Radiant Logistics, the acquisitive West Coast company, is dialing back its merger and acquisition efforts.
Regarding the company’s third-quarter earnings — its fiscal year begins July 1 — Bohn Crain, founder and CEO, said in a release that Radiant came into the quarter with a plan to make “a series of smaller strategic tuck-in acquisitions … while bullishly looking for growth opportunities in which we could add value.”
But Radiant has needed to pivot given the onset of the pandemic. As a result of COVID-19, Bohn said in his note, “we have tabled any acquisition opportunities” and suspended stock buybacks.
The changes at the company go further than that. Crain’s detailed statement said Radiant has taken other steps to cut operating costs. Late in the quarter, Radiant “initiated a series of what we hope will be temporary workforce reductions to mitigate our declining gross margins until our business recovers.”
Crain’s salary was cut by 50%. The company’s proxy reported his base salary the past two years at $325,000. Other compensation took his total pay package in 2019 up to about $1.65 million.
Bohn said he and other members of the management team will forego quarterly bonuses. The rest of the management team took a 20% cut in salary, according to the earnings statement. Members of the board of directors at Radiant are taking a 50% cut in their cash compensation, which the proxy lists as $40,000 for three directors.
The quarter saw the company’s revenues decline almost 14%, to $177.2 million. Net revenues were down slightly less, to $47.8 million from $52.7 million. Net income attributable to common shareholders was just a bit more than zero, though adjusted net income attributable to shareholders, a non-GAAP measure of profitability, was $4 million, or 8 cents per share. That was down from 11 cents per share in the corresponding quarter of 2019.
EBITDA was down to $6.1 million from adjusted EBITDA of $8.4 million for Q12019.
“Our numbers are down but it’s not like we lost any customers,” Crain said on the earnings call with analysts. They’re just operating at lower levels of activity or not operating at all, he added.
The move away from acquisitions is a significant change in just three months. In the earnings call for the second quarter, which ended Dec. 31, Crain talked about “tuck-in” acquisitions, which appear to be where a small brokerage that is a Radiant agency is acquired by the parent. Those agencies are known as “strategic operating partners.”
“We think there is an inherent pipeline of tuck-in acquisitions,” Crain said at the time. “And we would expect over time more and more of our strategic operating partners to effectively raise their hand and begin that process of converting from an agency to a company-owned store.”
Asked by an analyst on the call for the recently ended quarter whether the pandemic will ultimately provide some acquisition opportunities to pick up companies that are still in business but have been weakened, Crain said Radiant doesn’t “view ourselves as predatory. We want to make sure we come out of this with all our fingers and toes intact. Where there are partnering opportunities, we will try to partner.”
Moving forward, Crain said Radiant expects further tightening of results due to the pandemic. But he said the company has started a program called SPARC, which stands for Securing Profitable Accounts at Reasonable Credit, in an effort to bring in new business.
“We wanted for our agents to think aggressively and look for new business,” Crain said about the SPARC program. The incentive is providing the agents with what Crain called a “holiday on the corporate fees for winning new business, as long as they onboard the new business” in a certain period of time.