Earnings Call Transcript
Radiant Logistics, Inc (RLGT)
Earnings Call Transcript - RLGT Q2 2021
Operator, Operator
Good afternoon ladies and gentlemen. This afternoon, Todd Macomber, Radiant's Chief Financial Officer will discuss financial results for the company's Second Fiscal Quarter Ended December 31st, 2020. Following his comments, we will open the floor for 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 future-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 Chief Financial Officer, Todd Macomber.
Todd Macomber, CFO
Thanks. Good afternoon everyone and thank you for joining today's call. Unfortunately, Bohn is unavailable for the call as he is recovering from COVID. We expect him to make a full and complete recovery and look forward to seeing him back in the office along with his continued leadership. I have asked my colleague, Arnold Goldstein, Radiant's Chief Commercial Officer to participate with me on this call. We are very pleased to report another quarter of solid financial results as we continue to navigate this unique environment. We reported revenues of $218.8 million and net revenues of $55.3 million for the quarter ended December 31st, 2020. Revenues were up about 7.7% or approximately $16.9 million, while net revenues were down slightly about 1.1% or $600,000. Consistent with recent quarters, through a number of cost savings and other strategic initiatives, we were able to manage our operating costs and post impressive financial results. For the three months ended December 31st, 2020, we reported net income attributable to Radiant Logistics of $3.812 million on $218.8 million of revenues, or $0.08 per basic and $0.07 per fully diluted share, which also included a charge of $1.8 million per change in contingent consideration. For the three months ended December 31st, 2019, we reported net income attributable to Radiant Logistics of approximately $2.587 million on $201.9 million of revenues or $0.05 per basic and fully diluted share. This represents an increase of approximately $1.225 million of net income over the comparable prior year period or 47.4%. For the three months ended December 31st, 2020, we reported adjusted net income attributable to Radiant Logistics of $8.640 million compared to adjusted net income attributable to Radiant Logistics of $6.300 million for the three months ended December 31st, 2019. This represents an increase of approximately $2.340 million or approximately 37.1%. We reported adjusted EBITDA of $12.529 million for the three months ended December 31st, 2020 compared to adjusted EBITDA of $9.375 million for the three months ended December 31st, 2019. This represents an increase of $3.154 million or approximately 33.6%. Moving on to the six month results. For the six months ended December 31st, 2020, we reported net income attributable to Radiant Logistics of $6.900 million on $394.7 million of revenues, or $0.14 per basic and fully diluted shares. For the six months ended December 31st, 2019, we reported net income attributable to Radiant Logistics of $5.822 million on $402.5 million of revenues or $0.12 per basic and $0.11 per fully diluted share. This represents an increase of approximately $1.078 million over the comparable prior period or approximately 18.5%. For the six months ended December 31st, 2020, we reported adjusted net income attributable to Radiant Logistics of $15.160 million compared to adjusted net income attributable to Radiant Logistics of $12.783 million for the six months ended December 31st, 2019. This represents an increase of approximately $2.377 million or approximately 18.6%. We reported adjusted EBITDA of $21.756 million for the six months ended December 31st, 2020 compared to adjusted EBITDA of $19.053 million for the six months ended December 31st, 2019. This represents an increase of $2.703 million or approximately 14.2%. We have always managed our business with an eye towards net revenues and getting as many of those dollars to the bottom line. I'm pleased to report that our adjusted EBIT margins were up 590 basis points for the current quarter to 22.7% from 16.8% for the comparable prior year period. Our balance sheet remains very strong, providing us with ample flexibility to capture opportunities should we choose to act. We have a war chest of dry powder with less than one turn of debt. Our results continue to show that even through this pandemic, our non-asset based variable cost model works well enabling us to maintain profitable growth and we're also able to report significantly improved adjusted EBITDA margins. We continue to see a slow and steady improvement across many industry verticals that we serve, even though this environment continues to have tight capacity. With the diversity of our customers and service offerings, the strength of our balance sheet, our optimism surrounding the strengthening of the economy, we're excited about what opportunities lie ahead for Radiant. We will continue to closely monitor our performance, as well as the overall political economy. We look forward to reengaging in acquisition opportunities and/or stock buybacks and we'll be communicating that information. With that, I will now turn it over to our moderator to open it up for any Q&A.
Operator, Operator
Certainly. Ladies and gentlemen, the floor is now open for questions. Your first question is coming from Mark Argento. Your line is live.
