# Radiant Logistics, Inc: Form 10-Q for the period ended Dec 31, 2022

- Company: [Radiant Logistics, Inc](/companies/rlgt.md) (CIK 1171155)
- Form: 10-Q
- Filed: 2023-03-27
- Accepted by EDGAR: Mar 27, 2023, 12:14 ET
- Period: 2022-12-31
- Accession: 0000950170-23-009863
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1171155/000095017023009863/rlgt-20221231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1171155/000095017023009863/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-10-01 to 2022-12-31 | $278.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2022-07-01 to 2022-12-31 | $609.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2022-10-01 to 2022-12-31 | $8.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2022-07-01 to 2022-12-31 | $17.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-10-01 to 2022-12-31 | $7.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2022-07-01 to 2022-12-31 | $18.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-10-01 to 2022-12-31 | $742.0k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2022-07-01 to 2022-12-31 | $1.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-10-01 to 2022-12-31 | $1.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2022-07-01 to 2022-12-31 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-10-01 to 2022-12-31 | $4.8m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2022-07-01 to 2022-12-31 | $13.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-10-01 to 2022-12-31 | $0.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2022-07-01 to 2022-12-31 | $0.27 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-10-01 to 2022-12-31 | $0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2022-07-01 to 2022-12-31 | $0.27 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-10-01 to 2022-12-31 | 49,427,420 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2022-07-01 to 2022-12-31 | 49,865,216 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2022-07-01 to 2022-12-31 | $65.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2022-07-01 to 2022-12-31 | $3.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2022-07-01 to 2022-12-31 | $5.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-12-31 | $62.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-12-31 | $249.1m | us-gaap:AssetsCurrent |
| Total assets | at 2022-12-31 | $469.9m | us-gaap:Assets |
| Current liabilities | at 2022-12-31 | $158.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-12-31 | $268.6m | us-gaap:Liabilities |
| Long-term debt | at 2022-12-31 | $49.2m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-12-31 | $4.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-12-31 | $201.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 45,492 characters.

### CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

*This report contains “forward-looking statements” within the meaning set forth in United States securities laws and regulations – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as “anticipate,” “believe,” “estimates,” “expect,” “future,” “intend,” “may,” “plan,” “see,” “seek,” “strategy,” or “will” or the negative thereof or any variation thereon or similar terminology or expressions. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We have developed our forward-looking statements based on management’s beliefs and assumptions, which in turn rely upon information available to them at the time such statements were made. Such forward-looking statements reflect our current perspectives on our business, future performance, existing trends and information as of the date of this report. These include, but are not limited to, our beliefs about future revenue and expense levels, growth rates, prospects related to our strategic initiatives and business strategies, along with express or implied assumptions about, among other things: our continued relationships with our strategic operating partners; the performance of our historic business, as well as the businesses we have recently acquired, at levels consistent with recent trends and reflective of the synergies we believe will be available to us as a result of such acquisitions; our ability to successfully integrate our recently acquired businesses; our ability to locate suitable acquisition opportunities and secure the financing necessary to complete such acquisitions; transportation costs remaining in-line with recent levels and expected trends; our ability to mitigate, to the best extent possible, our dependence on current management and certain larger strategic operating partners; our compliance with financial and other covenants under our indebtedness; the absence of any adverse laws or governmental regulations affecting the transportation industry in general, and our operations in particular; the impact of COVID-19 on our operations and financial results; continued disruptions in the global supply chain; higher inflationary pressures particularly surrounding the costs of fuel; potential adverse legal, reputational and financial effects on the Company resulting from the ransomware incident or future cyber incidents and the effectiveness of the Company’s business continuity plans in response to cyber incidents, like the ransomware incident; the commercial, reputational and regulatory risks to our business that may arise as a consequence of our need to restate our financial statements; our longer-term relationship with our senior lenders as a consequence of our need to restate our financial statements; our temporary loss of the use of a Registration Statement on Form S-3 to register securities in the future; any disruption to our business that may occur on a longer-term basis should we be unable to remediate during fiscal year 2023 certain material weaknesses in our internal controls over financial reporting, 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 Part 1 Item 1A of this report. 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. Readers are cautioned not to place undue reliance on our forward-looking statements, as they speak only as of the date made. We disclaim any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.*

***The following discussion and analysis of our financial condition and result of operations should be read in conjunction with the condensed consolidated financial statements and the related notes and other information included elsewhere in this report.***

### Overview

We operate as a third-party logistics company, providing multi-modal transportation and logistics services primarily in the United States and Canada. We service a large and diversified account base consisting of consumer goods, food and beverage, manufacturing and retail customers, which we support from an extensive network of operating locations across North America as well as an integrated international service partner network located in other key markets around the globe. We provide these services through a multi-brand network, which includes over 100 operating locations. Included in these operating locations are a number of independent agents, who we also refer to as our “strategic operating partners”, that operate exclusively on our behalf, and approximately 25 Company-owned offices. As a third-party logistics company, we have a vast carrier network of asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines in our carrier network. We believe shippers value our services because we are able to objectively arrange the most efficient and cost-effective means, type and provider of transportation service without undue influence caused by the ownership of transportation assets. In addition, our minimal investment in physical assets affords us the opportunity for a higher return on invested capital and net cash flows than our asset-based competitors.

