What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-05-11 compared with 2020-02-10 · 161 added, 166 removed, 204 unchanged (62% of the section changed)

11 unchanged sentences

our ability to locate suitable acquisition opportunities and secure the financing necessary to complete such acquisitions;

the occurrence of no adverse developments affecting domestic and international economic, political or competitive conditions within our industry;

transportation costs remaining in-line with recent levels and expected trends;

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the absence of any adverse laws or governmental regulations affecting the transportation industry in general, and our operations in particular;

and such other factors that may be identified from time to time in our Securities and Exchange Commission (“SEC”) filings and other public announcements, including those set forth under the caption “Risk Factors” in our Form 10-K for the year ended June 30, 2019.

the impact of COVID-19 on our operations and financial results;

In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of these risks.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.

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We also provide other value-added logistics services, including customs brokerage and MM&D solutions to complement our core transportation service offering.

We expect to grow our business organically and by completing acquisitions of other companies with complementary geographic and logistics service offerings.

Our organic growth strategy will continue to focus on streng thening existing and expanding new customer relationships leveraging the benefit of our truck brokerage and intermodal service offerings, while continuing our efforts on the organic build-out of our network of strategic operating partner locations.

In addi tion to our focus on organic growth, we continue to search for acquisition candidates that bring to our current platform a critical mass from a geographic and/or purchasing power standpoint along with complementary service offerings.

We expect to grow our business organically and by completing acquisitions of ot her companies with complementary geographic and logistics service offerings.

Our organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of our truck brokerage and intermodal service offerings, while continuing our efforts on the organic build-out of our network of strategic operating partner locations.

In addition to our focus on organic growth, we continue to search for acquisition candidates that bring to our current platfor m a critical mass from a geographic and/or purchasing power standpoint along with complementary service offerings.

As we continue to grow and scale our business, we believe that we are creating density in our trade lanes, which creates opportunities for us to more efficiently source and manage our transportation capacity.

In addition, we remain focused on leveraging our back-office infrastr ucture to drive productivity improvement across the organization.

In addition, we remain focused on leveraging our back-office infrastructure to drive productivity improvement across the organization.

The recent COVID-19 outbreak was declared a pandemic by the World Health Organization on March 11, 2020 and has rapidly spread to the United States and many other parts of the world and has impacted and may continue to impact our business operations, including employees, customers, financial condition, liquidity and cash flow for an extended period of time.

In particular, we are seeing significant changes in demand among our various customers depending on their industry.

Certain industries saw an increase in demand, while other industries experienced a slowdown of demand and production.

Federal and state governments have implemented measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply chain logistical changes, and closure of nonessential businesses.

Since late March, we shifted our focus to delivering against four key objectives:

ensuring the health and safety of our employees;

providing supply chain continuity for our customers, operating partners and carriers;

protecting the economic security of our people to the greatest extent possible;

and taking the steps necessary to mitigate the impacts of the slowing economy on our own business.

Our business model has also shown its strength in the diversity of our service offerings.

Although the pandemic has had a substantial negative impact on many of the industry verticals and customers that we serve, the Radiant network is proud to be playing an active role in the fight against COVID-19:

delivering personal protective equipment, food and beverage, consumer goods, technology and other essential products for our customers in North America and around the world.

Notwithstanding this great effort by our team, we anticipate the contraction in our business from the shelter-at-home mandates, closing of manufacturing facilities and general global economic slowdown will more than off-set any financial benefit from our support of essential businesses.

The effects of COVID-19, however, will not be fully reflected in our financial results until future periods.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic;

governmental, business, and individuals' actions in response to the pandemic;

and the impact on economic activity including the possibility of recession or financial market instability.

These factors may adversely impact consumer, business, and government spending as well as customers' ability to pay for our services on an ongoing basis.

This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.

In response to COVID-19 we have implemented the following measures to ensure the health and safety of our employees, the financial soundness of the Company and the continuity of our services to our customers :

We are applying the social distancing guidelines by having a majority of our office employees work from their homes;

We provide clear communication to our employees promoting essential healthy hygiene habits and assist in responsibly responding to potential symptoms including self-quarantining and testing;

We initiated a series of workforce reduction measures impacting employees across our U.S.

operations that included 20% salary reductions, reduction in hours, furloughs and terminations;

We implemented temporary salary reductions for company executive officers and temporary reductions in cash retainers for board members;

Our executives have agreed to forgo any bonuses under the Company’s discretionary quarterly Short-term Incentive Plan;

We have tabled any acquisition opportunities, suspended our stock buy-back program, deferred discretionary technology investments and reduced discretionary operating expenses.

