Radiant Logistics, Inc Q4 FY2025 Earnings Call

Good afternoon. Welcome to Radiant Logistics' Inc.'s Financial Discussion for Fourth Fiscal Quarter and Year Ended June 30, 2025. 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, 2025. Following their comments, we will open the call to questions. This conference is scheduled for 30 minutes. This conference 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 Radiant's website. 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, Matthew. Good afternoon, everyone, and thank you for joining in on today's call. With the benefit of our diverse service offering and ongoing acquisition efforts, we continue to deliver solid financial results and generated $38.8 million in adjusted EBITDA for our fiscal year ended June 30, 2025, which is up $7.6 million and 24.4% relative to the prior year period. The year-over-year improvement in adjusted EBITDA was driven principally through our acquisition efforts. For the year ended June 30, 2025, our acquisitions generated $6 million in adjusted EBITDA, driven principally by our greenfield acquisitions of Seattle-based Cascade Transportation in June '24, Houston-based Foundation Logistics and Services in September '24, St. Louis-based TCB Transportation in December '24, and Los Angeles-based Transcon Shipping in March '25, along with the conversion of our strategic operating partners, Miami-based Select Logistics in February '24 and Philadelphia-based USA Logistics in April '25. Notwithstanding these strong year-over-year results, we expect to continue to see some near-term volatility tied to the ebb and flow of the ongoing U.S. negotiations around trade and tariffs. In any event, we continue to believe that there will ultimately be a surge in global trade as these tariff disputes are brought to rest. In the interim, we intend to remain nimble in response to any tariff announcements by the U.S. administration and continue to support our customers in navigating these quickly evolving markets and executing thoughtful supply chain strategies for competitive advantage. As previously discussed, we believe we are well positioned with a durable business model, diverse service offering and strong balance sheet to navigate through a slower freight market. We continue to enjoy a strong balance sheet with approximately $23 million of cash on hand as of June 30 and only $20 million drawn on our $200 million credit facility. At the same time, we remain focused on the long term, staying true to our strategy to deliver profitable growth through a combination of organic and acquisition initiatives while thoughtfully relevering our balance sheet through a combination of strategic operating partner conversions, synergistic tuck-in acquisitions and stock buybacks. We made good progress in this regard over this last year, having completed 3 greenfield acquisitions and 3 strategic operating partner conversions in fiscal '25. In addition, earlier this month, we achieved a significant milestone with our acquisition of Mexico-based Weport. Mexico is an important market for us, and in addition to supporting Radiant's legacy and prospective customers across Mexico, Weport is well positioned to serve as a platform to help us continue to scale our North American footprint. We believe these transactions are representative of a broader pipeline of opportunities, which includes both greenfield acquisitions, 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 and look forward to providing further updates as we progress our acquisition efforts. 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 3 and 12 months ended June 30, 2025. For the 3 months ended June 30, 2025, we reported net income attributable to Radiant Logistics for the quarter of $4.907 million on $220.6 million of revenues or $0.10 per basic and fully diluted share. For the 3 months ended June 30, 2024, we reported net income attributable to Radiant Logistics of $4.781 million on $206 million of revenues or $0.10 per basic and fully diluted share. This represents an improvement of approximately $126,000 of net income over the comparable prior year period or 2.6%. Regarding quarterly adjusted net income results, we reported $5.485 million for the 3 months ended June 30, 2025, compared to adjusted net income of $7.015 million for the 3 months ended June 30, 2024. This represents a decrease of approximately $1.530 million or approximately 21.3%. For adjusted EBITDA, we reported $7.890 million for the 3 months ended June 30, 2025, compared to adjusted EBITDA of $9.078 million for the 3 months ended June 30, 2024. This represents a decrease of approximately $1.188 million or approximately 13.1%. Moving on to the 12-month results, for the 12 months ended June 30, 2025, we reported net income attributable to Radiant Logistics of $17.291 million on $902.7 million of revenues or $0.37 per basic and $0.35 for fully diluted share. For the 12 months ended June 30, 2024, we reported net income attributable to Radiant Logistics of $7.685 million on $802.5 million of revenues or $0.16 per basic and fully diluted share. This represents an increase of approximately $9.606 million over the comparable prior year period or 125%. For adjusted net income, we reported $30.944 million for the 12 months ended June 30, 2025, compared to adjusted net income of $22.647 million for the 12 months ended June 30, 2024, representing an increase of approximately $8.297 million or approximately 36.6%. For adjusted EBITDA, we reported $38.756 million for the 12 months ended June 30, 2025, compared to adjusted EBITDA of $31.160 million for the 12 months ended June 30, 2024. This represents an increase of approximately $7.596 million or approximately 24.4%. With that, I will turn the call over to our moderator to facilitate any Q&A from our callers.

