# RADIANT LOGISTICS, INC (RLGT) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from RADIANT LOGISTICS, INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1171155/000095017023047958/rlgt-20230630.htm
Accession: 0000950170-23-047958
Filing date: 2023-09-13
Report date: 2023-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/RLGT/
All MD&A years: /company/RLGT/mda/
Previous year: /company/RLGT/mda/fy2022/ (FY 2022)
Next year: /company/RLGT/mda/fy2024/ (FY 2024)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and result of operations should be read in conjunction with the 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 technology-enabled global transportation and value-added logistics solutions primarily in the United States and Canada. We service a large and diversified account base consisting of consumer goods, food and beverage, electronics and high-tech, aviation and automotive, military and government, and manufacturing and retail customers, which is supported 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. The Company provides 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 are also referred to as “strategic operating partners,” that operate exclusively on the Company's behalf, and approximately 25 Company-owned offices. As a third-party logistics company, the Company has a vast carrier network of asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines in its 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 MM&D, CHB and GTM solutions 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 global economic and trade environments remain uncertain, including the potential future impacts of a pandemic, higher inflation and oil prices, rising interest rates and the conflict in Ukraine, and could have a negative impact on our business and financial results. As demand softens and pandemic restrictions subsided, port congestion cleared, shortages of labor and equipment eased resulting in excess carrier capacity over demand. These conditions could impact our financial results.

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.

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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), a non-GAAP financial measure, 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 results.

Our operating results will be affected as acquisitions occur. Since acquisitions are recorded 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 revenue minus our 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 with 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 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 share-based compensation expense, changes in fair value of contingent consideration, expenses specifically attributable to acquisitions, ransomware incident related costs, changes in fair value of interest rate swap contracts, restatement costs, transition and lease termination costs, foreign currency transaction gains and losses, extraordinary items, 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 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.

Critical Accounting Estimates

Accounting policies, methods and estimates are an integral part of the consolidated financial statements prepared by management and are based upon management’s current judgments. These judgments are normally based on knowledge and experience regarding past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. While there are a number of accounting policies, methods and estimates that affect our financial statements, the areas that are particularly significant include revenue recognition; the fair value of acquired assets and liabilities and the assessment of the recoverability of long-lived assets, goodwill and intangible assets; and fair value of contingent consideration.

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As a non-asset-based carrier, we do not generally own transportation assets. We do, however, own certain trailers and refrigerated trailers that we use in our business. We generate the majority of our transportation revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to our customers. We recognize revenue and the corresponding related costs in a manner that depicts the transfer of promised goods or services to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services. Our performance obligation is satisfied over time and recognized upon the transfer of control of the services over the requisite transit period as customers’ goods move from point of origin to point of destination. We determine the period to recognize revenue and the corresponding related costs based upon the actual departure date and delivery date, if available, or estimated delivery date if delivery has not occurred as of the reporting date. Certain shipments may require us to estimate revenue, in which case it uses the average revenue per shipment, per mode of transportation. Determination of the transit period and the percentage of completion of the shipment as of the reporting date requires management to make judgments that affect the timing and amount of revenue recognition. Macroeconomic conditions impacting the supply chain such as port delays, COVID-19 impacting the labor force, as well as inflationary pressures can impact the actual results compared to our estimates. Revenue from CHB services is recognized upon completion of the service.

We perform an annual impairment test for goodwill as of April 1 of each year or more frequently if facts or circumstances indicate that the carrying amount may not be recoverable. We assess qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount. After assessing qualitative factors, if further testing is necessary, we would determine the fair value of each reporting unit and compare the fair value to the reporting unit’s carrying amount.

Definite-lived intangible assets consist of customer related intangible assets, trade names and trademarks, licenses, developed technology, and non-compete agreements arising from the Company’s acquisitions and are amortized using the straight-line method over periods of up to 15 years.

We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, we estimate fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

The Company has contingent obligations to transfer cash payments and/or equity shares to former shareholders of acquired operations in conjunction with certain acquisitions if specified operating results and financial objectives are met over their stated earn-out period. The Company uses projected future financial results based on recent and historical data to value the anticipated future earn-out payments. To calculate fair value, the future earn-out payments were then discounted using Level 3 inputs.

