What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-02-09 compared with 2020-11-09 · 171 added, 57 removed, 227 unchanged (50% of the section changed)

41 unchanged sentences

The overall demand for transportation services have been significantly impacted.

COVID-19 has adversely affected most of our operations, financial condition, and results of operations in fiscal year 2020 and the first quarter of our fiscal year 2021.

COVID-19 has adversely affected most of our operations, financial condition, and results of operations in fiscal year 2020 and the first six months of our fiscal year 2021.

Beginning in April of 2020, we have experienced decreased customer demands in many parts of our business while seeing improvements in the demand in certain segments of business.

We have been working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response to our declining revenues.

Our results for the second quarter of fiscal 2021 showed encouraging recovery as we navigate through this unique environment as we saw revenue increase from the second quarter of fiscal 2020.

However, given the current environment due to COVID-19, there remains uncertainty that this recovery will be sustained.

We continue to work hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response to these impacts.

However, the relative effectiveness will depend on the severity and duration of the pandemic.

2 unchanged sentences

We expect to continue to incur additional costs as we continue to implement operational changes in response to the pandemic.

We face significant risks related to the global economic downturn and severe reduction in revenues caused by the pandemic.

We face significant risks related to the global economic downturn caused by the pandemic.

These risks include materially reduced demand for our services and challenges to the ongoing viability of some of our customers.

57 unchanged sentences

Results of Operations

Three months ended September 30, 2020 and 2019 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by reportable operating segments for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

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

The following table summarizes revenues, cost of transportation and other services, and net revenues by reportable operating segments for the three months ended December 31, 2020 and 2019:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

(In thousands)

12 unchanged sentences

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

Transportation revenue was $169.8 million and $191.8 million for the three months ended September 30, 2020 and 2019, respectively.

The decrease of $22.0 million, or 11.5%, is primarily attributable to the impact of COVID-19.

Net transportation revenue was $42.1 million and $50.7 million for the three months ended September 30, 2020 and 2019, respectively.

Net transportation margins decreased from 26.4% to 24.8%, primarily due to shifts in product mix and certain lower margin business.

Value-added services revenue was $6.0 million and $8.8 million, for the three months ended September 30, 2020 and 2019, respectively.

The decrease of $2.8 million, or 31.8%, is primarily attributable to slowdown in our contract logistics and custom brokerage services offerings as the result of COVID-19 .

Net value-added services revenue was $3.9 million for the three months ended September 30, 2020, compared to $4.9 million for the comparable prior year period.

Net value-added services revenue margins increased from 55.6% to 64.1%, primarily due to lower personnel and warehousing costs as a percentage of revenue.

The following table provides a reconciliation for the three months ended September 30, 2020 and 2019 of net revenues to gross profit, the most directly comparable GAAP measure:

Transportation revenue was $212.1 million and $193.6 million for the three months ended December 31, 2020 and 2019, respectively.

The increase of $18.5 million, is primarily attributable to increased volume with certain customers over the previous quarter.

Net transportation revenue was $50.8 million and $51.0 million for the three months ended December 31, 2020 and 2019, respectively.

Net transportation margins decreased from 26.3% to 23.9%, primarily due to shifts in product mix towards certain lower margin business.

Value-added services revenue was $6.7 million and $8.3 million, for the three months ended December 31, 2020 and 2019, respectively.

The decrease of $1.6 million, is primarily attributable to slowdown in our contract logistics and custom brokerage services offerings.

Net value-added services revenue was $4.5 million for the three months ended December 31, 2020, compared to $4.9 million for the comparable prior year period.

Net value-added services revenue margins increased from 59.7% to 67.9%, primarily due to lower warehousing costs as a percentage of revenue.

The following table provides a reconciliation for the three months ended December 31, 2020 and 2019 of net revenues to gross profit, the most directly comparable GAAP measure:

(In thousands)

Three Months Ended September 30,

Three Months Ended December 31,

Reconciliation of net revenues to GAAP gross profit

5 unchanged sentences

Net margin (net revenues as a percentage of revenues)

The following table compares condensed consolidated statements of comprehensive income data by reportable operating segment s for the three months ended September 30, 2020 and 2019 :

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the three months ended December 31, 2020 and 2019:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

(In thousands)

13 unchanged sentences

Income (loss) before income taxes

Income tax expense

Income tax benefit (expense)

Net income (loss)

1 unchanged sentence

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

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Operating expenses as a percent of net revenues:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

Operating expenses as a percent of

net revenues (1) :

United States

5 unchanged sentences

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

Operating partner commissions decreased $5.6 million, or 23.1%, to $18.6 million for the three months ended September 30, 2020.

