Radiant Logistics, Inc Q4 FY2024 Earnings Call

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, 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 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.

Thanks John. Good afternoon everyone and thank you for joining in on today's call. While our full year results continue to reflect the difficult freight markets being experienced by the entire industry, as well as our own operations, we did see good sequential improvement in our financial results for the fourth fiscal quarter ended June 30, 2024, when compared to our third fiscal quarter ended March 31. With net income up over 750%, adjusted net income up 94.4%, and adjusted EBITDA up 75%, we hope to continue to build on this positive trend in the coming quarters as markets find their way to more sustainable and normalized levels. Notwithstanding the tough year-over-year comparisons, we continue to deliver meaningfully positive results and have generated $31.2 million in adjusted EBITDA and $17.3 million in cash from operations for the fiscal year ended June 30, 2024. In addition, we continue to enjoy a strong balance sheet and after completing five tuck-in acquisitions and deploying over $4 million in support of our stock buyback program, we were able to finish the quarter with approximately $25 million of cash on hand and still nothing drawn in our $200 million credit facility. As previously discussed, 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 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 believe over time we will continue to deliver meaningful value for our shareholders, operating partners, and the end customers that we serve. In this regard, we made good progress in supporting three agent station conversions over the course of fiscal 2024 with the acquisition of Florida-based Daleray in October of 2023, the Select businesses in February of 2024, and Minnesota-based Viking Worldwide in April of 2024. We launched Radiant in 2006 with the goal of partnering with logistics entrepreneurs who would benefit from our unique value proposition and our built-in exit strategy. We believe these three transactions are representative of a broader pipeline of opportunities inherent in our agent-based network, and we look forward to continuing to support other strategic operating partners when they are ready to begin their transition from an agency to a company-owned location. In addition, in June of this year, we were able to welcome two new teams to our network with the acquisition of Portland-based DVA Associates and Seattle-based Cascade Transportation, both of which joined us from a competing network. And most recently, we completed the acquisition of Foundation Logistics, another great addition to the Radiant Network based in Houston, Texas. We will continue to look for greenfield acquisition opportunities where we find opportunities that bring critical mass to our current platform with respect to geography, purchasing power, and targeted industry segments. With that, I'll turn it over to Todd Macomber, our CFO, to walk us through our detailed financial results, and then we'll open it up for some Q&A.

Thanks, Bohn, and good afternoon, everyone. Today we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the three months and 12 months ended June 30, 2024. For the three months ended June 30, 2024, we reported net income attributable to Radiant Logistics of $4,781,000 on $206 million of revenues or $0.10 per basic and fully diluted share. For the three months ended June 30, 2023, we reported net income attributable to Radiant Logistics of $3,143,000 on $232.2 million of revenue or $0.07 per basic and $0.06 per fully diluted share. This represents an increase of approximately $1,638,000 of net income over the comparable prior year period or 52.1%. For adjusted net income, we reported $7,015,000 for the three months ended June 30, 2024, compared to adjusted net income of $6,457,000 for the three months ended June 30, 2023. This represents an increase of approximately $558,000 or approximately 8.6%. For adjusted EBITDA, we reported $9,078,000 for the three months ended June 30, 2024, compared to adjusted EBITDA of $9,208,000 for the three months ended June 30, 2023. This represents a decrease of approximately $130,000 or approximately 1.4%. Moving along to the 12-month results, for the 12 months ended June 30, 2024, we reported net income attributable to Radiant Logistics of $7,685,000 on $802.5 million of revenues or $0.16 per basic and fully diluted share. For the 12 months into June 30, 2023, we reported net income attributable to Radiant Logistics of $20,595,000 on $1,085,000,000 of revenues or $0.43 per basic and $0.42 per fully diluted share. This represents a decrease of approximately $12,910,000 over the comparable prior year period or 62.7%. For adjusted net income, we recorded $22,647,000 for the 12 months ended June 30, 2024, compared to adjusted net income of $39,301,000 for the 12 months ended June 30, 2023. This represents a decrease of approximately $16,654,000 or approximately 42.4%. For adjusted EBITDA, we reported $31,160,000 for the 12 months ended June 30, 2024, compared to adjusted EBITDA of $55,638,000 for the 12 months ended June 30, 2023. This represents a decrease of approximately $24,478,000 or approximately 44%. With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.

