rlgt-10q_20180930.htm

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 49,459,188 shares outstanding of the registrant’s common stock, par value $.001 per share, as of November 1, 2018.



(In thousands, except share and per share data)	September 30,			June 30,
	2018			2018
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,956		$	6,992
Accounts receivable, net of allowance of $2,035 and $1,703, respectively		100,444			137,578
Contract assets		27,254			—
Income tax receivable		1,073			2,105
Prepaid expenses and other current assets		8,499			6,599
Total current assets		145,226			153,274

Technology and equipment, net		19,125			18,566

Goodwill		65,389			65,389
Intangible assets, net		63,055			65,264
Deposits and other assets		1,248			2,945
Total other long-term assets		129,692			133,598
Total assets	$	294,043		$	305,438

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	80,462		$	90,153
Operating partner commissions payable		13,869			14,322
Accrued expenses		6,608			5,404
Current portion of notes payable		3,946			3,726
Current portion of contingent consideration		1,100			960
Transition and lease termination liability		1,094			1,385
Other current liabilities		259			295
Total current liabilities		107,338			116,245

Notes payable, net of current portion		41,475			43,197
Contingent consideration, net of current portion		1,380			1,615
Deferred rent liability		987			1,020
Deferred income taxes		8,297			8,665
Other long-term liabilities		367			1,082
Total long-term liabilities		52,506			55,579
Total liabilities		159,844			171,824

Commitments and contingencies (Note 14)

Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; 839,200 shares issued and outstanding, liquidation preference of $20,980		1			1
Common stock, $0.001 par value, 100,000,000 shares authorized; 49,544,886 and 49,511,907 shares issued, and 49,453,088 and 49,420,109 shares outstanding, respectively		31			31
Additional paid-in capital		118,236			117,968
Treasury stock, at cost, 91,798 shares		(253	)		(253	)
Retained earnings		16,071			15,539
Accumulated other comprehensive income (loss)		(119	)		186
Total Radiant Logistics, Inc. stockholders’ equity		133,967			133,472
Non-controlling interest		232			142
Total equity		134,199			133,614
Total liabilities and equity	$	294,043		$	305,438

The accompanying notes form an integral part of these condensed consolidated financial statements.

(In thousands, except share and per share data)	Three Months Ended September 30,
	2018			2017
Revenues	$	218,883		$	197,977

Operating expenses:
Cost of transportation and other services		164,015			152,374
Operating partner commissions		24,828			19,692
Personnel costs		14,545			13,993
Selling, general and administrative expenses		7,124			6,303
Depreciation and amortization		3,633			3,575
Transition and lease termination costs		—			107
Change in fair value of contingent consideration		(95	)		(300	)
Total operating expenses		214,050			195,744

Income from operations		4,833			2,233

Other income (expense):
Interest income		12			7
Interest expense		(789	)		(771	)
Foreign currency transaction gains (losses)		34			(85	)
Other		150			130
Total other expense		(593	)		(719	)

Income before income taxes		4,240			1,514

Income tax expense		(977	)		(626	)

Net income		3,263			888
Less: net income attributable to non-controlling interest		(180	)		(61	)

Net income attributable to Radiant Logistics, Inc.		3,083			827
Less: preferred stock dividends		(511	)		(511	)

Net income allocable to common stockholders	$	2,572		$	316

Other comprehensive income (loss):
Foreign currency translation loss		(305	)		(805	)
Comprehensive income	$	2,958		$	83

Income per share allocable to common stockholders:
Basic and Diluted	$	0.05		$	0.01

Weighted average common shares outstanding:
Basic		49,437,930			49,085,545
Diluted		50,705,434			50,642,953

The accompanying notes form an integral part of these condensed consolidated financial statements.

	RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY
(In thousands, except share and per share data)	Preferred Stock				Common Stock				Additional Paid-in			Treasury			Retained			Accumulated Other Comprehensive			Total Radiant Logistics, Inc. Stockholders'			Non- Controlling			Total
	Shares		Amount		Shares		Amount		Capital			Stock			Earnings			Income (Loss)			Equity			Interest			Equity
Balance as of June 30, 2018		839,200	$	1		49,420,109	$	31	$	117,968		$	(253	)	$	15,539		$	186		$	133,472		$	142		$	133,614
Cumulative effect adjustment, upon adoption of ASC 606 on July 1, 2018 (Note 2)		—		—		—		—		—			—			(335	)		—			(335	)		—			(335	)
Cumulative effect adjustment, upon adoption of ASU 2016-16 on July 1, 2018 (Note 2)		—		—		—		—		—			—			(1,705	)		—			(1,705	)		—			(1,705	)
Share-based compensation		—		—		—		—		331			—			—			—			331			—			331
Issuance of common stock upon exercise of stock options		—		—		32,979		—		(63	)		—			—			—			(63	)		—			(63	)
Preferred dividends paid		—		—		—		—		—			—			(511	)		—			(511	)		—			(511	)
Distribution to non-controlling interest		—		—		—		—		—			—			—			—			—			(90	)		(90	)
Net income		—		—		—		—		—			—			3,083			—			3,083			180			3,263
Other comprehensive loss		—		—		—		—		—			—			—			(305	)		(305	)		—			(305	)
Balance as of September 30, 2018		839,200	$	1		49,453,088	$	31	$	118,236		$	(253	)	$	16,071		$	(119	)	$	133,967		$	232		$	134,199

The accompanying notes form an integral part of these condensed consolidated financial statements.