Unidentified Analyst, Analyst
Hey guys, this is John on for Mark. Thanks for taking my questions. Congrats and nice quarter and wish Bohn a speedy recovery. First one from me, could you kind of peel the onion and dig into a little bit more some of the industry verticals where you've seen the most strength? And maybe give us an update on where the overall capacity environment has trended so far in 2021?
Todd Macomber, CFO
Sure. A significant portion of our work is related to government contracts. We have seen a considerable amount of government work, and consumer products have been one of our strongest sectors. Overall capacity is tightening, and while I believe it will remain that way for a while, things are beginning to improve slightly. However, there are many ships currently waiting at the LA port to dock, which has restricted freight movement from the West Coast to the East. It's going to take time to address these challenges.
Unidentified Analyst, Analyst
Okay. Then second, you called out the Clippers business in the press release, I'm just wondering if you could dig into that a little bit more. What are you seeing there, shine giving you more confidence in the growth trajectory?
Todd Macomber, CFO
Clipper has been performing exceptionally well for us. We recently invested in another warehouse, and their bundling strategy has proven to be very effective. They have a strong pipeline and are making significant progress. We are extremely pleased with their performance as they continue to grow, and I believe there are many opportunities ahead for Clipper. They are truly excelling in every aspect.
Unidentified Analyst, Analyst
Okay. Last one for me, when you think about the cost structure is that effectively bid and kind of normalized at this point? I know you guys have been able to run a pretty profitable business here, but when you look out into the next couple quarters, what is kind of the outlook for capital allocation and reinvesting the business, both internally as well as potentially M&A?
Todd Macomber, CFO
Good questions. I would say that when COVID hit, like everyone else, we tightened our belts. Moving forward, we expect personnel costs to remain at similar levels. We made a small investment in new sales staff, but overall, our personnel costs are stable, which is where most of our cost savings came from. There were also some savings in SG&A, but I anticipate those to remain as they are now. Regarding M&A, we are always exploring opportunities, but we are cautious about the stock's trading multiples and what we would need to pay. Typically, we structure deals with an earn-out, paying half upfront and the rest later depending on the opportunity's value. Currently, we are assessing various options, and while I don't know all the specifics, we're aware of potential opportunities for the future, and we are looking forward to them.
Unidentified Analyst, Analyst
Awesome. Thanks guys. Congrats on the quarter.
Todd Macomber, CFO
Thank you so much.
Operator, Operator
Thank you. Your next question is coming from David Campbell. Your line is live.
David Campbell, Analyst
Hi, Todd. Thanks for taking my question. There's a charge of $251,000 to $291,000 in the other expense section of the profit and loss statement. Can you explain what that is?
Todd Macomber, CFO
That's a negative expense. That's actually leasehold income from a space that we had that we ended up leasing out.
David Campbell, Analyst
Okay. And you lost money on the lease?
Todd Macomber, CFO
No, it's a negative expense. So, it's income.
David Campbell, Analyst
Its income, right. So, it’s a negative expense?
Todd Macomber, CFO
Right.
David Campbell, Analyst
Regarding your lease situation, the West Coast has had ships waiting to come in, which usually would be resolved in February when the Chinese New Year begins. Do you have any insight into how the situation will look after the Chinese New Year?
Todd Macomber, CFO
Dave, I think it's a great question. I mean, I think part of the issue, though, is COVID. My understanding is there's about 1,800 workers or there was a few weeks ago, that weren't able to be in the port to unload those ships, which is really causing a tremendous strain. So, COVID is having a significant impact. I don't know what it is today, but there was an article a few weeks ago that came out to talk about that, but I got to believe COVID is still very much a significant impact, impacting the ability to unload those ships. Obviously, it will happen in time, but I really don't have a lot of visibility. Maybe Arnie, if you want to jump.
Arnold Goldstein, Chief Commercial Officer
In addition to the impact of COVID, there is a significant imbalance in equipment. With many ocean vessels docked at the port, this means there are containers that are not being unloaded and sent back to Asia for reloading. As a result, the inventories and volumes accumulating in Asia are considerable. Therefore, it is reasonable to anticipate that the peak demand will likely extend beyond Chinese New Year for the next month or so until they begin to clear out.
David Campbell, Analyst
Thank you. You mentioned that government work is one of your stronger sectors. Is that related to COVID-19 work?