Thank you. We will now begin the question-and-answer session. The first question comes from Elliot Alper with TD Cowen. Please go ahead.

Hey guys, thanks. This is Elliot on for Jason Seidl. Maybe just first starting on the quarter EBITDA sequentially almost $4 million, I guess above our expectations. Can you talk about maybe the drivers of the outperformance in the June quarter?

Sure, it's difficult to pinpoint specific numbers, but we're observing sequential growth. Q3 was noticeably weak, but we are seeing growth in terms of volume and pricing is improving.

Got it. Okay. And then, you know, there is a lot of noise with support data we look at. I guess maybe a couple questions here, but maybe one, can you talk through kind of what you are seeing in terms of peak season this year, if you saw any pull forward earlier in the summer? And then maybe two, are you seeing kind of any customers shift freight ahead of the potential of Port Strike on October 1st?

Yes, I'll take a shot at that. So I think the short answer is yeah, we did see some pull forward, you know, a combination of global events, you know, risk of change over in elections and potential tariffs and you know there's a lot of factors I think that have caused some level of pull-forward and an acceleration in terms of kind of a more traditional peak. So I think the answer to that is yes. And so we're, you know, in the past several months, we've seen kind of additional pressure on the West Coast, which we view as a positive thing. You know, ocean rates are up, as well as we're starting to see a little relief and a little tightening I guess to be more precise tightening in capacity off of the West Coast, which we think ultimately is a net positive for us and other transports in the marketplace.

Okay, and then Bohn, I'm curious to just hear your thoughts. I mean, do you think there is a real probability of a real strike or, excuse me, port strike? There is a report out this week suggesting both sides are pretty far apart on negotiations. Would love to hear your thoughts.

I wouldn't want to speculate on that. To the extent that it happens, we'll be here to support our customers with diversions and other ways to solve the problems when they occur. Hopefully it doesn't happen, but we'll do our best to support our customers if it does.

Got it. All right. Thanks guys.

I wouldn't want to speculate on that. I would just say that to the extent that happens, we'll be here to support our customers with diversions and other ways to solve the problems when they occur. Hopefully it doesn't, but we'll be there to support our customers as best we can.

Exactly. All right. Appreciate it.

Okay. The next question comes from Kevin Gainey with Thompson Davis. Kevin, please proceed.

Good afternoon, Bohn and Todd. How's it going?

Yeah, thanks.

Yeah, thank you.

Maybe we could start off looking at a little bit of forward, as you think about entering fiscal year 2025. Maybe you guys can talk about how you see the market at least over maybe the July-August timeframe and then how you're thinking about how that might shape up for 2025.

I think we can refer back to our last quarter, where we are optimistic and the numbers suggest that the March quarter was likely the bottom for us. We've noticed some sequential improvements this quarter. I believe this performance is indicative of the run rate we can expect moving forward, based on what we understand today. While we are not back to normal, whatever that means these days, I genuinely feel that the worst is behind us, and this quarter better represents what you can anticipate from us in the future. However, I do want to emphasize that we aren't seeing any significant catalysts that would lead to a major jump; it's more of a steady grind for everyone, and we're working hard alongside others while being mindful of our cost structure and aligning it with the business opportunities we encounter. I want to slightly shift your question because it's pertinent to our unique situation. Many companies are struggling with their balance sheets and aren't in a position to pursue acquisitions, but we are. We've been actively searching in the marketplace for tuck-in acquisitions that align with our valuation, structure, and fit. We were quite active this past year and plan to maintain that momentum into 2025.

Since you brought up the M&A piece, maybe kind of two questions on that. As far as seller expectations, how have they changed? Do you feel like they've become more reasonable? And then I know you mentioned in the release that there were targeted industry segments that you guys were looking at. And I'm kind of curious what those might be from both a transportation segment or maybe like an end market vertical that you're interested in?