Through our operating locations across North America, we offer domestic, international air and ocean freight forwarding services and freight brokerage services, including truckload services, LTL services, and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. Our primary business operations involve arranging the shipment, on behalf of our customers, of materials, products, equipment and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS. Our services include arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. We also provide other value-added logistics services, including materials management and distribution (“MM&D”) services, customs house brokerage (“CHB”) services and technology platforms to complement our core transportation service offering.

The Company expects to grow its business organically and by completing acquisitions of other companies with complementary geographical and logistics service offerings. The Company’s organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of the Company’s truck brokerage and intermodal service offerings, while continuing its efforts on the organic build-out of the Company’s network of strategic operating partner locations. In addition, as the Company continues to grow and scale its business, the Company believes that it is creating density in its trade lanes, which creates opportunities for the Company to more efficiently source and manage its transportation capacity.

In addition to its focus on organic growth, the Company will continue to search for acquisition candidates that bring critical mass from a geographic and purchasing power standpoint, along with providing complementary service offerings to the current platform. As the Company continues to grow and scale its business, it also remains focused on leveraging its back-office infrastructure and technology systems to drive productivity improvement across the organization.

### Impact of Notable External Conditions

The COVID-19 pandemic continues to impact our business operations and financial results. Although the effects have lessened over time, there is uncertainty in the nature and degree of its continued effects over time with new strains frequently being discovered and additional booster shots being recommended. As the world continues to respond to COVID-19, we continue to follow guidelines ensuring the safety of our employees, while striving to protect the health and well-being of the communities in which we operate.

Additionally, the transportation industry is faced with economic inflation and possible recession. A prolonged period of inflation could result in increased interest rates, higher fuel prices, and decreased consumer spending, which could have a negative impact on our business and financial results. The results of these impacts could include supply chain instability, longer lead times, delayed orders, and continued issues with capacity constraints in driver, truck, and shipping container availability.

Lastly, since Russia’s invasion of Ukraine, global supply chains have experienced increased fuel prices. While the Company does not have direct exposure to these geographies, we cannot predict how global supply chain activities, or the economy at large may be impacted by a prolonged war in Ukraine or sanctions imposed in response to the war.

### Performance Metrics

Our principal source of income is derived from freight forwarding and freight brokerage services we provide to our customers. As a third-party logistics provider, we arrange for the shipment of our customers’ freight from point of origin to point of destination. Generally, we quote our customers a turnkey cost for the movement of their freight. Our price quote will often depend upon the customer’s time-definite needs (first day through fifth day delivery), special handling needs (heavy equipment, delicate items, environmentally sensitive goods, electronic components, etc.), and the means of transport (motor carrier, air, ocean or rail). In turn, we assume the responsibility for arranging and paying for the underlying means of transportation.

Our transportation revenue represents the total dollar value of services we sell to our customers. Our cost of transportation includes direct costs of transportation, including motor carrier, air, ocean, and rail services. Our adjusted transportation gross profit (gross transportation revenue less the direct cost of transportation) is the primary indicator of our ability to source, add value and resell services provided by third parties, and is considered by management to be a key performance measure. In addition, management believes measuring its operating costs as a function of adjusted transportation gross profit provides a useful metric, as our ability to control costs as a function of adjusted transportation gross profit directly impacts operating earnings.

Our operating results will be affected as acquisitions occur. Since all acquisitions are made using the acquisition method of accounting for business combinations, our financial statements will only include the results of operations and cash flows of acquired companies for periods subsequent to the date of acquisition.

Adjusted gross profit, a non-GAAP financial measure, is our total revenue minus our total cost of transportation and other services (excluding depreciation and amortization, which are reported separately) and adjusted gross profit percentage is adjusted gross profit as a percentage of our total revenue. We believe that these provide investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

Our GAAP-based net income will be affected by non-cash charges relating to the amortization of customer related intangible assets and other intangible assets attributable to completed acquisitions. Under applicable accounting standards, purchasers are required to allocate the total consideration in a business combination to the identified assets acquired and liabilities assumed based on their fair values at the time of acquisition. The excess of the consideration paid over the fair value of the identifiable net assets acquired is to be allocated to goodwill, which is tested at least annually for impairment. Applicable accounting standards require that we separately account for and value certain identifiable intangible assets based on the unique facts and circumstances of each acquisition. As a result of our acquisition strategy, our net income will include material non-cash charges relating to the amortization of customer related intangible assets and other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets (e.g. customer relationships). Thus, we believe that earnings before interest, taxes, depreciation and amortization, or EBITDA, is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business.

