Radiant Logistics, Inc. (AMEX:RLGT) Q2 2024 Earnings Call Transcript

Radiant Logistics, Inc. (AMEX:RLGT) Q2 2024 Earnings Call Transcript February 8, 2024

Radiant Logistics, Inc. beats earnings expectations. Reported EPS is $0.11, expectations were $0.09. RLGT isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone. 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 second fiscal quarter and six months ended December 31, 2023. 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 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. Sir, the floor is yours.

Bohn Crain: Thank you, Alex. Good afternoon, everyone, and thank you for joining in on today’s call. Our results for the quarter ended December 31, 2023, continue to reflect the difficult freight markets being experienced by the entire industry as well as our operations. This extended period of weak freight demand combined with excess capacity continues to negatively impact not only our current results but also the year-over-year comparison to our record results for the prior year period. With that said, we remain optimistic that we are at or near the bottom of the cycle and we would expect markets to begin to find their way to more sustainable and normalized levels towards the back half of calendar 2024. Notwithstanding the tough year-over-year comparisons, we continue to deliver meaningfully positive results and have generated $16.9 million in adjusted EBITDA and $12.1 million in cash from operations for the six months ended December 31, 2023.

In addition, we continue to enjoy a strong balance sheet, finishing the quarter with approximately $33 million of cash on hand and nothing drawn on 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 re-levering our balance sheet through a combination of Asian station 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.

In this regard, we are very excited about our recent agent station conversions with the acquisition of Delray and the select businesses which will combine, solidify our offering in support of the cruise line industry in South Florida. We launched Radiant in 2006 with the goal of partnering with logistics entrepreneurs who would benefit from our unique value proposition and the built-in exit strategy available to the entrepreneurs participating in our network. We believe these two transactions are representative of a broader pipeline of opportunities inherent in our agent-based network and we look forward to supporting other strategic operating partners when they are ready to begin their transition from an agency to company-owned location. With that said, I’ll now 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.

Todd Macomber: Thanks, Bohn 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, 2023. For the three months ended December 31, 2023, we reported net income attributable to Radiant Logistics of $985000 on $201 point million [ph] of revenues or $0.02 per basic and diluted share. For the three months ended December 31, 2022, we reported net income attributable to Radiant Logistics of $4.836 million on $278.1 million of revenues or $0.10 per basic and diluted share. This represents a decrease of approximately $3.851 million of net income over the comparable prior year period or 79.6%. For adjusted net income, we reported $5.496 million for the three months ended December 31, 2023 compared to adjusted net income of $11.142 million for the three months ended December 31, 2022.

This represents a decrease of approximately $5.646 million or approximately 50.7%. For adjusted EBITDA, we reported $7.708 million for the three months ended December 31, 2023 compared to adjusted EBITDA of $16.203 million for the three months ended December 31, 2022. This represents a decrease of approximately $8.495 million or approximately 52.4%. Moving along to the six-month results. For the six months ended December 31, 2023, we reported net income attributable to Radiant Logistics of $3.607 million on $411.9 million of revenues or $0.08 per basic and $0.07 per full diluted share. For the six months ended December 31, 2022, we reported net income attributable to Reading Logistics of $13.269 million from $609.1 million of revenues or $0.27 per basic and fully diluted share.

This represents a decrease of approximately $9.662 million over the comparable prior year period or 72.8%. For adjusted net income, we reported $12.46 million for the six months ended December 31, 2023 compared to adjusted net income of $24.621 million for the six months ended December 31, 2022. This represents a decrease of approximately $12.575 million or approximately 51.1%. For adjusted EBITDA, we reported $16.873 million for the six months ended December 31, 2023 compared to adjusted EBITDA of $34.871 million for the six months ended December 31, 2022. This represents a decrease of approximately $17.998 million or approximately 51.6%. With that I will turn the call back over to our moderator to facilitate any Q&A from our callers.

