rlgt-10q_20181231.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 49,511,148 shares outstanding of the registrant’s common stock, par value $.001 per share, as of February 4, 2019.



(In thousands, except share and per share data)	December 31,			June 30,
	2018			2018
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,913		$	6,992
Accounts receivable, net of allowance of $2,375 and $1,703, respectively		107,457			137,578
Contract assets		24,259			—
Income tax receivable		—			2,105
Prepaid expenses and other current assets		11,175			6,599
Total current assets		154,804			153,274

Technology and equipment, net		18,847			18,566

Goodwill		65,389			65,389
Intangible assets, net		60,554			65,264
Deposits and other assets		1,267			2,945
Total other long-term assets		127,210			133,598
Total assets	$	300,861		$	305,438

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	88,240		$	90,153
Operating partner commissions payable		14,395			14,322
Accrued expenses		6,429			5,404
Income tax payable		572			—
Current portion of notes payable		3,817			3,726
Current portion of contingent consideration		309			960
Transition and lease termination liability		882			1,385
Other current liabilities		408			295
Total current liabilities		115,052			116,245

Notes payable, net of current portion		55,848			43,197
Contingent consideration, net of current portion		905			1,615
Deferred rent liability		978			1,020
Deferred income taxes		7,921			8,665
Other long-term liabilities		318			1,082
Total long-term liabilities		65,970			55,579
Total liabilities		181,022			171,824

Commitments and contingencies (Note 14)

Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; nil and 839,200 shares issued and outstanding, respectively		—			1
Common stock, $0.001 par value, 100,000,000 shares authorized; 49,561,374 and 49,511,907 shares issued, and 49,469,576 and 49,420,109 shares outstanding, respectively		31			31
Additional paid-in capital		99,346			117,968
Treasury stock, at cost, 91,798 shares		(253	)		(253	)
Retained earnings		19,490			15,539
Accumulated other comprehensive income		679			186
Total Radiant Logistics, Inc. stockholders’ equity		119,293			133,472
Non-controlling interest		546			142
Total equity		119,839			133,614
Total liabilities and equity	$	300,861		$	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 December 31,						Six Months Ended December 31,
	2018			2017			2018			2017
Revenues	$	260,938		$	206,714		$	479,821		$	404,691

Operating expenses:
Cost of transportation and other services		196,977			159,350			360,992			311,724
Operating partner commissions		28,355			19,528			53,183			39,220
Personnel costs		15,906			14,909			30,451			28,902
Selling, general and administrative expenses		7,522			6,352			14,646			12,655
Depreciation and amortization		3,815			3,567			7,448			7,142
Transition and lease termination costs		(11	)		—			(11	)		107
Change in fair value of contingent consideration		(476	)		190			(571	)		(110	)
Total operating expenses		252,088			203,896			466,138			399,640

Income from operations		8,850			2,818			13,683			5,051

Other income (expense):
Interest income		13			9			24			16
Interest expense		(873	)		(811	)		(1,661	)		(1,582	)
Foreign currency transaction gains (losses)		159			(55	)		193			(139	)
Other		59			96			209			226
Total other expense		(642	)		(761	)		(1,235	)		(1,479	)

Income before income taxes		8,208			2,057			12,448			3,572

Income tax benefit (expense)		(1,874	)		1,840			(2,851	)		1,214

Net income		6,334			3,897			9,597			4,786
Less: net income attributable to non-controlling interest		(464	)		(56	)		(644	)		(117	)

Net income attributable to Radiant Logistics, Inc.		5,870			3,841			8,953			4,669
Less: preferred stock dividends		(445	)		(511	)		(956	)		(1,023	)
Less: issuance costs for preferred stock redemption		(1,659	)		—			(1,659	)		—

Net income allocable to common stockholders	$	3,766		$	3,330		$	6,338		$	3,646

Other comprehensive income:
Foreign currency translation gain (loss)		798			210			493			(595	)
Comprehensive income	$	7,132		$	4,107		$	10,090		$	4,191

Income per share allocable to common stockholders:
Basic	$	0.08		$	0.07		$	0.13		$	0.07
Diluted	$	0.07		$	0.07		$	0.12		$	0.07

Weighted average common shares outstanding:
Basic		49,461,982			49,174,789			49,449,956			49,130,167
Diluted		51,064,163			50,711,153			50,884,799			50,677,053