EBITDA is a non-GAAP measure of income and does not include the effects of interest, taxes, and excludes the non-cash effects of depreciation and amortization on long-term assets. Companies have some discretion as to which elements of depreciation and amortization are excluded in the EBITDA calculation. We exclude all depreciation charges related to property, technology, and equipment and all amortization charges (including amortization of leasehold improvements). We then further adjust EBITDA to exclude changes in fair value of contingent consideration, expenses specifically attributable to acquisitions, transition and lease termination costs, foreign currency transaction gains and losses, share-based compensation expense, litigation expenses unrelated to our core operations, and other non-cash charges. While management considers EBITDA and adjusted EBITDA useful in analyzing our results, it is not intended to replace any presentation included in our condensed consolidated financial statements. The Company’s financial covenants with its lenders define an adjusted EBITDA as a key component of its covenant calculations. The Company’s ability to grow adjusted EBITDA is closely monitored by management as it’s directly tied to financial borrowing capacity and also is a frequent point of discussion with its investors as well as the Company’s earnings calls.

Our operating results are also subject to seasonal trends when measured on a quarterly basis. The impact of seasonality on our business will depend on numerous factors, including the markets in which we operate, holiday seasons, consumer demand, and economic conditions. Since our revenue is largely derived from customers whose shipments are dependent upon consumer demand and just-in-time production schedules, the timing of our revenue is often beyond our control. Factors such as shifting demand for retail goods and/or manufacturing production delays could unexpectedly affect the timing of our revenue. As we increase the scale of our operations, seasonal trends in one area of our business may be offset to an extent by opposite trends in another area. We cannot accurately predict the timing of these factors, nor can we accurately estimate the impact of any particular factor, and thus we can give no assurance any historical seasonal patterns will continue in future periods.

### Results of Operations

### Three months ended December 31, 2022 and 2021 (unaudited)

***The following table summarizes revenues, cost of transportation and other services, and adjusted gross profit by reportable operating segments for the three months ended December 31, 2022 and 2021:***

*(In thousands)*

| Revenues | Three Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Three Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations | Total (as restated) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Transportation | $233,432 | $29,803 | $(58) | $263,177 | $295,194 | $31,430 | $(963) | $325,661 |
| Value-added services | 4,359 | 10,583 | — | 14,942 | 2,507 | 7,610 | — | 10,117 |
|  | 237,791 | 40,386 | (58) | 278,119 | 297,701 | 39,040 | (963) | 335,778 |
| Cost of transportation and other services |  |  |  |  |  |  |  |  |
| Transportation | 175,622 | 22,923 | (58) | 198,487 | 235,263 | 26,543 | (963) | 260,843 |
| Value-added services | 587 | 5,017 | — | 5,604 | 1,746 | 2,051 | — | 3,797 |
|  | 176,209 | 27,940 | (58) | 204,091 | 237,009 | 28,594 | (963) | 264,640 |
| Adjusted gross profit (1) |  |  |  |  |  |  |  |  |
| Transportation | 57,810 | 6,880 | — | 64,690 | 59,931 | 4,887 | — | 64,818 |
| Value-added services | 3,772 | 5,566 | — | 9,338 | 761 | 5,559 | — | 6,320 |
|  | $61,582 | $12,446 | $— | $74,028 | $60,692 | $10,446 | $— | $71,138 |
| Adjusted gross profit percentage |  |  |  |  |  |  |  |  |
| Transportation | 24.8% | 23.1% | N/A | 24.6% | 20.3% | 15.5% | N/A | 19.9% |
| Value-added services | 86.5% | 52.6% | N/A | 62.5% | 30.4% | 73.0% | N/A | 62.5% |

(1) Adjusted gross profit is revenues net of cost of transportation and other services.

Transportation revenue was $263.2 million and $325.7 million for the three months ended December 31, 2022 and 2021, respectively. The decrease of $62.5 million, or 19.2% is primarily attributable to a significant decrease in ocean rates. Adjusted transportation gross profit was $64.7 million and $64.8 million for the three months ended December 31, 2022 and 2021, respectively. Net transportation margins increased from 19.9% to 24.6%, primarily due to a higher mix of domestic and international shipments, which have higher gross profit margin characteristics than ocean shipments.

Value-added services revenue was $14.9 million and $10.1 million, for the three months ended December 31, 2022 and 2021, respectively. The increase of $4.8 million, or 47.7%, is primarily attributed to the recent acquisition of Navegate as well as increases in the value-added services associated with our Canada segment. Adjusted value-added services gross profit was $9.3 million for the three months ended December 31, 2022, compared to $6.3 million for the comparable prior year period. Adjusted value-added services gross profit percentage remains unchanged at 62.5%.

***The following table provides a reconciliation for the three months ended December 31, 2022 and 2021 of adjusted gross profit to gross profit, the most directly comparable GAAP measure:***

*(In thousands)*

| Reconciliation of adjusted gross profit to GAAP gross profit | Three Months Ended December 31, 2022 | 2021 (as restated) |
| --- | ---: | ---: |
| Revenues | $278,119 | $335,778 |
| Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below) | (204,091) | (264,640) |
| Depreciation and amortization | (3,585) | (3,332) |
| GAAP gross profit | $70,443 | $67,806 |
| Depreciation and amortization | 3,585 | 3,332 |
| Adjusted gross profit | $74,028 | $71,138 |
| GAAP gross margin (GAAP gross profit as a percentage of revenues) | 25.3% | 20.2% |
| Adjusted gross profit percentage (adjusted gross profit as a percentage of revenues) | 26.6% | 21.2% |