Results of Operations

Fiscal year ended June 30, 2023, compared to fiscal year ended June 30, 2022

The following table summarizes revenues, cost of transportation and other services, and adjusted gross profit by reportable operating segments for the fiscal years ended June 30, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2023","","","Year Ended June 30, 2022"],["(In thousands)","United States","","","Canada","","","Corporate/ Eliminations","","","Total","","","United States","","","Canada","","","Corporate/ Eliminations","","","Total"],["Revenues"],["Transportation","$","923,039","","","$","110,225","","","$","(385",")","","$","1,032,879","","","$","1,268,248","","","$","149,230","","","$","(1,428",")","","$","1,416,050"],["Value-added services","","14,458","","","","38,149","","","","\u2014","","","","52,607","","","","14,785","","","","28,584","","","","\u2014","","","","43,369"],["","","937,497","","","","148,374","","","","(385",")","","","1,085,486","","","","1,283,033","","","","177,814","","","","(1,428",")","","","1,459,419"],["Cost of transportation and other services"],["Transportation","","692,578","","","","86,471","","","","(385",")","","","778,664","","","","1,014,750","","","","119,947","","","","(1,428",")","","","1,133,269"],["Value-added services","","5,545","","","","17,437","","","","\u2014","","","","22,982","","","","7,265","","","","12,600","","","","\u2014","","","","19,865"],["","","698,123","","","","103,908","","","","(385",")","","","801,646","","","","1,022,015","","","","132,547","","","","(1,428",")","","","1,153,134"],["Adjusted gross profit (1)"],["Transportation","","230,461","","","","23,754","","","","\u2014","","","","254,215","","","","253,498","","","","29,283","","","","\u2014","","","","282,781"],["Value-added services","","8,913","","","","20,712","","","","\u2014","","","","29,625","","","","7,520","","","","15,984","","","","\u2014","","","","23,504"],["","$","239,374","","","$","44,466","","","$","\u2014","","","$","283,840","","","$","261,018","","","$","45,267","","","$","\u2014","","","$","306,285"],["Adjusted gross profit percentage"],["Transportation","","25.0","%","","","21.6","%","","N/A","","","","24.6","%","","","20.0","%","","","19.6","%","","N/A","","","","20.0","%"],["Value-added services","","61.6","%","","","54.3","%","","N/A","","","","56.3","%","","","50.9","%","","","55.9","%","","N/A","","","","54.2","%"]]
[[/GREPCENT_TABLE]]

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

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Transportation revenue was $1,032.9 million and $1,416.1 million for the fiscal years ended June 30, 2023 and 2022, respectively. The decrease of $383.2 million, or 27.1%, is primarily attributable to a significant decrease in international and ocean rates, including significantly lower ocean volumes, and a lack of non-recurring charter business which had occurred in the prior year. Adjusted transportation gross profit was $254.2 million and $282.8 million for the fiscal years ended June 30, 2023 and 2022, respectively. Adjusted transportation gross profit percentage increased from 20.0% to 24.6%, primarily due to a higher mix of domestic shipments, which have higher gross profit margin characteristics than ocean shipments.

Value-added services revenue was $52.6 million and $43.4 million for the fiscal years ended June 30, 2023 and 2022, respectively. The increase of $9.2 million, or 21.3%, is primarily attributable to the increase in warehouse revenues from our Canada segment. Adjusted value-added services gross profit was $29.6 million and $23.5 million for the fiscal years ended June 30, 2023 and 2022, respectively. Adjusted value-added services gross profit percentage increased from 54.2% to 56.3%.

