Radiant Logistics, Inc.

Greetings. Welcome to Radiant Logistics financial discussion for second fiscal quarter ended December 31st, 2024. This afternoon, Bon Crane, Radiant Logistics founder and CEO, and Radiant's Chief Financial Officer, Todd McCumber, We'll provide a general business update and discuss financial results for the company's second fiscal quarter and six months ended December 31st, 2024. 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 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, Bon Crane.

Thanks, Paul. Good afternoon, everyone, and thank you for joining in on today's call. With the benefit of our diverse service offering, we continue to deliver solid financial results, and generated $12 million in adjusted EBITDA for our second fiscal quarter ended December 31, 2024. These results are generally ahead of results from the comparable prior year period, as well as our most recent previous quarter ended September 30, 2024. We continue to take great pride in our work to support humanitarian and relief-related projects around the globe. Our results this quarter reflect our support of a number of such projects, including chartering 49 flights to bring approximately 8 million units of IV fluid to the U.S. as a result of the national shortages resulting from Hurricane Milton. Notwithstanding these strong results for the quarter, we do expect our future near-term results to continue to be challenged by market headwinds. Near-term results could also be further frustrated by the recently introduced tariffs with China, Mexico, and Canada, as we head into our slowest seasonal quarter ended March 31. As previously discussed, we believe we are well positioned with a durable business model, diverse service offering, and strong balance sheet to navigate through these slower freight markets as we find our way back to more normalized market conditions. We continue to enjoy a strong balance sheet with approximately $20 million of cash on hand, no meaningful debt, and an untapped $200 million credit facility. 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 strategic operating partner 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. We made good progress in this regard over this last quarter with the acquisition of Texas-based Foundation Logistics, the conversion of our Michigan-based strategic operating partner, Focus Logistics, which is combining with our existing Radian operations in Detroit, and the acquisition of TCV Transportation in St. Louis, Missouri. We believe these three transactions are representative of our broader pipeline of opportunities which includes both greenfield acquisitions, those companies not currently part of our network, as well as acquisition opportunities inherent in our agent-based network where we can support our current operating partners in their exit strategies. We look forward to providing further updates as we continue to progress along these lines. With that said, I'll now turn it over to Todd Maycumber, our Chief Financial Officer, to walk us through our detailed financial results. and then we'll open it up for some Q&A.

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 31st, 2024. For the three months ended December 31st, 2024, we reported net income attributable to Radiant Logistics of $6,467,000 on 264.5 million of revenues or 14 cents per basic and 13 cents for fully diluted share. For the three months ended December 31st, 2023, we reported net income attributable to Radiant Logistics of $985,000 on 201.1 million of revenues, or 2 cents per basic and fully diluted share. This represents an increase of approximately $5,482,000 net income over the comparable prior year period. or 556.5%. For adjusted net income, we reported $10,695,000 for the three months ended December 31st, 2024, compared to adjusted net income of $5,496,000 for the three months ended December 31st, 2023. This represents an increase of approximately $5,199,000, or approximately 94.6%. For adjusted EBITDA, we reported $12,016,000 for the three months ended December 31st, 2024, compared to adjusted EBITDA of $7,708,000 for the three months ended December 31st, 2023. This represents an increase of approximately $4,308,000, or approximately 55.9%. For the six months period, the six months ended December 31st, 2024, we reported net income attributable to radiant logistics of $9,843,000 on 468.1 million of revenues, or 21 cents per basic and 20 cents for fully diluted share. 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 valued share. This represents an increase of approximately $6,236,000 over the comparable prior year period, or 172.9%. For adjusted net income, we reported $18,578,000 the six months ended December 31st, 2024, compared to adjusted net income of $12,046,000 for the six months ended December 31st, 2023. This represents an increase of approximately $6,532,000 or approximately 54.2%. For adjusted EBITDA, we reported $21,468,000 for the six months ended December 31st, 2024, compared to adjusted EBITDA of $16,874,000 for the six months ended December 31st, 2023. This represents an increase of approximately $4,000,000 $594,000, or approximately 27.2%. With that, I will turn the call over to our moderator to facilitate any Q&A from our callers.

Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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. Once again, that's star one if you wish to ask a question on today's call. One moment, please, while we pull for questions. And the first question today is coming from Elliot Alper from TD County. Elliot, your line is live.

All right, yeah, thank you. This is Elliot. I'm for Jason Seidel. Maybe just starting off, Can you give more detail on maybe the outperformance in the December quarter? Was Milton the primary driver? Maybe anything else you saw unusual about peak season or curious if you saw any pull forward in the market?

Sure. I'll take a crack at that. You know, I think the conversation had to start with kind of the diversity of our service offering and the fact that we did have an opportunity to support a number of initiatives. you know, in and around Hurricane Milton that, you know, was the real driver in the outperformance for the quarter. And, you know, we're appreciative for that opportunity. We tried to do our best to temper the press release itself because it's still tough going out there and kind of this project activity, you know, is kind of helping us through the trough, but it's still – kind of slow going. You know, I do think, as you were alluding to, there was some, you know, a little bit of pull forward this quarter kind of in anticipation of tariffs. So we got, you know, a little bit of, you know, what I would call a modest bump there. But more broadly, it's pretty tough out there for us and our competitors. And we were just fortunate enough to have some pretty meaningful, you know, meaningful in terms of human impact and ultimately meaningful in terms of financial performance for us in and around supporting this IV fluid project.

Okay, great. And then I wanted to ask about the acquisition of TCB you made in December. Can you talk about the strategic rationale of acquiring an intermodal marketing company and maybe a ballpark of how we should think about the size of that business or maybe the margins versus your existing business?

Yeah, sure. So, you know, this is a really great question. Thank you for that. Just to kind of provide some foundational comments to my response. You know, back in 2015, we acquired another public company that was called Wheels Group, which we rebranded as Radiant Global Logistics Canada. Wheels itself had done some acquisitions and had acquired a company from ABF kind of back in the day that many people will know as Clipper Express. We ultimately rebranded Clipper Express as Radiant Road and Rail. And we often refer to that as our U.S.-based brokerage platform. And for us, that means both intermodal and truck brokerage. And so, and anecdotally, Radiant Road and Rail, formerly known as Clicker Express, is quite literally the oldest subsidiary in our consolidated group. It was incorporated in 1938, one of the original intermodal marketing companies. But in any event, their core or principal business was in the 53-foot space. PCB brought an incremental competency to our intermodal offering around 40 foot. And then, again, just for context, we've been working hard to build out a true bimodal service offering from our road and rail platform in Chicago to have a robust over-the-road and intermodal service offering. So we see a lot of potential revenue synergies. you know, through the onboarding of this, you know, of TCB, and they're, you know, a small but mighty player in the 40-foot space, and we're really excited to have them and the team as part of our organization moving forward. And, you know, I think we've kind of stayed away from, you know, a lot of details around the precision of the purchase price and numbers, but I think you know, dimensionally, it's, you know, in two to $3 million of incremental EBITDA contribution is what we would anticipate from that business.

Okay, great. Thank you. And then maybe this last one, and there's been just a lot of news on tariffs changing by the day. Can you talk about your customs brokerage operation, kind of what you're seeing now or how shippers are reacting? Like, how big is that business? Or do you charge customers on you know, how much they're speaking with their sales contact, any color there would be helpful. Thank you.

