Image source: The Motley Fool.
Radiant Logistics Inc (RLGT 2.23%)
Q3Â 2020 Earnings Call
May 11, 2020, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, ladies and gentlemen. This afternoon Bohn Crain, Radiant Logistics' Founder and CEO and Radiant's Chief Financial Officer, Todd Macomber will discuss financial results for the company's Third Fiscal Quarter and Nine Months ended March 31 2020. Following their comment, we will open the call to questions. This conference is scheduled for 30 minutes.
This conference call may include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The company has based these forward-looking statements on its current expectations and projections about future events. These 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 or 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 turn the conference over to Radiant's Founder and CEO, Mr. Bohn Crain. Sir, the floor is yours.
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Thank you. Good afternoon, everyone and thank you for joining in on today's call. I'm very proud of the Radiant network and our response to these unprecedented times. We began the quarter looking to make use of our recently expanded credit facility to execute against a series of smaller strategic tuck-in acquisitions while accelerating our stock buyback program and bullishly looking for growth opportunities in which we could add value to our loyal customers and dedicated network of strategic operating partners.
Unfortunately, as we came to recognize the true magnitude of the COVID-19 pandemic, we had to quickly pivot to a new set of priorities. 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. Confronted with an eroding demand, within the global shipping community, during March, we also had to make difficult decisions to initiate a series of workforce reduction measures impacting employees across our US operation. This included 20% salary reductions, reduction in hours, furloughs and in some cases termination.
As part of this initiative, I initiated a 50% reduction in my base salary and the balance of our US based leadership team agreed to reduce their base salaries by 20%. In addition, we all agreed to forego any bonuses under the company's discretionary quarterly cash bonus plan. In support of these initiatives, our Board of Directors also agreed to 50% reduction in their Board cash compensation. All of these concessions will remain in effect until our senior leaders and board conclude that the adverse effects of COVID-19 have subsided and the company regains its pre-COVID financial trends. The impact of these cost reductions, however will not be more fully realized until the quarter ended June 30, given these initiatives were not launched until late in March of this year.
We have long espoused benefits of our variable cost, non-asset based business model. Those benefits have never been more appreciated as much as they have during these past months as the decentralized nature of our non-asset and non -- and agent based business model have provided a clear advantage in an environment where social distancing can disrupt businesses that operate on a more centralized basis. Even so, we have been exposed to an unprecedented combination of global reduction in demand and output that has nearly tripled many of our customers in the airline, retail, trade show, hospitality and travel and leisure businesses across the country.
While others could shrink under these pressures our extraordinary team of associates across the Radiant network have continued to deliver for our customers. With mission-critical teammates reporting for duty to over 100 operating locations across North America, we keep a central freight moving. We have been able to leverage our industry-leading technology to allow the majority of our 550 US based employees to work from home. This initiative has helped to protect the health and well-being of our employees and their families, reduce the risk of community spread and substantially limited the potential for disruption to our operations. I could not be more appreciative of the people that report to work each day, whether in person or remotely that make this company that we started some 14 years ago, a special place to work.
In addition, our business model has also shown it's 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 central products for our customers across 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 economic slowdown will be more than offset by any near-term benefit from our support of essential businesses.
We are working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives. We have tabled any acquisition opportunities, suspended our stock buyback program, deferred discretionary technology investments, reduced discretionary operating expenses and in late March initiated a series of what we hope will be temporary workforce reductions to mitigate our declining gross margin until our business recovers. At the same time, we've also taken steps to provide additional support to our strategic operating partners and are intensely focused on working with them to understand the underlying financial health of our legacy customers in the face of COVID-19.
We anticipate providing our strategic operating partners with additional financial support in connection with slow and non-paying customers for which they are responsible. In addition, and in an effort to encourage our ongoing sales efforts, we've also launched the Radiant SPARC Program securing profitable accounts at reasonable credit to provide our strategic operating partners with a financial incentive to pursue new business, while taking a heightened interest in the underlying credit quality of potential new accounts. The impact of COVID-19 will likely continue to have an adverse effect on our financial results for the foreseeable future. However all things considered, we are very fortunate to have been disciplined in our allocation of capital over the years and entered this economic downturn with very low leverage on our balance sheet.
Ultimately, the economy will recover. As this happens, we believe this will create a great opportunity to support our customers and bringing their supply chains back online. In the interim, we will continue to work to keep our employees safe and a central freight moving, while giving our strategic operating partners the support they need, At the same time, we will continue to flex our non-asset based business model and remain focused on the cost reduction initiatives that we have under way. We believe that all of these initiatives when taken together will ensure that we emerge from the pandemic as a stronger more vibrant competitor.