The following table provides a reconciliation for the fiscal years ended June 30, 2023 and 2022 of adjusted gross profit to gross profit, the most directly comparable GAAP measure:

[[GREPCENT_TABLE]]
[["(In thousands)","Year Ended June 30,"],["Reconciliation of adjusted gross profit to GAAP gross profit","2023","","","2022"],["Revenues","$","1,085,486","","","$","1,459,419"],["Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)","","(801,646",")","","","(1,153,134",")"],["Depreciation and amortization","","(12,961",")","","","(12,775",")"],["GAAP gross profit","$","270,879","","","$","293,510"],["Depreciation and amortization","","12,961","","","","12,775"],["Adjusted gross profit","$","283,840","","","$","306,285"],["GAAP gross margin (GAAP gross profit as a percentage of revenues)","","25.0","%","","","20.1","%"],["Adjusted gross profit percentage (adjusted gross profit as a percentage of revenues)","","26.1","%","","","21.0","%"]]
[[/GREPCENT_TABLE]]

The following table compares consolidated statements of comprehensive income data by reportable operating segments for the fiscal years ended June 30, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2023","","","Year Ended June 30, 2022"],["(In thousands)","United States","","","Canada","","","Corporate/ Eliminations","","","Total","","","United States (2)","","","Canada","","","Corporate/ Eliminations (2)","","","Total"],["Adjusted gross profit (1)","$","239,374","","","$","44,466","","","$","\u2014","","","$","283,840","","","$","261,018","","","$","45,267","","","$","\u2014","","","$","306,285"],["Operating expenses:"],["Operating partner commissions","","115,605","","","","\u2014","","","","\u2014","","","","115,605","","","","121,937","","","","\u2014","","","","\u2014","","","","121,937"],["Personnel costs","","55,624","","","","17,953","","","","5,935","","","","79,512","","","","50,542","","","","16,287","","","","5,413","","","","72,242"],["Selling, general and administrative expenses","","22,424","","","","8,573","","","","7,521","","","","38,518","","","","21,638","","","","6,901","","","","5,461","","","","34,000"],["Depreciation and amortization","","4,072","","","","3,335","","","","15,293","","","","22,700","","","","3,820","","","","3,509","","","","11,387","","","","18,716"],["Transition, lease termination, and other costs","","30","","","","\u2014","","","","\u2014","","","","30","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Change in fair value of contingent consideration","","\u2014","","","","\u2014","","","","(646",")","","","(646",")","","","\u2014","","","","\u2014","","","","767","","","","767"],["Total operating expenses","","197,755","","","","29,861","","","","28,103","","","","255,719","","","","197,937","","","","26,697","","","","23,028","","","","247,662"],["Income (loss) from operations","","41,619","","","","14,605","","","","(28,103",")","","","28,121","","","","63,081","","","","18,570","","","","(23,028",")","","","58,623"],["Other income (expense)","","599","","","","332","","","","(1,506",")","","","(575",")","","","678","","","","233","","","","(1,351",")","","","(440",")"],["Income (loss) before income taxes","","42,218","","","","14,937","","","","(29,609",")","","","27,546","","","","63,759","","","","18,803","","","","(24,379",")","","","58,183"],["Income tax expense","","\u2014","","","","\u2014","","","","(6,305",")","","","(6,305",")","","","\u2014","","","","\u2014","","","","(12,692",")","","","(12,692",")"],["Net income (loss)","","42,218","","","","14,937","","","","(35,914",")","","","21,241","","","","63,759","","","","18,803","","","","(37,071",")","","","45,491"],["Less: net income attributable to non- controlling interest","","(646",")","","","\u2014","","","","\u2014","","","","(646",")","","","(1,027",")","","","\u2014","","","","\u2014","","","","(1,027",")"],["Net income (loss) attributable to Radiant Logistics, Inc.","$","41,572","","","$","14,937","","","$","(35,914",")","","$","20,595","","","$","62,732","","","$","18,803","","","$","(37,071",")","","$","44,464"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2023","","","Year Ended June 30, 2022"],["Operating expenses as a percent of adjusted gross profit (1):","United States","","","Canada","","","Corporate/ Eliminations","","Total","","","United States","","","Canada","","","Corporate/ Eliminations","","Total"],["Operating partner commissions","","48.3","%","","","0.0","%","","N/A","","","40.7","%","","","46.7","%","","","0.0","%","","N/A","","","39.8","%"],["Personnel costs","","23.2","%","","","40.4","%","","N/A","","","28.0","%","","","19.4","%","","","36.0","%","","N/A","","","23.6","%"],["Selling, general and administrative expenses","","9.4","%","","","19.3","%","","N/A","","","13.6","%","","","8.3","%","","","15.2","%","","N/A","","","11.1","%"],["Depreciation and amortization","","1.7","%","","","7.5","%","","N/A","","","8.0","%","","","1.5","%","","","7.8","%","","N/A","","","6.1","%"]]
[[/GREPCENT_TABLE]]