Sure. So there again, I'll ground the conversation in some of our prior acquisition activities. So we had, you know, historically been what I would characterize as dabbling in the customs brokerage space. But a few years back, we acquired a company called Navigate, which was principally an NBOCC and customs brokerage platform based in Minneapolis. And we've since rebranded that business as Radiant World Trade Services. So we have a, you know, it's relatively small in the scheme of things, but an extraordinarily strong competency in the customs brokerage space, both transactionally and just, you know, from an advisory standpoint, trying to help our customers understand and respond to the shifting sands of tariffs and the quickly evolving landscape in which we're all operating. And I would be remiss to not also take the opportunity to talk about the technology that we acquired in connection with our acquisition of Navigate because we are very excited about what I'll call the bundled solution offering that we now enjoy to be able to provide a really robust collaboration platform for PO management, vendor management, customs brokerage in a really robust, holistic way that historically we and most people kind of in our relative size don't kind of play in that way or that dimension. And so we're very active. We are growing our customs brokerage and we continue to try to cross sell our customs brokerage capabilities into our other international clients. But I really am quite hopeful that over time, we'll have more and more to tell, more and more of a story to tell around our technology platform, which we're kind of repositioning our branding as Navigate and the global trade management capabilities, inclusive of custom brokerage that will set inside that Navigate platform. So that was a really broad answer to your customs brokerage question, but we're You know, we're a meaningful player, and we're definitely punching above our weight these days in and around that offering. And it's probably one of the most exciting threads and opportunities as we move forward and catalysts for growth for us.

Great. Thanks, Don. I appreciate it.

Thank you. And once again, it is star one on your phone if you wish to ask a question today. The next question is coming from Mark Argento from Lake Streets. Mark, your line is live.

Hey, Bonnie, Todd. Just a quick one. If you could just help us think through a little bit. You guys have been pretty active on the M&A side, which is great, and anticipating that will continue just given the environment. But could you help maybe just size up a little bit? And you did that with the – TCB acquisition, but just help us think about, you know, either gross or net revenue and or adjusted EBITDA contributions from some of these acquisitions. And I know it's a little bit tough to probably pin it all down, but, you know, is it, you know, in this quarter, $12 million, you know, was that, you know, same store EBITDA contribution, did you benefit a couple million bucks from these acquisitions? Is it more? Is it less? Just trying to get a little bit of a feel for kind of organic versus acquisition type contribution.

Yeah, sure. So, again, we've got to, as you described, we have to paint with a pretty broad brush here, you know, for a number of contributing factors. So, I would start with, you know, when we acquire in an agency station or convert an agency station, we really don't see any change at the revenue or gross margin line items. because that business is already flowing through our financials. You know, we end up reducing commission expense paid out and kind of that difference, if you will, is what will flow through in terms of incremental EBITDA. So that's one of the areas where we talk about margin expansion. Margin expansion defined as EBITDA divided by gross margin and kind of one of the byproducts of those conversion efforts of agency stations. We did – You know, we've done a number of those recently, and we would anticipate, in fact, for those who have been following our story for a long time, the notion of the gray tail and kind of the aging of our strategic operating partners. You know, we think that theme will continue and just continue to accelerate as we move forward. So there's not going to be kind of a lot of top-line impact of that particular piece. I would say on kind of a, and so TCB is a little different because that's a greenfield acquisition, but quite literally we only have one month of those activities in our December quarter. So we really haven't seen the flow through effects of TCB in our financials yet, you know, as it relates to the December quarter. And without getting in too much detail, I would say on a, same store basis, we were relatively flat, candidly best case flat, and some of this project opportunity, you know, really helped lift the numbers. And I'll say it again for emphasis, that's why we were kind of cautioning, you know, as good as this is and we're really grateful to have it, you know, we don't want people to take this quarterly result and multiply it by four and think that's our go-forward run rate because it's it's going to be, you know, tougher sledding ahead, you know, in particular this March quarter, seasonality and tariffs and everything else going on. So, you know, hopefully that's at least somewhat responsive to your question.