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

As a percentage of net revenues, operating partner commissions decreased 310 basis points to 40.4% from 43.5% for the three months ended September 30, 2020 and 2019, respectively, as a result of a higher percentage of net revenues coming from company owned stores.

Personnel costs decreased $2.1 million, or 13.9%, to $12.8 million for the three months ended September 30, 2020.

Operating partner commissions decreased $1.4 million, or 5.3%, to $24.0 million for the three months ended December 31, 2020.

The decrease is primarily due to decreased net revenues from operating partners, including the conversion of two agent stations to Radiant owned stores in February 2020 .

As a percentage of net revenues, operating partner commissions decreased 187 basis points to 43.5% from 45.3% for the three months ended December 31, 2020 and 2019, respectively, as a result of a higher percentage of net revenues coming from company owned stores.

Personnel costs decreased $1.5 million, or 9.8%, to $13.7 million for the three months ended December 31, 2020.

The decrease is primarily due to temporary workforce reductions and temporary compensation reductions as a result of managements response to COVID-19.

As a percentage of net revenues, personnel costs increased 106 basis points to 27.8% from 26.7% for the three months ended September 30, 2020 and 2019 , respectively.

Selling, general and administrative (“SG&A”) expenses decreased $2.0 million, or 26.2%, to $5.7 million for the three months ended September 30, 2020.

The decrease is primarily attributable to decreased spending for professional services fees, bad debt & claims, and travel for the quarter.

As a percentage of net revenues, SG&A decreased 150 basis points to 12.3% from 13.8% for the three months ended September 30, 2020 and 2019 , respectively.

Depreciation and amortization costs increased $0.2 million, or 3.1%, to $4.2 million for the three months ended September 30, 2020.

The increase is due to investments in technology infrastructure and increased amortizable intangible assets associated with recent acquisitions of two operating partner locations .

Other expenses were $0.5 million and $0.7 million for the three months ended September 30, 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 .

As a percentage of net revenues, personnel costs decreased 237 basis points to 24.8% from 27.2% for the three months ended December 31, 2020 and 2019 , respectively.

Selling, general and administrative (“SG&A”) expenses decreased $1.1 million, or 16.6%, to $5.6 million for the three months ended December 31, 2020.

The decrease is primarily attributable to decreased spending for bad debt and claims, and travel for the quarter.

As a percentage of net revenues, SG&A decreased 187 basis points to 10.1% from 11.9% for the three months ended December 31, 2020 and 2019 , respectively.

Depreciation and amortization costs were $4.1 million for both the three months ended December 31, 2020 and 2019 .

Change in fair value of contingent consideration caused a loss of $1.9 million for the three months ended December 31, 2020 , compared to a loss of $0.03 million for the three months ended December 31, 2019.

The change in each year is attributable to a change in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other expenses were $0.7 million and $0.6 million for the three months ended December 31, 2020 and 2019 , respectively.

Our increase in net income is driven principally by decreased operating expenses 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 September 30, 2020 and 2019 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

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

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

(In thousands)

15 unchanged sentences

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

Adjusted EBITDA decreased $0.5 million, or 4.7% to $9.2 million for the quarter ended September 30, 2020.

Adjusted EBITDA increased $3.1 million, or 33.7% to $12.5 million for the quarter ended December 31, 2020.

Six months ended December 31, 2020 and 2019 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by reportable operating segments for the six months ended December 31, 2020 and 2019:

Six Months Ended December 31, 2020

Six Months Ended December 31, 2019

(In thousands)

United States

Transportation

Value-added services

Cost of transportation and other services

Transportation

Value-added services

Net revenues (1)

Transportation

Value-added services

Transportation

Value-added services

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

Transportation revenue was $382.0 million and $385.4 million for the six months ended December 31, 2020 and 2019 , respectively.

The decrease of $3.4 million, or 0.9%, is primarily attributable to general market softness exacerbated by the impact of the COVID-19 pandemic during the first quarter offset by returning volumes during the second quarter.

Net transportation revenue was $92.9 million and $101.7 million for the six months ended December 31, 2020 and 2019 , respectively.

Net transportation revenue margins decreased from 26.4% to 24.3%, primarily due to shifts in product mix towards certain lower margin business.

