scalable back office and seeing an expansion on that on the EBITDA growth, kind of getting... more and more dollars to the bottom line as a function of gross margin. And so we would think of that in kind of the eight to 12 times target. So four to six and eight to 12.
spk03: All right. Very helpful, Bon. Thank you for the time as always.
spk04: And again, congrats.
spk03: Thank you.
spk01: Thank you. Your next question is coming from Jeff Kaufman from Vertical Research Partners. Your line is live.
spk05: Thank you very much. Congratulations. Thank you. Thank you. So a couple questions. Big jump in the tax rate this quarter, almost 300 basis points. Was that kind of a one-time deal? Is something different as a result of Navigate being on board? Was it related to some of the one-time items? Could you give us some guidance on taxes, the quarter, and then tax rate for the year?
spk02: Yeah, the tax rate for the year, obviously everything, we just went through a significant exercise over the weekend. And the rates, you know, I think the rate of what we're booking now is going to be the rate going forward. But we did, you know, we looked at, you know, Navigate had more state income taxes than Radiant as a whole. So overall, it's, you know, it changed the overall mix a little bit.
spk01: Thank you. Your next question is coming from Mark Argentino from Lake Street. Your line is live.
spk05: Hey, guys. Congrats on a solid quarter. Sorry to hear about those Minnesota state tax rates. Unfortunately, I know a little too much about them. Anyways, congrats on a solid quarter. Obviously, you guys are hitting your stride. I guess
spk08: Your next question is coming from Mike.
spk02: I'm sorry. We lost. Yeah, we've just lost the last two people. It seemed like I got cut off.
spk01: Please hit star 1 to reenter the queue. Your next question is coming from Mike Vermont from Newland Capital. Your line is live.
spk07: Hey, guys. How are you doing? Sorry for that.
spk04: Hopefully they'll call back in.
spk07: Go ahead, Mike. So first of all, guys, I got to say just phenomenal. You know, when we started out with investing in Radiant years ago, you never could have believed we'd be where we are today. It's incredible. And, you know, it's amazing that we're kind of close to the same stock price and we're earning five times what we used to. So just applaud you guys on that. You know, a lot's happened competitively, I guess, in the last few months in our sector. Some of you are One of your largest competitors was announced, I guess, last week that Maersk acquired Pilot. And from what I can see, they paid over 14 times EBITDA. We're trading under six. I think we're at five and a half right now, a little less. First of all, how do you balance that when you guys look at that and what do you see happening out there in the competitive landscape? We're the only public, I guess, logistics company in that space, right? There's, I guess, three or four other that are privately owned. Maersk decided to buy Pilot, paid an amazing price for them. How do you see things developing out there? What's your take on all of this? If you give that multiple to us, we're at $23 right now. There's some massive disconnect here. I'm just wondering what you're thinking.
spk04: Well, there's a lot of different aspects to that, right? So I guess starting with the obvious, which is, you know, Maersk and the other ocean lines have accumulated quite a bit of cash in this environment in terms of ocean pricing. So they, you know, I think they also acquired LF Thong. And so there's a, you know, they have been and they may continue to be acquisitive for all that, for all that, you know, we know. So, I think, you know, consolidation will continue, you know, so it would seem. And, you know, in terms of ourselves, you know, we're trying to continue to create shareholder value executing our strategy. We haven't been, you know, rewarded the way that we would like to be. You know, that creates its own frustrations and its own opportunities. So, You know, we've begun to do some work on the stock buyback side of things. I think we've spent close to $7 million this past, you know, through the first six months of this year. So, you know, it's tough, right? I think that's the straight answer. You know, when we started this journey, you know, I think we were trading at $0.44 a share, right? And we're down at $0.20 a share, you know, somewhere along the way. So... We think we are, I believe, absolutely, we're executing a strategy that is creating meaningful, intrinsic value in the business that ultimately, for I think a number of contributing factors, hasn't been fully reflected in our stock price, and I think that's you know, part of the reality of being, at least some portion of that is part of the reality of being, you know, a smaller public transport, you know, but even some larger public transports, I think of ECHO in particular, you know, they had done a relatively good job of positioning themselves as a technology-forward, non-asset-based 3PL, and ultimately, you know, they decided to go private themselves. So it's something that we have to continue to kind of think about in terms of the range of options for how we continue to move forward. But at least at this point, we believe there's still plenty of work to be done, plenty of opportunity to create shareholder value. How and when that gets unlocked remains to be seen. But we're still busy executing our strategy and continuing to put up really exceptional results. And hopefully the cumulative weight of the evidence will ultimately win out and we'll see some appreciation in our stock price. But at the same time, there are You know, it's irreputable. There's lots of money on the sidelines in the private equity world, and they are, you know, they're aggressively bidding on businesses. So, you know, that's, you know, will always be, I shouldn't say always, but at least in this current environment remains, you know, an option available to us should that make sense.
