Management from Radiant Logistics fielded questions from analysts and investors most concerned with the company’s low valuation on a Monday call after the market closed. The stock has been largely range-bound in recent years even as its earnings have grown fivefold.
The third-party logistics provider reported adjusted earnings per share of 24 cents for the fiscal second quarter ended Dec. 31. The result was ahead of a range of consensus estimates between 12 cents and 14 cents and the year-ago result of 17 cents.
The adjusted result excluded costs associated with a December ransomware event (approximately $750,000) and deal costs from its acquisition of Navegate, a global digital freight management platform specializing in customs brokerage, freight forwarding and truck brokerage.
The adjustments also included a normalized tax rate of 24.5%, 290 basis points lower than the one recorded in the period. Navegate is headquartered near Minneapolis-St. Paul and pays a higher state income tax rate than the rest of the Radiant platform.
“We’re trying to continue to create shareholder value executing our strategy,” Bohn Crain, founder and CEO, said on the call. “We haven’t been rewarded the way that we would like to be. That creates its own frustrations and its own opportunities.”
Shares of RLGT, which trade at 7 times on an enterprise value-to-adjusted earnings before interest, taxes, depreciation and amortization basis, pale in comparison to Pilot Freight Services, which shipping line Maersk acquired at a 13.8x EV/EBITDA multiple on Wednesday.
Crain said the company remains focused on repurchasing its stock, which “does not accurately reflect Radiant’s (NYSE: RLGT) intrinsic value or long-term growth prospects” as well as acquisitions as a means of boosting value.
Radiant’s revenue increased 52.1% year-over-year to $332.8 million in the quarter. The result included one month of contribution from Navegate, which reported annual revenue of $87.5 million for the 12-month period ending Sept. 30.
Net revenue of $71.6 million was 29.5% higher year-over-year, however the margin dipped 380 bps to 21.5%. Higher third-party transportation expenses in a capacity-constrained freight market were the culprit.
Crain said the company is comfortable with debt leverage of 2.5x EBITDA even though financial covenants allow for 3x. Radiant ended the quarter with debt leverage of 1.4x.
It’s not just about M&A and share repurchases.
Organic opportunities should drive gross margin dollar growth in the 4% to 6% range “conservatively,” with EBITDA growth in the 8% to 12% range.
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