35

***The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the three months ended December 31, 2022 and 2021:***

*(In thousands)*

|  | Three Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Three Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations (as restated) | Total (as restated) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Adjusted gross profit (1) | $61,582 | $12,446 | $— | $74,028 | $60,692 | $10,446 | $— | $71,138 |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Operating partner commissions | 30,512 | — | — | 30,512 | 31,169 | — | — | 31,169 |
| Personnel costs | 16,051 | 4,379 | 211 | 20,641 | 12,582 | 3,994 | 83 | 16,659 |
| Selling, general and administrative expenses | 5,114 | 1,886 | 1,637 | 8,637 | 5,508 | 1,715 | 1,129 | 8,352 |
| Depreciation and amortization | 1,611 | 811 | 4,492 | 6,914 | 1,095 | 893 | 2,459 | 4,447 |
| Transition, lease termination, and other costs | 30 | — | — | 30 | — | — | — | — |
| Change in fair value of contingent consideration | — | — | 150 | 150 | — | — | 455 | 455 |
| Total operating expenses | 53,318 | 7,076 | 6,490 | 66,884 | 50,354 | 6,602 | 4,126 | 61,082 |
| Income (loss) from operations | 8,264 | 5,370 | (6,490) | 7,144 | 10,338 | 3,844 | (4,126) | 10,056 |
| Other (expense) income | (162) | 189 | (786) | (759) | 122 | 73 | (1,123) | (928) |
| Income (loss) before income taxes | 8,102 | 5,559 | (7,276) | 6,385 | 10,460 | 3,917 | (5,249) | 9,128 |
| Income tax benefit (expense) | — | — | (1,460) | (1,460) | — | — | (2,513) | (2,513) |
| Net income (loss) | 8,102 | 5,559 | (8,736) | 4,925 | 10,460 | 3,917 | (7,762) | 6,615 |
| Less: net income attributable to non- controlling interest | (89) | — | — | (89) | (76) | — | — | (76) |
| Net income (loss) attributable to Radiant Logistics, Inc. | $8,013 | $5,559 | $(8,736) | $4,836 | $10,384 | $3,917 | $(7,762) | $6,539 |

| Operating expenses as a percent of adjusted gross profit (1): | Three Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Three Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations | Total (as restated) |
| --- | ---: | ---: | --- | ---: | ---: | ---: | --- | ---: |
| Operating partner commissions | 49.5% | 0.0% | N/A | 41.2% | 51.4% | 0.0% | N/A | 43.8% |
| Personnel costs | 26.1% | 35.2% | N/A | 27.9% | 20.7% | 38.2% | N/A | 23.4% |
| Selling, general and administrative expenses | 8.3% | 15.2% | N/A | 11.7% | 9.1% | 16.4% | N/A | 11.7% |
| Depreciation and amortization | 2.6% | 6.5% | N/A | 9.3% | 1.8% | 8.5% | N/A | 6.3% |

(1) Adjusted gross profit is revenues net of cost of transportation and other services.

Operating partner commissions decreased $0.7 million, or 2.1%, to $30.5 million for the three months ended December 31, 2022. The decrease is primarily due to a reduction in the number of strategic operating partners. As a percentage of adjusted gross profit, operating partner commissions decreased 260 basis points to 41.2% from 43.8% for the three months ended December 31, 2022 and 2021, respectively.

Personnel costs increased $4.0 million, or 23.9%, to $20.6 million for the three months ended December 31, 2022. The increase is primarily due to increased workforce supporting the expansion of business shipment volumes in both U.S. and Canada, and the inclusion of payroll associated with our acquisition of Navegate. As a percentage of adjusted gross profit, due to expansion of business volumes, and adjusted gross profit, personnel costs increased 448 basis points to 27.9% from 23.4% for the three months ended December 31, 2022 and 2021, respectively.

Selling, general and administrative (“SG&A”) expenses increased $0.3 million, or 3.4%, to $8.6 million for the three months ended December 31, 2022. The increase is primarily due to IT related initiatives, increased professional services fees, facilities costs, bank fees, and travel expenses. As a percentage of adjusted gross profit, SG&A remains unchanged at 11.7% for the three months ended December 31, 2022 and 2021, respectively.

Depreciation and amortization costs increased $2.5 million, or 55.5%, to $6.9 million for the three months ended December 31, 2022. The increase is primarily due to the acquisition of Navegate and the accelerated amortization of certain trade names resulting from the rebranding of certain trade names.

Our increase in net income is driven principally by increased adjusted gross profit, increased other income (expense), and partially offset by increased operating expenses compared to the comparable prior year period.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions, gains or losses from changes in fair value of contingent consideration, and changes in fair value of interest rate swap contracts that are difficult to predict.