Value added services revenue was $12.7 million and $17.0 million for the six months ended December 31, 2020 and 2019, respectively.

The decrease of $4.3 million, or 25.3%, is primarily attributable to a slowdown in our contract logistics and custom brokerage services offerings, exacerbated by COVID-19 .

Net value added services revenue was $8.4 million for the six months ended December 31, 2020, compared to $9.8 million for the comparable prior year period.

Net value added services revenue margins increased from 57.6% to 66.1%, primarily due to lower personnel and warehousing costs as a percentage of revenue.

The following table provides a reconciliation for the six months ended December 31, 2020 and 2019 of net revenues to gross profit, the most directly comparable GAAP measure:

(In thousands)

Six Months Ended December 31,

Reconciliation of net revenues to GAAP gross profit

Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)

Depreciation and amortization

GAAP gross profit

Depreciation and amortization

GAAP gross margin (GAAP gross profit as a percentage of revenues)

Net margin (net revenues as a percentage of revenues)

The following table compares consolidated statements of comprehensive income data by reportable operating segments for the six months ended December 31, 2020 and 2019:

Six Months Ended December 31, 2020

Six Months Ended December 31, 2019

(In thousands)

United States

Net revenues (1)

Operating expenses:

Operating partner commissions

Personnel costs

Selling, general and administrative expenses

Depreciation and amortization

Transition, lease termination, and other costs

Change in fair value of contingent consideration

Total operating expenses

Income (loss) from operations

Other income (expense)

Income (loss) before income taxes

Income tax expense

Net income (loss)

net income attributable to non-

controlling interest

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

Six Months Ended December 31, 2020

Six Months Ended December 31, 2019

Operating expenses as a percent of

net revenues (1) :

United States

Operating partner commissions

Personnel costs

Selling, general and administrative

Depreciation and amortization

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

Operating partner commissions decreased $6.9 million, or 14.0%, to $42.6 million for the six months ended December 31, 2020.

The decrease is primarily due to decreased net revenues from operating partners, including the conversion of two agent stations to Radiant owned stores in February 2020 .

As a percentage of net revenues, operating partner commissions decreased 235 basis points to 42.1% from 44.4% for the six months ended December 31, 2020 and 2019 , respectively.

Personnel costs decreased $3.6 million, or 11.8%, to $26.5 million for the six months ended December 31, 2020.

The decrease is primarily due to increased cost controls resulting in reduced headcount, hours, and compensation as a result of the COVID-19 pandemic .

As a percentage of net revenues, personnel costs decreased 79 basis points to 26.2% from 27.0% for the six months ended December 31, 2020 and 2019 , respectively.

Selling, general and administrative (“SG&A”) expenses decreased $3.1 million, or 21.7%, to $11.2 million for the six months ended December 31, 2020.

The decrease is primarily attributable to decreased bad debt expense, travel and professional services for the period.

As a percentage of net revenues, SG&A decreased 178 basis points to 11.1% from 12.9% for the six months ended December 31, 2020 and 2019 , respectively.

Depreciation and amortization costs increased $0.1 million, or 1.4%, to $8.2 million for the six months ended December 31, 2020.

The increase is due to investments in technology infrastructure and increased amortizable intangible assets associated with recent acquisitions of two operating partner locations.

As a percentage of net revenues, depreciation and amortization increased 85 basis points to 8.1% from 7.3% for the six months ended December 31, 2020 and 2019 , respectively.

Change in fair value of contingent consideration caused a loss of $1.9 million for the six months ended December 31, 2020 , compared to a loss of $0.05 million for the six months ended December 31, 2019.

The change in each year is attributable to a change in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other expenses were $1.2 million and $1.3 million for the six months ended December 31, 2020 and 2019 , respectively .

Our increase in net income is driven principally by decreased operating expenses compared to the comparable prior year period .

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

Six Months Ended December 31, 2020

Six Months Ended December 31, 2019

(In thousands)

United States

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

Income tax expense

Depreciation and amortization

Net interest expense

Share-based compensation

Change in fair value of contingent consideration

Acquisition related costs

Litigation costs

Transition, lease termination, and other costs

Change in fair value of interest rate swap contracts

Foreign currency transaction loss (gain)

Adjusted EBITDA

Adjusted EBITDA as a % of net revenues (1)

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

Adjusted EBITDA increased $2.7 million, or 14.2% to $21.8 million for the six months ended December 31, 2020.

Liquidity and Capital Resources

3 unchanged sentences

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

As of September 30, 2020, we have $23.9 million in cash on hand to serve as adequate working capital.

