Radiant(RLGT) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Explanatory Note The company restated its previously issued financial statements for fiscal years 2021 and 2022 due to historical errors primarily related to the timing of revenue and cost recognition - The company concluded that financial statements for fiscal years 2021 and 2022 should be restated to correct historical errors[9] - The primary reason for the restatement was errors in the timing of recognition for estimated in-transit revenues and related costs[9] Financial Statements (Unaudited) For the nine months ended March 31, 2023, the company reported revenues of $853.3 million and net income of $18.0 million, with total assets decreasing to $433.9 million and positive operating cash flow of $76.1 million Condensed Consolidated Balance Sheets As of March 31, 2023, total assets decreased to $433.9 million from $497.4 million at June 30, 2022, driven by reductions in current assets, while total equity increased to $206.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Total current assets | $216,057 | $289,344 | | Total assets | $433,930 | $497,351 | | Total current liabilities | $141,989 | $187,664 | | Total liabilities | $227,522 | $302,794 | | Total equity | $206,408 | $194,557 | Condensed Consolidated Statements of Comprehensive Income For the third quarter ended March 31, 2023, revenues significantly decreased to $244.2 million from $441.3 million year-over-year, with net income falling to $4.2 million from $13.6 million Financial Performance Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 (Restated) | Nine Months 2023 | Nine Months 2022 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $244,171 | $441,310 | $853,261 | $1,076,486 | | Income from operations | $6,258 | $17,474 | $24,296 | $37,992 | | Net income attributable to Radiant | $4,183 | $13,567 | $17,452 | $27,715 | | Diluted EPS | $0.08 | $0.27 | $0.35 | $0.55 | Condensed Consolidated Statements of Changes in Equity Total equity increased from $194.6 million at June 30, 2022, to $206.4 million at March 31, 2023, primarily driven by net income partially offset by common stock repurchases - Key drivers of equity change for the nine months ended March 31, 2023 included net income of $17.5 million and common stock repurchases totaling $5.0 million[19] Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2023, net cash provided by operating activities was $76.1 million, a significant improvement from the prior-year period, with net cash used for investing and financing activities Cash Flow Summary (in thousands) | Activity | Nine Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2022 (Restated) | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $76,105 | $(6,938) | | Net cash used for investing activities | $(10,236) | $(44,433) | | Net cash provided by (used for) financing activities | $(45,038) | $77,217 | | Net increase in cash | $26,536 | $26,344 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, including revenue recognition for transportation services, segment information, the acquisition of Cascade Enterprises, and ongoing remediation for a material weakness in internal controls over financial reporting - The company operates as a third-party logistics provider in the U.S. and Canada, offering freight forwarding and brokerage services through a network of over 100 operating locations[26][27] - Transportation services revenue is recognized over time as goods move from origin to destination, representing a single performance obligation[52] - On October 1, 2022, the company acquired Cascade Enterprises of Minnesota, Inc. for $3.25 million in cash plus contingent consideration based on future performance[129] - The company's board authorized a repurchase program for up to 5,000,000 shares; during the nine months ended March 31, 2023, 839,864 shares were repurchased for $5.0 million[103] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 46.6% decrease in Q3 transportation revenue to lower international rates and volumes and the absence of prior-year non-recurring charter business, while net transportation margins improved and operating cash flow remained strong - The company's primary performance indicator is adjusted gross profit (gross transportation revenue less direct cost of transportation), which management believes reflects the ability to source, add value, and resell services[148] - Management also uses non-GAAP measures like EBITDA and Adjusted EBITDA to evaluate performance, as these eliminate non-cash charges like amortization from acquisitions[151][152] Q3 2023 vs Q3 2022 Performance (in millions) | Metric | Q3 2023 | Q3 2022 (Restated) | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Transportation Revenue | $229.3 | $429.2 | $(199.9) | -46.6% | | Adjusted Transportation Gross Profit | $60.3 | $78.1 | $(17.8) | -22.8% | | Adjusted EBITDA | $11.6 | $22.6 | $(11.0) | -48.7% | - The decrease in Q3 transportation revenue was primarily due to a significant drop in international and ocean rates and volumes, and a lack of non-recurring charter business that occurred in the prior year[155] - Net cash from operating activities increased by $83.0 million for the nine months ended March 31, 2023, compared to the prior year, mainly due to changes in operating assets and liabilities[176] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from foreign exchange rate fluctuations, particularly with its Canadian operations, and interest rate changes on its variable-rate revolving credit facility, without historically using hedging instruments - The company has currency exposure from its Canadian operations; a 1.0% change in foreign exchange rates would impact net income by approximately $0.13 million[187] - The company is subject to interest rate risk on its Revolving Credit Facility; for every 1.0% increase in interest rates, interest expense would increase by approximately $0.01 million for every $1.0 million in borrowings[188] Controls and Procedures Management concluded that the company's disclosure controls and procedures were ineffective as of March 31, 2023, due to a material weakness in internal control over financial reporting related to revenue recognition accruals, with ongoing remediation efforts - The CEO and CFO concluded that disclosure controls and procedures were ineffective as of March 31, 2023[190] - The ineffectiveness is due to a material weakness in internal controls related to the recording and processing of revenue transactions, specifically the timing of estimated accruals for in-transit revenues and costs[191] - Remediation efforts, which began in fiscal year 2022, are ongoing and include refining the accrual process and performing additional review procedures[192][193] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various ordinary course legal actions with no material proceedings reported as of March 31, 2023, but disclosed a December 2021 ransomware incident that could lead to future claims - As of March 31, 2023, there were no legal proceedings deemed potentially material[196] - A December 2021 ransomware incident resulted in some data extraction of customer and employee information, which could lead to future legal or regulatory actions despite recovery efforts being complete[197] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 - No material changes in risk factors were reported since the last Annual Report on Form 10-K[198] Unregistered Sale of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during the three months ended March 31, 2023, with 3,408,077 shares remaining available for repurchase under the existing program - No common stock was repurchased during the three months ended March 31, 2023[199] - As of March 31, 2023, the company had authorization to repurchase up to an additional 3,408,077 shares[199] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications as required by the Sarbanes-Oxley Act and Inline XBRL data files - Filed exhibits include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906[200]