***The following table provides a reconciliation for the three months ended December 31, 2022 and 2021 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:***

*(In thousands)*

|  | Three Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Three Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations (as restated) | Total (as restated) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net income (loss) attributable to Radiant Logistics, Inc. | $8,013 | $5,559 | $(8,736) | $4,836 | $10,384 | $3,917 | $(7,762) | $6,539 |
| Income tax expense | — | — | 1,460 | 1,460 | — | — | 2,513 | 2,513 |
| Depreciation and amortization (2) | 1,839 | 811 | 4,492 | 7,142 | 1,095 | 893 | 2,459 | 4,447 |
| Net interest expense | — | — | 683 | 683 | — | — | 745 | 745 |
| EBITDA | 9,852 | 6,370 | (2,101) | 14,121 | 11,479 | 4,810 | (2,045) | 14,244 |
| Share-based compensation | 443 | 69 | 167 | 679 | 369 | 53 | — | 422 |
| Change in fair value of contingent consideration | — | — | 150 | 150 | — | — | 455 | 455 |
| Acquisition related costs | — | — | 22 | 22 | — | — | 396 | 396 |
| Ransomware incident related costs, net | — | — | — | — | — | — | 751 | 751 |
| Litigation costs | — | — | 247 | 247 | — | — | 167 | 167 |
| Transition, lease termination, and other costs | 30 | — | — | 30 | — | — | — | — |
| Change in fair value of interest rate swap contracts | — | — | 104 | 104 | — | — | 378 | 378 |
| Foreign currency transaction loss (gain) | 185 | (189) | — | (4) | (124) | 20 | — | (104) |
| Adjusted EBITDA | $10,510 | $6,250 | $(1,411) | $15,349 | $11,724 | $4,883 | $102 | $16,709 |
| Adjusted EBITDA as a % of adjusted gross profit (1) | 17.1% | 50.2% | N/A | 20.7% | 19.3% | 46.7% | N/A | 23.5% |

(1) Adjusted gross profit is revenues net of cost of transportation and other services.

(2) Depreciation and amortization for the purposes of calculating adjusted EBITDA, a non-GAAP financial measure, includes depreciation expenses recognized on certain computer software as a service.

### Six months ended December 31, 2022 and 2021 (unaudited)

***The following table summarizes revenues, cost of transportation and other services, and adjusted gross profit by reportable operating segments for the six months ended December 31, 2022 and 2021:***

*(In thousands)*

| Revenues | Six Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Six Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations | Total (as restated) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Transportation | $517,914 | $61,655 | $(255) | $579,314 | $556,118 | $60,763 | $(981) | $615,900 |
| Value-added services | 9,895 | 19,881 | — | 29,776 | 5,220 | 14,056 | — | 19,276 |
|  | 527,809 | 81,536 | (255) | 609,090 | 561,338 | 74,819 | (981) | 635,176 |
| Cost of transportation and other services |  |  |  |  |  |  |  |  |
| Transportation | 398,306 | 47,843 | (255) | 445,894 | 441,874 | 51,432 | (981) | 492,325 |
| Value-added services | 3,756 | 8,932 | — | 12,688 | 3,493 | 3,502 | — | 6,995 |
|  | 402,062 | 56,775 | (255) | 458,582 | 445,367 | 54,934 | (981) | 499,320 |
| Adjusted gross profit (1) |  |  |  |  |  |  |  |  |
| Transportation | 119,608 | 13,812 | — | 133,420 | 114,244 | 9,331 | — | 123,575 |
| Value-added services | 6,139 | 10,949 | — | 17,088 | 1,727 | 10,554 | — | 12,281 |
|  | $125,747 | $24,761 | $— | $150,508 | $115,971 | $19,885 | $— | $135,856 |
| Adjusted gross profit percentage |  |  |  |  |  |  |  |  |
| Transportation | 23.1% | 22.4% | N/A | 23.0% | 20.5% | 15.4% | N/A | 20.1% |
| Value-added services | 62.0% | 55.1% | N/A | 57.4% | 33.1% | 75.1% | N/A | 63.7% |

Transportation revenue was $579.3 million and $615.9 million for the six months ended December 31, 2022 and 2021, respectively. The decrease of $36.6 million, or 5.9%, is primarily attributable to decrease in ocean and brokerage revenue. Adjusted transportation gross profit was $133.4 million and $123.6 million for the six months ended December 31, 2022 and 2021, respectively. Net transportation margins increased from 20.1% to 23.0%, primarily due to a higher mix of domestic and international shipments, which have higher gross profit margin characteristics than ocean shipments.

Value-added services revenue was $29.8 million and $19.3 million, for the six months ended December 31, 2022 and 2021, respectively. The increase of $10.5 million, or 54.5%, is primarily attributed to the recent acquisition of Navegate as well as increases in the value-added services associated with our Canada segment. Adjusted value-added services gross profit was $17.1 million for the six months ended December 31, 2022, compared to $12.3 million for the comparable prior year period. Adjusted value-added services gross profit percentage decreased from 63.7% to 57.4%, primarily due to acquisition of Navegate, which has lower value-added services margin characteristics.

