Radiant(RLGT) - 2021 Q4 - Annual Report

PART I ITEM 1. BUSINESS Radiant Logistics provides multi-modal transportation and logistics services in North America, growing organically and through acquisitions Our Company Radiant Logistics offers multi-modal transportation and logistics services globally via a over 100 operating locations network, using a non-asset-based model for efficiency - Radiant Logistics operates as a third-party logistics company, offering multi-modal transportation and logistics services primarily in the United States and Canada[17] - The company utilizes a multi-brand network of over 100 operating locations, including independent strategic operating partners and approximately 20 Company-owned offices[17] - Its non-asset-based business model allows for objective, efficient, and cost-effective transportation solutions with minimal physical asset investment, leading to a higher return on invested capital[17] COVID-19 The COVID-19 pandemic continues to create economic uncertainty, impacting future operations and financial results despite fiscal year 2021 recovery - The COVID-19 pandemic continues to have widespread implications, making it difficult to predict its future impact on the overall economy and the company's operations[21] - Fiscal year 2021 showed encouraging recovery, but uncertainty remains regarding the pandemic's duration, governmental responses, economic activity, and its effect on consumer/business spending and customer payment ability[21][22] - This uncertainty also impacts management's accounting estimates and assumptions, potentially leading to greater variability in areas like receivables and forward-looking guidance[22] Competitive Strengths Radiant Logistics leverages a non-asset-based model, diverse customer base, and advanced IT to provide flexible, cost-effective solutions and partner support - The non-asset-based business model provides competitive pricing, flexible solutions, strong cash flow, and adaptability to changing market conditions due to minimal fixed operating costs[24] - Strategic operating partners benefit from Radiant's operating authority, technology, sales/marketing support, working capital access, carrier networks, and collective purchasing power, allowing them to focus on operations and sales[25] - The company maintains a diverse customer base of over 12,000 accounts, with no single customer or strategic operating partner representing more than 10% of consolidated revenue, reducing concentration risks[27] Industry Overview The fragmented logistics industry sees rising demand for flexible, cost-effective non-asset-based 3PLs like Radiant, driven by outsourcing, globalization, and e-business - The logistics industry is highly fragmented, with increasing demand for third-party logistics providers due to businesses seeking efficient and cost-effective supply chain management[32] - Non-asset-based providers offer greater flexibility and cost-effectiveness compared to asset-based competitors, who prioritize maximizing their own fleet utilization[34] - Factors increasing demand for global logistics solutions include outsourcing, globalization of trade, need for time-definite delivery, consolidation of providers, and the influence of e-business[36] Our Growth Strategy Radiant Logistics pursues growth through organic expansion and 19 acquisitions since 2006, integrating smaller 3PLs to expand services and efficiency - The company's growth strategy combines organic expansion, focusing on customer relationships and strategic operating partner network build-out, with strategic acquisitions[39] - Since 2006, Radiant has completed 19 acquisitions, expanding its services into various industries and geographies, including automotive, domestic operating partners, and Canadian logistics[35][37][41] - The acquisition strategy targets smaller, fragmented third-party logistics providers, offering them a vehicle for liquidation or growth by integrating them into Radiant's platform[40] Our Operating Strategy Radiant's operating strategy centralizes back-office functions for efficiency and focuses on strong customer relationships to deliver tailored supply chain solutions - A key element of the operating strategy is to maximize operational efficiencies by integrating general and administrative functions into a central back-office, reducing redundancies and enabling acquired companies to focus on sales and operations[41] - The company aims to develop strong, interactive customer relationships through a relationship-oriented approach, meeting with customers to design solutions and identify resources for their supply chain strategies[42] Operations Radiant provides domestic and international freight forwarding and brokerage, operating non-asset-based to arrange shipments via a carrier network and offering value-added MM&D and CHB services - The company offers domestic and international air and ocean freight forwarding, and freight brokerage services including truckload, LTL, and intermodal[43] - Operating as a non-asset-based provider, Radiant arranges shipments via third-party carriers (trucking, airlines, railroads, ocean carriers) and generates gross margin from the price difference between customer charges and carrier payments[44] - Value-added services include Materials Management and Distribution (MM&D) and Customs House Brokerage (CHB)[49] Information Services Radiant's growth strategy emphasizes enhancing and integrating IT systems, including an SAP-based platform, to provide real-time shipment information and boost productivity - Continued enhancement and migration of information systems to a common set of customer-facing and back-office applications is a key component of the growth strategy[50] - The company is transitioning domestic and international freight forwarding services to a new SAP-based transportation management system, with future plans to transition legacy brokerage systems[51] - These efforts aim to provide accurate real-time shipment information, enhanced reporting, and drive significant productivity improvement across the network[50] Sales and Marketing Radiant markets services via its North American network of company-owned and partner locations, supporting partners with technology and purchasing power, with no single customer exceeding 10% of revenue - Services are marketed through a network of Company-owned and strategic operating partner locations across North America[52] - Strategic operating partners receive support for