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 -- Senior Vice President and Chief Financial Officer
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 nine months ended March 31, 2020. For the three months ended March 31, 2020, we reported net income attributable to common stockholders of $53,000 on $177.2 million of revenues or $0.00 per basic and fully diluted share. For the three months ended March 31, 2019, we reported net income attributable to common stockholders of $2,932,000 on $206 million of revenues or $0.06 per basic and fully diluted share. This represents a decrease of approximately $2,879,000 million over the comparable prior year period.
For the three months ended March 31, 2020, we reported adjusted net income attributable to common stockholders of $3,965,000. For the three months ended March 31, 2019, we reported adjusted net income attributable to common stockholders of $5,579,000. This represents a decrease of approximately $1,614,000 million or approximately 28.9%. We reported adjusted EBITDA of $6,057,000 for the three months ended March 31, 2020 compared to adjusted EBITDA of $8,437,000 for the three months ended March 31, 2019. This represents a decrease of $2,380,000 or approximately 28.2%.
Moving along to the nine-month results, which are as follows. For the nine months ended March 31, 2020 we reported net income attributable to common stockholders of $5,875,000 on $579.7 million of revenues or $0.12 per basic and $0.11 per fully diluted share. For the nine months ended March 31, 2019, we reported net income attributable to common stockholders of $9,270,000 on $685.9 million of revenues or $0.19 per basic and $0.18 per fully diluted share. This represents a decrease of approximately $3,395,000 million over the comparable prior year period or 36.6%.
For the nine months ended March 31, 2020, we reported adjusted net income attributable to common stockholders of $16,747,000. For the nine months ended March 31, 2019, we reported adjusted net income attributable to common stockholders of $19,110,000. This represents a decrease of approximately $2,363,000 or approximately 12.4%. We reported adjusted EBITDA of $25,110,000 for the nine months ended March 31, 2020 compared to adjusted EBITDA of $29,749,000 for the nine months ended March 31, 2019. This represents a decrease of approximately $4,639,000 or approximately 15.6%.
With that I will turn the call back over to our moderator to facilitate any Q&A from our callers.
Questions and Answers:
Operator
Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from Jason Seidl with Cowen. Please go ahead, sir.
Jason Seidl -- Cowen -- Analyst
Thank you, operator. Hey, Bohn. Hey, Todd. Hope you guys are doing well. Bohn, can you talk a little bit about how you expect the business to trend as the economy slowly comes back online. And then maybe you can give us some info on what you've seen here early in the quarter?
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Thanks, Jason. I guess I would say, ultimately we don't have -- there are certainly some good things developing. But it is ultimately a mixed bag and we don't have a lot of visibility out there. There are certain segments of our business have been in the right spot in terms of servicing, food and beverage, and Canada, in particular, some of the customers that they service, they have fared better than others. At the same time, we support customers and trade show and cruise line and some other categories that aren't faring nearly as well in this market environment. With all that said at some point in time, ultimately, things will start to rebound.
And I think that will practically cause customers that need to reset their supply chains and to kind of reposition product and inventories that they haven't necessarily been in a position to move around the way that they need to and I think that all that -- that whole landscape will give -- will create an opportunity for us and companies like us that are in the airfreight and time-definite, time expedited space to be able to kind of rise to the challenge and support our customers as they try to come back online. So that's all -- I'm not sure that's entirely responsive to your question, we don't have a lot of visibility in terms of near-term improvement. Historically, the quarter ended March is the seasonally slowest quarter of the year, but the kind of the full impacts of the shelter in place mandates really didn't start to hit us and others full on until this quarter ended June 30. So I think that's the kind of the underlying dynamic that we're facing.
At the same time, we've been fortunate to have an opportunity to play a role and the fight against COVID-19 or around PPE and other essential products moving across the country. So that's going to somewhat -- we believe somewhat mitigate the dip, if you will, but we're not expecting it to kind of offset the broad-based weakness that we're expecting for the quarter ended June. We're optimistic that the quarter in September, things will turn and we'll have a -- we can be a lot more constructive and definitive about what we're seeing, but it's just too early to tell at this point.
Jason Seidl -- Cowen -- Analyst
And if we can drill down a bit on the brokerage side that you guys have, the stuff that you acquired Wheels.We're hearing from a lot of the brokers out there that obviously with this downturn and the spot rates, have you seen some of the margins expand. What's your percent of your mix of business between contract and transactional business in the brokerage unit?
Bohn Crain -- Founder, Chairman and Chief Executive Officer
We're much more heavily weighted on the contract side as opposed to spot, but I would -- I think the call outs for us as it relates to our brokerage business and the -- on the US side, what we would refer to as Radiant Clipper, that business is predominantly intermodal with just a small bit of truck brokerage in the scheme of things. So we're -- our results are more tempered by what's happening in intermodal and antenna modality shifts truck versus rail.