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

(2)
Certain amounts in the corporate/eliminations segment have been reclassified from the United States column to conform to the current year presentation.

Operating partner commissions decreased $6.3 million, or 5.2%, to $115.6 million for the fiscal year ended June 30, 2023. The decrease is primarily due to the decreased adjusted gross profit from operating partners, a reduction in the number of strategic operating partners, and the conversion of a strategic operating partner to a Company-owned location not subject to commission. As a percentage of adjusted gross profit, operating partner commissions increased 92 basis points to 40.7% from 39.8% for the fiscal years ended June 30, 2023 and 2022, as a result of a higher percentage of adjusted gross profit coming from operating partner locations.

Personnel costs increased $7.3 million, or 10.1%, to $79.5 million for the fiscal year ended June 30, 2023. The increase is primarily due to a full year of operations associated with the acquisition of Navegate and increased workforce supporting the expansion of business in Canada. As a percentage of adjusted gross profit, personnel costs increased 443 basis points to 28.0% from 23.6% for the fiscal years ended June 30, 2023 and 2022, respectively.

Selling, general and administrative (“SG&A”) expenses increased $4.5 million, or 13.3%, to $38.5 million for the fiscal year ended June 30, 2023. The increase is primarily due to a full year of operations associated with the acquisition of Navegate, increased facility expenses, IT related initiatives, and increased professional service fees as a result of our restatement, offset by decreased bad debt costs. As a percentage of adjusted gross profit, SG&A increased 247 basis points to 13.6% from 11.1% for the fiscal years ended June 30, 2023 and 2022, respectively.

Depreciation and amortization costs increased $4.0 million, or 21.3%, to $22.7 million for the fiscal year ended June 30, 2023. The increase is attributable to the acquisition of Navegate and the accelerated amortization of trade names resulting from the rebranding of certain trade names. As a percentage of adjusted gross profit, depreciation and amortization increased 189 basis points to 8.0% from 6.1% for the fiscal years ended June 30, 2023 and 2022, respectively.

Change in fair value of contingent consideration was a gain of $0.6 million for the fiscal year ended June 30, 2023, compared to a loss of $0.8 million for the fiscal year ended June 30, 2022. The change in each fiscal year is attributable to a change in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Net other expense increased $0.2 million, or 30.7%, from an expense of $0.4 million for the fiscal year ended June 30, 2022 to an expense of $0.6 million for the fiscal year ended June 30, 2023.

Our change in net income is driven by decreased adjusted gross profit, increased operating expenses, and decreased income taxes compared to the prior fiscal year.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions as well as gains or losses from changes in fair value of contingent consideration that are difficult to predict.

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The following table provides a reconciliation for the fiscal years ended June 30, 2023 and 2022 of adjusted EBITDA to net income, the most directly comparable GAAP measure:

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2023","","","Year Ended June 30, 2022"],["(In thousands)","United States","","","Canada","","","Corporate/ Eliminations","","","Total","","","United States (3)","","","Canada","","","Corporate/ Eliminations (3)","","","Total"],["Net income (loss) attributable to Radiant Logistics, Inc.","$","41,572","","","$","14,937","","","$","(35,914",")","","$","20,595","","","$","62,732","","","$","18,803","","","$","(37,071",")","","$","44,464"],["Income tax expense","","\u2014","","","","\u2014","","","","6,305","","","","6,305","","","","\u2014","","","","\u2014","","","","12,692","","","","12,692"],["Depreciation and amortization (2)","","4,529","","","","3,335","","","","15,293","","","","23,157","","","","3,820","","","","3,509","","","","11,387","","","","18,716"],["Net interest expense","","\u2014","","","","\u2014","","","","1,889","","","","1,889","","","","\u2014","","","","\u2014","","","","3,191","","","","3,191"],["EBITDA","","46,101","","","","18,272","","","","(12,427",")","","","51,946","","","","66,552","","","","22,312","","","","(9,801",")","","","79,063"],["Share-based compensation","","1,091","","","","224","","","","1,188","","","","2,503","","","","731","","","","248","","","","819","","","","1,798"],["Change in fair value of contingent consideration","","\u2014","","","","\u2014","","","","(646",")","","","(646",")","","","\u2014","","","","\u2014","","","","767","","","","767"],["Acquisition related costs","","\u2014","","","","\u2014","","","","185","","","","185","","","","\u2014","","","","\u2014","","","","596","","","","596"],["Ransomware incident related costs, net","","\u2014","","","","\u2014","","","","6","","","","6","","","","\u2014","","","","\u2014","","","","684","","","","684"],["Litigation costs","","\u2014","","","","\u2014","","","","1,208","","","","1,208","","","","\u2014","","","","\u2014","","","","568","","","","568"],["Transition, lease termination, and other costs","","30","","","","\u2014","","","","\u2014","","","","30","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Change in fair value of interest rate swap contracts","","\u2014","","","","\u2014","","","","(383",")","","","(383",")","","","\u2014","","","","\u2014","","","","(1,840",")","","","(1,840",")"],["Restatement costs","","\u2014","","","","\u2014","","","","1,544","","","","1,544","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Foreign currency transaction loss (gain)","","(429",")","","","(326",")","","","\u2014","","","","(755",")","","","(573",")","","","(145",")","","","\u2014","","","","(718",")"],["Adjusted EBITDA","$","46,793","","","$","18,170","","","$","(9,325",")","","$","55,638","","","$","66,710","","","$","22,415","","","$","(8,207",")","","$","80,918"],["Adjusted EBITDA as a % of adjusted gross profit (1)","","19.5","%","","","40.9","%","","N/A","","","","19.6","%","","","25.6","%","","","49.5","%","","N/A","","","","26.4","%"]]
[[/GREPCENT_TABLE]]

(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.

(3)
Certain amounts in the corporate/eliminations segment have been reclassified from the United States column to conform to the current year presentation.

Adjusted EBITDA decreased $25.3 million, or 31.2% to $55.6 million for the fiscal year ended June 30, 2023.

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 June 30, 2023, we have $32.5 million in unrestricted cash on hand to serve as adequate working capital.

Fiscal year ended June 30, 2023 compared to fiscal year ended June 30, 2022

Net cash provided by operating activities was $97.9 million and $24.9 million for the fiscal years ended June 30, 2023 and 2022, respectively. The cash provided primarily consisted of net income adjusted for depreciation and amortization and changes in accounts receivable, contract assets, accounts payable, income taxes, and accrued expenses and other liabilities.

Net cash used for investing activities was $10.7 million and $45.7 million for the fiscal years ended June 30, 2023 and 2022, respectively. Cash paid for acquisitions were $3.3 million and $38.4 million for the fiscal years ended June 30, 2023 and 2022, respectively. Cash paid for purchases of property, technology, and equipment were $7.6 million and $7.5 million for the fiscal years ended June 30, 2023 and 2022, respectively.