Performance Metrics

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Results of Operations

Three months ended December 31, 2019 and 2018 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by geographic operating segments for the three months ended December 31, 2019 and 2018 (in thousands):

Three Months Ended December 31, 2019

Three Months Ended December 31, 2018

Three months ended March 31, 2020 and 2019 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by geographic operating segments for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

United States

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Value-added services

(1) Net revenues are revenues net o f cost of transportation and other services.

Transportation revenue was $193.6 million and $252.5 million for the three months ended December 31, 2019 and 2018, respectively.

The decrease of $58.8 million, is primarily attributable to general market softness, a decrease in non-recurring disaster relief project work reported in the comparable prior year period, and decisions to exit certain lower margin business.

Net transportation revenue was $51.0 million and $59.5 million for the three months ended December 31, 2019 and 2018, respectively.

(1) Net revenues are revenues net of cost of transportation and other services.

Transportation revenue was $170.0 million and $197.6 million for the three months ended March 31, 2020 and 2019, respectively.

The decrease of $27.6 million, or 14.0%, is primarily attributable to general market softness including a slight impact from COVID-19, a decrease in non-recurring disaster relief project work reported in the comparable prior year period, and decisions to exit certain lower margin business.

Net transportation revenue was $43.1 million and $48.6 million for the three months ended March 31, 2020 and 2019, respectively.

Net transportation margins increased from 24.6% to 25.4%, primarily due to shifts in product mix and exiting certain lower margin business.

Value-added services revenue was $8.3 million and $8.5 million, for the three months ended December 31, 2019 and 2018, respectively.

The decrease of $0.2 million, is primarily attributable to slowdown in our contract logistics and custom brokerage services offerings.

Net value-added services revenue was $4.9 million for the three months ended December 31, 2019, compared to $4.5 million for the comparable prior year period.

Value-added services revenue was $7.2 million and $8.4 million, for the three months ended March 31, 2020 and 2019, respectively.

The decrease of $1.2 million, or 14.6%, is primarily attributable to slowdown in our contract logistics and custom brokerage services offerings.

Net value-added services revenue was $4.7 million for the three months ended March 31, 2020, compared to $4.1 million for the comparable prior year period.

Net value-added services revenue margins increased from 49.2% to 64.9%, primarily due to lower personnel and warehousing costs as a percentage of revenue.

The following table compares condensed consolidated statements of comprehensive income data by operating segment for the three months ended December 31, 2019 and 2018 (in thousands):

Three Months Ended December 31, 2019

Three Months Ended December 31, 2018

The following table compares condensed consolidated statements of comprehensive income data by operating segment for the th ree months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

United States

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Depreciation and amortization

Transition, lease termination, and other costs

Change in fair value of contingent consideration

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Income (loss) before income taxes

Income tax benefit (expense)

Income tax expense

Net income (loss)

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Net income (loss) attributable to Radiant Logistics, Inc.

preferred stock dividends

issuance costs for preferred stock redemption

Net income (loss) attributable to common stockholders

Three Months Ended December 31, 2019

Three Months Ended December 31, 2018

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Operating expenses as a percent of

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(1) Net revenues are revenues net of cost of transportation and other services.

Operating partner commissions decreased $3.0 million, or 10.5%, to $25.4 million for the three months ended December 31, 2019.

Operating partner commissions decreased $2.7 million, or 12.0%, to $20.4 million for the three months ended March 31, 2020.

The decrease is primarily due to decreased net revenues from operating partners.

As a percentage of net revenues, operating partner commissions increased 101 basis points to 45.3% from 44.3% for the three months ended December 31, 2019 and 2018, respectively, as a result of reduced volume of special projects with lower margin characteristic.

Personnel costs decreased $0.7 million, or 4.3%, to $15.2 million for the three months ended December 31, 2019.

As a percentage of net revenues, operating partner commissions decreased 125 basis points to 42.6% from 43.8% for the three months ended March 31, 2020 and 2019, respectively, as a result of reduced volume of special projects with lower margin characteristic.

Personnel costs decreased $0.4 million, or 2.7%, to $14.4 million for the three months ended March 31, 2020.

The decrease is primarily due to decreased headcount.

As a percentage of net revenues, personnel costs increased 234 basis points to 27.2% from 24.9% for the three months ended December 31, 2019 and 2018 , respectively.

Selling, general and administrative (“SG&A”) expenses decreased $0.8 million, or 11.2%, to $6.7 million for the three months ended December 31, 2019.

The decrease is primarily attributable to decreased facilities spending and legal expense for the quarter.

As a percentage of net revenues, SG&A increased 18 basis points to 11.9% from 11.8% for the three months ended December 31, 2019 and 2018 , respectively.

Depreciation and amortization costs increased $0.3 million, or 7.3%, to $4.1 million for the three months ended December 31, 2019.

As a percentage of net revenues, personnel costs increased 209 basis points to 30.2% from 28.1% for the three months ended March 31, 2020 and 2019 , respectively.