No, it's not an easy question to answer with a lot of specificity, but that was very helpful. I mean, you know, drawing on your past experiences with, you know, tariffs, and I know this is kind of unique and somewhat unprecedented, environment right now so it's hard to you know handicap with great precision but you know what you know obviously there was some pull forward which you mentioned in anticipation of potentially this happening but how does this normally play out like there's a pull forward and then you know there's a little bit of a normalization in the market um how do you guys kind of play this situation or at least try to handicap it a little bit you know it's it's it's a tough one you know i i i

I will give you kind of my perspective, but I think it's worth what you pay for it here, right? But, you know, at the end of the day, I think, you know, when tariffs get put into place, there will be some short-term disruptions as people try to respond and kind of reconfigure or adjust, you know, individually within our own portfolio of customers. There could conceivably be some winners and losers within our own portfolio of customers and kind of what happens to the underlying products that they're making and how they are impacted to the good or the bad relative to the tariffs. But at the end of the day, we just simply don't, as a country, we simply don't have the manufacturing capability to support the consumption requirements of the U.S. consumer. So, you know, even though prices may go up, somebody is still going to have to pay for them just by the laws of simple supply and demand. So whether it comes, you know, continues to come from China or gets repositioned and is coming from Vietnam and or, you know, U.S. and Canada, those trade flows are still going to have to happen, you know, albeit, you know, likely higher prices for consumers. But that's an entirely different conversation. and kind of beyond the scope of this call. So, you know, I can't tell you, you know, what will or won't happen and what's, you know, posturing or, you know, is actually going to come to pass. But, you know, we and the rest of the industry will digest it, you know, and continue to move forward.

Thanks. Just one last one. I think I asked question pretty much every time, so I'm just going to do it again. But in terms of the environment on the M&A side, seems like things remain robust. And is this kind of environment of uncertainty, is that what, you know, compels some of these, you know, conversations that turn into transactions? Or what do you foresee there?

Well, not necessarily that. I think for us, there's a number of things afoot, right? We have our aging agent stations that just kind of biologically are raising their hands because they're aging out and need to think about their own succession planning and exit strategies. And so, you know, we've been playing that as a long game for a very long time, you know, and so that's just, you know, continuing to move forward. So that is one threat of it. And then, you know, there's a – certainly not all, but a good number of folks in our space were ultimately levered up at peak earnings, and as the markets softened, they really found their balance sheets in disarray. So there's a lot of kind of what I would characterize as normal participants in the M&A space are somewhat sidelined right now while they try to figure out how to get their own balance sheets right-sized. so that they could become actionable again. So that's another piece of it, which has, you know, from my standpoint, we're still the same guys executing the same plan with the same discipline we always have been. It's just the market is kind of coming back to us because of some of these dynamics. You know, part of the dynamic in the transactional space, and you hear all, You know, we and others have talked about, you know, it's kind of hard to transact on peak earnings and kind of understanding that. And now are we in trough earnings and kind of working our way through some of those dynamics. But that's one of the precise reasons why we use earn-out structures in our deals and that we really try to structure to mitigate risk to make sure we don't ultimately overpay for the businesses that we acquire. So, you know, we still have a lot of dry powder. We, you know, expect to continue to be very disciplined, but we're really executing the same playbook we were when we met 10 years ago, Mark.

Yep. No, it's true. One final final. Anything on the buyback of the quarter?

No. No. Not this quarter. We're too busy doing deals.

Well, no. Good use of capital. It's great. Thanks, guys.

All right. Thank you.

Thank you. And the next question is coming from Kevin Ganey from Thompson Davis. Kevin, your line is live.

Hi, Bon. Todd. Good quarter, guys. Maybe if you could kind of talk about how you're feeling about market conditions currently. I know you've kind of that they're still slow, but maybe compare it to how you guys felt this time last year.

And that's a lifetime ago. You know, I would say I'm more bullish today. I mean, again, I'm going to say it again. You know, business remains soft. It's going to be soft for us, I think, heading forward. into 2025, not just for us, but for our industry. You know, I think it's going to be tough going near term. But having said that, I've never been more bullish about kind of where we are in our relative kind of position, you know, or relative place out there in the landscape and that we're actionable and we have the financial flexibility. And we've got some, you know, as I alluded to, some really interesting things kind of in the tech stack. world that we're bringing to market that, you know, we think are going to be a differentiator for us. So it's, you know, it's going to be, there's still going to be plenty of bumps and bruises, you know, you know, as we get through 25, you know, tariffs to the extent they're brought into place, that's going to, you know, I think cause some further near-term kind of dislocation and confusion in the marketplace. But notwithstanding all of that, you know, I think to answer your kind of fundamental question, you know, I'm more bullish about the prospects for Radiant and kind of where we are in the cycle and all of those things, you know, that, you know, I feel really good.