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Net cash used for financing activities was $80.2 million and net cash provided by financing activities was $28.9 million for the fiscal years ended June 30, 2023 and 2022, respectively. Net repayments of the Revolving Credit Facility were $62.5 million for the fiscal year ended June 30, 2023, compared to net proceeds from the Revolving Credit Facility of $47.5 million for the fiscal year ended June 30, 2022. Payments of debt issuance costs were $0.9 for the fiscal year ended June 30, 2023. Repayments of notes payable and finance lease liabilities were $5.0 million and $5.1 million for the fiscal years ended June 30, 2023 and 2022, respectively. Proceeds from the sale of common stock were $0.2 million for the fiscal year ended June 30, 2022. Payments for repurchases of common stock were $11.1 million and $11.3 million for the fiscal years ended June 30, 2023 and 2022, respectively. Payments of contingent consideration as a financing activity was $1.1 million for the fiscal year ended June 30, 2022. Distributions to non-controlling interest were $0.6 million and $1.1 million for the fiscal years ended June 30, 2023 and 2022, respectively. Proceeds from exercises of stock options were $0.3 million and $0.4 million for the fiscal years ended June 30, 2023 and 2022, respectively. Payments of employee tax withholdings related to restricted stock units and stock options were $0.5 million for the fiscal years ended June 30, 2023 and 2022.

Working Capital

We believe that our current working capital, anticipated cash flow from operations, and access to financing through the Revolving Credit Facility are adequate for funding existing operations for the next twelve months.

Acquisitions

Below are descriptions of recent acquisitions in the last two fiscal years.

On December 3, 2021, and effective as of November 30, 2021, the Company entered into a Stock Purchase Agreement, pursuant to which it acquired all of the issued and outstanding common shares of Navegate, Inc. (“Navegate”), a Minnesota based, privately held company from Saltspring Capital, LLC. Navegate is a technology-enabled supply chain management and third-party logistics services company that combines a robust digital platform and decades of expertise to manage international, cross-border, and domestic freight from purchase order to final delivery. Navegate’s combination of technology-enabled services, customs brokerage expertise, and a full complement of international and domestic services significantly reduces costs and leads to better compliance and risk mitigation for its customers. As consideration for the acquisition, the Company paid $38.9 million in cash.

On October 1, 2022, the Company, through a wholly-owned subsidiary, acquired the assets and operations of Cascade Enterprises of Minnesota, Inc. (“Cascade”) a Minneapolis, Minnesota based privately held company that has operated as a strategic operating partner under the Company’s Airgroup brand since 2007. As part of the post-acquisition integration activities, Cascade has combined with existing Company‑owned operations in Minneapolis and is able to leverage the Company’s Global Trade Management (“GTM”) platform to strengthen the Company’s purchase order and vendor management service offerings. As consideration for the acquisition, the Company paid $3.3 million in cash upon closing, and the seller is entitled to additional contingent consideration payable in subsequent periods based on future performance of the acquired operation.

Technology

A primary component of our business strategy is to provide robust and advanced technology offerings to our customers, while providing advanced technology to our operations, strategic operating partners and management. To accomplish this, we will continuously develop and enhance our technology platform to align with current and future business requirements. During the fiscal year ended June 30, 2023, we capitalized approximately $0.6 million on technology enhancements and software systems in order to increase our operating efficiency and improve technology offerings. We expect to spend between $2.0 million and $3.0 million during the fiscal year ended June 30, 2024 in order to continue enhancing our technology platform, which we expect will include elements focused on customer facing, vendor facing, and user facing tools and systems that will be integrated into our existing platform and support our continued growth.

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 Revolving Credit Facility includes a $75 million accordion feature to support future acquisition opportunities. The Revolving 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, MUFG Union Bank, N.A. and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”).

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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 its 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 Revolving 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 0.50% to 1.50%; b) Term Secured Overnight Financing Rate ("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 Revolving Credit Facility.

For borrowings under the Revolving 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 Revolving Credit Facility to pursue acquisitions or repurchase its common stock.

As of June 30, 2023, there were no borrowings outstanding on the Revolving Credit Facility.

Senior Secured Loan

In connection with the Company’s acquisition of Radiant Canada, 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’s U.S. and Canadian subsidiaries are guarantors of the 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’s U.S. and Canadian subsidiaries are guarantors of the 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 consolidated financial statements.

Off Balance Sheet Arrangements

As of June 30, 2023, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which had been established for the purpose of facilitating off‑balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Recent Accounting Guidance

The recent accounting guidance is discussed in Note 2 to the consolidated financial statements contained in this report.