***The following table provides a reconciliation for the six months ended December 31, 2022 and 2021 of adjusted gross profit to gross profit, the most directly comparable GAAP measure:***

*(In thousands)*

| Reconciliation of adjusted gross profit to GAAP gross profit | Six Months Ended December 31, 2022 | 2021 (as restated) |
| --- | ---: | ---: |
| Revenues | $609,090 | $635,176 |
| Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below) | (458,582) | (499,320) |
| Depreciation and amortization | (5,341) | (6,331) |
| GAAP gross profit | $145,167 | $129,525 |
| Depreciation and amortization | 5,341 | 6,331 |
| Adjusted gross profit | $150,508 | $135,856 |
| GAAP gross margin (GAAP gross profit as a percentage of revenues) | 23.8% | 20.4% |
| Adjusted gross profit percentage (adjusted gross profit as a percentage of revenues) | 24.7% | 21.4% |

38

***The following table compares condensed consolidated statements of comprehensive income data by portable operating segments for the six months ended December 31, 2022 and 2021:***

*(In thousands)*

|  | Six Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Six Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations (as restated) | Total (as restated) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Adjusted gross profit (1) | $125,747 | $24,761 | $— | $150,508 | $115,971 | $19,885 | $— | $135,856 |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Operating partner commissions | 60,617 | — | — | 60,617 | 58,730 | — | — | 58,730 |
| Personnel costs | 31,151 | 8,784 | 477 | 40,412 | 23,496 | 7,773 | 1,043 | 32,312 |
| Selling, general and administrative expenses | 10,521 | 3,602 | 3,284 | 17,407 | 9,658 | 3,167 | 2,314 | 15,139 |
| Depreciation and amortization | 3,137 | 1,569 | 8,987 | 13,693 | 2,030 | 1,691 | 4,981 | 8,702 |
| Transition, lease termination, and other costs | 30 | — | — | 30 | — | — | — | — |
| Change in fair value of contingent consideration | — | — | 310 | 310 | — | — | 455 | 455 |
| Total operating expenses | 105,456 | 13,955 | 13,058 | 132,469 | 93,914 | 12,631 | 8,793 | 115,338 |
| Income from operations | 20,291 | 10,806 | (13,058) | 18,039 | 22,057 | 7,254 | (8,793) | 20,518 |
| Other expense | 150 | 350 | (878) | (378) | 321 | 161 | (1,775) | (1,293) |
| Income before income taxes | 20,441 | 11,156 | (13,936) | 17,661 | 22,378 | 7,415 | (10,568) | 19,225 |
| Income tax expense | — | — | (4,224) | (4,224) | — | — | (4,915) | (4,915) |
| Net income | 20,441 | 11,156 | (18,160) | 13,437 | 22,378 | 7,415 | (15,483) | 14,310 |
| Less: net income attributable to non- controlling interest | (168) | — | — | (168) | (162) | — | — | (162) |
| Net income attributable to Radiant Logistics, Inc. | $20,273 | $11,156 | $(18,160) | $13,269 | $22,216 | $7,415 | $(15,483) | $14,148 |

| Operating expenses as a percent of adjusted gross profit (1): | Six Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Six Months Ended December 31, 2021 United States (as restated) | Canada | Corporate/ Eliminations | Total (as restated) |
| --- | ---: | ---: | --- | ---: | ---: | ---: | --- | ---: |
| Operating partner commissions | 48.2% | 0.0% | N/A | 40.3% | 50.6% | 0.0% | N/A | 43.2% |
| Personnel costs | 24.8% | 35.5% | N/A | 26.9% | 20.3% | 39.1% | N/A | 23.8% |
| Selling, general and administrative expenses | 8.4% | 14.5% | N/A | 11.6% | 8.3% | 15.9% | N/A | 11.1% |
| Depreciation and amortization | 2.5% | 6.3% | N/A | 9.1% | 1.8% | 8.5% | N/A | 6.4% |

(1) Adjusted gross profit is revenues net of cost of transportation and other services.

Operating partner commissions increased $1.9 million, or 3.2%, to $60.6 million for the six months ended December 31, 2022. The increase is primarily due to increased adjusted gross profit generated from operating partner stations partially offset by a reduction in the number of strategic operating partners. As a percentage of adjusted gross profit, operating partner commissions decreased 295 basis points to 40.3% from 43.2% for the six months ended December 31, 2022 and 2021, respectively, as a result of a higher percentage of adjusted gross profit coming from operating partner locations over the prior year period.

Personnel costs increased $8.1 million, or 25.1%, to $40.4 million for the six months ended December 31, 2022. The increase is primarily due to increased workforce due to increase in business, and the inclusion of personnel costs from Navegate for six months, compared to one month in the prior period. As a percentage of adjusted gross profit, personnel costs increased 307 basis points to 26.9% from 23.8% for the six months ended December 31, 2022 and 2021, respectively.

Selling, general and administrative (“SG&A”) expenses increased $2.3 million, or 15.0%, to $17.4 million for the six months ended December 31, 2022. The increase is primarily due to increased professional services fees, facilities costs, IT related initiatives, and travel expenses. As a percentage of adjusted gross profit, SG&A increased 42 basis points to 11.6% from 11.1% for the six months ended December 31, 2022 and 2021, respectively.

Depreciation and amortization costs increased $5.0 million, or 57.4%, to $13.7 million for the six months ended December 31, 2022. The increase is primarily due to the acquisition of Navegate and the accelerated amortization of certain trade names resulting from the rebranding of certain trade names.