Sure, addressing the first part of your question regarding seller expectations, I don't believe those expectations have necessarily changed significantly. I think there are a couple of factors at play. First, we have moved past the rapid growth phase, making it easier to conduct transactions based on the more stable trailing 12-month numbers we are currently observing, rather than those from the peak of COVID and the market dynamics it created. The figures have stabilized, allowing participants to feel more comfortable with the current numbers and engage in the market. However, there aren't as many stakeholders actively pursuing opportunities right now; many are not in a position to seize the chances available, unlike us. While we are not the only active players in the field—there are several strong and capable competitors—there are also many who are not in a favorable situation, which creates a competitive advantage for us. Additionally, considering our acquisition pipeline within our network, it remains our enduring promise to support our operating partners when they're ready for their own access strategies. Time is a constant factor, and as our partners age, the opportunity set continues to evolve both literally and figuratively. We expect this trend to persist as we move forward.

Sounds good. And then just to kind of give you a chance to talk about the contract itself and probably the first test of it, the USA contract. Maybe if you could talk about Francine, the hurricane, and then just in general how that contract shapes up for you guys and what it might be.

We're not in a position to provide too much detail on that for various reasons, but as natural disasters and other opportunities arise, we expect to be among the first called to support those efforts.

Sounds like a place to be. Appreciate the time, guys.

Yeah, you bet.

The next question comes from Jeff Kauffman with Vertical Research Partners. Please proceed.

Thank you very much. Congratulations on the impressive numbers. I have a couple of quick questions. Considering the six acquisitions you've made over the past year, what is the approximate incremental EBITDA we can expect from them?

That is a good question. What we – we have not disclosed that. And so I'm going to punt because of the fact that we have it and I will respond this way Jeff, you've been following us so long and I appreciate that and there was a time when every transaction we did was material. And we had to disclose it and file an 8-K and pro formas. And we had to kind of lift our pants, right, for the benefit of our competition to see what we were doing. And I'm so glad to be on this call here today and tell you we don't have to do that anymore. And so we're quite happy to just keep our lips zipped, as best we can and tend to our business and share the results as they occur.

Fair enough. I just thought maybe as a collective group, maybe I could get that answer. All right, go a different direction. Revenues down about 11%. Operating partner commissions down about 20%. Why were commissions down so much more than revenues? Normally those two are fairly close.

There are two main factors at play. Firstly, we had some significant non-recurring project business in the same period last year, which impacted our top line numbers. Secondly, the commission dynamics you're observing are related to the conversion of agency stations to company-owned stores. As we acquire agency stations, it's natural to expect this trend to continue.

Okay, so if the agency commission.

You know, just a quick reminder, right? So, as we buy in agency stations, nothing changes down to the gross margin line item, but as we buy folks in, the agent station commission goes away. We pick up their local level personnel and SG&A costs, and the difference is kind of their incremental EBITDA that we would onboard into our consolidated results.

Okay, so a couple million dollars of that. That's fair. Alright well that's well I guess one more. You know Bohn, you said we think we bottomed but we're lacking a catalyst to take us up to the next step, which seems to be the view of most folks in the market. What isn't happening that you would hope should be happening in the global economy right now? Like what do you think's holding us back?

Our future is closely tied to our customers' activity. We rely on them to conduct more business and generate more hard freight. While the service economy is thriving, it doesn't produce much hard freight for us to handle. We are optimistic about an improvement in investment, where businesses feel confident and start investing in hard freight. We’ve moved past discussions about safety stocks and excess inventory, and now we need the economic engine to run more efficiently, even if not at full capacity.

So the way we should think in the near term would be, you know, business moving forward plus or minus acquisitions until the world changes.

I think that's right. It may change in November, who knows?

You know, we're seeing slight upticks in volumes, Jeff, month over month, you know, but it's not, you know, for now it's fairly, you know, I wouldn't say it like Bohn saying, I mean there's nothing, you know, that's going to dramatically uptick it. We are seeing strengthening and on top of that the revenue profile, I'm seeing has been increased, you know, that's been slowly increasing too. But it's going to take a while, like Bohn says, you know, before we get back to where, to where we think it will ultimately land.

Alright guys, well that's all I have. Congratulations and thank you.

Thank you.

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