ESG and Climate Change Effects

ESG matters continue to attract considerable public and scientific attention.

At Radiant, we recognize the importance of addressing climate-related risks and opportunities to ensure our business is resilient and sustainable for the future. In 2023, we have taken strides to align with the TCFD framework. We have already begun to collect data to inform future strategy as well as our disclosures.

To test the resilience of our strategy, we will develop scenario analysis to stress test and improve our resiliency. As part of this effort, we plan to host workshops with leaders across the company to identify and discuss our climate-related risks and opportunities. Climate-related risks identified through this scenario analysis exercise will be incorporated into Radiant’s Enterprise Risk Management (“ERM”) Framework.

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Due to Radiant’s asset-light based business model and strategy, we do not anticipate that the risks associated with climate change will have a material financial impact on our business in the short, medium, or long term. In particular, Radiant is not exposed to rising emissions costs through carbon taxes as its revenue model historically adds a service fee to the cost of shipping. Nor will Radiant, as an asset-light freight forwarder, face the rising investment costs and risks that carriers will bear to decarbonize their vessels, aircraft and vehicles.

Throughout our ESG assessment process, however, we have identified potential climate-related revenue opportunities that we are seeking to capture. These include helping customers to manage increased complexity from carbon taxes and emissions reporting requirements; meeting the demand for decarbonized logistics services including intermodal and other eco-friendly transportation and logistics solutions; and supporting government agencies, non-governmental organizations (“NGOs”) and other partners.

We include below our preliminary TCFD disclosures based on our business model and assessment of materiality. Following the completion of our carbon inventory, we will subsequently publish a full TCFD report, which will be available online at www.radiantdelivers.com.

As Radiant continues our ESG journey, we have begun to map and link a range of environmental, social, and governance topics to the relevant voluntary disclosure frameworks, beginning with the TCFD framework. By evaluating our non-asset-based business model against this voluntary framework, we are seeking to best align and progress in the area of climate, while also evaluating avenues for improvement in the areas of social initiatives and governance.