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		—			—			—		—		795			—			—			—		795			—			795
Issuance of common stock upon exercise of stock options		—			—			49,467		—		(97	)		—			—			—		(97	)		—			(97	)
Preferred dividends paid		—			—			—		—		—			—			(1,303	)		—		(1,303	)		—			(1,303	)
Redemption of preferred stock		(839,200	)		(1	)		—		—		(19,320	)		—			(1,659	)		—		(20,980	)		—			(20,980	)
Distribution to non-controlling interest		—			—			—		—		—			—			—			—		—			(240	)		(240	)
Net income		—			—			—		—		—			—			8,953			—		8,953			644			9,597
Other comprehensive income		—			—			—		—		—			—			—			493		493			—			493
Balance as of December 31, 2018		—		$	—			49,469,576	$	31	$	99,346		$	(253	)	$	19,490		$	679	$	119,293		$	546		$	119,839

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

(In thousands, except share and per share data)	Six Months Ended December 31,
		2018			2017
OPERATING ACTIVITIES:
Net income	$	9,597		$	4,786
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
share-based compensation		795			730
amortization of intangible assets		4,972			4,937
depreciation and amortization of technology and equipment		2,476			2,205
deferred income tax benefit		(610	)		(3,288	)
amortization of debt issuance costs		115			123
change in fair value of contingent consideration		(571	)		(110	)
transition and lease termination costs		(11	)		107
gain on disposal of technology and equipment		(22	)		(19	)
change in allowance for doubtful accounts		672			407
CHANGES IN OPERATING ASSETS AND LIABILITIES:
accounts receivable		(3,887	)		(3,243	)
contract assets		9,755			—
income tax receivable/payable		2,667			(1,212	)
prepaid expenses, deposits and other assets		(4,674	)		403
accounts payable		1,554			(4,458	)
operating partner commissions payable		1,032			359
accrued expenses		(5,743	)		(460	)
other liabilities		(679	)		452
deferred rent liability		91			89
payment of contingent consideration		(626	)		(1,474	)
transition and lease termination liability		(515	)		(264	)
Net cash provided by operating activities		16,388			70

INVESTING ACTIVITIES:
Payments to acquire businesses		—			(600	)
Purchases of technology and equipment		(2,292	)		(3,061	)
Proceeds from sale of technology and equipment		257			68
Payment for acquisition of intangible assets		(262	)		(561	)
Net cash used for investing activities		(2,297	)		(4,154	)

FINANCING ACTIVITIES:
Proceeds from credit facility, net		14,439			8,119
Payments of debt issuance costs		—			(88	)
Repayments of notes payable		(1,761	)		(1,706	)
Payments of contingent consideration		(164	)		(413	)
Payments of preferred stock dividends		(1,303	)		(1,023	)
Payment for preferred stock redemption		(20,980	)		—
Distribution to non-controlling interest		(240	)		(84	)
Payments of employee tax withholdings related to cashless exercise of stock options		(97	)		(129	)
Net cash provided by (used for) financing activities		(10,106	)		4,676

Effect of exchange rate changes on cash and cash equivalents		936			(1,924	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,921			(1,332	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		6,992			5,808

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	11,913		$	4,476

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid	$	1,336		$	3,283
Interest paid	$	1,517		$	1,444

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.

In November 2017, the Company issued 123,063 shares of common stock at a fair value of $5.06 per share in satisfaction of $623 of various earn-out payments for the period ended June 30, 2017, resulting in a decrease to the current portion of contingent consideration, an increase to common stock of $1 and an increase to additional paid-in capital of $622.

During the six months ended December 31, 2018, the Company acquired $826 of refrigerated trailers financed through a capital lease.

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 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.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendment to the initial guidance: ASU 2018-19 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. Topic 326 is effective for the Company in the first quarter of fiscal 2020. The Company is currently evaluating the impact of the standard on its consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11 and ASU 2018-20 (collectively, Topic 842). Topic 842 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. 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 in the process of implementing software for facilitating compliance with the new guidance. Topic 842 is effective for the Company on July 1, 2019. The Company is currently evaluating the impact of Topic 842 on its consolidated financial statements and disclosures. As of December 31, 2018, the Company reported $27,646 in future minimum lease obligations and will evaluate those contracts, as well as other existing arrangements, to determine if they qualify for lease accounting under Topic 842.

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 six months ended December 31, 2018.

As stated, the comparative prior period information for the three and six months ended December 31, 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:


	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 December 31, 2018 and June 30, 2018	3
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2018 and 2017	4
	Condensed Consolidated Statements of Changes in Equity for the six months ended December 31, 2018	5
	Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 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	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6.	Exhibits	39
Signatures		40

(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

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☐