Radiant faces a difficult year but cash flows reassure

As Radiant Logistics approached the end of its fourth fiscal quarter, which closes on 30 June, a great deal of uncertainty surrounds its operating income profile.

The US-based freight forwarder, which has grown by acquisition over the past few years, has seen its valuation come under a huge amount of pressure in the last 12 months, with its shares now trading close to a 52-week low of $2.95.

One problem is that while Radiant is growing, a steeper growth rate has so far determined widening operating losses.

In the three months ended 31 March, revenues rose to $173m from $102m year-on-year on the back of inorganic growth, but it posted an operating loss of $471,781 against an operating profit of $1.5m one year earlier.

Similarly, in the nine months ended 31 March, its sales almost doubled to $598m, but it posted an operating loss of $1.3m compared with an operating profit of $5.4m during the same period one year earlier.

Unsurprisingly, heavier interest expenses came with tax benefits, yet in the nine months ended 31 March, earnings per share (EPS) came in at -$0.10 against $0.06 year-on-year.

Its latest EPS figures are based on a much higher share count – total shares outstanding rose to 48.7m from 34.7m in the third quarter of 2015 on a weighted average basis, and further dilution in future is possible if Radiant decides to use equity, as it did in the past, to finance its ambitious expansion plans.

On the bright side, its net leverage looks manageable, while operating cash flow rose in the nine months ended 31 March, up to $19.1m from $6.3m year-on-year, mainly due to positive cash inflows from lower receivables, which were only partly offset by a drop in payables. Its cash and cash equivalents were significantly higher year-on-year, standing at $19.7m at the end of the third quarter.

This is a critical stage of growth for a company that needs a higher valuation to pursue acquisitions. The problem is that a poor performance in recent months has pushed down its market value to $159m, which implies a trade multiple some 20% below book value. 

There are also changes at its senior management level. Joe Bento, Radiant’s senior vice president of operations is set to succeed Dan Stegemoller as chief operating officer of the company’s freight forwarding operations effective on June 30.

In addition, it announced the appointment of 30-year logistics veteran Arnie Goldstein to the newly created position of chief commercial officer. He has previously worked at at Hellmann, Pacer, Wilson UTC and Danzas/AEI.

Source: Transport Intelligence, June 29, 2016

Author: Alessandro Pasetti