Your first question is coming from Elliot Alper from TD Cowen.

This is Elliot Alper on for Jason Seidl. Can you talk about the changing trade policy and how that's affected your business? I guess, maybe more specifically first on the Mexico side, given your recent acquisition of Weport?

Sure. The situation continues to be fluid, with ups and downs. Initially, there was a rush as people tried to get ahead of tariffs, followed by some inventory buildup. There have been warehousing challenges as everyone navigates different strategies around tariffs, including moving freight to U.S. neighboring countries like Canada and Mexico. It's an interesting time. We are definitely seeing a shift or diversification away from China toward Southeast Asia, and we believe that markets like Mexico will benefit from these trade dynamics. I can't predict the future direction, but I expect ongoing volatility. We will support our customers through this process while also continuing to strengthen our presence in North America. For many years, we have had a strong position in the U.S. In 2015, we acquired a public company known as Wheels, which expanded our platform in Canada. Our partnership with Weport and our investment in Mexico is a continuation of our mission to create a comprehensive one-stop shop for North America. Weport plays a key role in completing our North American strategy as we progress.

Okay. Great. And then yes. So we've seen a lot of volatility on the imports this year. I guess, 2 different pull-forward events. We've also seen kind of more capacity in TEUs come online this year. I guess, how are you managing your business differently given all that's going on? And how are your customers managing their businesses differently?

It has been a challenging period for customers trying to navigate their supply chains due to the volatility. Many shippers are doing their best to buy time as they anticipate the impacts of upcoming tariff effective dates and the complexities of moving freight into Canada or Mexico. They are trying to figure out the potential outcomes and which commodities may be affected. Until more information is provided regarding the timing of changes for various commodities, the situation remains difficult. Additionally, the legality of the tariffs is being examined by the Supreme Court, adding to the uncertainty. As a result, our customs brokerage operations, along with those of our competitors, are extremely busy as we strive to support our customers during these unpredictable times.

Okay. That's helpful. And then maybe just 1 on the near term. So adjusted EBITDA was a bit below us, specifically EBITDA margins. I guess anything to call out in the quarter, any pull forward or a lack thereof would be helpful.

Yes, I believe it's more about the lack of pull forward. It seems there was more of a pull forward in earlier periods. As Bohn mentioned, people pulled forward, which led to building inventories that we then burned through, and eventually, we needed to start bringing in more products. That's what I've observed. It's a matter of timing, and it's challenging for us to predict when these changes will occur. It clearly affects us in different ways at different times. In this particular quarter, we noticed less pull forward. It's not alarming, and it's something we expect, but it's tough to precisely quantify how things will unfold in the short term.

Your next question is coming from Mark Argento from Lake Street.

Just a quick follow-up on the last question in terms of EBITDA. I did notice, it looks like depreciation and amortization in the quarter was down like $3.6 million, running closer to $5 million a quarter. Obviously, that add-back wasn't there for us. What did you guys end up? Writing something down or what was it?

As Bohn mentioned, in 2015, we made a significant acquisition of Wheels Group, which had a 10-year lifespan. Consequently, there is considerable amortization related to that acquisition, which is now nearing the end of its life. The figures you see for this quarter will be more of a baseline moving forward, so it's simply that.

Understood. The Wheels deal has reached the end of its amortization period. That's clear. On another note, you have been very active in mergers and acquisitions, and many of the companies you're acquiring are already nearly fully integrated. Is there a limit to how many more deals you can do? Is there any reason you couldn't pursue 10 or 15 acquisitions a year? Without trying to be overly ambitious, could you share your thoughts on the deal pipeline and your capacity to continue this activity?

We've always discussed the limitations concerning acquisitions, and we don't see any real constraints on attractive acquisition candidates. Given our low leverage, we have plenty of capacity to pursue deals. The main limitation is our ability to integrate and manage the acquisitions we make. Historically, we've operated various platforms to support M&A activity. For example, our U.S. forwarding operation platform is where many Asia station conversions are taking place. We also have a U.S. intermodal and truck brokerage platform in Chicago, which has facilitated transactions like the TCB deal. Additionally, we have a Canadian platform where we're consistently exploring opportunities. Recently, with Weport, we've established a fourth platform to look into potentially interesting opportunities, including expanding our capabilities in Mexico. For quite some time, we've highlighted our extremely low leverage on our balance sheet, and as we move toward a more normalized level, we still have significant capacity within our existing capital structure for growth. This is especially true when considering the free cash flow characteristics of our business. I appreciate your choice of words; while I wouldn't describe us as aggressive, I do see us as active. Current market dynamics seem to favor us, and we're eager to capitalize on that opportunity. We're also excited about various organic initiatives we are working on.