As of December 31, 2020, we have $7.3 million in cash on hand to serve as adequate working capital.

We believe that COVID-19 is likely to continue impacting general economic activity and demand in our markets, which could have an adverse effect on our results of operations, which in turn, could limit the amounts available to us under the Revolving Credit Facility and cause us to seek other external financing sources to meet our operating and capital needs.

However, future conditions in the credit markets may be unpredictable alternative sources of credit may be reduced.

Net cash provided by operating activities were $13.4 million for the three months ended September 30, 2020.

Net cash provided by operating activities were $0.1 million for the three months ended September 30, 2019.

Net cash provided by operating activities were $1.9 million for the six months ended December 31, 2020.

Net cash provided by operating activities were $6.3 million for the six months ended December 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 three months ended September 30, 2020 increased by $13.3 million, compared with the same period in fiscal year 2019, primarily due to the net change in operating assets and liabilities.

Net cash used for investing activities were $2.1 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively.

Cash flow from operating activities for the six months ended December 31, 2020 decreased by $4.4 million, compared with the same period in fiscal year 2019, primarily due to the net change in operating assets and liabilities.

Net cash used for investing activities were $4.8 million and $2.7 million for the six months ended December 31, 2020 and 2019, respectively.

The primary use of cash was for purchases of property, technology, and equipment.

Cash paid for purchases of property, technology, and equipment were $2.1 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively.

Net cash used for financing activities was $21.7 million for the three months ended September 30, 2020 .

Net cash provided by financing activities were $4.8 million for the three months ended September 30, 2019 .

Repayment of the Revolving Credit Facility were $20 million for the three months ended September 30, 2020 .

Proceeds from the Revolving Credit Facility were $193.9 million for the three months ended September 30, 2019 , and Repayment of the Revolving Credit Facility were $187.3 million for the three months ended September 30, 2019 .

Repayments of notes payable and finance lease liability were $0.7 million and $1.1 million for the three months ended September 30, 2020 and 2019, respectively.

Distributions to non-controlling interest were $0.7 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively.

Payments of employee tax withholdings related to vesting of restricted stock awards were $0.3 million for both the three months ended September 30, 2020 and 2019 .

Payments of employee tax withholdings related to the cashless exercise of stock option were $0.1 million for the three months ended September 30, 2019.

Cash paid for purchases of property, technology, and equipment were $4.8 million and $2.8 million for the six months ended December 31, 2020 and 2019, respectively.

Net cash used for financing activities was $23.4 million for the six months ended December 31, 2020 .

Net cash used by financing activities were $0.7 million for the six months ended December 31, 2019 .

Repayment of the Revolving Credit Facility were $20 million for the six months ended December 31, 2020 .

Proceeds from the Revolving Credit Facility were $387.5 million for the six months ended December 31, 2019 , and Repayment of the Revolving Credit Facility were $384.1 million for the six months ended December 31, 2019 .

Repayments of notes payable and finance lease liability were $2.3 million and $2.4 million for the six months ended December 31, 2020 and 2019, respectively.

Distributions to non-controlling interest were $0.9 million and $0.3 million for the six months ended December 31, 2020 and 2019, respectively.

Payments of employee tax withholdings related to vesting of restricted stock awards were $0.3 million for both the six months ended December 31, 2020 and 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, 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 September 30, 2020 , the borrowings outstanding on the Revolving Credit Facility was $10 million.

On December 31, 2020 , the borrowings outstanding on the Revolving Credit Facility was $10 million.

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

29 unchanged sentences

Despite the good-faith belief that given the Company’s circumstances all eligibility requirements for the PPP Loans were satisfied, if it is later determined that the Company had violated any applicable laws or regulations or it is otherwise determined the Company was ineligible to receive the PPP Loans, it may be required to repay the PPP Loans in its entirety and/or be subject to additional penalties.

The Company is in the process of seeking forgiveness for the PPP Loans.

The term of the Company’s PPP Loans is two years.

7 unchanged sentences

Working Capital

The ongoing impacts of COVID-19 have created significant uncertainties around the Company’s operations during the quarter ended September 30, 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.

The ongoing impacts of COVID-19 have created significant uncertainties around the Company’s operations during the quarter ended December 31, 2020 .

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

Supported by the Company’s access to financing, we believe that our current working capital and anticipated cash flow from operations are adequate to funding existing operations for the next twelve months.

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.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis