RADIANT LOGISTICS INC

Three months ended December 31, 2023 and 2022 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and adjusted gross profit by reportable operating segments for the three months ended December 31, 2023 and 2022:

(1)

Transportation revenue was $187.8 million and $265.0 million for the three months ended December 31, 2023 and 2022, respectively. The decrease of $77.2 million, or 29.1% is primarily due to significant decreases in international and ocean rates, compounded by lower ocean volumes, and an overall decrease in charter business compared to the prior year period. Adjusted transportation gross profit was $54.6 million and $66.6 million for the three months ended December 31, 2023 and 2022, respectively. Net transportation margins increased from 25.1% to 29.1%, primarily due to a higher mix of domestic shipments, which have higher gross profit margin characteristics than ocean and charter shipments.

Value-added services revenue was $13.3 million and $13.1 million for the three months ended December 31, 2023 and 2022, respectively. Adjusted value-added services gross profit was $7.4 million for the three months ended December 31, 2023, compared to $7.5 million for the comparable prior year period. Adjusted value-added services gross profit percentage decreased from 56.9% to 55.7%.

The following table provides a reconciliation for the three months ended December 31, 2023 and 2022 of adjusted gross profit to gross profit, the most directly comparable GAAP measure:

The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the three months ended December 31, 2023 and 2022:

(1)

(2)

Operating partner commissions decreased $4.7 million, or 15.4%, to $25.8 million for the three months ended December 31, 2023. The decrease in commissions isprimarily due to a reduction of adjusted gross profit generated from our strategic operating partners and the conversion of a strategic operating partner to a company-owned location, who earned commissions in the prior year period. As a percentage of adjusted gross profit, operating partner commissions increased 43 basis points to 41.6% from 41.2% for the three months ended December 31, 2023 and 2022, respectively, as a result of a higher percentage of gross margin generated from strategic operating partners.

Personnel costs decreased $0.8 million, or 4.3%, to $19.8 million for the three months ended December 31, 2023. As a percentage of adjusted gross profit, personnel costs increased 399 basis points to 31.9% from 27.9% for the three months ended December 31, 2023 and 2022, respectively.

Selling, general and administrative (“SG&A”) expenses increased $1.9 million, or 22.2%, to $10.6 million for the three months ended December 31, 2023. The increase is primarily due to increased software costs, facilities costs, and allowance for credit losses. As a percentage of adjusted gross profit, SG&A increased 538 basis points to 17.1% from 11.7% for the three months ended December 31, 2023 and 2022, respectively.

Depreciation and amortization costs decreased $2.5 million, or 36.9%, to $4.4 million for the three months ended December 31, 2023. The decrease is attributable to the accelerated amortization of intangible assets in the prior year resulting from the rebranding of certain trade names. As a percentage of adjusted gross profit, depreciation and amortization costs decreased 230 basis points to 7.0% from 9.3% for the three months ended December 31, 2023 and 2022, respectively.

Our decrease in net income is driven principally by decreased adjusted gross profit, partially offset by decreased operating partner commissions, decreased amortization of intangible assets and income tax expense compared to the comparable prior year period.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions, gains or losses from changes in fair value of contingent consideration, and changes in fair value of interest rate swap contracts, which are difficult to predict.

The following table provides a reconciliation for the three months ended December 31, 2023 and 2022 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:

(1)

Depreciation and amortization for the purposes of calculating adjusted EBITDA, a non-GAAP financial measure, includes depreciation expenses recognized on certain computer software as a service.

(2)

(3)

Six months ended December 31, 2023 and 2022 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and adjusted gross profit by reportable operating segments for the six months ended December 31, 2023 and 2022:

(1)

Transportation revenue was $385.8 million and $583.1 million for the six months ended December 31, 2023 and 2022, respectively. The decrease of $197.3 million, or 33.8% is primarily due to significant decreases in international and ocean rates, compounded by lower ocean volumes, and an overall decrease in charter business compared to the prior year period. Adjusted transportation gross profit was $108.4 million and $135.7 million for the six months ended December 31, 2023 and 2022, respectively. Net transportation margins increased from 23.3% to 28.1%, primarily due to a higher mix of domestic shipments, which have higher gross profit margin characteristics than ocean and charter shipments.

Value-added services revenue was $26.1 million and $26.0 million for the six months ended December 31, 2023 and 2022, respectively. Adjusted value-added services gross profit was $14.4 million for the six months ended December 31, 2023, compared to $14.9 million for the comparable prior year period. Adjusted value-added services gross profit percentage decreased from 57.2% to 55.2%.

The following table provides a reconciliation for the six months ended December 31, 2023 and 2022 of adjusted gross profit to gross profit, the most directly comparable GAAP measure:

The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the six months ended December 31, 2023 and 2022:

(1)

(2)

Operating partner commissions decreased $11.0 million, or 18.2%, to $49.6 million for the six months ended December 31, 2023. The decrease in commissions isprimarily due to a reduction of adjusted gross profit generated from our strategic operating partners. As a percentage of adjusted gross profit, operating partner commissions increased 11 basis points to 40.4% from 40.3% for the six months ended December 31, 2023 and 2022, respectively, as a result of a higher percentage of gross margin generated from strategic operating partners.

Personnel costs decreased $1.0 million, or 2.5%, to $39.4 million for the six months ended December 31, 2023. As a percentage of adjusted gross profit, personnel costs increased 522 basis points to 32.1% from 26.9% for the six months ended December 31, 2023 and 2022, respectively.

SG&A expenses increased $2.7 million, or 15.1%, to $20.1 million for the six months ended December 31, 2023. The increase is primarily due to increased software costs, facilities costs, and allowance for credit losses. As a percentage of adjusted gross profit, SG&A increased 475 basis points to 16.3% from 11.6% for the six months ended December 31, 2023 and 2022, respectively.

Depreciation and amortization costs decreased $4.8 million, or 35.1%, to $8.9 million for the six months ended December 31, 2023. The decrease is attributable to the accelerated amortization of intangible assets in the prior year resulting from the rebranding of certain trade names. As a percentage of adjusted gross profit, depreciation and amortization costs decreased 186 basis points to 7.2% from 9.1% for the six months ended December 31, 2023 and 2022, respectively.

Our decrease in net income is driven principally by decreased adjusted gross profit, partially offset by decreased operating partner commissions, decreased amortization of intangible assets and income tax expense compared to the comparable prior year period.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions, gains or losses from changes in fair value of contingent consideration, and changes in fair value of interest rate swap contracts, which are difficult to predict.

The following table provides a reconciliation for the six months ended December 31, 2023 and 2022 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:

(1)

Depreciation and amortization for the purposes of calculating adjusted EBITDA, a non-GAAP financial measure, includes depreciation expenses recognized on certain computer software as a service.

(2)

(3)

Liquidity and Capital Resources

Generally, our primary sources of liquidity are cash generated from operating activities and borrowings under our Revolving Credit Facility, as described below. These sources also fund a portion of our capital expenditures and contractual contingent consideration obligations. Our level of cash and financing capabilities along with cash flows from operations have historically been sufficient to meet our operating and capital needs. As of December 31, 2023, we have $32.9 million in unrestricted cash on hand to serve as adequate working capital.

Net cash provided by operating activities was $12.1 million and $67.0 million for the six months ended December 31, 2023 and 2022, respectively. The cash provided by operating activities primarily consisted of net income adjusted for depreciation and amortization and changes in accounts receivable, contract assets, accounts payable, income taxes, and payments of contingent consideration. Cash flow from operating activities for the six months ended December 31, 2023 decreased by $54.9 million, compared with the same period in fiscal year 2023, primarily due to decreased net income, amortization of intangible assets, and net changes in accounts receivable, contract assets, and accounts payable.

Net cash used for investing activities was $4.9 million and $6.7 million for the six months ended December 31, 2023 and 2022, respectively. Cash paid for acquisitions were $0.1 million and $3.3 million for the six months ended December 31, 2023 and 2022, respectively. Cash paid for purchases of property, technology, and equipment were $5.0 million and $3.4 million for the six months ended December 31, 2023 and 2022, respectively. Proceeds from sale of property, technology, and equipment were $0.2 million and less than $0.1 million of the six months ended December 31, 2023 and 2022.