Jason Seidl -- Cowen -- Analyst
Right.
Bohn Crain -- Founder, Chairman and Chief Executive Officer
So we're in the right commodity groups, but we're not necessarily enjoying some of the benefits of the other truck brokers or folks that are more heavily on the truck brokerage side. Having said that and again in Canada, they've -- there probably are best example of kind of keeping in stride and kind of being in the servicing the light accounts with the right value propositions and the right modalities to hold up better than our other areas of our business -- business cycle.
Jason Seidl -- Cowen -- Analyst
Understand. Let me ask one more question. I'll turn it over to somebody else, I don't want to hog all the time. But has this downturn caused you to rethink sort of your mix of business that you want going forward? And if so, what should we look from you guys once you resume your M&A platform later down the road.
Bohn Crain -- Founder, Chairman and Chief Executive Officer
No. I don't think it necessarily changes our view. I think we are -- at least from our perspective very diversified, which we think is a good thing and so good news, bad news associated with being diversified. In this market, we got some winners and some losers effectively, but I think there are certainly areas of our business that are -- that we would expect to be slower to recover, but that doesn't mean we are -- have any intention of abandoning them or abandoning our strategic operating partners that serve those particular niches. We continue to think, over -- if we really kind of look on the horizon, we think the same value proposition and the same opportunities remain intact. We're uniquely positioned in supporting the agent base freight forwarding community, and we continue to try to build a back office and infrastructure that can support a larger enterprise and at the end of the day, notwithstanding our government's efforts, not everybody is going to make it through this thing, right.
We're going to have customers that go bankrupt and go away unfortunately and I expect we'll have some competitors go bankrupt and go away. And so this is for better or worse or a bit of a financial survival of the fittest. I think we were fortunate to be -- have a strong balance sheet and be under levered as we came into the cycle. A lot of our competitors might been levered at 4 times or 5 times before the cycle started. We were levered at less than one times as the cycle started. So this certainly doesn't feel good for us and we're experiencing our own fair share of pain. I can't imagine what those folks are going through that are levered, we're levered at 5 times coming into the cycle. So we think we're in as good a shape as we possibly can be. We're making the tough decisions. We're being aggressive with our working capital and cash management and shut down acquisitions near-term, shutdown stock buybacks to make sure that we come out of this other side and as best shape as we can.
Jason Seidl -- Cowen -- Analyst
Bohn clearly that's been fortunate for Radiant, and do you think that as you do come out of this that some of the people that may make it out and make it out a bit injured, do you think that will create more opportunities on the M&A side for you?
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Yeah. Potentially, I mean, I certainly don't view ourselves as creditory in this impairment. We want to make sure we come out of this with all of our fingers and toes intact on the other side of this. And then where this partnering opportunities, we'll be eager to engage with folks and create win-win situations to the extent we can.
Jason Seidl -- Cowen -- Analyst
Sounds good. Listen Bohn, stay safe out there.
Bohn Crain -- Founder, Chairman and Chief Executive Officer
All right. Thanks.
Operator
[Operator instructions] We'll take our next question from Mark Argento with Lake Street Capital Markets. Please go ahead sir.
Mark Argento -- Lake Street Capital Markets -- Analyst
Hey, Bohn. Hey, Todd. Just wanted to -- I think you referred to it, I think, in the press release and also in your prepared remarks. But some of the things that you're doing the work with your customers. I think you announced an offering or some type of a program, maybe you could talk a little bit about what you're doing to work with your customers and any of the kind of value chain participants to try to keep them in good work and shape. I think you call it, the spark, is it the...
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Yeah. So there is -- I would call out two things. So in our agent based business model, basically our strategic operating partners are in a first loss position in bad debt right. So we literally spend 2 hours a day on conference calls with folks within the various regions making sure we understand the financial health of our underlying customers. How they're faring through the pandemic to make sure that we -- that we're making good business decisions, supporting customers where we can, but also making sure we are paid for the work that we're doing or when and if we have to putting people on credit hold because we have to continue to pay our carriers timely to keep our freight moving.
And while we can provide a little relief, at the end of the day, we can't move freight for free. So that's a big part of our conversation and focus. At the same time, we launched this new program called the SPARC program, an acronym for securing profitable accounts at reasonable credit and naturally people are a little more defensive in this environment, but we wanted to try to create an environment or incentive for our agent stations to be thinking ahead, thinking aggressively and going and looking for new business.
So we effectively rolled out a program to give them a holiday on the corporate fees associated with them winning new business, so long as they onboard the new business following a very prescriptive onboarding process that we could really understand the credit quality of the customers that we were onboarding because in this environment, slow and non-paying customers can get fired from one service provider and they'll start ricocheting across the transportation community and we want to make sure we didn't end up picking up somebody else's problem for a non-performing customer.