Selling, general and administrative (“SG&A”) expenses increased $1.2 million, or 17.8%, to $8.0 million for the three months ended March 31, 2020.

The increase is primarily attributable to increased technology spending for the quarter.

As a percentage of net revenues, SG&A increased 388 basis points to 16.8% from 12.9% for the three months ended March 31, 2020 and 2019 , respectively.

Depreciation and amortization costs increased $0.5 million, or 11.3%, to $4.3 million for the three months ended March 31, 2020.

The increase is due to investments in a new transportation management system and technology infrastructure.

Tran sition, lease termination and other costs increased $0.3 million for the three months ended December 31, 2019.

The increase is primarily attributable to non-recurring severance expense during the most recent quarter.

Change in fair value of contingent consideration represents the change in the fair value of contingent consideration due to former shareholders of acquired operations.

The change in the current period is primarily attributable to an increase in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other net expenses were $0.6 million for both three months ended December 31, 2019 and 2018 .

Other net expenses were $0.5 million and $0.6 million for the three months ended March 31, 2020 and 2019 , respectively.

Our change in net income is driven principally by decreased net revenues, partially offset by decreased operating expenses and decreased income taxes compared to the comparable prior year period .

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions as well as gains or losses from changes in fair value of contingent consideration that are difficult to predict.

The following table provides a reconciliation for the three months ended December 31, 2019 and 2018 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

Three Months Ended December 31, 2019

Three Months Ended December 31, 2018

The following table provides a reconciliation for the three months ended March 31, 2020 and 2019 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

United States

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Net income (loss) attributable to common stockholders

preferred stock dividends

issuance costs for preferred stock redemption

Net income (loss) attributable to Radiant Logistics, Inc.

7 unchanged sentences

Transition, lease termination, and other costs

Foreign exchange loss (gain)

Foreign currency transaction loss (gain)

Adjusted EBITDA

1 unchanged sentence

(1) Net rev enues are revenues net of cost of transportation and other services.

Six months ended December 31, 2019 and 2018 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by geographic operating segments for the six months ended December 31, 2019 and 2018 (in thousands):

Six Months Ended December 31, 2019

Six Months Ended December 31, 2018

Nine months ended March 31, 2020 and 2019 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by geographic operating segments for the nine months ended March 31, 2020 and 2019 (in thousands):

Nine Months Ended March 31, 2020

Nine Months Ended March 31, 2019

United States

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(1) Net revenues are revenues net o f cost of transportation and other services.

Transportation revenue was $385.4 million and $463.6 million for the six months ended December 31, 2019 and 2018, respectively.

The decrease of $78.2 million, is primarily attributable to general market softness, a decrease in non-recurring disaster relief project revenue reported in the comparable prior year period, and decisions to exit certain lower margin business.

Net transportation revenue was $101.7 million and $110.9 million for the six months ended December 31, 2019 and 2018, respectively.

Transportation revenue was $555.5 million and $661.2 million for the nine months ended March 31, 2020 and 2019, respectively.

The decrease of $105.7 million, or 16.0%, is primarily attributable to general market softness including a slight impact from COVID-19, a decrease in non-recurring disaster relief project revenue reported in the comparable prior year period, and decisions to exit certain lower margin business.

Net transportation revenue was $144.8 million and $159.5 million for the nine months ended March 31, 2020 and 2019, respectively.

Net transportation margins increased from 24.1% to 26.1%, primarily due to shifts in product mix and exiting certain lower margin business.

Value-added services revenue was $17.0 million and $16.2 million, for the six months ended December 31, 2019 and 2018, respectively.

The increase of $0.8 million, or 5.2%, is primarily attributable to growth in our contract logistics and custom brokerage services offerings.

Net value-added services revenue was $9.8 million for the six months ended December 31, 2019, compared to $7.9 million for the comparable prior year period.

Value-added services revenue was $24.2 million and $24.6 million, for the nine months ended March 31, 2020 and 2019, respectively.

The decrease of $0.4 million, or 1.7%, is primarily attributable to the slowdown in our contract logistics and custom brokerage services offerings.

Net value-added services revenue was $14.5 million for the nine months ended March 31, 2020, compared to $12.1 million for the comparable prior year period.

Net value-added services revenue margins increased from 49.0% to 59.7%, primarily due to lower personnel and warehousing costs as a percentage of revenue.