Net cash used for financing activities was $6.8 million and $23.7 million for the six months ended December 31, 2023 and 2022, respectively. There were no repayments or borrowings under the Revolving Credit Facility for the six months ended December 31, 2023, compared to net repayments of the Revolving Credit Facility of $15.0 million for the six months ended December 31, 2022. Payments of debt issuance costs were $0.1 million and $0.8 million for the six months ended December 31, 2023 and 2022, respectively. Repayments of notes payable and finance lease liabilities were $2.6 million and $2.5 million for each of the six months ended December 31, 2023 and 2022, respectively. Payments for repurchases of common stock was $3.1 million and $5.0 million for the six months ended December 31, 2023 and 2022, respectively. Payments of contingent consideration was $0.3 million for the six months ended December 31, 2023. Distributions to non-controlling interest were $0.3 million and $0.2 million for the six months ended December 31, 2023 and 2022, respectively. Proceeds from exercise of stock options were less than $0.1 million and $0.2 million for the six months ended December 31, 2023 and 2022, respectively. Payments of employee tax withholdings related to restricted stock units and stock options were $0.4 million and $0.5 million for the six months ended December 31, 2023 and 2022, respectively.

Revolving Credit Facility

The Company entered into a $200 million syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated as of August 5, 2022, and amended as of September 27, 2023. The Revolving Credit Facility is segregated into two tranches, a $150 million tranche that may be loaned in U.S. Dollars and a $50 million tranche that may be loaned in either U.S. Dollars or Canadian Dollars. The Revolving Credit Facility includes a $75 million accordion feature to support future acquisition opportunities. The Revolving Credit Facility was entered into with Bank of America, N.A. and BMO Capital Markets Corp. as joint book runners and joint lead arrangers, Bank of America, N.A. as Administrative Agent, Swingline Lender and Letter of Credit Issuer, Bank of Montreal as syndication agent, KeyBank National Association and MUFG Union Bank, N.A. as co-documentation agents and Bank of America, N. A., Bank of Montreal, KeyBank National Association, MUFG Union Bank, N.A. and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”).

The Revolving Credit Facility has a term of five years and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company and the guarantors on a parity basis with the security interest held by Fiera Private Debt Fund IV LP and Fiera Private Debt Fund V LP described below. Borrowings in U.S. Dollars accrue interest (at the Company’s option) at a) the Lenders’ base rate plus 0.50% to 1.50%; b) Term Secured Overnight Financing Rate (“SOFR”) plus 1.40% to 2.40%; or c) Term SOFR Daily Floating Rate plus 1.40% to 2.40%. Borrowings in Canadian Dollars accrue interest (at the Company’s option) at a) Term Canadian Overnight Repo Rate Average (“CORRA”) plus 0.29547% to 0.32138% depending on the term, plus 1.40% to 2.40%; or b) Daily Simple CORRA plus 0.29547% plus 1.40% to 2.40%. Rates are adjusted based on the Company’s consolidated net leverage ratio. The Company’s U.S. and Canadian subsidiaries are guarantors of the Revolving Credit Facility.

For borrowings under the Revolving Credit Facility, the Company is subject to the maximum consolidated net leverage ratio of 3.00 and minimum consolidated interest coverage ratio of 3.00. Additional minimum availability requirements and financial covenants apply in the event the Company seeks to use advances under the Revolving Credit Facility to pursue acquisitions or repurchase its common stock.

As of December 31, 2023, there were no borrowings outstanding on the Revolving Credit Facility.

Senior Secured Loans

In connection with the Company’s acquisition of Radiant Canada, Radiant Canada obtained a CAD$29 million senior secured Canadian term loan from Fiera Private Debt Fund IV LP (“FPD IV” formerly, Integrated Private Debt Fund IV LP) pursuant to a CAD$29,000,000 Credit Facilities Loan Agreement. The Company’s U.S. and Canadian subsidiaries are guarantors of the obligations thereunder. The loan matures on April 1, 2024 and accrues interest at a rate of 6.65% per annum. The Company is required to maintain five months interest in a debt service reserve account to be controlled by FPD IV.

In connection with the Company’s acquisition of Lomas, Radiant Canada obtained a CAD$10 million senior secured Canadian term loan from Fiera Private Debt Fund V LP (formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement. The Company’s U.S. and Canadian subsidiaries are guarantors of the obligations thereunder. The loan matures on June 1, 2024 and accrues interest at a fixed rate of 6.65% per annum. The loan repayment consists of monthly blended principal and interest payments.

The loans may be prepaid in whole at any time providing the Company gives at least 30 days prior written notice and pays the difference between (i) the present value of the loan interest and the principal payments foregone discounted at the Government of Canada Bond Yield for the term from the date of prepayment to the maturity date, and (ii) the face value of the principal amount being prepaid.

For additional information regarding our indebtedness, see Note 8 to our unaudited condensed consolidated financial statements.