[[GREPCENT_TABLE]]
[["Category Governance:","Disclose the organization\u2019s governance around climate-related risks and opportunities"],["Describe the Board\u2019s oversight of climate-related risks and opportunities.","Risk management is a strategic priority within the Company and responsibility for managing risk rests with management while the Committees and the Board provide oversight. Radiant is committed to our responsibility to sustainability and climate-related matters and has undertaken to integrate this core value into our corporate governance. As part of this process, the Board of Directors has made ESG risks and opportunities a regular agenda item in quarterly meetings. An independent board member has been responsible for sustainability/ESG and has been spearheading this discussion since 2022."],["Describe management\u2019s role in assessing and managing climate-related risks and opportunities.","With the independent board member providing oversight, the Radiant ESG Steering Committee has been meeting weekly since 2022 to establish learning pathways for the organization as a whole, data collection processes and metrics, as well as a cadence of risk and opportunity assessment that engages with all leaders of senior management. The ESG Steering Committee is headed by our Vice President of Marketing & Communications, who serves as the management liaison and updates the CEO and Board of Directors on all ESG-related activities.Radiant has further engaged the expertise of key members within the organization with the preliminary development of an Radiant ESG Task Force, which meets monthly to ensure our climate-related initiatives continue to align seamlessly with our business strategy and overarching corporate goals."],["Category Strategy:","Disclose the actual and potential impacts of climate-related risks and opportunities on the organization\u2019s businesses, strategy and financial planning"],["Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.","Radiant began its initial assessment of climate-related risks and opportunities in 2022 and has continued to evaluate these throughout 2023. This process will continue as we identify and formalize those short, medium, and long term risks and opportunities, with the understanding that this is a changing model that must account for a dynamic market.We believe our operations model is uniquely positioned to be both flexible and agile in making both these assessments and adjustments. We will continue to engage with our customers and vendors to ensure we are aware of developments in climate-related risks and opportunities and other sustainability measures. In doing so, we will look to manage policy change, technology updates, and market shifts, in addition to the physical risks of climate-related events or the fallout from such an event, as well as the ongoing reputational risks associated with the transportation industry."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","We will also continue to develop relationships with vendors and partners who share the core value that we are all responsible for climate-related challenges. As such, we will continue to align with partners who likewise seek to develop robust environmental initiatives within their own organization.We see our core commitment to our customers as a climate-related, emerging opportunity on multiple fronts:helping customers to manage increased complexity from carbon taxes and emissions reporting requirements; meeting the shifting demand for decarbonized logistics services including intermodal and other eco-friendly transportation and logistics solutions; and supporting government agencies, NGOs and other partners."],["Describe the impact of climate-related risks and opportunities on the organization\u2019s businesses, strategy, and financial planning.","We do not anticipate risks associated with climate change to be material, due to Radiant\u2019s asset-light based business model. However, we have flexibility that will enable us to adjust and respond accordingly where and when appropriate.Radiant also seeks to capture increased opportunities by further developing services that simplify the supply chains of our customers, support best practices in terms of partnerships with like-minded organizations, and enhance learning opportunities via climate-conscious industry groups and associations."],["Describe the resilience of the organization\u2019s strategy, taking into consideration different climate-related scenarios, including a 2\u00b0C or lower scenario.","Radiant is developing its ERM Framework to include the identification, assessment and response to climate-related events. We will be developing scenario analysis to stress test and improve our resiliency."],["Category Risk Management:","Disclose the processes used by the organization to identify, assess and manage climate-related risks"],["Describe the organization\u2019s processes for identifying and assessing climate-related risks.","Climate-related risks are being identified and assessed by our ESG Steering Committee and will be considered with the Company\u2019s ERM Framework."],["Describe the organization\u2019s processes for managing climate-related risks.","Climate-related risks are reviewed and discussed initially via our ESG Steering Committee and moving forward in conjunction with our ESG Task Force. While discussed at the committee level, these risks will still be considered in conjunction with our ERM Framework at the Board level and with our overall Business Continuity Plan in mind."],["Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organization\u2019s overall risk management.","Regarding day-to-day continuity, the Radiant ESG Steering Committee will have oversight for data acquisition, measurement and evaluation. The Radiant ESG Task Force will begin to monitor and discuss industry developments and change in climate-related areas, to ensure we have the most up to date information and developments at the field level. Finally and as regards to overall risk in climate-related areas, the ESG Steering Committee will continue to report on at least a quarterly basis to both the CEO and the Board of Directors in these areas."],["Category Metrics:","Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities"],["Describe the organization\u2019s processes for identifying and assessing climate-related risks and disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks.","While Radiant is an asset-light structure, we recognize the impact that offices, warehouses and certain business lines contribute to the overall global carbon footprint (Scope 1 & 2 emissions). Likewise, we believe we have the responsibility to make positive choices in our own service providers who ultimately contribute to our own footprint (Scope 3 emissions). In 2023, we began the data collection process for our own Company-owned locations, the end result of which will encompass our Scope 1 & 2 emissions. We will subsequently turn to our Scope 3 emissions to ultimately build a complete picture of our greenhouse gas emissions, whilst making meaningful reduction targets for our emissions throughout."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","In the meantime, we have long been committed to sustainability programs. Many of these are well established across our organization and include: \u2022Technology Recycling Program;\u2022Public Transport Incentive Program for corporate employees;\u2022Power-Saving Automatic lights roll-out to reduce electricity consumption;\u2022Reduce, Re-use: water bottle filling stations to encourage multi-use containers, as well as the roll-out of compostable cutlery and plates at Company-owned locations, where available;\u2022Recycle: paper recycling program at our corporate headquarter; and\u2022Remote hybrid working options to reduce emissions from commuting."],["Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.","While we are focusing on the data collection to quantify your Scope 1 & 2 greenhouse gas emissions, we will continue to evaluate programs that will help to reduce our overall impact as a company on the environment. Once we have concluded our baseline measurements, we intend to establish formal targets to measure our performance against."]]
[[/GREPCENT_TABLE]]