The following table compares condensed consolidated statements of comprehensive income data by operating segment for the six months ended December 31, 2019 and 2018 (in thousands):

Six Months Ended December 31, 2019

Six Months Ended December 31, 2018

The following table compares condensed consolidated statements of comprehensive income data by operating segment for the nine months ended March 31, 2020 and 2019 (in thousands):

Nine Months Ended March 31, 2020

Nine Months Ended March 31, 2019

United States

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Net income (loss) attributable to common stockholders

Six Months Ended December 31, 2019

Six Months Ended December 31, 2018

Nine Months Ended March 31, 2020

Nine Months Ended March 31, 2019

Operating expenses as a percent of

7 unchanged sentences

(1) Net revenues are revenues net of cost of transportation and other services.

Operating partner commissions decreased $3.7 million, or 6.8%, to $49.5 million for the six months ended December 31, 2019.

Operating partner commissions decreased $6.4 million, or 8.4%, to $69.9 million for the nine months ended March 31, 2020.

The decrease is primarily due to decreased net revenues from operating partners.

As a percentage of net revenues, operating partner commissions decreased 31 basis points to 44.4% from 44.8% for the six months ended December 31, 2019 and 2018, respectively.

Personnel costs decreased $0.4 million, or 1.2%, to $30.1 million for the six months ended December 31, 2019.

As a percentage of net revenues, operating partner commissions decreased 59 basis points to 43.9% from 44.5% for the nine months ended March 31, 2020 and 2019, respectively.

Personnel costs decreased $0.8 million, or 1.7%, to $44.5 million for the nine months ended March 31, 2020.

The decrease is primarily due to decreased headcount.

As a percentage of net revenues, personnel costs increased 135 basis points to 27.0% from 25.6% for the six months ended December 31, 2019 and 2018 , respectively.

Selling, general and administrative (“SG&A”) expenses decreased $0.3 million, or 2.1%, to $14.3 million for the six months ended December 31, 2019.

The decrease is primarily attributable to decreased facility spending and legal expense for the quarter.

As a percentage of net revenues, SG&A increased 54 basis points to 12.9% from 12.3% for the six months ended December 31, 2019 and 2018 , respectively.

Depreciation and amortization costs increased $0.7 million, or 9.2%, to $8.1 million for the six months ended December 31, 2019.

The increase is due to investments in a new transportation management system and technology infrastructure.

Transition, lease termination and other costs increased $0.3 million for the six months ended December 31, 2019.

The increase is primarily attributable to non-recurring severance expense during the most recent quarter.

Change in fair value of contingent consideration represents the change in the fair value of contingent consideration due to former shareholders of a cquired operations.

As a percentage of net revenues, personnel costs increased 155 basis points to 27.9% from 26.4% for the nine months ended March 31, 2020 and 2019 , respectively.

Selling, general and administrative (“SG&A”) expenses increased $0.9 million, or 4.3%, to $22.4 million for the nine months ended March 31, 2020.

The increase is primarily attributable to increased technology, legal and other general expenses for the nine-month period.

As a percentage of net revenues, SG&A increased 154 basis points to 14.0% from 12.5% for the nine months ended March 31, 2020 and 2019 , respectively.

Depreciation and amortization costs increased $1.1 million, or 9.9%, to $12.4 million for the nine months ended March 31, 2020.

The increase is primarily due to investments in a new transportation management system and technology infrastructure.

Transition, lease termination and other costs increased $0.3 million for the nine months ended March 31, 2020.

The increase is primarily attributable to non-recurring severance expense during the most recent nine-month period.

Change in fair value of contingent cons ideration represents the change in the fair value of contingent consideration due to former shareholders of acquired operations.

The change in the current period is primarily attributable to an increase in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other expenses were $1.3 million and $1.2 million for the six months ended December 31, 2019 and 2018, respectively .

Other expenses were $1.7 million and $1.9 million for the nine months ended March 31, 2020 and 2019, respectively .

Our change in net income is driven principally by decreased net revenues, partially offset by decreased operating expenses, and decreased income taxes compared to the comparable prior year period .

The following table provides a reconciliation for the six months ended December 31, 2019 and 2018 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

Six Months Ended December 31, 2019

Six Months Ended December 31, 2018

The following table provides a reconciliation for the nine months ended March 31, 2020 and 2019 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

Nine Months Ended March 31, 2020

Nine Months Ended March 31, 2019

United States

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Liquidity and Capital Resources

Net cash provided by operating activities were $6.3 million and $16.4 million for the six months ended December 31, 2019 and 2018, respectively.

The cash provided primarily consisted of net income adjusted for depreciation and amortization and changes in accounts receivable, contract assets, accounts payable, income taxes, operating partner commissions payable, and accrued and other liabilities.

Cash flow from operating activities for the six months ended December 31, 2019 decreased by $10.1 million, compared with the same period in 2018, primarily due to the decrease in net income and net change in operating assets and liabilities.

Net cash used for investing activities were $2.7 million and $2.3 million for the six months ended December 31, 2019 and 2018, respectively.

The primary uses of cash were for purchases of property, technology, and equipment.