(In thousands, except share and per share data)	Three Months Ended September 30,
		2018			2017
OPERATING ACTIVITIES:
Net income	$	3,263		$	888
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
share-based compensation		331			350
amortization of intangible assets		2,472			2,494
depreciation and amortization of technology and equipment		1,161			1,081
deferred income tax benefit		(253	)		(512	)
amortization of debt issuance costs		59			62
change in fair value of contingent consideration		(95	)		(300	)
transition and lease termination costs		—			107
gain on disposal of technology and equipment		(16	)		(4	)
change in allowance for doubtful accounts		332			231
CHANGES IN OPERATING ASSETS AND LIABILITIES:
accounts receivable		4,440			(6,592	)
contract assets		6,759			—
income tax receivable		1,055			(233	)
prepaid expenses, deposits and other assets		(1,876	)		692
accounts payable		(5,488	)		(939	)
operating partner commissions payable		506			623
accrued expenses		(5,761	)		503
other liabilities		(742	)		473
deferred rent liability		(29	)		112
transition and lease termination liability		(276	)		(213	)
Net cash provided by (used for) operating activities		5,842			(1,177	)

INVESTING ACTIVITIES:
Payments to acquire businesses		—			(1,025	)
Purchases of technology and equipment		(1,134	)		(1,383	)
Proceeds from sale of technology and equipment		232			41
Net cash used for investing activities		(902	)		(2,367	)

FINANCING ACTIVITIES:
Proceeds from (repayments to) credit facility, net		(2,003	)		4,975
Payments of debt issuance costs		—			(87	)
Repayments of notes payable		(843	)		(835	)
Payments of preferred stock dividends		(511	)		(511	)
Distribution to non-controlling interest		(90	)		—
Payments of employee tax withholdings related to cashless exercise of stock options		(63	)		(2	)
Net cash provided by (used for) financing activities		(3,510	)		3,540

Effect of exchange rate changes on cash and cash equivalents		(466	)		(37	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		964			(41	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		6,992			5,808

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	7,956		$	5,767

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid	$	178		$	1,404
Interest paid	$	735		$	701

The accompanying notes form an integral part of these condensed consolidated financial statements.

In September 2017, the Company issued 10,019 shares of common stock at a fair value of $4.99 per share in satisfaction of $50 of the Sandifer-Valley Transportation & Logistics, Ltd. Purchase price, resulting in an increase to common stock and additional paid-in capital of $50.

During the three months ended September 30, 2018, the Company acquired $812 of refrigerated trailers financed through a capital lease.

In September 2018, $262 was recorded as an increase to accrued expenses and intangible assets for the purchase of a customer list.

The accompanying notes form an integral part of these condensed consolidated financial statements.

Radiant Logistics, Inc. and its consolidated subsidiaries (the “Company”) operates as a third-party logistics company, providing multi-modal transportation and logistics services primarily to customers based in the United States and Canada. The Company services a large and diversified account base which it supports from an extensive multi-brand network of over 100 operating locations (including 20 Company-owned offices) across North America as well as an integrated international service partner network located in other key markets around the globe. As a third-party logistics company, the Company has a carrier network of approximately 10,000 asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines. The Company believes shippers value its services because it is able to objectively arrange the most efficient and cost-effective means, type and provider of transportation service since it is not influenced by the ownership of transportation assets. In addition, the Company’s minimal investment in physical assets affords it the opportunity for a higher return on invested capital and net cash flows than the Company’s asset-based competitors.

Through its operating locations across North America, the Company offers domestic and international air and ocean freight forwarding services and freight brokerage services including truckload services, less than truckload services; and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. The Company’s primary transportation services involve arranging shipments, on behalf of its 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, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. The Company also provides other value added supply chain services, including order fulfillment, inventory management, and warehouse and distribution services (collectively, “MM&D” services), and customs brokerage services to complement its 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.

The condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The Company’s management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018.

The interim period information included in this Quarterly Report on Form 10-Q reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of the Company’s management, necessary for a fair statement of the results of the respective interim periods. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15 (Subtopic 350-40), Intangibles - Goodwill and Other - Internal-Use Software - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for the Company in the first quarter of fiscal year 2021, and early adoption is permitted. The Company is assessing the impact of this guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company in the first quarter of fiscal 2021, and earlier adoption is permitted. The Company is assessing the impact of this guidance on its consolidated financial statements.