operating authority, technology, sales/marketing, working capital, and carrier networks, allowing them to gain regional, national, and global brand recognition[52] - No single customer or strategic operating partner accounts for more than 10% of consolidated revenue, although the loss of significant partners could negatively impact the business[52] Competition and Business Conditions The highly competitive global logistics industry, influenced by trade and economic conditions, sees Radiant competing on rates and service quality, with its acquisition strategy and expanded offerings as key differentiators - The global transportation and logistics industry is intensely competitive, influenced by factors such as economic/political conditions, trade volumes, work stoppages, and currency fluctuations[53][54] - Competition is based primarily on rates, service quality (reliability, responsiveness, expertise, convenience), scope of operations, geographic coverage, and information technology[23][54] - Radiant believes its acquisition strategy, which has expanded service offerings like truck brokerage and intermodal capabilities, serves as a catalyst for margin expansion and a competitive differentiator[54] Regulation Interstate and international freight transportation is highly regulated by various federal agencies, with compliance failures risking fines or permit revocation, and ongoing developments impacting costs - Interstate and international freight transportation is highly regulated, with compliance failures potentially resulting in substantial fines or revocation of operating permits[55] - Air freight forwarding is regulated by the Federal Aviation Administration and Transportation Security Administration; surface freight by the Federal Motor Carrier Safety Administration and Surface Transportation Board; ocean forwarding by the Federal Maritime Commission; and customs brokerage by the Bureau of Customs and Border Protection[56][59][60][61][62] - The industry is subject to ongoing regulatory and legislative developments that can impact operating practices, demand, and costs of services[56][57] Human Capital As of June 30, 2021, Radiant Logistics had 685 employees, mostly full-time, with no collective bargaining agreements and good employee relations - As of June 30, 2021, the company had 685 employees, including 656 full-time staff[63] - No employees are covered by a collective bargaining agreement, and the company considers its employee relations to be good[63] Available Information Radiant Logistics provides free access to its SEC filings (10-K, 10-Q, 8-K, proxy statements) on its website and the SEC website - The company's website (www.radiantdelivers.com) provides free access to SEC filings, including 10-K, 10-Q, 8-K, and proxy statements[64] - These reports are also available free of charge on the SEC website (www.sec.gov)[64](index=64&type=chunk) ITEM 1A. RISK FACTORS This section details significant risks to Radiant Logistics' business, including operational challenges, COVID-19 impact, partner reliance, competition, acquisition complexities, and stock price volatility - The company faces risks related to its business operations, including the ongoing impact of COVID-19, dependence on its strategic operating partner network, and the need to maintain and expand it[68][69][70] - Significant risks are associated with its acquisition strategy, such as scarcity of desirable targets, competition, financing challenges, integration difficulties, and potential non-cash charges from intangible asset amortization[115][116][120][123] - Risks related to common stock include significant market price fluctuations, potential dilution from future share issuances, and the influence of the CEO's substantial ownership[130][135][137][138] RISKS PARTICULAR TO OUR BUSINESS Radiant Logistics faces business risks from COVID-19, partner network reliance, third-party carrier liabilities, IT systems, competition, and regulatory compliance, especially internationally - The COVID-19 pandemic continues to pose risks, with uncertain future impacts on the economy, operations, and financial results, affecting accounting estimates and assumptions[68][69] - Dependence on strategic operating partners is a critical risk, as failure to maintain or expand this network, or issues with partner compliance (e.g., indirect air carrier regulations), could negatively impact revenues and operations[70][71][72] - The company relies heavily on information technology systems for efficiency and growth, making it vulnerable to failures, cyber-attacks, and integration challenges with acquired businesses[73][74][75] Risks Related to our Acquisition Strategy Radiant's acquisition strategy faces risks from target scarcity, competition, financing limits, integration difficulties, and potential non-cash charges impacting earnings and stock price - The company faces scarcity and intense competition for desirable acquisition targets, often from entities with greater financial resources, placing it at a competitive disadvantage[115] - Acquisition financing is limited, requiring additional debt or equity, and existing credit facilities impose conditions (e.g., leverage ratios, availability) that may restrict future acquisitions[116][117][118][119] - Integrating acquired businesses poses risks including operational difficulties, diversion of resources, potential loss of strategic operating partners or key employees, and non-cash charges from intangible asset amortization that can affect earnings[120][123] Risks Related to our Common Stock Radiant's common stock price is volatile due to performance and market factors; takeover deterrence, limited liquidity, and potential dilution from future issuances also pose risks, with no anticipated dividends - The market price of common stock may fluctuate significantly due to factors like earnings variations, competitor performance, public announcements, regulatory changes, and overall economic conditions[130][131] - Provisions in the certificate of incorporation, bylaws, and Delaware law, along with the CEO's approximately 20% beneficial ownership, could make a contested takeover more difficult and limit other stockholders' influence[134][135] - The issuance of additional shares for acquisitions or compensation may dilute existing stockholders' ownership interests and create downward pressure on the stock price. The company does not anticipate paying cash dividends[137][138][141] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments from the SEC regarding the company's filings - The company has no unresolved staff comments[143] ITEM 2. PROPERTIES Radiant Logistics' principal executive offices are in Renton, Washington, with over 100 leased operating locations in the U.S. and Canada, deemed adequate and insured - The principal executive offices are located in Renton, Washington[144] - The company's network comprises over 100 operating locations, including leased company-owned offices and warehouses in multiple U.S. and Canadian cities[144] - Current offices and warehouses are considered adequately covered by insurance and sufficient to support operations for the foreseeable future[144] ITEM 3. LEGAL PROCEEDINGS Legal proceedings information is incorporated by reference from Note 15 – Commitments and Contingencies in the consolidated financial statements - Legal proceedings information is incorporated by reference from Note 15 – Commitments and Contingencies in the consolidated financial statements[145] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Radiant Logistics, Inc - This item is not applicable[146] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Radiant Logistics' common stock trades on NYSE American (RLGT), with 76 stockholders of record; no cash dividends are anticipated due to credit facility restrictions, but a share repurchase program is active - Radiant Logistics' common stock trades on the NYSE American under the symbol 'RLGT'[149] - As of September 1, 2021, there were 76 stockholders of record[149] - The company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future, with restrictions from existing credit facilities[150] Common Stock Repurchases (Q4 FY2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :----------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | | June 1 - 30, 2021 | 268,969 | $7.10 | 268,969 | ITEM 6. SELECTED FINANCIAL DATA This item is not applicable to Radiant Logistics, Inc. as a smaller reporting company - This item is not applicable[155] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section reviews Radiant Logistics' financial condition and operations, covering its 3PL model, COVID-19 impact, performance metrics, accounting policies, comparative results, liquidity, acquisitions, technology, and debt facilities - Radiant Logistics operates as a third-party logistics company, providing multi-modal transportation and logistics services primarily in the United States and Canada, with a focus on organic growth and strategic acquisitions[157][159][160] - The COVID-19 pandemic continues to create uncertainty, impacting the economy and the company's future results, despite an encouraging recovery in fiscal year 2021[161][162] - Key performance measures include transportation revenue, cost of transportation, net transportation revenue (gross revenue less direct costs), net margin, EBITDA, and adjusted EBITDA, which management uses to assess financial performance and control costs[163][164][166][167][168] Overview Radiant Logistics is a third-party logistics company providing multi-modal transportation and logistics services across North America through a non-asset-based model, pursuing organic growth and strategic acquisitions - Radiant Logistics provides multi-modal transportation and logistics services primarily in the United States and Canada, serving a diversified account base[157] - The company operates through a multi-brand network of over 100 locations, including strategic operating partners and company-owned offices, leveraging a non-asset-based model[157] - Growth is pursued organically by strengthening customer relationships and expanding service offerings, and through acquisitions of companies with complementary geographical and logistics services[159][160] COVID-19 The COVID-19 pandemic continues to create economic uncertainty, impacting future operations, financial results, and accounting estimates despite fiscal year 2021 recovery - The COVID-19 pandemic's widespread implications make it difficult to predict its future impact on the overall economy and the company's operations[161] - Fiscal year 2021 showed encouraging recovery, but uncertainty persists regarding the pandemic's duration, governmental actions, and its impact on economic activity, consumer spending, and customer payments[161][162] - This uncertainty affects management's accounting estimates and assumptions, potentially leading to greater variability in areas like receivables and forward-looking guidance[162] Performance Metrics Radiant Logistics' primary income is from freight forwarding and brokerage, with key performance metrics including transportation revenue, net transportation revenue, EBITDA, and adjusted EBITDA, used to evaluate financial performance - Primary income is derived from freight forwarding and freight brokerage services, with transportation revenue representing the total dollar value of services sold[163][164] - Net transportation revenue (gross transportation revenue less direct costs) is a key performance measure, indicating the ability to source, add value, and resell third-party services[164] - EBITDA and adjusted EBITDA are non-GAAP measures used to analyze results, excluding non-cash effects like depreciation and amortization, which are material due to the company's acquisition strategy[167][168] Critical Accounting Policies Radiant Logistics' critical accounting policies involve significant judgments and estimates for revenue recognition, transportation cost accruals, fair value of acquisitions, contingent consideration, and asset impairment assessments - Critical accounting policies involve significant management judgments and estimates, particularly for revenue recognition, accruals for purchased transportation, and fair value of acquired assets/liabilities[170] - Key areas include fair value of contingent consideration and the assessment of recoverability for long-lived assets, goodwill, and intangible assets[170] - Goodwill impairment tests are performed annually, and intangible assets (customer related, trade names, non-compete agreements) are amortized over their useful lives[171][172] Results of Operations FY2021 saw increased transportation and net transportation revenue due to volume, improved value-added services net revenue, decreased SG&A, a higher contingent consideration loss, and a significant PPP loan forgiveness gain, boosting net income and adjusted EBITDA Revenues, Cost of Transportation, and Net Revenues by Segment (FY2021 vs FY2020) | (In thousands) | Year Ended June 30, 2021 | Year Ended June 30, 2020 | | :--------------------------------- | :----------------------- | :----------------------- | | Revenues | | | | Transportation | $858,827 | $824,516 | | Value-added services | $30,297 | $30,681 | | Total Revenues | $889,124 | $855,197 | | Cost of transportation and other services | | | | Transportation | $657,957 | $634,135 | | Value-added services | $10,342 | $11,689 | | Total Cost of Services | $668,299 | $645,824 | | Net revenues | | | | Transportation | $200,870 | $190,381 | | Value-added services | $19,955 | $18,992 | | Total Net Revenues | $220,825 | $209,373 | | Net margin | | | | Transportation | 23.4% | 23.1% | | Value-added services | 65.9% | 61.9% | - Transportation revenue increased by $34.3 million (4.2%) to $858.8 million in FY2021, primarily due to increased volume, while net transportation revenue margins slightly increased from 23.1% to 23.4%[178] Key Operating Expenses (FY2021 vs FY2020) | Operating Expense | FY2021 (in thousands) | FY2020 (in thousands) | Change (YoY) | | :------------------------------------- | :-------------------- | :-------------------- | :------------- | | Operating partner commissions | $94,040 | $85,821 | +9.6% | | Personnel costs | $55,378 | $57,679 | -4.0% | | Selling, general and administrative expenses | $24,434 | $29,548 | -17.3% | | Depreciation and amortization | $16,642 | $16,571 | +0.4% | | Change in fair value of contingent consideration | $4,350 (loss) | $1,752 (loss) | +148.3% | | Net other income (expense) | $3,377 (income) | $(1,981) (expense) | +270.5% | | Net income attributable to Radiant Logistics, Inc. | $22,943 | $10,541 | +117.7% | | Adjusted EBITDA | $48,781 | $38,259 | +27.5% | Liquidity and Capital Resources Radiant Logistics' liquidity relies on cash from operations and its $150 million Revolving Credit Facility; FY2021 saw decreased operating cash flow due to receivables, lower investing cash use, and increased financing cash use from debt repayments and stock repurchases - Primary liquidity sources are cash from operating activities and borrowings under the Revolving Credit Facility[192] - As of June 30, 2021, the company had $13.7 million in cash on hand, deemed adequate for working capital for the next twelve months[192][196] Cash Flow Summary (FY2021 vs FY2020) | Cash Flow Activity | FY2021 (in thousands) | FY2020 (in thousands) | | :----------------------------------- | :-------------------- | :-------------------- | | Net cash provided by operating activities | $14,100 | $29,880 | | Net cash used for investing activities | $(11,073) | $(14,143) | | Net cash provided by (used for) financing activities | $(23,749) | $12,289 | Acquisitions In February 2020, Radiant Logistics acquired two Adcom agency locations for $9.2 million cash and stock, aiming to diversify its network in medical device, high-tech, and trade-show industries - On February 7, 2020, Radiant acquired the assets and operations of Friedway Enterprises, Inc. and CIC2, Inc., two Adcom agency locations[198] - Consideration included $9.2 million in cash and 45,086 shares of common stock, with potential for up to $10.0 million in additional contingent consideration based on future performance[198] - The acquisition was expected to strengthen and diversify Radiant's network, particularly in the medical device, high-tech, and trade-show industries[198] Technology Radiant Logistics prioritizes technology enhancement, spending $2.1 million in FY2021 and planning over $3.5 million in FY2022 for platform improvements to boost customer offerings and operational efficiency - Technology enhancement is a primary component of the business strategy, aiming to provide advanced offerings to customers and improve operational efficiency[199] - In FY2021, $2.1 million was spent on technology enhancements and software systems[199] - The company plans to spend over $3.5 million in FY2022 to further enhance its technology platform, focusing on customer, vendor, and user-facing tools[199] Revolving Credit Facility Radiant Logistics has a $150 million revolving credit facility, maturing in March 2025, with variable interest rates, a $50 million accordion feature, and financial covenants, with $15 million outstanding and compliance as of June 30, 2021 - The company has a $150 million syndicated revolving credit facility, maturing on March 13, 2025, collateralized by accounts receivable and other assets[200][201] - Borrowings accrue interest at variable rates, adjustable based on the company's consolidated leverage ratio (e.g., LIBOR plus 2.00% to 2.75%)[201] - The facility includes a $50 million accordion feature for future acquisitions and is subject to financial covenants, including a maximum consolidated leverage ratio of 3.00 and a minimum fixed charge coverage ratio of 1.25. As of June 30, 2021, $15 million was outstanding, and the company was in compliance[202][319] Senior Secured Loan Radiant Canada holds two senior secured term loans from Fiera Private Debt Funds totaling CAD$39.0 million, maturing in 2024 at 6.65% annual interest rate, guaranteed by Radiant Logistics and subject to similar covenants - Radiant Canada has a CAD$29.0 million senior secured term loan from FPD IV, maturing April 1, 2024, with a 6.65% annual interest rate[204] - An additional CAD$10.0 million senior secured term loan from FPD V, also maturing June 1, 2024, with a 6.65% annual interest rate[205] - Both loans are guaranteed by Radiant Logistics and its subsidiaries and are subject to the same covenants as the Revolving Credit Facility. As of June 30, 2021, $9.7 million and $4.0 million were outstanding on the FPD IV and FPD V loans, respectively[320][321][323] Paycheck Protection Program Loans Radiant Logistics received $5.9 million in PPP loans in May 2020, which were fully forgiven by June 30, 2021, though risks of ineligibility penalties remain - On May 4, 2020, the company received $5.9 million in PPP loan proceeds under the CARES Act[207] - The loan required certification of necessity due to economic uncertainty, with a risk of repayment and penalties if deemed ineligible or in violation of regulations[207] - As of June 30, 2021, all PPP loans totaling $5.9 million, including $0.06 million of interest, were forgiven[209][326] Off Balance Sheet Arrangements As of June 30, 2021, Radiant Logistics had no off-balance sheet arrangements, indicating no material exposure to associated financing, liquidity, market, or