Cash paid for purchases of property, technology, and equipment were $2.8 million and $2.3 million for the six months ended December 31, 2019 and 2018, respectively.

Net cash used for financing activities were $0.7 million and $10.1 million for the six months ended December 31, 2019 and 2018, respectively.

Net proceeds from the Senior Credit Facility was $3.5 million and $14.4 million for the six months ended December 31, 2019 and 2018, respectively.

Repayments of notes payable and finance lease liability were $2.4 million and $1.8 million for the six months ended December 31, 2019 and 2018, respectively.

Repurchases of common stock were $1.0 million for the six months ended December 31, 2019.

Payments for the redemption of preferred stock and payments of preferred stock dividends were $21 million and $1.3 million for the six months ended December 31, 2018.

Distributions to non-controlling interest were $0.3 million and $0.2 million for the six months ended December 31, 2019 and 2018, respectively.

Payments of employee tax withholdings related to vesting of restricted stock awards were $0.3 million for the six months ended December 31, 2019.

Payments of employee tax withholdings related to the cashless exercise of stock option were $0.1 million for both the six months ended December 31, 2019 and 2018.

A primary component of our business strategy is the continued development and implementation of advanced information systems to provide accurate and timely information to our management, strategic operating partners and customers.

We intend to spend in excess of $3.5 million during the entire fiscal year ending June 30, 2020 in order to continue improving our technology systems, which we expect will include the implementation of a key transportation management system that will, among other things, more fully integrate our systems with our strategic operating partners and any new operations that we may acquire in the future.

Senior Credit Facility

We have the USD$75.0 million senior credit facility (the “Senior Credit Facility”) with Bank of America, N.A.

on its own behalf and as agent to the other lenders named therein, currently consisting of the Bank of Montreal (as the initial member of the syndicate under such loan).

The Senior Credit Facility matures on June 14, 2022 and is collateralized by a first-priority security interest in all of the assets of the U.S.

co-borrowers, a first-priority security interest in all of the accounts receivable and associated assets of the Canadian co-borrowers (the “Canadian A/R Assets”) and a second-priority security interest on the other assets of the Canadian borrowers.

Advances under the Senior Credit Facility are available to fund future acquisitions, capital expenditures, repurchase of Company stock, or for other corporate purposes.

Borrowings under the Senior Credit Facility accrue interest at a variable rate of interest based upon LIBOR and/or one or more other interest rate indices plus an applicable margin.

The Senior Credit Facility provides for advances of up to 85% of our eligible Canadian and domestic accounts receivable, 75% of eligible accrued but unbilled domestic receivables and eligible foreign accounts receivable, all of which are subject to certain sub-limits, reserves and reductions.

The co-borrowers of the Senior Credit Facility include the following:

(i) with respect to U.S.

obligations under the Senior Credit Facility;

Radiant Logistics, Inc.;

Radiant Global Logistics, Inc.;

Radiant Transportation Services, Inc.;

Radiant Logistics Partners LLC;

Adcom Express, Inc.;

Radiant Customs Services, Inc.;

DBA Distribution Services, Inc.;

International Freight Systems (of Oregon), Inc.;

Radiant Off-Shore Holdings LLC;

Green Acquisition Company, Inc.;

On Time Express, Inc.;

Clipper Exxpress Company;

Radiant Global Logistics (CA);

Service By Air, Inc.;

Highways and Skyways, Inc.;

and Radiant Trade Services, Inc.;

and (ii) with respect to Canadian obligations under the Senior Credit Facility, Wheels International Inc., Wheels MSM Canada Inc., 2062698 Ontario Inc., Associate Carriers Canada Inc., and Wheels Associate Carriers Inc.

As co-borrowers under the Senior Credit Facility, the accounts receivable of the foregoing entities are eligible for inclusion within the overall borrowing base of the Company and all borrowers are responsible for repayment of the debt associated with applicable advances (U.S.

or Canadian) under the Senior Credit Facility.

In addition, we and our U.S.

subsidiaries guarantee both the U.S.

and Canadian obligations under the Senior Credit Facility, while our Canadian subsidiaries guarantee only the Canadian obligations under the Senior Credit Facility.

The terms of the Senior Credit Facility are subject to a financial covenant, which may limit the amount otherwise available under such facility.

The covenant requires us to maintain a basic fixed charge coverage ratio of at least 1.0 to 1.0 during any period (the “Trigger Period”) in which we are in default under the Senior Credit Facility if total availability falls below $10.0 million or if U.S.

availability is less than $6.0 million.

Under the terms of the Senior Cr edit Facility, we are permitted to make additional acquisitions without the consent of the senior lenders only if certain conditions are satisfied.