Our increase in net income is driven principally by increased adjusted gross profit, increased other income (expense), and partially offset by increased operating expenses compared to the comparable prior year period.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions, gains or losses from changes in fair value of contingent consideration, and changes in fair value of interest rate swap contracts that are difficult to predict.

***The following table provides a reconciliation for the six months ended December 31, 2022 and 2021 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:***

*(In thousands)*

|  | Six Months Ended December 31, 2022 United States | Canada | Corporate/ Eliminations | Total | Six Months Ended December 31, 2021 United States (as restated) | Canada |  | Corporate/ Eliminations (as restated) |  | Total (as restated) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net income attributable to Radiant Logistics, Inc. | $20,273 | $11,156 | $(18,160) | $13,269 | $22,216 | $7,415 |  | $(15,483) |  | $14,148 |
| Income tax expense | — | — | 4,224 | 4,224 | — | — |  | 4,915 |  | 4,915 |
| Depreciation and amortization (2) | 3,365 | 1,569 | 8,987 | 13,921 | 2,030 | 1,691 |  | 4,981 |  | 8,702 |
| Net interest expense | — | — | 1,465 | 1,465 | — | — | — | 1,352 | — | 1,352 |
| EBITDA | 23,638 | 12,725 | (3,484) | 32,879 | 24,246 | 9,106 |  | (4,235) |  | 29,117 |
| Share-based compensation | 770 | 129 | 389 | 1,288 | 556 | 119 |  | 97 |  | 772 |
| Change in fair value of contingent consideration | — | — | 310 | 310 | — | — |  | 455 |  | 455 |
| Acquisition related costs | — | — | 49 | 49 | — | — |  | 496 |  | 496 |
| Ransomware incident related costs, net | — | — | — | — | — | — |  | 751 |  | 751 |
| Litigation costs | — | — | 366 | 366 | — | — |  | 321 |  | 321 |
| Transition, lease termination, and other costs | 30 | — | — | 30 | — | — |  | — |  | — |
| Change in fair value of interest rate swap contracts | — | — | (587) | (587) | — | — |  | 424 |  | 424 |
| Foreign currency transaction gain | (125) | (346) | — | (471) | (306) | (69) |  | — |  | (375) |
| Adjusted EBITDA | $24,313 | $12,508 | $(2,957) | $33,864 | $24,496 | $9,156 |  | $(1,691) |  | $31,961 |
| Adjusted EBITDA as a % of adjusted gross profit (1) | 19.3% | 50.5% | N/A | 22.5% | 21.1% | 46.0% |  | N/A |  | 23.5% |

(1) Adjusted gross profit is revenues net of cost of transportation and other services.

(2) Depreciation and amortization for the purposes of calculating adjusted EBITDA, a non-GAAP financial measure, includes depreciation expenses recognized on certain computer software as a service.

### Liquidity and Capital Resources

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. As of December 31, 2022, we have $62.0 million in unrestricted cash on hand to serve as adequate working capital.

Net cash provided by operating activities were $65.5 million for the six months ended December 31, 2022. Net cash used for operating activities were $19.7 million for the six months ended December 31, 2021. The cash used or provided by 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, 2022 increased by $85.2 million, compared with the same period in fiscal year 2022, primarily due to increased depreciation and amortization, and net changes in operating assets and liabilities.

Net cash used for investing activities were $6.7 million and $38.9 million for the six months ended December 31, 2022 and 2021, respectively. Cash paid for acquisitions were $3.3 million, and cash paid for purchases of property, technology, and equipment. Cash paid for purchases of property, technology, and equipment were $3.4 million and $4.5 million for the six months ended December 31, 2022 and 2021, respectively. Proceeds from sale of property, technology, and equipment were nominal for both of the six months ended December 31, 2022 and 2021.

Net cash used for financing activities was $23.7 million for the six months ended December 31, 2022. Net cash provided by financing activities were $60.7 million for the six months ended December 31, 2021. Net repayments of the Revolving Credit Facility were $15.0 million for the six months ended December 31, 2022, compared to net proceeds from the Revolving Credit Facility of $70.5 million for the six months ended December 31, 2021. Repayments of notes payable and finance lease liability were $2.5 million for the six months ended December 31, 2022 and 2021. Payments for repurchases of common stock was $5.0 million and $6.3 million for the six months ended December 31, 2022 and 2021, respectively. Distributions to non-controlling interest were $0.2 million for the six months ended December 31, 2022 and 2021. Proceeds from exercise of stock options were $0.2 million and $0.4 million for the six months ended December 31, 2022 and 2021, respectively. Payments of employee tax withholdings related to restricted stock awards and stock options were $0.5 million and $0.4 million for the six months ended December 31, 2022 and 2021, respectively.

### Revolving Credit Facility

The Company entered into a $200 million syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated as of August 5, 2022. The Credit Facility includes a $75 million accordion feature to support future acquisition opportunities. On December 31, 2022, the borrowings outstanding on the Revolving Credit Facility was $47.5 million. The Credit Facility was entered into with Bank of America, N.A. and BMO Capital Markets Corp. as joint book runners and joint lead arrangers, Bank of America, N.A. as Administrative Agent, Swingline Lender and Letter of Credit Issuer, Bank of Montreal as syndication agent, KeyBank National Association and MUFG Union Bank, N.A. as co-documentation agents and Bank of America, N. A., Bank of Montreal, KeyBank National Association, MFUG Union Bank, N.A. and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”). This replaces the $150 million Revolving Credit Facility dated March 13, 2020.