spk07: Excellent. I just got to say, you know, you guys are doing a, Unbelievable job here. Acquisition looks fantastic. The earnings look great. And going through, I guess, what you dealt with too in the quarter, I've gone back. I can't remember a public non-asset logistics company trading at these levels with your kind of organic growth. So congratulations. And yeah, eventually it'll unlock. But great job there. And continue it into 2022. Thank you.
spk01: Thank you. Your next question is coming from David Cannon from Cannon Wealth Management. Your line is live.
spk06: Hi, good afternoon, guys. Congratulations. Great job. Thank you. So first question is, what's your comfort level in terms of leverage ratio versus EBITDA?
spk04: I think probably the short answer to that is probably two and a half times is where we would think the normalized leverage ratio we would target. Our existing credit facilities provide for three times and can flex up to 3.25 times kind of under our existing framework. So plus or minus two and a half times would probably be how we would
spk06: So we have a lot of room. My question is, if the stock continues to trade as the previous caller called out, you know, sub six times, five and a half times EBITDA, are you more likely to deploy your capital in buybacks or M&A trades? given the current marketplace with most things trading at higher multiples than where your stock is? And by the way, Navigate, great job. I'll do those deals all day long. So how do you answer that?
spk04: Yeah, well, I think we have to continue to, you know, I think we're going to continue to do our best to take a balanced approach. We'll continue to be interrogating the market, looking for synergistic, compelling solutions you know, acquisitions that we think make sense for, you know, the network, for the shareholders and the network, et cetera. But, you know, the hurdle rate, you know, becomes in part, you know, what that looks like relative to buying in our own stock. And so it's something that, you know, historically we've done. We're kind of doing what we said we were going to do, which is take this multi-pronged approach and, you know, do a combination of, stock buybacks and continued what will likely be smaller tuck-in acquisitions. That's the baseline playbook in terms of how we think about capital allocation.
spk06: Okay. And then as far as the impact from the ransomware attack, you quantified it at about $750K. My question is, The adjusted number, does it add back? The adjusted EPS number, does it add back the 750 or that's how? Yeah, it does.
spk04: Yeah. And the press release, when you get to the, I think it's the last page, there's kind of a reconciliation that takes place. And you'll see that 750 is an add back in those numbers. And both adjusted EBITDA and adjusted net income.
spk06: Okay. And then what was the net revenue number approximately that we lost from, I mean, I'm sure I could back into it using your EBITDA margin.
spk04: Well, you can't really get to a net revenue impact of the number. We're sure that there was probably some small amount of revenue lost through the process, but not a ton. And what I mean by that is we continue to service our customers with you know, through the entire process. So some shipments were deferred or kind of slow to move, but we don't believe that there was any meaningful top-line revenue lost in the scheme of our overall financials. It was just, you know, what you're seeing is the, and that $750,000 is basically the third-party cost we incurred in parachuting in the SWAT team to deal with the cyber event itself. I should take a moment to just acknowledge the resiliency of the network and all the hard work they did as we were working through that. It was pretty amazing, the effort the team put forward to ensure that we didn't miss a beat with our customers with a less than optimal fact pattern as we work through the ransomware.
spk06: Yeah, good call out. And then, you know, what's impressive is the organic growth in the quarter. Could you give us a sense as to what the drivers were? Was it new customers? Was it growth within existing customers? Was it one particular vertical or just sort of just completely different?
spk04: I would say it was really broad-based. The guys in Canada continue to do an extraordinary job in their bundling strategy. We saw great growth in the forwarding business, a fair amount of that coming in the ocean product line. And then Clipper itself has seen you know, really positive results, you know, kind of across the board within their business with probably the temperature-controlled business leading the way within the work that they do.
spk06: And, Bon, you know, this is the first time I've heard you call out, you know, the statement that you did previously about there's a lot of private equity money out there. you know, the implication is, hey, maybe someone's going to, is kicking your tires. Could you just comment a little bit more on that? Are you getting inbound calls?
spk04: No, I would say unequivocally, no one's kicking our tires. I don't want to leave anyone with that impression. You know, I get, you know, I certainly get asked from time to time, you know, hey, are you in the process of selling your business, right? And the answer is unequivocally no or not, right? We're We're very passionate about what we're doing, and so we're not in any kind of process considering to sell ourselves.