The conditions imposed by the Senior Credit Facility include the following:

(i) the absence of an event of d efault under the Senior Credit Facility, (ii) the acquisition must be consensual;

(iii) the company to be acquired must be in the transportation and logistics industry, located in the United States or certain other approved jurisdictions, and have a positi ve EBITDA for the twelve month period most recently ended prior to such acquisition, (iv) no debt or liens may be incurred, assumed or result from the acquisition, subject to limited exceptions, (v) after giving effect for the funding of the acquisition, w e must have availability under the Senior Credit Facility of at least the greater of 15% of the U.S.-based borrowing base and Canadian-based borrowing base or $15.0 million, and U.S.

availability of at least $10.0 million, and (vi) the pro forma fixed char ge coverage ratio is at least 1.1 to 1.0.

In the event that we are not able to satisfy the conditions of the Senior Credit Facility in connection with a proposed acquisition, we must either forego the acquisition, obtain the consent of the senior lenders, or retire the Senior Credit Facility.

This may limit or slow our ability to achieve the critical mass we may need to achieve our strategic objectives.

As of December 31, 2019, we had gross availability of $68.0 million, net of $17.2 million in advances and letter of credit reserves with approximately $50.7 million in availability under the Senior Credit Facility to support future acquisitions and our ongoing working capital requirements.

We expect to structure acquisitions with certain amounts paid at closing and the balance paid over a number of years in the form of earn-out installments, which are payable based upon the future earnings of the acquired businesses payable in cash, stock or some combination thereof.

As we continue to execute our acquisition strategy, we will be required to make significant payments in the future if the earn-out installments under our various acquisitions become due.

While we believe that a portion of any required cash payments will be generated by the acquired businesses, we may have to secure additional sources of capital to fund the remainder of any cash-based earn-out payments as they become due.

This presents us with certain business risks relative to the availability of capacity under our Senior Credit Facility, the availability and pricing of future fund raising, as well as the potential dilution to our stockholders to the extent the earn-outs are satisfied directly, or indirectly, from the sale of equity.

Generally, our primary sources of liquidity are cash generated from operating activities and borrowings under our Revolving Credit Facility, as described below.

These sources also fund a portion of our capital expenditures and contractual contingent consideration obligations.

Our level of cash and financing capabilities along with cash flows from operations have historically been sufficient to meet our operating and capital needs.

We believe that during the next 12 months the COVID-19 pandemic is likely to impact general economic activity and demand in our markets, which if continued unabated could continue to have an adverse effect on our results of operations;

which, in turn, could cause the amounts available to us under the Revolving Credit Facility to be limited and cause us to seek other external financing sources to meet our operating and capital needs.

However, in this case, conditions in the credit markets may also deteriorate and the availability of alternative sources of credit on commercially reasonable terms may be reduced.

In addition, the Company has a limited market capitalization and its stock price has declined roughly 30% since January 1, 2020.

The Company believes access to capital markets has tightened and that accessing such markets at this time would be significantly detrimental to the business.

Net cash used in operating activities were $1.3 million for the nine months ended March 31, 2020.

Net cash provided by operating activities were $33.5 million for the nine months ended March 31, 2019.

The cash used or provided primarily consisted of net income adjusted for depreciation and amortization and changes in accounts receivable, contract assets, accounts payable, income taxes, operating partner commissions payable, and accrued and other liabilities.

Cash flow from operating activities for the nine months ended March 31, 2020 decreased by $34.8 million, compared with the same period in fiscal year 2019, primarily due to the decrease in net income and net change in operating assets and liabilities.

Net cash used for investing activities were $13.8 million and $4.7 million for the nine months ended March 31, 2020 and 2019, respectively.

The primary uses of cash were for business acquisitions and purchases of property, technology, and equipment.

Cash paid for business acquisition were $9.2 million for the nine months ended March 31, 2020.

Cash paid for purchases of property, technology, and equipment were $4.7 million for each of the nine months ended March 31, 2020 and 2019.

Net cash provided by financing activities was $24.1 million for the nine months ended March 31, 2020.

Net cash used for financing activities were $30.7 million for the nine months ended March 31, 2019.

Net proceeds from the Revolving Credit Facility were $32.2 million for the nine months ended March 31, 2020.

Net repayments to the Revolving Credit Facility were $4.7 million for the nine months ended March 31, 2019.

Repayments of notes payable and finance lease liability were $3.2 million and $2.7 million for the nine months ended March 31, 2020 and 2019, respectively.

Repurchases of common stock were $2.5 million for the nine months ended March 31, 2020.

Payments of contingent consideration were $0 million and $0.2 million for the nine months ended March 31, 2020 and 2019, respectively.

Payments for the redemption of preferred stock and payments of preferred stock dividends were $21 million and $1.3 million for the nine months ended March 31, 2019.

Distributions to non-controlling interest were $0.3 million and $0.7 million for the nine months ended March 31, 2020 and 2019, respectively.