The Revolving Credit Facility has a term of five years and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company and the guarantors named below on a parity basis with the security interest held by Fiera Private Debt Fund IV LP and Fiera Private Debt Fund V LP described below. Borrowings under the Credit Facility accrue interest (at the Company’s option), at a) the Lenders’ base rate plus 0.75% and can be subsequently adjusted based on the Company’s consolidated net leverage ratio under the facility at the Lenders’ base rate plus 0.5% to 1.50%; b) Term SOFR plus 1.65% and can be subsequently adjusted based on the Company’s consolidated net leverage ratio under the facility at Term SOFR plus 1.40% to 2.40%; and c) Term SOFR Daily Floating Rate plus 1.65% and can be subsequently adjusted based on the Company’s consolidated net leverage ratio under the facility at Term SOFR Daily Floating Rate plus 1.40% to 2.40%. The Company’s U.S. and Canadian subsidiaries are guarantors of the Credit Facility.

For general borrowings under the Credit Facility, the Company is subject to the maximum consolidated net leverage ratio of 3.00 and minimum consolidated interest coverage ratio of 3.00. Additional minimum availability requirements and financial covenants apply in the event the Company seeks to use advances under the Credit Facility to pursue acquisitions or repurchase its common stock.

### Senior Secured Loans

In connection with the Company’s acquisition of Radiant Canada (formerly, Wheels International Inc.), Radiant Canada obtained a CAD$29 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 Company and its U.S. 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. The Company is required to maintain five months interest in a debt service reserve account to be controlled by FPD IV.

In connection with the Company’s acquisition of Lomas, Radiant Canada obtained a CAD$10 million senior secured Canadian term loan from Fiera Private Debt Fund V LP (formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement. The Company and its U.S. and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on June 1, 2024 and accrues interest at a fixed rate of 6.65% per annum. The loan repayment consists of monthly blended principal and interest payments.

The loans may be prepaid in whole at any time providing the Company gives at least 30 days prior written notice and pays 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.

For additional information regarding our indebtedness, see Note 8 to our unaudited condensed consolidated financial statements.

## Market risk

As filed, 1,167 characters.

We are exposed to market risks in the ordinary course of business. These risks are primarily related to foreign exchange risk. We have currency exposure arising from both sales and purchases denominated in foreign currencies, as well as intercompany transactions. Significant changes in exchange rates between foreign currencies in which we transact business and the U.S. dollar may adversely affect our results of operations and financial condition. Historically, we have not entered into any hedging activities, and, to the extent that we continue not to do so in the future, we may be vulnerable to the effects of currency exchange rate fluctuations. A portion of our business is conducted in Canada. If foreign exchange rates were 1.0% higher or lower, our net income would have changed by approximately $0.10 million.

We are also subject to risks related to an increase in interest rates. For every $1.0 million outstanding on our Revolving Credit Facility, we will incur approximately $0.06 million of interest expense. For every 1.0% increase in interest rates, our interest expense per $1.0 million in borrowings will increase by approximately $0.01 million.

## Controls and procedures

As filed, 3,305 characters.

#### Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

An evaluation of the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as of December 31, 2022, was carried out by our management under the supervision and with the participation of our CEO and CFO. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were ineffective as of December 31, 2022 due to the existence of material weaknesses described below.

As of June 30, 2021, we concluded that a material weakness existed in our internal control over financial reporting related to the recording and processing of revenues transactions, including the timing of the Company’s estimated accrual of in-transit revenues and related costs. This material weakness relates to the conditions that led to the restatement of previously issued consolidated financial statements as discussed in Note 2 of the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

In response to this material weakness, the Company began taking corrective action during fiscal year 2022 to address the material weakness and provide reasonable assurance that future errors in revenue transactions would be prevented and/or detected in a timely manner. The Company’s corrective actions include, but are not limited to, working with strategic operating partners and company-owned stations to understand their processes and controls, communicating the critical data elements in our revenue accrual process, and performing additional review procedures of unposted shipments in an effort to improve the overall accuracy of the revenue accrual.

As of December 31, 2022, remediation is on-going. As such, we concluded the Company does not have effective internal controls over the recording and processing of revenues. Specifically, the controls as currently designed are not sufficient to prevent or detect a material misstatement in revenues as the design of the controls lacks the level of precision necessary to ensure the completeness and accuracy of revenue.

The Company will continue evaluating the appropriate corrective actions to remediate the material weakness during fiscal year 2023 to strengthen our internal controls over the recording of revenues.

#### Changes in Internal Control over Financial Reporting

Except for the material weakness described above, there have not been any other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 192 characters.

There have been no material changes in the risk factors disclosed by us under Part I, Item 1A. Risk Factors contained in the Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Filed Mar 27, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-009863. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.