credit risks - As of June 30, 2021, the company had no relationships with unconsolidated entities or financial partners for off-balance sheet arrangements[210] - This means the company is not materially exposed to financing, liquidity, market, or credit risks that could arise from such relationships[210] Recent Accounting Guidance Recent accounting guidance is discussed in Note 2 to the consolidated financial statements - Recent accounting guidance is discussed in Note 2 to the consolidated financial statements[211] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Radiant Logistics is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Radiant Logistics is not required to provide information on quantitative and qualitative disclosures about market risk[212] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents Radiant Logistics' audited consolidated financial statements for FY2021 and FY2020, with an unqualified audit opinion but an adverse opinion on internal controls due to material weaknesses in revenue and commission calculations - The independent registered public accounting firm issued an unqualified opinion on the consolidated financial statements for June 30, 2021 and 2020[216] - However, an adverse opinion was expressed on the company's internal control over financial reporting as of June 30, 2021, due to material weaknesses related to revenue recording and operating partner commission calculations[217][227][231] - The financial statements include consolidated balance sheets, statements of comprehensive income, changes in equity, and cash flows, along with extensive notes detailing accounting policies, assets, liabilities, and equity[235][238][240][243][248] Report of Independent Registered Public Accounting Firm Auditors issued an unqualified opinion on financial statements but an adverse opinion on internal control over financial reporting, citing goodwill fair value determination as a critical audit matter - The independent auditors issued an unqualified opinion on the consolidated financial statements for June 30, 2021 and 2020[216] - An adverse opinion was expressed on the company's internal control over financial reporting as of June 30, 2021[217] - The determination of the fair value of each reporting unit for goodwill impairment testing was identified as a critical audit matter, involving challenging and subjective auditor judgment due to key assumptions in income and market approaches[222][223] Report of Independent Registered Public Accounting Firm (Internal Control) Auditors issued an adverse opinion on internal control over financial reporting due to material weaknesses in revenue recording and operating partner commission calculations, though no material misstatements occurred - The independent auditors issued an adverse opinion on the company's internal control over financial reporting as of June 30, 2021[227] - Material weaknesses were identified regarding management's failure to design and maintain controls over (1) revenue and (2) operating partner commissions, lacking the necessary precision for completeness and accuracy[231] - These material weaknesses could result in misstatements that would not be prevented or detected, although they did not lead to material misstatements in the 2021 consolidated financial statements[231] Consolidated Balance Sheets As of June 30, 2021, total assets increased to $357.2 million, driven by receivables and lease assets, while total liabilities rose to $195.8 million, and equity attributable to Radiant Logistics, Inc. grew to $161.1 million Consolidated Balance Sheet Summary (FY2021 vs FY2020) | (In thousands) | June 30, 2021 | June 30, 2020 | | :------------------------------------------ | :------------ | :------------ | | ASSETS | | | | Total current assets | $176,310 | $140,588 | | Property, technology, and equipment, net | $24,151 | $18,712 | | Goodwill | $72,582 | $72,199 | | Intangible assets, net | $41,404 | $51,192 | | Operating lease right-of-use assets | $39,022 | $12,580 | | Total assets | $357,241 | $300,040 | | LIABILITIES AND EQUITY | | | | Total current liabilities | $126,357 | $93,716 | | Total long-term liabilities | $69,481 | $68,149 | | Total liabilities | $195,838 | $161,865 | | Total Radiant Logistics, Inc. stockholders' equity | $161,110 | $137,366 | | Total equity | $161,403 | $138,175 | - Total assets increased by $57.2 million, driven by increases in accounts receivable, contract assets, property, technology, and equipment, and operating lease right-of-use assets[236] - Total liabilities increased by $34.0 million, primarily due to higher accounts payable and operating lease liabilities[236] Consolidated Statements of Comprehensive Income Radiant Logistics' net income increased significantly to $22.9 million in FY2021, driven by higher revenues, improved operations, and a $5.9 million PPP loan forgiveness gain, with basic EPS rising to $0.46 Consolidated Statements of Comprehensive Income Summary (FY2021 vs FY2020) | (In thousands, except per share data) | Year Ended June 30, 2021 | Year Ended June 30, 2020 | | :------------------------------------------ | :----------------------- | :----------------------- | | Revenues | $889,124 | $855,197 | | Total operating expenses | $863,143 | $837,695 | | Income from operations | $25,981 | $17,502 | | Total other income (expense) | $3,377 | $(1,981) | | Income before income taxes | $29,358 | $15,521 | | Income tax expense | $(5,896) | $(3,157) | | Net income | $23,462 | $12,364 | | Net income attributable to Radiant Logistics, Inc. | $22,943 | $10,541 | | Basic Income per share | $0.46 | $0.21 | | Diluted Income per share | $0.45 | $0.21 | - Net income attributable to Radiant Logistics, Inc. increased by 117.7% from $10.5 million in FY2020 to $22.9 million in FY2021[239] - A significant gain on forgiveness of debt of $5.9 million contributed to the increase in net income in FY2021[239] Consolidated Statements of Changes in Equity Radiant Logistics' total equity increased to $161.4 million in FY2021, primarily due to $22.9 million net income and $0.7 million other comprehensive income, partially offset by share repurchases Consolidated Statements of Changes in Equity Summary (FY2021 vs FY2020) | (In thousands) | June 30, 2021 | June 30, 2020 | | :------------------------------------------ | :------------ | :------------ | | Total Radiant Logistics, Inc. stockholders' equity | $161,110 | $137,366 | | Non-controlling interest | $293 | $809 | | Total