So the SPARC Program and so it's really work. We had a lot of new customer ads here in this environment where our stations are taking advantage of the SPARC Program, but we're doing in a kind of thoughtful proactive way around credit and that's going to serve us well over time and it gives the stations a little more leeway to be aggressive in pursuing new business at the same time.
Mark Argento -- Lake Street Capital Markets -- Analyst
Got it. That's helpful description. Obviously nobody has a crystal ball they know when the economy is going to come back online to a greater degree, but when you do think about the opportunity to be maybe aggressive is not the right word, but opportunistic from a play a role as a consolidator or even within your own agent base, station based groups in terms of more M&A, what you need to see the market that will give you confidence that you can start to kind of resume the strategy that has really got where you are today?
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Well, I think we want to see our own -- kind of the health of our own underlying business improve, I would -- I think, we're going to -- I don't June is going to tell us anything right. June is a bit of a pass at least for me mentally. And I do -- I guess not grounded in a lot of hard effects, but perhaps for my own mental sake I think of June as being the darkest of it and as we get through June and into September, hopefully, we will have better visibility into some positive developments both in terms of what's happening with Asia and international freight starting to pick back up as well as the health of some of our underlying customer.
As we think about the cycle, our numbers are down but we -- it's not that we've lost any customers, right. When we tell everybody to go home and seize business, well that certainly slows down the freight volume. So at the end of the day, we're going to have to get people back to work and get the consumer back out there spending. So I don't think I have any hard prescriptive data points, but we got very good visibility kind of comparative week over week numbers. We got a pretty good handle on a weekly basis in terms of what's happening, by individual operating locations, both company-owned and agent stations out across the country. And I don't think it's going to be -- I don't think it's going to be light switch, I think it's going to be a grind, right, to bring the business back online. So it may take longer than any other would like but hopefully the darkest days are here in the quarter ended June.
Mark Argento -- Lake Street Capital Markets -- Analyst
Last one maybe for Todd, on the -- you guys just redid your credit facility I think it's about $150 million facility. What kind of liquidity do you have in terms of that facility in terms of -- is it part receivables factored or what maybe you could just talk through, at a higher level, what kind of liquidity profile you have there?
Todd Macomber -- Senior Vice President and Chief Financial Officer
Yeah. This one is cash flow based as opposed to the asset side. So it's a multiple EBITDA and it's 3 times is what it is and there is a fixed charge coverage too. But -- so that's of a difference between the two programs. Yeah. So I just want to embellish on that a little bit. So on our -- coming into this, we were $38 million, $40 million of EBITDA, so wouldn't have been in a position to tap that full facility on a stand-alone basis. It was really put in place in anticipation of being able to support M&A. So as we think about kind of our -- the face amount of the facility is $150 million, but our ability to access funds under that facility will really be limited by 3 times our trailing 12 months EBITDA. So there are two principal covenants. Once funded at the EBITDA which is at 3 times as there was a fixed charge coverage ratio of 1.25 times.
Mark Argento -- Lake Street Capital Markets -- Analyst
Great. That's helpful. Thanks guys and good luck.
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Thank you.
Todd Macomber -- Senior Vice President and Chief Financial Officer
Thanks, Mark.
Operator
[Operator instructions] And sir, there appear to be no further questions at this time.
Bohn Crain -- Founder, Chairman and Chief Executive Officer
All right. Thank you. Let me close by saying that we remain very bullish on our prospects and the scalable non-asset based platform that we've created at Radiant. Our unique multibrand strategy and consolidating agent based reporting network, industry-leading technology platform and low leverage on our balance sheet puts us in a unique position to navigate these uncertain markets and position ourselves to emerge from this pandemic as a stronger competitor. Ultimately the economy will recover. As this happens, we believe this will create a great opportunity to support our customers and bringing their supply chains back online.
In the interim, we will continue to work to keep our employees safe and essential freight moving while giving our strategic operating partners the support they need. At the same time, we remain patiently persistent in the pursuit of our vision to leverage our multibrand strategy and scalable back-office infrastructure to bring our unique value proposition to the agent base forwarding community, which we believe over time will continue to deliver meaningful value for our shareholders, our operating partners and the end customers that we serve. Thanks for listening and your support of Radiant Logistics.
Operator
[Operator Closing Remarks]
Duration: 33 minutes
Call participants:
Bohn Crain -- Founder, Chairman and Chief Executive Officer
Todd Macomber -- Senior Vice President and Chief Financial Officer
Jason Seidl -- Cowen -- Analyst
Mark Argento -- Lake Street Capital Markets -- Analyst