spk06: Okay. Good luck next quarter. Keep up the great work, and we hope you guys accelerate the buyback in the absence of the creed of M&A and take advantage of this opportunity of the disrespect the market is showing to the stock. Thank you.
spk04: All right. Thanks, Dave.
spk01: Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone at this time. Your next question is coming from Jeff Kaufman from Vertical Research Partners. Your line is live.
spk05: Hey, round two.
spk04: Hey, sorry for that.
spk05: I hope you got a roll of quarters there to keep feeding the machine. Yeah, I'm calling from one of those old phones, I guess.
spk04: Sorry about that. No, I think it might have been on our end, so I apologize. That's okay. That's okay.
spk05: All right, so a lot of questions have been asked. I'm glad no one's kicking your tires and you're not going private tomorrow. So let me focus on some other things. A lot of businesses that have reported this quarter have been talking about how Omicron really affected their business more than anyone thought in January and even into early February. Absenteeism was up, and it wasn't just their businesses, but their customers' businesses. I was just curious. It doesn't sound like it was a big deal in fiscal 2Q. You had your own other issues. But has Omicron hit your business at all, or has this Canadian trucker protest hit your Canadian business? And are there any oddities we should be thinking about as we're thinking through the third quarter forecasting?
spk04: Yeah, well, it seems like it's kind of the recurring, non-recurring oddities, right? So all of those things you are mentioning, you know, Omicron, you know, the border stuff, You know, all of that stuff is challenging everyone, right? So, you know, ultimately it's the folks in the trenches that are where the proverbial rubber meets the road that are, you know, still finding a way to get it done. So it's not without a lot of effort. So, you know, we are being, I guess, impacted in terms of Blood, sweat, and tears, but everybody's answering the bell and getting it done. Again, not unique to us, but I think everybody is really challenged on the labor front through a combination of inflation and then just people being out sick and in quarantine with Omicron. So everyone's shorthanded and trying to carry more water than they normally would need to. you know, waiting for folks to get back on the job as they're kind of recovering. So it's kind of, we've had a lot of, you know, absenteeism in response to Omicron. But fortunately, you know, again, I think generally recognized, you know, most folks aren't going to the hospital with Omicron. You know, it's like they're out for several days, but then they're back. And so we're working through it as best we can, just like everybody else out there.
spk02: Hey, Jeff, as it relates to Canada, yes, I mean, great question. We've, you know, basically Canada has been able to kind of navigate through that. As you know, the trucking, you know, they've been largely shut down, but they're able to move stuff that where they were trucking stuff, they've gone rail to get it across the border. So it's a matter of, you know, kind of tactically attacking the But they've been able to do that so far.
spk05: That's great to hear.
spk02: It certainly impacts them. It's a challenge for them, for sure. Hopefully all that is getting resolved soon. I think it's starting to lighten up is what I saw in the news. But yeah, it's ongoing for now.
spk05: Now, Todd, we got cut off. I was following up your tax comment because you had mentioned things are different now with Navi.
spk04: Jeff, we're going to have to cut you off again if you start asking tax rate questions.
spk05: Well, I'm just wondering, kind of, what's the right way to think about it going forward?
spk02: Yeah, you know, I think the rate, you know, I mean, everything got trued up and we went through the whole exercise this, you know, the last few days, you know, with our tax advisors. You know, the reality of it is if you look at Radian as a whole, We're in a lot of places where we're not having to pay state taxes because we don't have nexus, but when you look at Navigate, they are largely in Minnesota and they've got operations in Chicago. They've got boots on the ground there, so they're paying state income taxes. The overall rates, everything was looked at very closely. I think the rates that we have right now this quarter, barring another acquisition, the rate here is what I think is going to stay the rest of the way. So that's the best rate that you can use right now, barring another acquisition.
spk05: All right. Well, since I asked about tax rate twice, I guess I should stop. So thank you very much. You bet.
spk04: Thanks, Jeff.
spk01: Thank you. There are no further questions in the queue. I'll now hand the conference back to our host for closing remarks. Please go ahead.
spk04: Thanks. 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 have here at Radiant. At the same time, we've begun to thoughtfully relever our balance sheet, and through a combination of strategic acquisition and stock buybacks, we believe we are creating meaningful, intrinsic value for our shareholders that has yet to be recognized in our stock price. Through this multi-pronged approach of organic growth, acquisition, 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.
spk01: Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Disclaimer