equity | $161,403 | $138,175 | | Net income attributable to Radiant Logistics, Inc. | $22,943 | $10,541 | | Other comprehensive income | $696 | $258 | | Repurchase of common stock | $(1,909) | $(2,496) | | Issuance of common stock upon exercise of stock options, net of taxes withheld and paid | $1,277 | $442 | | Share-based compensation | $1,071 | $1,663 | | Distribution to non-controlling interest | $(1,035) | $(1,260) | - Total equity increased by $23.2 million from $138.2 million in FY2020 to $161.4 million in FY2021[241] - The increase was primarily driven by net income attributable to Radiant Logistics, Inc. ($22.9 million) and other comprehensive income ($0.7 million)[241] Consolidated Statements of Cash Flows Radiant Logistics' FY2021 cash flows saw decreased operating cash ($14.1 million) due to receivables, lower investing cash use ($11.1 million), and a shift to $23.7 million used in financing from debt repayments and stock repurchases Consolidated Statements of Cash Flows Summary (FY2021 vs FY2020) | (In thousands) | Year Ended June 30, 2021 | Year Ended June 30, 2020 | | :------------------------------------------ | :----------------------- | :----------------------- | | Net cash provided by operating activities | $14,100 | $29,880 | | Net cash used for investing activities | $(11,073) | $(14,143) | | Net cash provided by (used for) financing activities | $(23,749) | $12,289 | | Net increase (decrease) in cash and cash equivalents | $(21,145) | $29,421 | | Cash and cash equivalents, end of year | $13,696 | $34,841 | - Net cash provided by operating activities decreased by $15.8 million, primarily due to an increase in accounts receivable[193][244] - Net cash used for financing activities shifted from a $12.3 million inflow in FY2020 to a $23.7 million outflow in FY2021, driven by net repayments on the revolving credit facility and common stock repurchases[195][244] - Non-cash activities included the forgiveness of $5.9 million in PPP loans during FY2021[246] Notes to the Consolidated Financial Statements The notes provide detailed disclosures on Radiant Logistics' organization, accounting policies, recent guidance, and specific financial items, including revenue, goodwill, debt, equity, fair value, taxes, share-based compensation, and contingencies - Note 1 details the company's organization, nature of operations as a third-party logistics provider, and the impact of the COVID-19 pandemic[249][250][251][252] - Note 3 outlines significant accounting policies, including principles of consolidation, use of estimates, revenue recognition, goodwill, intangible assets, and business combinations[257][259][264][268][270][274] - Notes 8 and 9 provide comprehensive information on the company's debt instruments, including the Revolving Credit Facility, Senior Secured Loans, and the forgiveness of Paycheck Protection Program loans, as well as derivative instruments[316][317][320][321][324][325][326][327][328] NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS Radiant Logistics, Inc. is a third-party logistics company providing multi-modal transportation and logistics services in the U.S. and Canada, including freight forwarding, brokerage, and value-added services, acknowledging COVID-19 uncertainty - Radiant Logistics, Inc. is a third-party logistics company offering multi-modal transportation and logistics services in the U.S. and Canada[249] - Services include domestic/international air and ocean freight forwarding, freight brokerage (truckload, LTL, intermodal), and value-added services like Materials Management and Distribution (MM&D) and Customs House Brokerage (CHB)[250] - The company acknowledges the widespread implications and uncertainty of the COVID-19 pandemic on its future operations and financial estimates[251][252] NOTE 2 - RECENT ACCOUNTING GUIDANCE Radiant Logistics is evaluating ASU 2020-04 and ASU 2016-13 (effective FY2024) and adopted ASU 2018-15 and ASU 2018-13 in FY2021 with no material financial statement impact - The company is assessing ASU 2020-04 (Reference Rate Reform) for potential impact on agreements, with temporary expedients available until December 31, 2022[253] - ASU 2016-13 (Credit Losses) is effective for the company in the first quarter of fiscal year 2024, and its impact is currently being evaluated[254] - ASU 2018-15 (Internal-Use Software) and ASU 2018-13 (Fair Value Measurement) were adopted on July 1, 2020, with no material impact on the consolidated financial statements[255][256] NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details Radiant Logistics' significant accounting policies, covering consolidation, estimates, asset accounting, goodwill, intangible assets, business combinations, revenue recognition, and other financial reporting areas - The consolidated financial statements include Radiant Logistics, Inc., its wholly-owned subsidiaries, and the variable interest entity Radiant Logistics Partners, LLC (RLP)[257] - Goodwill is tested annually for impairment, and definite-lived intangible assets (customer related, trade names, non-compete agreements) are amortized over their useful lives[264][269] - Revenue from transportation services is recognized over the transit period, while MM&D services are recognized over time, and CHB services at a point in time upon completion[275][276][277] NOTE 4 – EARNINGS PER SHARE Radiant Logistics reported basic EPS of $0.46 and diluted EPS of $0.45 for FY2021, based on $22.9 million net income and 49.9 million basic weighted average shares Earnings Per Share (FY2021 vs FY2020) | (In thousands, except share data) | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Net income attributable to Radiant Logistics, Inc. | $22,943 | $10,541 | | Weighted average common shares outstanding, basic | 49,890,945 | 49,600,506 | | Dilutive effect of share-based awards | 1,317,350 | 1,491,293 | | Weighted average common shares outstanding, diluted | 51,208,295 | 51,091,799 | | Basic Income per share | $0.46 | $0.21 | | Diluted Income per share | $0.45 | $0.21 | - Basic income per common share increased to $0.46 in FY2021 from $0.21 in FY2020[302] - Diluted income per common share increased to $0.45 in FY2021 from $0.21 in FY2020[302] NOTE 5 – LEASES Radiant Logistics holds operating and finance leases for various assets, with new significant leases commenced in FY2021; operating lease costs were $7.8 million, and ROU assets totaled $39.0 million as of June 30, 2021 - The company has operating and finance leases