Operator: Thank you. [Operator Instructions] Our first question is coming from Jason Seidl with TD Cowen. Your line is open

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Q&A Session

Jason Seidl: Thank you, operator. Good afternoon, Bohn and Todd. A couple of questions for me guys. If I stick on the acquisitions. Can you talk us through sort of what to expect from an EBITDA basis? And is there going to be any ramp-up cost to the outside private company that you onboarded at least for the current quarter?

Bohn Crain: Thanks, Jason. So this is Bohn. To answer the question, I guess a couple of different ways. Historically, we’ve talked about kind of the kind of the inherent agency stations that at some point in time along the continuum are likely to seek their exit strategies and the rate at which that is occurring, we expect to continue to accelerate just based upon the demographics of our agency network. And they can vary in size from painting with a brush anywhere from $0.5 million to $2 million of incremental EBITDA to the bottom line would kind of be the typical profile. And as a reminder to maybe some folks that aren’t as familiar with the mechanics, our agency stations when we buy in an agency station that ultimately manifests itself is margin expression defined as EBITDA divided by gross margin.

So when we convert an existing agent station to a company-owned store, our revenues don’t increase, our gross margins really don’t increase. It’s just that the agency station commissions get eliminated and we onboard their local level labor and SG&A cost and that difference is effectively the profitability of that business that we have onboarded. So there’s really no incremental cost per se in terms of onboarding the acquisition. And a little bit to the contrary and we talked about this in some of our calls in the past, in the early days when we were acquiring other agent-based networks there was redundant back-office infrastructure costs that we were able to capture. And so that was the cost synergy. We have a similar but slightly different opportunity at the node level of the network.

As we acquire in our agency stations, there’ll be redundant costs two facilities as an example of various facilities. So there should be some incremental cost synergies available to us at the node level of the network as we continue to kind of make good on our brand promise and supporting our agent stations on their excess strategies over time. And it wouldn’t — we’re not going to do one of these a month, but it wouldn’t surprise me that if we were to do one quarter type thing, here over the next year or so just as our network folks are kind of approaching the point where they’re ready to ring bell. And we’re here to support them in that process as that occurs.

Jason Seidl: That makes sense. I’m sorry, I thought before that one was an agent and one was not. Bohn, when you take a step back and you look at the broader market on the forwarding side, a lot’s been going on both from the macro and geopolitical side. How is that impacting results? Or how do you see that impacting results here in the current quarter?

Bohn Crain: Well, it’s certainly slowed down, I think for everyone. And it — I think the general narrative is, it was obviously slow through December. I think it will continue to be slow relatively through the March quarter. And then I’m optimistic that we’ll start to see certainly sequential improvement after that as we kind of find our way back to some sense of normalcy. But we’ve got anything as you alluded to any number of kind of political or kind of geopolitical things going on and interest rates and all. There’s any number of kind of headwinds. But I think we’re — I would like to think and believe we kind of have seen the worst of it and I’m pretty hopeful for improvement on the back half of the year. And for us kind of individually, I count us as fortunate to be where we are in terms of debt-free cash on the balance sheet.

So kind of net-net, we’re intending to just continue to execute our core strategy right through the storm so to speak. And through the combination of kind of these tuck-in acquisitions conversions and stock buybacks.

Jason Seidl: Okay. I appreciate that color. One quick thing. Maybe Todd this is for you. Just good to see you guys buying back stock. It looks like you did it under $6, at current levels should we expect you to continue to support shares going forward?

Todd Macomber: Yes.

Jason Seidl: Love the clarification. Gentlemen, thank you for your time, as always.

Bohn Crain: You bet. Thank you.

Operator: Thank you. Our next question is coming from Mark Argento with Lake Street Capital. Your line is live.

Mark Argento: Hey, Bohn, hey, Todd. Just quickly, just following up on kind of the M&A scenario this conversation I should say, maybe could you just walk us through how many agent stations you have out there? What’s realistic over time the opportunity to buy those? And I know you mentioned kind of one a quarter but what — over time how do you envision this playing out? And does that pace continue to accelerate? I’m guessing from here on out? And can you deploy enough capital there that you don’t really need to look at anything outside of the core agent station market at this point. Maybe just walk us through kind of how you envision that point out?