Todd Macomber, CFO
We are actively supporting various government entities, including FEMA, DOS, DHS, and HHS, primarily in relation to COVID relief. This includes personal protective equipment, vaccine-related activities, and manufacturing support for COVID initiatives. We are also heavily involved in assisting the government, particularly through FEMA, as well as with the National Guard and other groups. Overall, this segment represents a strong part of our business.
David Campbell, Analyst
That’s good, because it all sets, apparently, some weaknesses in other parts of your business, which are related to the economy, retail sales, et cetera.
Todd Macomber, CFO
Yes, trade shows and cruise lines will eventually return, and we look forward to that happening, but we can't wait for it. You're right.
David Campbell, Analyst
You're doing a great job managing the situation. We anticipate improved results in the March and June quarters when conditions should return to more normal levels, especially by June. Thank you for your responses.
Todd Macomber, CFO
You bet. Thanks David.
Operator, Operator
Thank you. Your next question is coming from Mike Vermont. Your line is live.
Unidentified Analyst, Analyst
Hey everyone. I just want to say great quarter, and Bohn, if you're listening or when you listen, I hope you feel better soon. Everyone did a phenomenal job this quarter and really over the past four quarters, eight quarters; it's a different company than it used to be. How much would you estimate the business that is currently shut down, like the cruise lines, constitutes? Is it around 20% of the business?
Todd Macomber, CFO
No, no, no.
Unidentified Analyst, Analyst
I'm sorry, I can't provide a response to that.
Todd Macomber, CFO
Yes, we really don't get into that level of granularity. It's not a huge amount. And so I don't want to start throwing numbers out there with stuff that we don't typically report on.
Unidentified Analyst, Analyst
Got it. Okay.
Todd Macomber, CFO
It's not huge. I mean, don't get me wrong, it'll be nice when it comes back. And it'll help. It'll add to the bottom line, of course, but it's not going to make any crazy increase in the number.
Arnold Goldstein, Chief Commercial Officer
Yes, we've been very fortunate over the last few years to invest in sales resources along vertical lines, which I'd like to say were great planning, but nobody planned a COVID. But along the government and military, life science, test logistics, NGO, which are non-government charitable organizations, which are moving cargo during this period. So, other verticals like cruise lines, not so much, obviously, but there are opportunities within marine, marine spare parts and other areas that we're looking at, as well as automotive is coming back now.
Unidentified Analyst, Analyst
Excellent. I understand this question was previously raised regarding capital allocation. We are currently trading at under 10 times earnings and six times EBITDA. Is there any mergers and acquisitions opportunity that is either strategic or inexpensive enough to consider it a better option than buying our stock right now?
Todd Macomber, CFO
It really depends on the multiple and there are opportunities. If we consider a larger business, we will have to pay more and compete with private equity, which will drive up the multiples. However, for smaller businesses, the multiple tends to be much more reasonable. Therefore, I can't provide a definitive answer, but generally speaking, that's our observation. For a smaller EBITDA business, we can target multiples that are quite favorable. This doesn't mean we won't consider larger opportunities, but we will carefully evaluate the allocation and compare it to the trading price of our company stock versus buying back our own shares, which doesn't come with integration risk. We are very mindful of this.
Unidentified Analyst, Analyst
Yes, when you look at it, our evaluation, our stock has moved slightly, but our valuation has actually come down. So, I guess that answers the question right there. It's hard to find anything of our size and diversity even close to the valuations.
Todd Macomber, CFO
Yes, I agree.
Unidentified Analyst, Analyst
Yes. Guy, great job and great through this difficult time, excellent execution.
Todd Macomber, CFO
Thank you so much.
Arnold Goldstein, Chief Commercial Officer
Thank you.
Operator, Operator
Thank you. There are no further questions in the queue at this time.
Todd Macomber, CFO
All right, let me close by saying we remain very bullish on our prospects here at Radiant and the scalable non-asset-based platform that we have built. With the diversity of our customers and service offerings, the strength of our balance sheet, the scalability of our technology and extensive carrier partner network, we are certainly optimistic about the economy, its ultimate recovery, and the opportunities that will present for Radiant. At the same time, we remain patiently persistent in the pursuit of our vision to leverage our multi-brand strategy and scalable back office infrastructure to support further consolidation in the marketplace, which we believe over time, will continue to deliver meaningful value for our shareholders, our operating partners, and the end customers we serve. Thanks for listening and your support of Radiant Logistics.
Operator, Operator
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.