That's good to hear. Maybe also if we could talk a little bit about the competitive landscape and how You guys have seen your competitors. Have they, in comparison to maybe, again, last cycle, has there been more, I guess, like risk maturity from some competitors? Are they, you know, is everybody holding strong on pricing? You know, whatever the kind of factors that they may decide on.

Yeah, I'm not sure. I mean, I think it certainly remains a very, very, you know, tough market out there. You know, the shippers have been kind of more aggressive in their pricing, you know, expectations. But, you know, I don't, you know, I think, you know, I think we have, and again, not just us, but I think as an industry, I think we've been kind of bouncing along the bottom here for, you know, more than a couple of quarters at this point. And I see significantly more upside than downside in terms of where we go from here. You know, there's still, you know, probably, you know, at the end of the day, this isn't directly related to the non-asset-based 3PL space, but, you know, within a broader context, you know, we still need more capacity to come out of the marketplace, right? So, and, you know, it's been an ongoing conversation for the last, you know, year or so that, you know, that there's quite a few asset-based transports that are really, really having a tough go. And, you know, we need that to kind of further resolve itself to get better alignment between supply and demand of transportation capacity. And I think we're slowly getting there, but we still have a little ways to go.

All right. And maybe one more just on kind of the near-term outlook for Q1. If you could kind of talk about what you guys maybe saw in January or if there's anything odd that you may think has happened so far and what you think you could do for Q1.

I mean, it's, you know, seasonally our slowest quarter. I mean, you know, and it's, you know, I mean, I think that we're starting to see a little uptick, but nothing, you know, it's going to play out, we believe, similar to last year. And, you know, like Vaughn's saying, it's, you know, I'm looking at the numbers, you know, of what we've posted for the month, and we're seeing some strength. in some areas. Ocean is one, for instance, you know, but by and large, it's going to be a soft quarter. You know, I think when we get to Q4, you know, I think that's when things are going to, you know, hopefully start, you know, upticking. The Terex is really anybody's guess, right? You know, that's the wild card that I don't think we really know at this point. But that's what we're seeing. We're seeing, you know, it's going to be, like Vaughn was saying, we've got some headwinds, you know, compared to sequentially.

Yeah, but I would look to the year ago, March quarter, as more indicative of where we're likely to land.

Perfect. Sounds good, guys. I appreciate the color. Yeah, you bet.

We did have another question come in from Jeff Kaufman from Vertical Research Partners. Jeff, your line is live. Thank you.

Thanks. Hey, Bon. Hey, Todd. Well, first of all, congratulations. Greetings. I apologize. I got on a little bit late, but did you talk at all about currency and how currency may or may not be impacting your market? And I know you've got a big Canadian operation. How is that? affecting, you know, as we think about first quarter comparison or first quarter, third quarter comparisons, fourth quarter comparisons? Because we've had a lot of companies flag currency having a bigger impact, I think, than people expected.

Yeah, it didn't have a huge impact. I mean, it did impact us, don't get me wrong. But, you know, I ran the numbers and it wasn't, you know, meaningful, you know, in regards to our, you know, when we retranslated it to U.S. dollars. and, you know, the EBITDA. You know, so, you know, last, you know, I'm just talking about this last quarter. So, the numbers were reported. It wasn't anything, you know, it had a small impact is what I would say.

Okay. That was my one. Thank you.

You bet.

Thanks, Jeff.

Thank you. And that does conclude today's Q&A session. I would now like to hand the call back to Bon Crane for closing remarks.

All right. 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 re-lever our balance sheet and through a combination of agent station conversions, synergistic tuck-in acquisitions, and stock buybacks Through our multi-pronged approach, 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.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.