for office space, warehouse space, trailers, and other equipment, with terms expiring through April 2032[303] - New significant leases commenced in February and March 2021 for warehouse space in Bolton, Ontario (7-year term) and office space in Renton, Washington (11-year term)[304] Lease Expense and Liabilities (FY2021 vs FY2020) | (In thousands) | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Operating lease cost | $7,762 | $7,012 | | Total finance lease cost | $753 | $789 | | Operating lease right-of-use assets | $39,022 | $12,580 | | Total operating lease liabilities | $41,888 | $13,313 | | Total finance lease liabilities | $2,552 | $3,164 | | Weighted average remaining operating lease term | 7.1 years | 2.9 years | | Weighted average operating lease discount rate | 4.11% | 3.22% | NOTE 6 – PROPERTY, TECHNOLOGY, AND EQUIPMENT Radiant Logistics' net property, technology, and equipment increased to $24.2 million in FY2021, with computer software as the largest component, and depreciation/amortization expenses of $6.5 million Property, Technology, and Equipment (FY2021 vs FY2020) | (In thousands) | June 30, 2021 | June 30, 2020 | | :------------------------------------------ | :------------ | :------------ | | Computer software | $23,967 | $21,884 | | Trailers and related equipment | $6,902 | $6,733 | | Office and warehouse equipment | $8,650 | $3,980 | | Leasehold improvements | $5,595 | $3,799 | | Computer equipment | $3,885 | $3,054 | | Furniture and fixtures | $1,720 | $1,017 | | Less: accumulated depreciation and amortization | $(26,568) | $(21,755) | | Total net property, technology, and equipment | $24,151 | $18,712 | - Net property, technology, and equipment increased to $24.2 million in FY2021 from $18.7 million in FY2020[307] - Depreciation and amortization expenses related to these assets were $6.5 million for FY2021, slightly up from $6.3 million in FY2020[308] NOTE 7 – GOODWILL AND INTANGIBLE ASSETS Radiant Logistics' goodwill totaled $72.6 million as of June 30, 2021, with no impairment found, and net intangible assets were $41.4 million, with $10.1 million amortization expense in FY2021 Goodwill Carrying Amounts (FY2021 vs FY2020) | (In thousands) | Total | | :------------------------------------------ | :---- | | Balance as of June 30, 2019 | $65,389 | | Acquisition | $6,810 | | Balance as of June 30, 2020 | $72,199 | | Foreign currency translation gain | $383 | | Balance as of June 30, 2021 | $72,582 | - Goodwill totaled $72.6 million as of June 30, 2021, with $50.8 million in the U.S. reporting unit and $21.8 million in the Canadian reporting unit[309] Intangible Assets, Net (FY2021 vs FY2020) | (In thousands) | June 30, 2021 Net Carrying Amount | June 30, 2020 Net Carrying Amount | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Customer related | $32,223 | $40,926 | | Trade names and trademarks | $8,770 | $9,709 | | Covenants not to compete | $411 | $557 | | Total Intangible Assets, Net | $41,404 | $51,192 | | Total amortization expense | $10,120 (FY2021) | $10,259 (FY2020) | NOTE 8 – NOTES PAYABLE Radiant Logistics' notes payable, net of current portion, decreased to $24.0 million in FY2021, including $15.0 million on the Revolving Credit Facility and $13.7 million on Senior Secured Loans, with all $5.9 million PPP loans forgiven Notes Payable Summary (FY2021 vs FY2020) | (In thousands) | June 30, 2021 | June 30, 2020 | | :------------------------------------------ | :------------ | :------------ | | Revolving Credit Facility | $15,000 | $30,000 | | Senior Secured Loans | $13,690 | $16,302 | | Other debt (PPP loans) | — | $5,925 | | Unamortized debt issuance costs | $(244) | $(336) | | Total notes payable | $28,446 | $51,891 | | Less: current portion | $(4,446) | $(3,800) | | Total notes payable, net of current portion | $24,000 | $48,091 | - The Revolving Credit Facility had $15.0 million outstanding as of June 30, 2021, with an interest rate of 2.10%[318][319] - Senior Secured Loans from FPD IV and FPD V totaled $13.7 million outstanding, both accruing interest at 6.65% annual interest rate[320][321] - All $5.9 million in PPP loans, including accrued interest, were forgiven during the fiscal year ended June 30, 2021[326] NOTE 9 – DERIVATIVES Radiant Logistics uses interest rate swap contracts to manage risk, with $30.0 million notional amount and $6 thousand fair value as of June 30, 2021, with fair value changes recognized in other income (expense) - The company uses interest rate swap contracts to manage interest rate risk, converting a portion of its Revolving Credit Facility from floating to fixed rates[328] - As of June 30, 2021, two interest rate swap contracts had a total notional amount of $30.0 million and a fair value of $6 thousand (asset)[328] - These derivatives are not designated as hedges, and gains/losses from changes in fair value are recognized in other income (expense)[328] NOTE 10 – STOCKHOLDERS' EQUITY Radiant Logistics is authorized for 5 million shares of preferred stock and 100 million shares of common stock; a stock repurchase program led to 268,969 shares repurchased for $1.9 million in FY2021 - The company is authorized to issue 5 million shares of preferred stock and 100 million shares of common stock; no preferred stock is outstanding[329] - A common stock repurchase program was renewed through December 31, 2021[330] Common Stock Repurchases (FY2021 vs FY2020) | (In thousands) | FY2021 | FY2020 | | :------------------------------------------ | :----- | :----- | | Shares repurchased | 268,969 | 541,049 | | Average cost per share | $7.10 | $4.61 | | Aggregate cost | $1,909 | $2,496 | NOTE 11 – VARIABLE INTEREST ENTITY AND RELATED PARTY TRANSACTIONS Radiant Logistics consolidates RLP, a variable interest entity 40% owned by RGL and 60% by the CEO's entity, providing national accounts strategy; RLP reported $865 thousand profits in FY2021 - Radiant Logistics Partners, LLC (RLP) is a variable interest entity consolidated by the company, owned 40% by RGL and 60% by an entity of the CEO[331][257] - RLP is a certified minority business enterprise providing national accounts strategy and diversity initiatives, offering benefits to the company[331] RLP Financial Summary (FY2021 vs FY2020) | (In thousands) | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | RLP Profits | $865 | $3,039 | | RCP's distributable share (non-controlling interest) | $519 | $1,823 | | RLP Total Assets | $489 | $1,393 | | RLP Total Liabilities | $2 | $45 | | RLP Partners' Capital | $487 | $1,348 | NOTE 12 – FAIR VALUE MEASUREMENT Radiant Logistics measures financial assets and liabilities at fair value using a three-level hierarchy; contingent consideration totaled $(7.3) million (Level 3), and interest rate swaps had a $6 thousand fair value as of June 30, 2021 - Fair value measurements are based on a three-level hierarchy, with Level 3 inputs used for contingent consideration due to unobservable data[335] Fair Value Measurements (FY2021 vs FY2020) | (In thousands) | June 30, 2021 (Level 3 Total) | June 30, 2020 (Level 3 Total) | | :------------------------------------------ | :---------------------------- | :---------------------------- | | Contingent consideration | $(7,263) | $(4,940) | | Interest rate swap contracts (derivatives) | $6 | $600 | - Contingent consideration, measured quarterly at fair value, increased to $(7.3) million in FY2021, reflecting changes in management's estimates of future earn-out payments[338][339] NOTE 13 – INCOME TAXES Radiant Logistics reported $5.9 million in income tax expense for FY2021, with an effective tax rate lower than 21% due to PPP loan forgiveness and other benefits; net deferred tax liabilities decreased to $(4.0) million Income Tax Expense (FY2021 vs FY2020) | (In thousands) | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Current tax expense | $9,288 | $3,568 | | Deferred tax benefit | $(3,392) | $(411) | | Total income tax expense | $5,896 | $3,157 | - The effective tax rate for FY2021 was lower than the U.S. federal statutory rate (21%) due to PPP loan forgiveness, foreign-derived intangible income, and windfall benefits from stock option exercises[343] Net Deferred Tax Liabilities (FY2021 vs FY2020) | (In thousands) | June 30, 2021 | June 30, 2020 | | :------------------------------------------ | :------------ | :------------ | | Net deferred tax liabilities | $(4,021) | $(7,484) | NOTE 14 – SHARE-BASED COMPENSATION Radiant Logistics recognized $1.0 million in share-based compensation expense for restricted stock awards and $32 thousand for stock options in FY2021, with 1.4 million options outstanding at a $3.73 weighted average exercise price Share-Based Compensation Expense (FY2021 vs FY2020) | (In thousands) | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Restricted stock awards expense | $1,039 | $1,168 | | Stock options expense | $32 | $495 | | Total share-based compensation expense | $1,071 | $1,663 | - As of June 30, 2021, $1.6 million of unrecognized share-based compensation cost for restricted stock awards is expected to be recognized over 1.76 years[348] Stock Option Activity (FY2021) | | Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value (in thousands) | | :------------------------------------------ | :--------------- | :------------------------------ | :--------------------------------------- | | Outstanding as of June 30, 2021 | 1,414,442 | $3.73 | $4,573 | | Exercisable as of June 30, 2021 | 1,289,442 | $3.44 | $4,494 | | Exercised during FY2021 | 630,926 | $3.48 | $1,920 | NOTE 15 – COMMITMENTS AND CONTINGENCIES Radiant Logistics faces various legal claims, accruing for probable losses, with no material proceedings as of June 30, 2021; contingent consideration from acquisitions totals $7.3 million in estimated earn-out payments - The company is involved in various claims and legal actions, with accruals recorded for probable and estimable losses; no potentially material legal proceedings as of June 30, 2021[352] - Agreements from previous acquisitions include future consideration provisions (earn-out payments) based on achieving specified operating and financial objectives[353] Estimated Discounted Earn-out Payments (as of June 30, 2021) | (In thousands) | 2022 | 2023 | 2024 | Total | | :------------------------------------------ | :----- | :----- | :----- | :---- | | Cash earn-out payments | $2,600 | $1,941 | $2,722 | $7,263 | NOTE 16 – OPERATING AND GEOGRAPHIC SEGMENT INFORMATION Radiant Logistics operates in two segments, U.S. and Canada, evaluating performance by revenues and income from operations; in FY2021, the U.S. segment generated $770.8 million in revenues and $35.3 million in income from operations - The company has two operating and reportable segments: United States and Canada[355] - Segment performance is evaluated based on revenues and income from operations, with corporate costs reported separately[356] Segment Performance (FY2021 vs FY2020) | (In thousands) | United States (2021) | Canada (2021) | United States (2020) | Canada (2020) | | :------------------------------------------ | :------------------- | :------------ | :------------------- | :------------ | | Revenues | $770,785 | $118,828 | $759,239 | $96,629 | | Income (loss) from operations | $35,257 | $11,982 | $28,505 | $8,459 | | Total assets | $290,912 | $66,329 | $273,457 | $26,583 | | Goodwill | $50,801 | $21,781 | $50,801 | $21,398 | NOTE 17 - BUSINESS COMBINATION In February 2020, Radiant Logistics acquired two Adcom agency locations for $9.2 million cash and stock, plus contingent consideration, resulting in $6.8 million goodwill and $5.7 million identifiable intangible assets - On February 7, 2020, Radiant acquired the assets and operations of Friedway Enterprises, Inc. and CIC2, Inc., two Adcom agency locations[358] - Consideration included $9.2 million in cash, 45,086 shares of common stock ($0.25 million fair value), and contingent consideration with a fair value of $3.14 million (maximum $10.0 million)[359][361] - The acquisition resulted in $6.8 million of goodwill, recorded in the U.S. operating segment, and $5.7 million in identifiable intangible assets (customer related and covenants not to compete)[360][361] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Radiant Logistics reported no changes in or disagreements with accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[363] ITEM 9A. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were ineffective as of June 30, 2021, due to material weaknesses in internal control over financial reporting, specifically in revenue and commission calculations, with remediation plans underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2021, due to material weaknesses in internal control over financial reporting[365] - Material weaknesses were identified in controls over the recording and processing of revenue and the calculation of operating partner commissions, lacking precision to ensure completeness and accuracy[368][