In February 2016 and July 2018, the FASB issued Accounting Standard Update (“ASU”) 2016-02 (ASC Topic 842), Leases ASU 2018-10, Codification Improvements to Topic 842, and Leases, ASU 2018-11, Leases (Topic 842), Target improvements, respectively. These ASUs amend a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Topic 842 is effective for the Company in the first quarter of fiscal year 2020. Companies are required to use a modified retrospective approach on adoption, with the option of applying the requirements of the standard either (1) retrospectively to each prior comparative reporting period presented, or (2) retrospectively at the beginning of the period of adoption, through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the impact of the standard on its consolidated financial statements and disclosures.

In February 2018, the FASB issued ASU 2018-02 (Topic 220), Income Statement—Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU was issued following the enactment of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) and permits entities to elect a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Topic 220 is effective for the Company in the first quarter of fiscal year 2020, and early adoption is permitted. The Company is assessing the impact of this guidance on its consolidated financial statements.

On July 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”) which superseded existing revenue recognition guidance under U.S. GAAP. The core principle of Accounting Standards Codification (“ASC”) 606 is for an entity to recognize revenue to depict the transfer of promised goods or services to its customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty of an entity’s revenues and cash flows arising from contracts with customers.

The Company adopted ASC 606 using the modified retrospective method applied to those contracts not completed as of July 1, 2018. Results for reporting periods beginning after July 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with ASC 605. The Company recorded a cumulative effect adjustment of $335, net of tax, to decrease the opening balance of retained earnings as of July 1, 2018, for the initial application of ASC 606. The transition adjustment includes primarily certain transportation services transactions with customers that required a change in the timing of when revenue is recognized. The corresponding direct costs of revenue, including primarily purchased transportation costs and commissions, have been expensed as incurred. The Company satisfied a significant majority of the performance obligations for contract liabilities recorded upon the adoption and recognized the corresponding revenues and related direct costs of revenue during the three months ended September 30, 2018.

As stated, the comparative prior period information for the three months ended September 30, 2017 has not been adjusted and continues to be reported under the Company’s historical revenue recognition policies as described in Note 2 to the consolidated financial statements in the Annual Report on Form 10-K filed on September 13, 2018.

The details of the significant changes and quantitative impact on the financial statement line items in the consolidated balance sheet as of July 1, 2018 for the adoption of ASC 606 were as follows:

(In thousands)	Balance as of June 30, 2018		Transition Adjustments			Balance as of July 1, 2018
Condensed Consolidated Balance Sheet
Assets
Accounts receivable, net of allowance for doubtful accounts	$	137,578	$	(32,689	)	$	104,889
Contract assets		—		34,014			34,014

Liabilities
Accounts payable		90,153		(3,995	)		86,158
Operating partner commissions payable		14,322		(959	)		13,363
Contract liabilities		—		6,716			6,716
Deferred income taxes		8,665		(102	)		8,563

Equity
Retained earnings		15,539		(335	)		15,204

The tables below summarize the impacts of the application of ASC 606 as compared with ASC 605, the guidance that was in effect before the change on the condensed consolidated statements of operations for the three months ended September 30, 2018 and condensed consolidated balance sheet as of September 30, 2018:

	Three Months Ended September 30, 2018
(In thousands, except per share data)	As Reported			Adjustments for ASC 606			Balance, ASC 605
Condensed Consolidated Statement of Operations
Revenues	$	218,883		$	(3,152	)	$	215,731

Operating expenses:
Cost of transportation and other services		164,015			(2,917	)		161,098
Operating partner commissions		24,828			(156	)		24,672
Personnel costs		14,545			—			14,545
Selling, general and administrative expenses		7,124			—			7,124
Depreciation and amortization		3,633			—			3,633
Change in fair value of contingent consideration		(95	)		—			(95	)
Total operating expenses		214,050			(3,073	)		210,977

Income from operations		4,833			(79	)		4,754

Total other expense		(593	)		—			(593	)

Income before income taxes		4,240			(79	)		4,161
Income tax expense		(977	)		19			(958	)

Net income		3,263			(60	)		3,203
Less: net income attributable to noncontrolling interest		(180	)		—			(180	)

Net income attributable to Radiant Logistics, Inc.		3,083			(60	)		3,023
Less: preferred stock dividends		(511	)		—			(511	)

Net income allocable to common stockholders	$	2,572		$	(60	)	$	2,512

Income per share allocable to common stockholders - Basic and Diluted	$	0.05		$	—		$	0.05


	405 114^th Ave S.E., Bellevue, WA 98004
	(Address of principal executive offices)

	(425) 943-4599
	(Registrant’s telephone number, including area code)

	N/A
(Former name, former address, and former fiscal year, if changed since last report)

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2018 and June 30, 2018	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2018 and 2017	4
	Condensed Consolidated Statements of Changes in Equity for the three months ended September 30, 2018	5
	Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 6.	Exhibits	35
Signatures		36

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☐

	September 30, 2018
(In thousands)	As Reported		Adjustments for ASC 606		Balance, ASC 605
Condensed Consolidated Balance Sheet
Assets
Accounts receivable, net of allowance	$	100,444	$	24,102	$	124,546
Contract assets		27,254