Payments of employee tax withholdings related to vesting of restricted stock awards were $0.3 million for the nine months ended March 31, 2020.

Payments of employee tax withholdings related to the cashless exercise of stock option were $0.1 million for both the nine months ended March 31, 2020 and 2019.

Revolving Credit Facility

The Company entered into a $150 million syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated as of March 13, 2020.

On March 31, 2020, the borrowings outstanding on the Revolving Credit Facility was $46 million.

The Revolving Credit Facility was entered into with Bank of America Securities, Inc.

as sole book runner and sole lead arranger, Bank of Montreal Chicago Branch, as lender and syndication agent, MUFG Union Bank, N.A as lender and documentation and Bank of America, N.

A., Keybank National Association and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”).

This replaces the Company’s $75 million facility dated June 14, 2017.

The Revolving Credit Facility has a term of five years, matures on March 13, 2025, and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company.

Borrowings under the Revolving Credit Facility accrue interest (at the Company’s option), at the Lenders’ base rate plus 1.00% or LIBOR plus 2.00% and can be subsequently adjusted based on the Company’s consolidated leverage ratio under the facility at the Lenders’ base rate plus 1.00% to 1.75% or LIBOR plus 2.00% to 2.75%.

The Revolving Credit Facility includes a $50.0 million accordion feature to support future acquisition opportunities.

For general borrowings under the Revolving Credit Facility, the Company is subject to the maximum consolidated leverage ratio of 3.00 and minimum consolidated fixed charge coverage ratio of 1.25.

Additional minimum availability requirements and financial covenants apply in the event the Company seeks to use advances under the Revolving Credit Facility to pursue acquisitions or repurchase its common stock.

In conjunction with the Revolving Credit Facility, Radiant entered into two interest rate swap contracts.

On March 20, 2020, and effective April 17, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade variable interest cash inflows at one-month LIBOR for a $20,000 notional amount, for fixed interest cash outflows at 0.635%.

This interest rate swap matures and terminates on March 13, 2025.

On April 1, 2020, and effective April 2, 2020, Radiant entered into an interest rate swap

co ntract with Bank of America to trade the variable interest cash inflows at one-month LIBOR for a $10,000 notional amount, for fixed interest cash outflows at 0.5865%.

This interest rate swap matures and terminates on March 13, 2025.

Senior Secured Loan

On April 2, 2015, Wheels International Inc.

(“Wheels”) obtained a CAD$29.0 million senior secured Canadian term loan from Integrated Private Debt Fund IV LP (“IPD IV”) pursuant to a CAD$29,000,000 Credit Facilities Loan Agreement (the “IPD IV Loan Agreement”).

On April 2, 2015, Radiant Canada obtained a CAD$29.0 million senior secured Canadian term loan from Fiera Private Debt Fund IV LP (“FPD IV” formerly, Integrated Private Debt Fund IV LP) pursuant to a CAD$29,000,000 Credit Facilities Loan Agreement (the “FPD IV Loan Agreement”).

The Company and its U.S.

and Canadian subsidiaries are guarantors of the Wheels obligations thereunder.

and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder.

The loan matures on April 1, 2024 and accrues interest at a rate of 6.65% per annum.

We made interest-only payments for the first 12 months and blended principal and interest payments through maturity.

In connection with the loan, we paid an amount equal to five months of interest payments into a debt service reserve account controlled by IPD IV.

In connection with our acquisition of Lomas, Wheels obtained a CAD$10.0 million senior secured Canadian term loan from Integrated Private Debt Fund V LP (“IPD V,” and together with IPD IV, “IPD”) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement (the “IPD V Loan Agreement,” and together with the IPD IV Loan Agreement, the “IPD Loan Agreements”).

In connection with the loan, we paid an amount equal to five months of interest payments into a debt service reserve account controlled by FPD IV.

In connection with our acquisition of Lomas, Radiant Canada obtained a CAD$10.0 million senior secured Canadian term loan from Fiera Private Debt Fund V LP (“FPD V” formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement (the “FPD V Loan Agreement,” and together with the FPD IV Loan Agreement, the “FPD Loan Agreements”).

The Company and its U.S.

and Canadian subsidiaries are guarantors of the Wheels obligations thereunder.

and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder.

The loan matures on June 1, 2024 and accrues interest at a rate of 6.65% per annum.

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The loans may be prepaid in whole at any time upon providing at least 30 days prior written notice and paying the difference between (i) the present value of the loan interest and the principal payments foregone discounted at the Government of Canada Bond Yield for the term from the date of prepayment to the maturity date and (ii) the face value of the principal amount being prepaid.

