Radiant Logistics' Report Ahead Of Expectations, But Peak Season Likely To Disappoint

Third-party logistics and multimodal transportation services provider Radiant Logistics Inc. RLGT, reported $0.13 in adjusted earnings per share for its fiscal first quarter ended Sept. 30, 2019.  The result was $0.02 per share ahead of consensus expectations and the same period in 2018.

However, the Bellevue, Washington-based company cautioned that a normal peak season uptick is not likely to occur.

"While we are pleased with our results for this most recent quarter, the outlook for the upcoming quarter looks relatively flat on a sequential basis as we are not seeing the traditional peak season trade flows that we would generally expect heading into the holidays. As an industry, we continue to work through the market uncertainties associated with global trade, tariffs and the prospect of impeachment along with digesting excess truck capacity and inventory buildups that are part of the current landscape, said Radiant Logistics' founder and CEO Bohn Crain.

Radiant Logistics reported total revenue of $200.5 million, an 8.4% year-over-year decline. Net revenue was up 1.2% with a 260 basis point (bp) improvement in net revenue margin. Management attributed the decline in revenue to its prior decision to exit lower margined business, a lack of disaster relief-related freight, an overall weakness in the broader freight market due to "slower global trade" and lower brokerage margins due to excess truck capacity.

Net revenue in the U.S. increased 2.3% year-over-year, but was partially offset by a 5.2% year-over-year decline in net revenue from the company's Canadian operations.

The company reported a 9.8% year-over-year increase in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to $9.7 million, with an adjusted EBITDA margin improvement of 130 bps over the same period.

Radiant Logistics' Key Performance Indicators

On the earnings conference call, management said the company is "looking to do deals." While the company continues to pursue acquisitions, management noted that they don't really see a better deal than buying RLGT stock at the moment.

Radiant Logistics has an open share repurchase authorization allowing it to repurchase up to 5 million of its outstanding shares. The current stock buyback program expires in December, but management expects the board to extend the program.

When speaking to potential acquisitions, management feels comfortable with the company's current liquidity profile. Radiant Logistics has a $75 million credit facility with roughly $15 million outstanding and approximately $64 million available to acquire targets.

Management provided a scenario in which it could essentially increase its current annual EBITDA run rate from $40 million to $60 million under its current capital structure without any notable dilution to shareholders. The scenario assumes a series of small tuck-in acquisitions at valuation multiple of five times EBITDA, or roughly $100 million in acquisitions. They believe that this would require only $50 million in cash at closing to facilitate the transactions.

While the math appears very achievable, management's tone was somewhat tepid on current acquisition prospects as potential target valuations remain elevated.

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