And just one final question for me. Given the tariff situation and with year-end approaching along with the holidays, are you beginning to notice any activity in countries that seem to have reached an agreement with the administration? Are things starting to move a bit more in those regions, or is everyone still adopting a wait-and-see approach, considering we are just 2.5 to 3 months away from year-end?

Yes, I believe people generally anticipate a subdued peak season. We may not witness the typical peak season we usually expect. However, there are ongoing trends with increased freight sourcing from Southeast Asia that are unlikely to change. The growth in Mexico has been significant and is anticipated to persist. It's essential for us to enhance our presence there, not only for new opportunities but also to support our existing customers as they increasingly diversify their supply chains with a focus on near sourcing strategies.

Your next question is coming from Jeff Kauffman from Vertical Research Partners.

Congratulations, guys. Great year. Bohn, I'd like to go revisit your comment about getting a little bit more active and leveraging up. Do you have a particular target where you don't necessarily want to lever up past a certain point as you relever the balance sheet and grow?

I believe the short answer is yes. For me, a normalized target would be around 2.5 times. That doesn't guarantee we'll reach it, and we could potentially go a bit higher temporarily if the right transaction comes up. However, we certainly do not plan to increase leverage to 4 or 5 times like some of our competitors backed by private equity.

You acquired a Mexican operation at a time when the transborder tariff situation is somewhat unclear. Was this a unique situation, or do you see it as an opportunity that could make sense once the tariffs are figured out and you find the right international partners?

Well, I think it was opportunistic. I also think it's the right international partners. But we all, myself included, have a tendency to think of the U.S. being the center of the world, but there's a big set of global commerce going on where we're not necessarily the center of. And there's an extraordinary amount of trade between China and Europe and Mexico. And Weport's international business really was virtually little, if any, cross-border business, it's true international air and ocean business from the Pacific and Europe. So we have, for a long time, been in the cross-border business independent of the Weport transaction. But what we really didn't have was a strong true international air and ocean capability as it relates to Mexico that we now enjoy by operation of the Weport transaction.

Okay. And just a couple of detailed questions for Todd, if I can. Todd, I think you answered an earlier question on the D&A, so there's a step down there and $3.6 million is kind of the right forward run rate we should be thinking about? Was that the answer?

Yes. I need to check on that, but I believe the acquisition took place right at the start of the fourth quarter in 2015. Since it's been 10 years, I can confirm that, but I'm fairly certain it happened at the beginning of the quarter. We can revisit this, but my main question is whether there was any activity within that quarter, which I doubt. It seems like the Wheels transaction concluded at the end of Q3. However, I just wanted to clarify that.

So the way I think about, I guess '26 is, it's going to be about a $4 million drag on EBITDA in terms of the comparison, '26 over '25. Is that the right way to think about it?

For EBITDA, you're saying?

Yes.

Well, I mean, it's an add back, right? So it wouldn't.

I'm sorry, it's a benefit. Benefit.

Yes. It will contribute positively to net income, but it likely won't impact EBITDA.

Correct.

Yes. So I would not expect that going forward, right? I would use a normalized rate going forward, and this was just simply a true-up when we went through all the mechanics. So definitely we'll use this.

Your next question is coming from Mike Vermut from Newland Capital.

So our numbers have held up our result much better than most in our space, right? So hats off to you guys. It's been very steady great results, and you've played a lot of offense during this downturn at a time where, I guess, most haven't. Most of kind of held back and haven't done the acquisitions that we have. So it's really laid the foundation for when I see for the future for when things start to pick up. Anyway to give us a look, you've brought all these new entities into the fold, what your customers are saying, new business wins that are out there? Just a sense of what it's going to look like over the next year, 2 years you see and how it's going to be additive to the business? We're one of the few that's actually gone out there and expanded in this time. So hats off to us. You've kept the balance sheet in perfect shape. Our numbers are great. Our cash flow is great. And I assume that our customers are loving what we're doing. It's just we haven't gotten that kind of view into it. If you could give us a little look as to what we should expect over the next year, 2 years with what we've brought in?

Thank you, Mike. That's an excellent question. We have been discussing the need for a more unified sales organization internally, as we have numerous tools at our disposal. Our aim is to position our sales team optimally to effectively sell our range of products and services. We're increasingly recognizing cross-sell opportunities and focusing on increasing wallet share among our customers. Reflecting on our acquisition of Navegate a few years back, we acquired some impressive technology that serves as a cutting-edge collaboration platform, unlike anything else currently available in the market. We are in the early stages of rolling this out to customers and have received very positive feedback. While it’s still early in the process, we are excited about our technological capabilities and how they will set us apart in the future.

Thank you. That concludes our Q&A session. I will now hand the conference back to Radiant's Founder and CEO, Bohn Crain, for closing remarks. Please go ahead.

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 through a combination of agent station conversions, synergistic tuck-in acquisitions and stock buybacks. Through our multipronged 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. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.