The loans are collateralized by a (i) first-priority security interest in all of the assets of Wheels except the Canadian A/R Assets, (ii) a second-priority security interest in the Canadian A/R Assets, and (iii) a second-priority security interest on all of our assets.

The terms of the loan are subject to certain financial covenants, which require us to maintain (i) a fixed charge coverage ratio of 1.1 to 1.0 during any Trigger Period, (ii) a debt service coverage ratio of at least 1.2 to 1.0 and (iii) a senior debt to EBITDA ratio of at least 3.0 to 1.0.

Under the terms of the IPD Loan Agreements, we are permitted to make additional acquisitions without IPD’s consent only if certain conditions are satisfied, including, among others:

(i) the equity interests or property acquired in such acquisition constitute a business reasonably related to our business or the business of Wheels;

(ii) no default or event of default shall exist prior to or will be caused as a result of such acquisition;

(iii) we or Wheels shall have provided IPD with at least ten business days prior written notice of such acquisition that must include certain descriptive information and pro forma information regarding the acquisition;

(iv) such person whose equity interests or property are being acquired shall have, from the last day of the most recent fiscal quarter of such person, actual (or pro forma to the extent approved in writing by IPD) positive EBITDA and net income, in each case for the 12 month period ending on such date;

(v) the aggregate cash consideration payable at the closing of the acquisition shall not exceed $10.0 million for any single transaction and $25.0 million in the aggregate, in any fiscal year or such greater amount approved in writing by IPD;

provided, however, that the foregoing limitation shall exclude cash consideration derived from the proceeds of sales of newly issued equity interests of Radiant during the twelve-month period prior to the closing of such acquisition (as described below);

(vi) no debt or liens may be incurred, assumed or result from the acquisition, subject to limited exceptions;

(vii) the assets subject to the acquisition are free from all liens except those permitted under the IPD Loan Agreements;

(viii) the post-closing U.S.

availability under the Senior Credit Facility is at least $10.0 million on a pro forma basis and (ix) the pro forma fixed charge coverage ratio is at least 1.1 to 1.0.

For additional information regarding our indebtedness, see Note 7 to our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended June 30, 2019 and Note 8 to our unaudited condensed consolidated financial statements contained elsewhere in this report.

For additional information regarding our indebtedness, see Note 8 to our unaudited condensed consolidated financial statements contained elsewhere in this report.

Working Capital

Given our continued focus on the build-out of our network of operating partner locations, we believe that our current working capital and anticipated cash flow from operations are adequate to fund existing operations for the next 12 months.

However, continued growth through strategic acquisitions will require additional sources of financing as our existing working capital is not sufficient to finance our operations and an acquisition program.

Thus, our ability to finance future acquisitions will be limited by the availability of additional capital.

We may, however, finance acquisitions using our common stock as all or some portion of the consideration.

In the event that our common stock does not attain or maintain a sufficient market value or potential acquisition candidates are otherwise unwilling to accept our securities as part of the purchase price for the sale of their businesses, we may be required to utilize more of our cash resources, if available, in order to continue our acquisition program.

If we do not have sufficient cash resources through either operations or from debt facilities, our growth could be limited unless we are able to obtain such additional capital.

Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes from the information previously reported under Part II, Item 7A of our Annual Report on Form 10-K for the year ended June 30, 2019.

The outbreak of COVID-19 has already started to have an adverse impact on the Company’s results of operations during its quarter ended March 31, 2020.

If these conditions continue unabated for more than the short-term, as most industry sources are predicting, the impact of COVID-19 is expected to significantly reduce our revenue, earnings and operating cash flow in future quarters.

Since continued growth through strategic acquisitions would normally require additional draws from our sources of financing, the Company’s search for new, potential acquisitions has been temporarily paused.

Furthermore, the Company has temporarily suspended its stock repurchase program.

Quantitative and Qualitat ive Disclosure About Market Risk

The Company uses interest rate swaps for the management of interest rate risk exposure, as the interest rate swaps effectively convert a portion of the Company’s Revolving Credit Facility from a floating to a fixed rate.

The interest rate swap is an agreement between the Company and Bank of America to pay, in the future, a fixed-rate payment in exchange for Bank of America paying the Company a variable payment.

The net payment obligation is based on the notional amount of the swap contract and the prevailing market interest rates.

The Company may terminate the swap contract prior to its expiration date, at which point a realized gain or loss would be recognized.

The value of the Company’s commitment would increase or decrease based primarily on the extent to which interest rates move against the rate fixed for each swap.

Radiant entered into two interest rate swap contracts.

This interest rate swap matures and terminates on March 13, 2025.

On April 1, 2020, and effective April 2, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade the variable interest cash inflows at one-month LIBOR for a $10,000 notional amount, for fixed interest cash outflows at 0.5865%.

This interest rate swap matures and terminates on March 13, 2025.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis