RADIANT LOGISTICS, INC - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021


☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-35392

RADIANT LOGISTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3625550

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

405 114th Avenue S.E., Third Floor

Bellevue, Washington 98004

(Address of principal executive offices) (Zip Code)

(425) 943-4599

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 Par Value	RLGT	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 50,119,474 shares outstanding of the registrant’s common stock as of May 3, 2021.

RADIANT LOGISTICS, INC.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of March 31, 2021 and June 30, 2020	3

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2021 and 2020	4

	Condensed Consolidated Statements of Changes in Equity for the three and nine months ended March 31, 2021 and 2020	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 6.	Exhibits	39

Signatures		40

RADIANT LOGISTICS, INC.

Condensed Consolidated Balance Sheets


	March 31,			June 30,
(In thousands, except share and per share data)	2021			2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,215		$	34,841
Accounts receivable, net of allowance of $1,561 and $1,990, respectively		110,991			71,838
Contract assets		26,038			16,312
Income tax receivable		—			780
Prepaid expenses and other current assets		19,720			16,817
Total current assets		160,964			140,588

Property, technology, and equipment, net		21,918			18,712

Goodwill		72,298			72,199
Intangible assets, net		43,742			51,192
Operating lease right-of-use assets		25,722			12,580
Deposits and other assets		3,710			4,769
Total other long-term assets		145,472			140,740
Total assets	$	328,354		$	300,040

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	84,597		$	65,003
Operating partner commissions payable		12,294			9,131
Accrued expenses		7,705			6,538
Income tax payable		357			—
Current portion of notes payable		4,316			3,800
Current portion of operating lease liability		6,429			6,121
Current portion of finance lease liability		739			688
Current portion of contingent consideration		2,319			2,127
Other current liabilities		424			308
Total current liabilities		119,180			93,716

Notes payable, net of current portion		24,766			48,091
Operating lease liability, net of current portion		20,080			7,192
Finance lease liability, net of current portion		1,988			2,476
Contingent consideration, net of current portion		4,944			2,813
Deferred income taxes		6,312			7,484
Other long-term liabilities		61			93
Total long-term liabilities		58,151			68,149
Total liabilities		177,331			161,865

Commitments and contingencies (Note 15)

Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 shares authorized; 50,751,454 and 50,188,486 shares issued, and 50,118,607 and 49,555,639 shares outstanding, respectively		32			32
Additional paid-in capital		103,671			102,214
Treasury stock, at cost, 632,847 shares		(2,749	)		(2,749	)
Retained earnings		49,308			37,424
Accumulated other comprehensive income		618			445
Total Radiant Logistics, Inc. stockholders’ equity		150,880			137,366
Non-controlling interest		143			809
Total equity		151,023			138,175
Total liabilities and equity	$	328,354		$	300,040

The accompanying notes are an integral part of these condensed consolidated financial statements.

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)


	Three Months Ended March 31,						Nine Months Ended March 31,
(In thousands, except share and per share data)	2021			2020			2021			2020
Revenues	$	236,532		$	177,221		$	631,214		$	579,691

Operating expenses:
Cost of transportation and other services		179,732			129,440			473,148			420,419
Operating partner commissions		23,761			20,352			66,386			69,899
Personnel costs		14,229			14,412			40,741			44,487
Selling, general and administrative expenses		6,688			8,027			17,910			22,370
Depreciation and amortization		4,174			4,282			12,418			12,413
Transition, lease termination, and other costs		—			—			—			328
Change in fair value of contingent consideration		2,500			3			4,350			52
Total operating expenses		231,084			176,516			614,953			569,968

Income from operations		5,448			705			16,261			9,723

Other income (expense):
Interest income		3			17			14			50
Interest expense		(611	)		(752	)		(1,919	)		(2,070	)
Foreign currency transaction gain (loss)		14			169			(158	)		120
Change in fair value of interest rate swap contracts		(512	)		—			(642	)		—
Gain on forgiveness of debt		1,414			—			1,414			—
Other		281			89			663			164
Total other income (expense)		589			(477	)		(628	)		(1,736	)

Income before income taxes		6,037			228			15,633			7,987

Income tax expense		(976	)		(102	)		(3,455	)		(1,850	)

Net income		5,061			126			12,178			6,137
Less: net income attributable to non-controlling interest		(77	)		(73	)		(294	)		(262	)

Net income attributable to Radiant Logistics, Inc.	$	4,984		$	53		$	11,884		$	5,875

Other comprehensive income:
Foreign currency translation gain		567			711			173			677
Comprehensive income	$	5,628		$	837		$	12,351		$	6,814

Income per share:
Basic	$	0.10		$	—		$	0.24		$	0.12
Diluted	$	0.10		$	—		$	0.23		$	0.11

Weighted average common shares outstanding:
Basic		50,034,950			49,577,370			49,807,932			49,667,243
Diluted		51,359,441			50,974,994			51,131,806			51,266,348

The accompanying notes are an integral part of these condensed consolidated financial statements.

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Changes in Equity

Three and Nine Months Ended March 31, 2021

(unaudited)


	RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY
	Common Stock				Additional Paid-in			Treasury			Retained		Accumulated Other Comprehensive			Total Radiant Logistics, Inc. Stockholders'			Non- Controlling			Total
(In thousands, except share and per share data)	Shares		Amount		Capital			Stock			Earnings		Income (Loss)			Equity			Interest			Equity
Balance as of June 30, 2020		49,555,639	$	32	$	102,214		$	(2,749	)	$	37,424	$	445		$	137,366		$	809		$	138,175
Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		112,864		—		(301	)		—			—		—			(301	)		—			(301	)
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		6,131		—		3			—			—		—			3			—			3
Distribution to non-controlling interest		—		—		—			—			—		—			—			(720	)		(720	)
Share-based compensation		—		—		144			—			—		—			144			—			144
Net income		—		—		—			—			3,088		—			3,088			141			3,229
Other comprehensive loss		—		—		—			—			—		(1,996	)		(1,996	)		—			(1,996	)
Balance as of September 30, 2020		49,674,634	$	32	$	102,060		$	(2,749	)	$	40,512	$	(1,551	)	$	138,304		$	230		$	138,534

Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		42,182		—		(33	)		—			—		—			(33	)		—			(33	)
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		250,249		—		1,068			—			—		—			1,068			—			1,068
Distribution to non-controlling interest		—		—		—			—			—		—			—			(150	)		(150	)
Share-based compensation		—		—		327			—			—		—			327			—			327
Net income		—		—		—			—			3,812		—			3,812			76			3,888
Other comprehensive income		—		—		—			—			—		1,602			1,602			—			1,602
Balance as of December 31, 2020		49,967,065	$	32	$	103,422		$	(2,749	)	$	44,324	$	51		$	145,080		$	156		$	145,236

Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		151,542		—		(54	)		—			—		—			(54	)		—			(54	)
Distribution to non-controlling interest		—		—		—			—			—		—			—			(90	)		(90	)
Share-based compensation		—		—		303			—			—		—			303			—			303
Net income		—		—		—			—			4,984		—			4,984			77			5,061
Other comprehensive income		—		—		—			—			—		567			567			—			567
Balance as of March 31, 2021		50,118,607	$	32	$	103,671		$	(2,749	)	$	49,308	$	618		$	150,880		$	143		$	151,023

The accompanying notes are an integral part of these condensed consolidated financial statements.

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Changes in Equity (continued)

Three and Nine Months Ended March 31, 2020

(unaudited)


	RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY
	Common Stock					Additional Paid-in			Treasury			Retained		Accumulated Other Comprehensive			Total Radiant Logistics, Inc. Stockholders'			Non- Controlling			Total
(In thousands, except share and per share data)	Shares			Amount		Capital			Stock			Earnings		Income (Loss)			Equity			Interest			Equity
Balance as of June 30, 2019		49,586,464		$	31	$	100,186		$	(253	)	$	26,883	$	187		$	127,034		$	246		$	127,280
Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		138,147			—		(314	)		—			—		—			(314	)		—			(314	)
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		82,627			—		(146	)		—			—		—			(146	)		—			(146	)
Distribution to non-controlling interest		—			—		—			—			—		—			—			(180	)		(180	)
Share-based compensation		—			—		430			—			—		—			430			—			430
Net income		—			—		—			—			3,235		—			3,235			96			3,331
Other comprehensive income		—			—		—			—			—		114			114			—			114
Balance as of September 30, 2019		49,807,238		$	31	$	100,156		$	(253	)	$	30,118	$	301		$	130,353		$	162		$	130,515

Repurchase of common stock		(189,558	)		—		—			(1,000	)		—		—			(1,000	)		—			(1,000	)
Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		34,434			—		—			—			—		—			—			—			—
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		10,000			—		39			—			—		—			39			—			39
Distribution to non-controlling interest		—			—		—			—			—		—			—			(90	)		(90	)
Share-based compensation		—			—		467			—			—		—			467			—			467
Net income		—			—		—			—			2,587		—			2,587			93			2,680
Other comprehensive loss		—			—		—			—			—		(148	)		(148	)		—			(148	)
Balance as of December 31, 2019		49,662,114		$	31	$	100,662		$	(1,253	)	$	32,705	$	153		$	132,298		$	165		$	132,463

Issuance of common stock to shareholders of acquired business		45,086			—		250			—			—		—			250			—			250
Repurchase of common stock		(351,491	)		—		—			(1,496	)		—		—			(1,496	)		—			(1,496	)
Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		4,149			—		(12	)		—			—		—			(12	)		—			(12	)
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		35,781			—		15			—			—		—			15			—			15
Share-based compensation		—			—		409			—			—		—			409			—			409
Net income		—			—		—			—			53		—			53			73			126
Other comprehensive income		—			—		—			—			—		711			711			—			711
Balance as of March 31, 2020		49,395,639		$	31	$	101,324		$	(2,749	)	$	32,758	$	864		$	132,228		$	238		$	132,466

The accompanying notes are an integral part of these condensed consolidated financial statements.

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Nine Months Ended March 31,
(In thousands)	2021			2020
OPERATING ACTIVITIES:
Net income	$	12,178		$	6,137
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Share-based compensation		774			1,306
Amortization of intangible assets		7,598			7,718
Depreciation and amortization of property, technology, and equipment		4,820			4,695
Deferred income tax benefit		(1,172	)		(1,537	)
Amortization of debt issuance costs		393			278
Change in fair value of contingent consideration		4,350			52
Gain on forgiveness of debt		(1,414	)		—
Other		(635	)		124
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable		(37,495	)		(657	)
Contract assets		(9,688	)		1,976
Income tax receivable/payable		1,197			(312	)
Prepaid expenses, deposits, and other assets		3,322			(3,734	)
Accounts payable		20,530			(8,250	)
Operating partner commissions payable		3,162			(2,500	)
Accrued and other liabilities		(4,221	)		(6,335	)
Payment of contingent consideration		—			(280	)
Net cash provided by (used for) operating activities		3,699			(1,319	)

INVESTING ACTIVITIES:
Payments to acquire businesses		—			(9,150	)
Purchases of property, technology, and equipment		(8,673	)		(4,728	)
Proceeds from sale of property, technology, and equipment		333			73
Net cash used for investing activities		(8,340	)		(13,805	)

FINANCING ACTIVITIES:
Proceeds from revolving credit facility		269			566,316
Repayment of revolving credit facility		(20,000	)		(534,152	)
Payments of debt issuance costs		—			(1,636	)
Repayments of notes payable and finance lease liability		(3,461	)		(3,215	)
Repurchases of common stock		—			(2,496	)
Payments of contingent consideration		(2,027	)		(47	)
Distribution to non-controlling interest		(960	)		(270	)
Proceeds from exercise of stock options		1,159			39
Payments of employee tax withholdings related to vesting of restricted stock awards		(334	)		(326	)
Payments of employee tax withholdings related to cashless exercise of stock options		(142	)		(131	)
Net cash provided by (used for) financing activities		(25,496	)		24,082

Effect of exchange rate changes on cash and cash equivalents		(489	)		2,319

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(30,626	)		11,277
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		34,841			5,420

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,215		$	16,697

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid	$	3,509		$	3,801
Interest paid	$	1,518		$	1,779

The accompanying notes are an integral part of these condensed consolidated financial statements.

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)

(In thousands)

Supplemental disclosure of non-cash financing activities:

During the nine months ended March 31, 2021, certain Paycheck Protection Program (the “PPP”) Loans totaling $1,414 were forgiven, including $11 of interest previously accrued.

The accompanying notes are an integral part of these condensed consolidated financial statements.

RADIANT LOGISTICS, INC.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

(Dollars in thousands, except share and per share data)

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

The Company

Radiant Logistics, Inc., and its consolidated subsidiaries (the “Company”) operates as a third-party logistics company, providing multi-modal transportation and logistics services primarily to customers based in the United States and Canada. The Company services a large and diversified account base, which it supports from an extensive multi-brand network of over 100 operating locations (including 20 Company-owned offices) across North America as well as an integrated international service partner network located in other key markets around the globe. As a third-party logistics company, the Company has a vast carrier network of asset-based transportation companies, including motor carriers, railroads, airlines, and ocean lines.

Through its operating locations across North America, the Company offers domestic and international air and ocean freight forwarding services and freight brokerage services, including truckload services, less than truckload services, and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. The Company’s primary transportation services involve arranging shipments, on behalf of its customers, of materials, products, equipment, and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. The Company also provides other value-added supply chain services, including order fulfillment, inventory management, and warehouse and distribution services, and customs brokerage services to complement its core transportation service offering.

The COVID-19 pandemic continues to have widespread implications and while we see improvements in the broader economy, it is difficult to predict how COVID-19 will impact the overall economy in the future. Many countries have begun the process of vaccinating their residents against COVID-19. However, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may impact the economy as well as our operations in the future. We saw revenue for the third quarter increase from the second quarter of fiscal 2021. While we are seeing positive results despite the current COVID-19 environment, there remains uncertainty regarding how COVID-19 will impact the Company's results in the future.

Due to the unprecedented and evolving nature of the COVID-19 pandemic, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The Company’s management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020.

The interim period information included in this Quarterly Report on Form 10-Q reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of the Company’s management, necessary for a fair statement of the results of the respective interim periods. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

NOTE 2 - RECENT ACCOUNTING GUIDANCE

Recent Accounting Guidance Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) and subsequent amendments to the initial guidance: ASU 2021-01, which provides temporary optional expedients and exceptions to the current guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. As of March 31, 2021, the Company has not utilized any of the expedients discussed within this ASU, however, it continues to assess its agreements to determine if LIBOR is included and if the expedients would be utilized through the allowed period of December 31, 2022.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance: ASU 2018-19, 2019-04, 2019-05, and 2020-03 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. Topic 326 is effective for the Company in the first quarter of fiscal year 2024. The Company is currently evaluating the impact of the standard on its consolidated financial statements and disclosures.

Recently Adopted Accounting Guidance

In August 2018, the FASB issued ASU 2018-15 (Subtopic 350-40), Intangibles—Goodwill and Other—Internal-Use Software— Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software. The Company adopted this standard on July 1, 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The Company adopted this standard on July 1, 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Principles of Consolidation

The condensed consolidated financial statements include the accounts of Radiant Logistics, Inc. and its wholly-owned subsidiaries as well as a single variable interest entity, Radiant Logistics Partners, LLC (“RLP”), which is 40% owned by Radiant Global Logistics, Inc. (“RGL”) and 60% owned by Radiant Capital Partners, LLC (“RCP”, see Note 11), an entity owned by the Company’s Chief Executive Officer. All significant intercompany balances and transactions have been eliminated.

Non-controlling interest in the condensed consolidated balance sheets represents RCP’s proportionate share of equity in RLP. Net income (loss) of non-wholly owned consolidated subsidiaries or variable interest entities is allocated to the Company and the holder(s) of the non-controlling interest in proportion to their percentage ownership.

b) Use of Estimates

The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results reported in future periods may be based upon amounts that could differ from these estimates due to the inherent uncertainty involved in making estimates and risks and uncertainties, including uncertainty in the current economic environment due to COVID-19.

c) Cash and Cash Equivalents

The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Cash equivalents consist of highly liquid investments with original maturities of three months or less.

d) Accounts Receivable

The Company’s receivables are recorded when billed and represent amounts owed by third-party customers, as well as amounts owed by strategic operating partners. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company evaluates the collectability of accounts receivable on a customer-by-customer basis. The Company records an allowance for doubtful accounts to reduce the net recognized receivable to an amount the Company believes will be reasonably collected. The allowance for doubtful accounts is determined from the analysis of the aging of the accounts receivable, historical experience and knowledge of specific customers.

The Company derives a substantial portion of its revenue through independently owned strategic operating partner locations operating under various Company brands. Each strategic operating partner is responsible for some or all of the collection of the accounts related to the underlying customers being serviced by such strategic operating partner. To facilitate this arrangement, based on contractual agreements, certain strategic operating partners are required to maintain a bad debt reserve in the form of a security deposit with the Company. The Company charges each strategic operating partner’s bad debt reserve account for any accounts receivable aged beyond 90 days along with any other amounts owed to the Company by strategic operating partners. However, the bad debt reserve account may carry a deficit balance when amounts charged to this reserve account exceed amounts otherwise available. In these circumstances, a deficit bad debt reserve account is recognized as a receivable in the Company’s condensed consolidated financial statements. Some strategic operating partners are not required to establish a bad debt reserve; however, they are still responsible to make up for any deficits and the Company may withhold all or a portion of future commissions payable to the strategic operating partner to satisfy any deficit balance. Currently, a number of the Company’s strategic operating partners have a deficit balance in their bad debt reserve accounts. The Company expects to replenish these funds through the future business operations of these strategic operating partners or as their customers satisfy the amounts payable to the Company. However, to the extent any of these strategic operating partners were to cease operations or otherwise be unable to replenish these deficit accounts, the Company would be at risk of loss for any such amounts and generally would reserve for them.

e) Property, Technology, and Equipment

Property, technology, and equipment is stated at cost, less accumulated depreciation, and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation or amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in other income or expense. Expenditures for maintenance, repairs and renewals of minor items are expensed as incurred. Major renewals and improvements are capitalized.

f) Goodwill

Goodwill represents the excess acquisition cost of an acquired entity over the estimated fair values assigned to the net tangible and identifiable intangible assets acquired. The Company performs its annual goodwill impairment test as of April 1 of each year or more frequently if facts or circumstances indicate that the carrying amount may not be recoverable. Based on the most recent annual impairment test, there was no impairment.

An entity has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount prior to performing a quantitative impairment test. The qualitative assessment evaluates various factors, such as macro-economic conditions, industry and market conditions, cost factors, relevant events and financial trends that may impact the fair value of the reporting unit. If it is determined that the estimated fair value of the reporting unit is more-likely-than-not less than its carrying amount, including goodwill, a quantitative assessment is required. Otherwise, no further analysis is required.

If a quantitative assessment is performed, a reporting unit’s fair value is compared to its carrying value. A reporting unit’s fair value is determined based upon consideration of various valuation methodologies, including the income approach, which utilizes projected future cash flows discounted at rates commensurate with the risks involved and multiples of current and future earnings. If the fair value of a reporting unit is less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

g) Long-Lived Assets

Long-lived assets, such as property, technology, and equipment and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company compares the undiscounted expected future cash flows to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent the carrying amount of the asset or asset group exceeds the fair value. Fair values of long-lived assets are determined through various techniques, such as applying probability weighted, expected present value calculations to the estimated future cash flows using assumptions a market participant would utilize or through the use of a third-party independent appraiser or valuation specialist. No impairment losses of long-lived assets were recorded during the nine months ended March 31, 2021 and 2020.

Intangible assets consist of customer related intangible assets, trade names and trademarks, and non-compete agreements arising from the Company’s acquisitions. Customer related intangible assets are amortized using the straight-line method over a period of up to ten years, trademarks and trade names are amortized using the straight-line method over 15 years, and non-compete agreements are amortized using the straight-line method over the term of the underlying agreements.

h) Business Combinations

The Company accounts for business acquisitions using the acquisition method as required by FASB ASC Topic 805, Business Combinations. The assets acquired and liabilities assumed in business combinations, including identifiable intangible assets, are recorded based upon their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired is recorded as goodwill. Acquisition expenses are expensed as incurred. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed as of the acquisition date, the estimates are inherently uncertain and subject to refinement.

The fair values of intangible assets are generally estimated using a discounted cash flow approach with Level 3 inputs. The estimate of fair value of an intangible asset is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To estimate fair value, the Company generally uses risk-adjusted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes the level and timing of cash flows appropriately reflects market participant assumptions.

For acquisitions that involve contingent consideration, the Company records a liability equal to the fair value of the contingent consideration obligation as of the acquisition date. The Company determines the acquisition date fair value of the contingent consideration based on the likelihood of paying the additional consideration. The fair value is generally estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the fair value of the contingent consideration liability is recognized in the condensed consolidated statements of comprehensive income. Amounts are generally due annually on November 1st and 90 days following the quarter of the final earn-out period of each respective acquisition.

During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the condensed consolidated statements of comprehensive income.

i) Revenue Recognition

The Company’s revenues are primarily from transportation services, which includes providing for the arrangement of freight, both domestically and internationally, through modes of transportations, such as air freight, ocean freight, truckload, less than truckload and intermodal. The Company generates its transportation services revenue by purchasing transportation from direct carriers and reselling those services to its customers.

In general, each shipment transaction or service order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed upon transaction price exists. The transaction price is typically fixed and not contingent upon the occurrence or non-occurrence of any other event. The transaction price is generally due 30 to 45 days from the date of invoice. The Company’s transportation transactions provide for the arrangement of the movement of freight to a customer’s destination. The transportation services, including certain ancillary services, such as loading/unloading, freight insurance and customs clearance, that are provided to the customer represent a single performance obligation as these promises aren’t distinct in the context of the contract. This performance obligation is satisfied over time and recognized in revenue upon the transfer of control of the services over the requisite transit period as the customer’s goods move from origin to destination. The Company determines the period to recognize revenue in transit based upon the departure date and the delivery date, which may be estimated if delivery has not occurred as of the reporting date. Determination of the transit period and the percentage of completion of the shipment as of the reporting date requires management to make judgments that affect the timing of revenue recognition. The Company has determined that revenue recognition over the transit period provides a reasonable estimate of the transfer of services to its customers as it depicts the pattern of the Company’s performance under the contracts with its customers.

The Company also provides materials management and distribution (“MM&D”) services for its customers under contracts generally ranging from a few months to five years and include renewal provisions. These MM&D service contracts provide for inventory management, order fulfilment and warehousing of the Customer’s product and arrangement of transportation of the customer’s product. The Company’s performance obligations are satisfied over time as the customers simultaneously receive and consume the services provided by the Company as they are performed. The transaction price is based on the consideration specified in the contract with the customer and contains fixed and variable consideration. In general, the fixed consideration component of a contract represents reimbursement for facility and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration component is comprised of cost reimbursement per unit pricing for time and pricing for materials used and is determined based on cost plus a mark-up for hours of services provided and materials used and is recognized over time based on the level of activity volume.

Other services include primarily customs house brokerage (“CHB”) services sold on a standalone basis as a single performance obligation. The Company recognizes revenue from this performance obligation at a point in time, which is the completion of the services. Duties and taxes collected from the customer and paid to the customs agent on behalf of the customers are excluded from revenue.

The Company uses independent contractors and third-party carriers in the performance of its transportation services. The Company evaluates who controls the transportation services to determine whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party. The Company determined it acts as the principal for its transportation services performance obligation since it is in control of establishing the prices for the specified services, managing all aspects of the shipments process and assuming the risk of loss for delivery and collection. Such transportation services revenue is presented on a gross basis in the condensed consolidated statements of comprehensive income.

A summary of the Company’s gross revenues disaggregated by major service lines and geographic markets (reportable segments), and timing of revenue recognition for the three and nine months ended March 31, 2021 and 2020 are as follows:


	Three Months Ended March 31, 2021
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	201,854	$	26,611	$	(125	)	$	228,340
Value-added services (1)		2,182		6,010		—			8,192
Total	$	204,036	$	32,621	$	(125	)	$	236,532

Timing of Revenue Recognition:
Services transferred over time	$	203,412	$	32,621	$	(125	)	$	235,908
Services transferred at a point in time		624		—		—			624
Total	$	204,036	$	32,621	$	(125	)	$	236,532

	Nine Months Ended March 31, 2021
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	543,078	$	67,588	$	(369	)	$	610,297
Value-added services (1)		6,224		14,693		—			20,917
Total	$	549,302	$	82,281	$	(369	)	$	631,214

Timing of Revenue Recognition:
Services transferred over time	$	547,672	$	82,281	$	(369	)	$	629,584
Services transferred at a point in time		1,630		—		—			1,630
Total	$	549,302	$	82,281	$	(369	)	$	631,214


	Three Months Ended March 31, 2020
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	148,941	$	21,217	$	(123	)	$	170,035
Value-added services (1)		3,290		3,896		—			7,186
Total	$	152,231	$	25,113	$	(123	)	$	177,221

Timing of Revenue Recognition:
Services transferred over time	$	151,587	$	25,113	$	(123	)	$	176,577
Services transferred at a point in time		644		—		—			644
Total	$	152,231	$	25,113	$	(123	)	$	177,221

	Nine Months Ended March 31, 2020
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	492,567	$	63,402	$	(508	)	$	555,461
Value-added services (1)		11,642		12,588		—			24,230
Total	$	504,209	$	75,990	$	(508	)	$	579,691

Timing of Revenue Recognition:
Services transferred over time	$	501,814	$	75,990	$	(508	)	$	577,296
Services transferred at a point in time		2,395		—		—			2,395
Total	$	504,209	$	75,990	$	(508	)	$	579,691

(1) Value-added services include MM&D, CHB, and other services.

Practical Expedients

The Company has elected to not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of the end of the period as the Company’s contracts with its transportation customers have an expected duration of one year or less.

For the performance obligation to transfer MM&D services in contracts with customers, revenue is recognized in the amount for which the Company has the right to invoice the customer, as this amount corresponds directly with the value provided to the customer for the Company’s performance completed to date.

The Company also applies the practical expedient that permits the recognition of employee sales commissions related to transportation services as an expense when incurred since the amortization period of such costs is less than one year. These costs are included in the condensed consolidated statements of comprehensive income.

Contract Assets

Contract assets represent amounts for which the Company has the right to consideration for the services provided while a shipment is still in-transit but for which it has not yet completed the performance obligation and has not yet invoiced the customer. Upon completion of the performance obligations, which can vary in duration based upon the method of transport and billing the customer, these amounts become classified within accounts receivable.

Operating Partner Commissions

The Company enters into contractual arrangements with independent agents that operate, on behalf of the Company, an office in a specific location that engages primarily in arranging, domestic and international, transportation services. In return, the independent agent is compensated through the payment of sales commissions, which are based on individual shipments. The Company accrues the independent agent’s commission obligation ratably as the goods are transferred to the customer.

j) Defined Contribution Savings Plans

The Company has an employee savings plan under which the Company provides safe harbor matching contributions. The Company’s contributions under the plan were $389 and $964 for the three and nine months ended March 31, 2021, respectively and $377 and $989 for the three and nine months ended March 31, 2020, respectively.

k) Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company records a liability for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Interest and penalties, if any, are recorded as a component of interest expense or other expense, respectively.

l) Share-Based Compensation

The Company grants restricted stock awards, restricted stock units and stock options to certain directors, officers, and employees. The Company accounts for share-based compensation as equity awards such that compensation cost is measured at the grant date based on the fair value of the award and is expensed ratably over the vesting period. The fair value of restricted stock is the market price as of the grant date, and the fair value of each stock option grant is estimated as of the grant date using the Black-Scholes option pricing model. Determining the fair value of share-based awards at the grant date requires judgment about, among other things, stock volatility, the expected life of the award, and other inputs. The Company accounts for forfeitures as they occur. The Company issues new shares of common stock to satisfy exercises and vesting of awards granted under its stock plans. Share-based compensation expense is reflected in the condensed consolidated statements of comprehensive income as part of personnel costs.

m) Basic and Diluted Income per Share Allocable to Common Stockholders

Basic income per common share is computed by dividing net income allocable to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is computed by dividing net income allocable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if the potential common shares, such as restricted stock awards and stock options, had been issued and were considered dilutive.

n) Foreign Currency Translation

For the Company’s foreign subsidiaries that prepare financial statements in currencies other than US dollars, the local currency is the functional currency. All assets and liabilities are translated at period-end exchange rates and all income statement amounts are translated at the weighted average rates for the period. Translation adjustments are recorded in accumulated other comprehensive (loss) income. Gains and losses on transactions of monetary items denominated in a foreign currency are recognized in other income (expense) in the condensed consolidated statements of comprehensive income.

o) Leases

The Company determines if an arrangement is a lease at inception. Assets and obligations related to operating leases are included in operating lease right-of-use (“ROU”) assets; current portion of operating lease liability; and operating lease liability, net of current portion in our condensed consolidated balance sheets. Assets and obligations related to finance leases are included in property, technology, and equipment, net; current portion of finance lease liability; and finance lease liability, net of current portion in our condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Annually, we perform an impairment analysis on ROU assets, and as of June 30, 2020, there was no material impairment to ROU assets.

The Company’s agreements with lease and non-lease components, are all each accounted for as a single lease component. For leases with an initial term of twelve months or less, the Company elected the exemption from recording right of use assets and lease liabilities for all leases that qualify, and records rent expense on a straight-line basis over the lease term. Expenses for these short-term leases for the three and nine months ended March 31, 2021 and 2020 are immaterial.

Certain leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. We exclude variable payments from lease ROU assets and lease liabilities, to the extent not considered fixed, and instead expense as incurred. Variable lease costs for the three and nine months ended March 31, 2021 and 2020 are immaterial.

p) Derivatives

Derivative instruments are recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in earnings with the corresponding hedged item. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in earnings. As of March 31, 2021, the Company does not have any derivatives designated as hedges.

For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are recognized in other income (expense) in the condensed consolidated statements of comprehensive income.

NOTE 4 – EARNINGS PER SHARE

The computations of the numerator and denominator of basic and diluted income per share are as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands, except share data)	2021		2020		2021		2020
Numerator:
Net income attributable to Radiant Logistics, Inc.	$	4,984	$	53	$	11,884	$	5,875

Denominator:
Weighted average common shares outstanding, basic		50,034,950		49,577,370		49,807,932		49,667,243
Dilutive effect of share-based awards		1,324,491		1,397,624		1,323,874		1,599,105

Weighted average common shares outstanding, diluted		51,359,441		50,974,994		51,131,806		51,266,348

Potentially dilutive common shares excluded		35,000		318,116		153,577		320,525

NOTE 5 – LEASES

The Company has operating and finance leases for office space, warehouse space, trailers, and other equipment. Lease terms expire at various dates through April 2032 with options to renew for varying terms at the Company’s sole discretion. The Company has not included these options to extend or terminate in its calculation of right-or-use assets or lease liabilities as it is not reasonably certain to exercise these options.

In February 2021, the Company commenced a new lease for warehouse space in Bolton, Ontario. The lease has a seven-year term ending in January 2028 replacing the Company's warehouse lease at Brampton, Ontario, which expired in March 2021.

In March 2021, the Company commenced a new lease for office space in Renton, Washington. The lease has an eleven-year term ending in April 2032 replacing office space currently leased at Bellevue, Washington, which will end in May 2021.

The components of lease expense were as follows:


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
(In thousands)	2021		2020			2021				2020
Operating:
Operating lease cost	$	1,987		$	1,775			$	5,503		$	5,465

Financing:
Amortization of leased assets		155			153				459			466
Interest on lease liabilities		33			41				105			131

Total finance lease cost	$	188		$	194			$	564		$	597

Supplemental cash flow information related to leases was as follows:


(In thousands)		Nine Months Ended March 31, 2021		Nine Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows arising from operating leases	$		5,598	$	5,484
Operating cash flows arising from finance leases			107		128
Financing cash flows arising from finance leases			531		497

Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$		17,920	$	1,163
Finance leases			38		26

Supplemental balance sheet information related to leases was as follows:


	March 31,			June 30,
(In thousands)	2021			2020
Operating lease:
Operating lease right-of-use assets	$	25,722		$	12,580

Current portion of operating lease liability		6,429			6,121
Operating lease liability, net of current portion		20,080			7,192

Total operating lease liabilities	$	26,509		$	13,313

Finance lease:
Property, technology, and equipment, net	$	2,831		$	3,254

Current portion of finance lease liability		739			688
Finance lease liability, net of current portion		1,988			2,476

Total finance lease liabilities	$	2,727		$	3,164

Weighted average remaining lease term:
Operating leases	5.9 years			2.9 years
Finance leases	4.6 years			5.0 years

Weighted average discount rate:
Operating leases		3.83	%		3.22	%
Finance leases		4.78	%		4.52	%

As of March 31, 2021, maturities of lease liabilities for each of the next five fiscal years ending June 30 and thereafter are as follows:


(In thousands)	Operating			Finance
2021 (remaining)	$	1,794		$	213
2022		7,098			841
2023		4,312			648
2024		3,635			573
2025		3,625			541
Thereafter		8,351			176

Total lease payments		28,815			2,992

Less imputed interest		(2,306	)		(265	)

Total lease liability	$	26,509		$	2,727

NOTE 6 – PROPERTY, TECHNOLOGY, AND EQUIPMENT


		March 31,			June 30,
(In thousands)	Useful Life	2021			2020
Computer software	3 - 5 years	$	23,797		$	21,884
Trailers and related equipment	3 - 15 years		7,030			6,733
Office and warehouse equipment	3 - 15 years		7,663			3,980
Leasehold improvements	(1)		4,252			3,799
Computer equipment	3 - 5 years		3,638			3,054
Furniture and fixtures	3 - 15 years		1,208			1,017

			47,588			40,467
Less: accumulated depreciation and amortization			(25,670	)		(21,755	)

		$	21,918		$	18,712

(1) The cost is amortized over the shorter of the lease term or useful life.

Depreciation and amortization expenses related to property, technology, and equipment were $1,651 and $4,820 for the three and nine months ended March 31, 2021, respectively and $1,792 and $4,695 for the three and nine months ended March 31, 2020, respectively. Computer software includes approximately $822 and $174 of software in development as of March 31, 2021 and June 30, 2020, respectively.

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The table below reflects the changes in the carrying amount of goodwill for the nine months ended March 31, 2021:


(In thousands)	Total
Balance as of June 30, 2020	$	72,199
Foreign currency translation loss		99

Balance as of March 31, 2021	$	72,298

We considered the uncertainties from COVID-19 as part of our determination as to whether any triggering events occurred during the quarter ended March 31, 2021, which would indicate an impairment of goodwill is more likely than not. Based on our assessment, there were no triggering events identified that would have an adverse impact on our business; and therefore, no impairment was identified for our goodwill as of March 31, 2021.

As additional facts and circumstances evolve, we continue to observe and assess our reporting units particularly as a direct consequence of the circumstances surrounding COVID-19. To the extent new information becomes available that impacts our results of operations and financial condition, we expect to revise our projections accordingly as our estimates of future net after-tax cash flows are highly dependent upon certain assumptions, including, but not limited to, the amount and timing of the economic recovery globally and nationally.

Furthermore, the evaluation of impairment of goodwill requires the use of estimates about future operating results. Changes in forecasted operations can materially affect these estimates, which could materially affect our results of operations and financial condition. The estimates of expected future cash flows require significant judgment and are based on assumptions we determined to be reasonable; however, they are unpredictable and inherently uncertain, including, estimates of future growth rates, operating margins and assumptions about the overall economic climate as well as the competitive environment within which we operate. There can be no assurance that our estimates and assumptions made for purposes of our impairment assessments as of the time of evaluation will prove to be accurate predictions of the future, especially in light of the uncertainty surrounding the COVID-19 pandemic. If our assumptions regarding business plans, competitive environments, or anticipated growth rates are not correct, we may be required to record non-cash impairment charges in future periods, whether in connection with our normal review procedures periodically, or earlier, if an indicator of an impairment is present prior to such evaluation.

Intangible Assets

Intangible assets consisted of the following as of March 31, 2021 and June 30, 2020, respectively:


	March 31, 2021
(In thousands)	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer related	4.4 years	$	102,346	$	(68,026	)	$	34,320
Trade names and trademarks	8.9 years		15,034		(6,056	)		8,978
Covenants not to compete	3.6 years		1,433		(989	)		444

		$	118,813	$	(75,071	)	$	43,742


	June 30, 2020
(In thousands)	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer related	5.1 years	$	102,153	$	(61,227	)	$	40,926
Trade names and trademarks	9.6 years		14,977		(5,268	)		9,709
Covenants not to compete	4.3 years		1,433		(876	)		557

		$	118,563	$	(67,371	)	$	51,192

Amortization expense amounted to $2,523 and $7,598 for the three and nine months ended March 31, 2021, respectively and $2,490 and $7,718 for the three and nine months ended March 31, 2020, respectively. Future amortization expense for each of the next five fiscal years ending June 30 are as follows:


(In thousands)
2021 (remaining)	$	2,521
2022		9,555
2023		9,077
2024		8,701
2025		6,710

NOTE 8 – NOTES PAYABLE

Notes payable consist of the following:


	March 31,			June 30,
(In thousands)	2021			2020
Revolving Credit Facility	$	10,269			$	30,000
Senior Secured Loans		14,564				16,302
Other debt		4,521				5,925
Unamortized debt issuance costs		(272	)			(336	)

Total notes payable		29,082				51,891
Less: current portion		(4,316	)			(3,800	)

Total notes payable, net of current portion	$	24,766			$	48,091

Future maturities of notes payable for each of the next five fiscal years ending June 30 are as follows:


(In thousands)
2021 (remaining)	$	1,052
2022		8,910
2023		4,689
2024		4,434
2025		10,269

	$	29,354

Revolving Credit Facility

The Company entered into a $150,000 syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated on March 13, 2020. The Revolving Credit Facility was entered into with Bank of America Securities, Inc. as sole book runner and sole lead arranger, Bank of Montreal Chicago Branch, as lender and syndication agent, MUFG Union Bank, N.A as lender and documentation agent and Bank of America, N. A., KeyBank National Association 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, matures on March 13, 2025, and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company. Borrowings under the Revolving Credit Facility accrue interest (at the Company’s option), at the Lenders’ base rate plus 1.00% or LIBOR plus 2.00% and can be subsequently adjusted based on the Company’s consolidated leverage ratio under the facility at the Lenders’ base rate plus 1.00% to 1.75% or LIBOR plus 2.00% to 2.75%. As of March 31, 2021, this interest rate used was 2.17%.

The Revolving Credit Facility includes a $50,000 accordion feature to support future acquisition opportunities. For general borrowings under the Revolving Credit Facility, the Company is subject to the maximum consolidated leverage ratio of 3.00 and minimum consolidated fixed charge coverage ratio of 1.25. 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 March 31, 2021, the borrowings outstanding on the Revolving Credit Facility was $10,269 and the Company was in compliance with all of its covenants.

Senior Secured Loans

In connection with the Company’s acquisition of Radiant Canada (formerly, Wheels International Inc.), Radiant Canada obtained a CAD$29,000 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 Credit Facilities Loan Agreement. The Company and its US and Canadian subsidiaries are guarantors of the Radiant Canada 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. The amount of approximately $600 is recorded as deposits and other assets in the accompanying condensed consolidated financial statements. The Company made interest-only payments for the first twelve months followed by monthly principal and interest payments of CAD$390 that will be paid through maturity.

In connection with the Company’s acquisition of Lomas, Radiant Canada obtained a CAD$10,000 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 Credit Facilities Loan Agreement. The Company and its US and Canadian subsidiaries are guarantors of the Radiant Canada 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 principal and interest payments of CAD$149.

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.

The covenants of the Revolving Credit Facility, described above, also apply to the FPD IV and FPD V term loans. As of March 31, 2021, the Company was in compliance with all of its covenants.

Paycheck Protection Program Loans

On May 4, 2020, the Company received loan proceeds of $5,925 pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. On April 28, 2020, the Secretary of the US Department of the Treasury stated that the Small Business Administration will perform a full review of any PPP loan over $2,000 before forgiving the loan. The certification made by the Company did not contain any objective criteria and is subject to interpretation. Despite the good-faith belief that given the Company’s circumstances all eligibility requirements for the PPP Loans were satisfied, if it is later determined that the Company had violated any applicable laws or regulations or it is otherwise determined the Company was ineligible to receive the PPP Loans, it may be required to repay the PPP Loans in its entirety and/or be subject to additional penalties.

The term of the Company’s PPP Loans is two years. The annual interest rate on the PPP Loans is 1% and no payments of principal or interest are due until the conclusion of the deferral period. The deferral period will end on the earlier of (i) the date that Small Business Administration remits the loan forgiveness amount to the lender, or (ii) if the loan is not forgiven, ten months after the end of the 24-week loan forgiveness covered period. Under the terms of the PPP loans, all or a portion of the principal may be forgiven if the Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part. With respect to any portion of the PPP Loans that is not forgiven, the PPP Loan will be repayable on the terms set forth above. The PPP Loan is recognized on the Company’s condensed consolidated balance sheet as notes payable and will be derecognized if and when forgiven.

As of March 31, 2021, certain PPP Loans totaling $1,414 were forgiven including, $11 of interest previously accrued. The Company is in the process of seeking forgiveness for the remaining $4,521 PPP Loan.

NOTE 9 – DERIVATIVES

All derivatives are recognized on the Company’s condensed consolidated balance sheets at their fair values and consist of interest rate swap contracts. On March 20, 2020, and effective April 17, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade variable interest cash inflows at one-month LIBOR for a $20,000 notional amount, for fixed interest cash outflows at 0.635%. On April 1, 2020, and effective April 2, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade the variable interest cash inflows at one-month LIBOR for a $10,000 notional amount, for fixed interest cash outflows at 0.5865%. Both interest rate swap contracts mature and terminate on March 13, 2025.

The Company uses an interest rate swap for the management of interest rate risk exposure, as the interest rate swap effectively converts a portion of the Company’s Revolving Credit Facility from a floating to a fixed rate. The interest rate swap is an agreement between the Company and Bank of America to pay, in the future, a fixed-rate payment in exchange for Bank of America paying the Company a variable payment. The net payment obligation is based on the notional amount of the swap contract and the prevailing market interest rates. The Company may terminate the swap contract prior to its expiration date, at which point a realized gain or loss would be recognized. The value of the Company’s commitment would increase or decrease based primarily on the extent to which interest rates move against the rate fixed for each swap. As of March 31, 2021, the derivative instrument had a total notional amount of $30,000 and a fair value of $42 recorded in other current liabilities in the condensed consolidated balance sheets. As of June 30, 2020, the derivative instrument had a total notional amount of $30,000 and a fair value of $600 recorded in deposits and other assets on the condensed consolidated balance sheet. Both interest rate swap contracts are not designated as hedges; gains and losses from changes in fair value are recognized in other income (expense) in the condensed consolidated statements of comprehensive income.

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue 5,000,000 shares of preferred stock, par value at $0.001 per share and 100,000,000 shares of common stock, $0.001 per share.

Common Stock

In March 2018, the Company’s board of directors authorized the repurchase of up to 5,000,000 shares of the Company’s common stock through December 31, 2019. On February 4, 2020, the Company announced that its board of directors had approved the renewal of the repurchase program through December 31, 2021. Under the stock repurchase program, the Company is authorized to repurchase, from time-to-time, shares of its outstanding common stock in the open market at prevailing market prices or through privately negotiated transactions as permitted by securities laws and other legal requirements. The program does not obligate the Company to repurchase any specific number of shares and could be suspended or terminated at any time without prior notice. Under this repurchase program, the Company purchased 541,049 shares of its common stock at an average cost of $4.61 per share for an aggregate cost of $2,496 during the fiscal year ended June 30, 2020. We have temporarily suspended our share repurchases under our stock repurchase program as we continue to assess the impacts of COVID-19.

NOTE 11 – VARIABLE INTEREST ENTITY AND RELATED PARTY TRANSACTIONS

RLP is owned 40% by RGL and 60% by RCP, a company for which the Chief Executive Officer of the Company is the sole member. RLP is a certified minority business enterprise that was formed for the purpose of providing the Company with a national accounts strategy to pursue corporate and government accounts with diversity initiatives. RCP’s ownership interest entitles it to a majority of the profits and distributable cash, if any, generated by RLP. The operations of RLP are intended to provide certain benefits to the Company, including expanding the scope of services offered by the Company and participating in supplier diversity programs not otherwise available to the Company. In the course of evaluating and approving the ownership structure, operations and economics emanating from RLP, a committee consisting of the independent Board member of the Company, considered, among other factors, the significant benefits provided to the Company through association with a minority business enterprise, particularly as many of the Company’s largest current and potential customers have a need for diversity offerings. In addition, the committee concluded that the economic relationship with RLP was on terms no less favorable to the Company than terms generally available from unaffiliated third parties.

Certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have the sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties are considered variable interest entities. The Company has power over significant activities of RLP including the fulfillment of its contracts and financing its operations. Additionally, the Company also pays expenses and collects receivables on behalf of RLP. Thus, the Company is the primary beneficiary, RLP qualifies as a variable interest entity, and RLP is consolidated in these condensed consolidated financial statements.

RLP recorded $128 and $490 in profits, of which RCP’s distributable share was $77 and $294 for the three and nine months ended March 31, 2021, respectively. RLP recorded $123 and $438 in profits, of which RCP’s distributable share was $73 and $262 for the three and nine months ended March 31, 2020, respectively. The non-controlling interest recorded as a reduction of net income available to common stockholders in the condensed consolidated statements of comprehensive income represents RCP’s distributive share.

NOTE 12 – FAIR VALUE MEASUREMENT

The accounting guidance for fair value, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The framework for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The fair value measurement level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:



Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;



Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost); and



Income approach: Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option-pricing, and excess earning models.

Items Measured at Fair Value on a Recurring Basis

The following table sets forth the Company’s financial assets (liabilities) measured at fair value on a recurring basis:


(In thousands)	Fair Value Measurements as of March 31, 2021
	Level 3			Total
Contingent consideration	$	(7,263	)	$	(7,263	)
Interest rate swap contracts (derivatives)		(42	)		(42	)

	Fair Value Measurements as of June 30, 2020
	Level 3			Total
Contingent consideration	$	(4,940	)	$	(4,940	)
Interest rate swap contracts (derivatives)	$	600		$	600

The following table provides a reconciliation of the financial assets (liabilities) measured at fair value using significant unobservable inputs (Level 3):


(In thousands)	Contingent Consideration			Interest rate swap contracts (derivatives)
Balance as of June 30, 2019	$	(375	)	$	—
Increase related to accounting for acquisitions		(3,140	)		—
Contingent consideration paid		327			—
Change in fair value		(1,752	)		600

Balance as of June 30, 2020	$	(4,940	)	$	600
Contingent consideration paid		2,027			—
Change in fair value		(4,350	)		(642	)

Balance as of March 31, 2021	$	(7,263	)	$	(42	)

The Company has contingent obligations to transfer cash payments and equity shares to former shareholders of acquired operations in conjunction with certain acquisitions if specified operating results and financial objectives are met over the next four fiscal years. Contingent consideration is measured quarterly at fair value, and any change in the fair value of the contingent liability is included in the condensed consolidated statements of comprehensive income. The change in the current period fair value is principally attributable to a net increase in management’s estimates of future earn-out payments through the remainder of the earn-out periods.

The Company uses projected future financial results based on recent and historical data to value the anticipated future earn-out payments. To calculate fair value, the future earn-out payments were then discounted using Level 3 inputs. The Company has classified the contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs. The Company believes the discount rate used to discount the earn-out payments reflects market participant assumptions. Changes in assumptions and operating results could have a significant impact on the earn-out amount, up to a maximum of $8,473 through earn-out periods measured through January 2023, although there are no maximums on certain earn-out payments.

For contingent consideration the following table provides quantitative information about the significant unobservable inputs used in fair value measurement:

(In thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Contingent consideration

(7,263

)

Discounted cash flows

Actual and projected EBITDA over three-year earnout period

> $9,000

Risk adjusted discount rate

Derivative instruments are carried at fair value on the condensed consolidated balance sheets. Interest rate swap contracts are included in other current liabilities on March 31, 2021 and in deposits and other assets on June 30, 2020.

Fair Value of Financial Instruments

The carrying values of the Company’s cash equivalents, receivables, contract assets, accounts payable, commissions payable, accrued expenses, and the income tax receivable and payable approximate the fair values due to the relatively short maturities of these instruments. The carrying value of the Company’s Revolving Credit Facility and notes payable would not differ significantly from fair value (based on Level 2 inputs) if recalculated based on current interest rates.

NOTE 13 – INCOME TAXES

For the three and nine months ended March 31, 2021 and 2020, respectively, the Company’s income tax expense is composed of the following:


	Three Months Ended March 31,						Nine Months Ended March 31,
(In thousands)	2021			2020			2021			2020
Current income tax expense	$	1,722		$	923		$	4,627		$	3,387
Deferred income tax benefit		(746	)		(821	)		(1,172	)		(1,537	)

Income tax expense	$	976		$	102		$	3,455		$	1,850

The Company’s effective tax rates, prior to discrete items for the three and nine months ended March 31, 2021 and 2020, are higher than the U.S. federal statutory rates primarily due to earnings in foreign operations and state taxes. The effective tax rate post discrete items was 16.2% and 22.1% for the three and nine months ended March 31, 2021, respectively. The three months' effective tax rate was lower than the U.S. federal statutory rate, while the nine months' effective tax rate was higher than the U.S. federal statutory rate. For the three months ended March 31, 2021, recognition of non-taxable gain from PPP Loan forgiveness reduced the effective tax rate. For the nine months ended March 31, 2021, earnings in foreign operations and state taxes increased the effective tax rate. The Company does not have any uncertain tax positions.

The Company and its wholly-owned U.S. subsidiaries file a consolidated Federal income tax return. The Company also files unitary or separate returns in various state, local, and non-U.S. jurisdictions based on state, local and non-U.S. filing requirements. The tax years which remain subject to examination by U.S. authorities are the years ended June 30, 2018 through June 30, 2020. Tax years which remain subject to examination by state authorities are the years ended June 30, 2016 through June 30, 2020. Tax years which remain subject to examination by non-U.S. authorities are the periods ended June 30, 2016 through June 30, 2020. Occasionally acquired entities have tax years that differ from the Company and are still open under the relevant statute of limitations and therefore are subject to potential adjustment.

The Company is no longer under examination by the US Internal Revenue Service for the fiscal year 2018. During the quarter ended December 31, 2020, the Company was formally notified that the audit had been closed with the Internal Revenue Service and that no adjustments were assessed.

NOTE 14 – SHARE-BASED COMPENSATION

The Company has two stock-based plans: the 2005 Stock Incentive Plan and the 2012 Stock Option and Performance Award Plan. Each plan authorizes the granting of up to 5,000,000 shares of the Company’s common stock. The plans provide for the grant of stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares and performance units. Restricted stock awards and units are equivalent to one share of common stock and generally vest after three years. The Company does not plan to make additional grants under the 2005 Stock Incentive Plan.

Restricted Stock Awards

Related to restricted stock awards, the Company recognized share-based compensation expense related to restricted stock awards of $292 and $759 for the three and nine months ended March 31, 2021, respectively and $298 and $868 for the three and nine months ended March 31, 2020, respectively. As of March 31, 2021, there was $1,908 of total unrecognized share-based compensation cost for restricted stock awards. Such costs are expected to be recognized over a weighted average period of approximately 1.95 years.

The following table summarizes restricted stock award activity under the plans:


	Number of Units			Weighted Average Grant Date Fair Value
Unvested balance as of June 30, 2020		755,872		$	5.07
Vested		(213,326	)		4.94
Granted		243,009			5.06
Forfeited		(73,894	)		5.09

Unvested balance as of March 31, 2021		711,661		$	5.10

Stock Options

Stock options are granted at exercise prices equal to the fair value of the common stock at the date of the grant and have a term of ten years. Generally, grants under each plan vest 20% annually over a five-year period from the date of grant. The Company recognized share-based compensation expense related to stock options of $11 and $15 for the three and nine months ended March 31, 2021, respectively and $112 and $438 for the three and nine months ended March 31, 2020, respectively. The aggregate intrinsic value of options exercised was $1,124 and $1,539 for the three and nine months ended March 31, 2021, respectively and $132 and $719 for the three and nine months ended March 31, 2020, respectively. As of March 31, 2021, there was $25 of total unrecognized share-based compensation cost for stock options. Such costs are expected to be recognized over a weighted average period of approximately 0.83 years.

The following table summarizes stock option activity under the plans:


	Number of Shares				Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)			Aggregate Intrinsic Value (In thousands)
Outstanding as of June 30, 2020		1,995,368		$		3.46		3.75	$		1,653
Exercised		(541,515	)			3.45		—			1,539
Forfeited		(50,000	)			3.37		—			—

Outstanding as of March 31, 2021		1,403,853		$		3.46		3.33	$		4,894

Exercisable as of March 31, 2021		1,373,853		$		3.45		3.28	$		4,811

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company records accruals for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. Legal expenses are expensed as incurred. There are no potentially material legal proceedings as of March 31, 2021.

Contingent Consideration and Earn-out Payments

The Company’s agreements with respect to previous acquisitions contain future consideration provisions, which provide for the selling equity owners to receive additional consideration if specified operating objectives and financial results are achieved in future periods. Earn-out payments are generally due annually on November 1st and 90 days following the quarter of the final earn-out period for each respective acquisition.

The following table represents the estimated discounted earn-out payments to be paid in each of the following fiscal years:


(In thousands)	2021 (remaining)		2022		2023		2024		Total
Earn-out payments:
Cash	$	100	$	2,219	$	1,856	$	3,088	$	7,263

Total estimated earn-out payments	$	100	$	2,219	$	1,856	$	3,088	$	7,263

NOTE 16 – OPERATING AND GEOGRAPHIC SEGMENT INFORMATION

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker or decision-making group in making decisions regarding allocation of resources and assessing performance. The Company’s chief operating decision-maker is the Chief Executive Officer. The Company has two operating and reportable segments: United States and Canada.

The Company evaluates the performance of the segments primarily based on their respective revenues and income from operations. In addition, the Company includes the costs of the Company’s executives, board of directors, professional services, such as legal and consulting, amortization of intangible assets, and certain other corporate costs associated with operating as a public company as Corporate.


As of and for Three Months Ended March 31, 2021						Corporate/
(In thousands)	United States		Canada			Eliminations			Total
Revenues	$	204,036	$	32,621		$	(125	)	$	236,532
Income (loss) from operations		9,176		3,280			(7,008	)		5,448
Other income		136		159			294			589
Income (loss) before income taxes		9,312		3,439			(6,714	)		6,037
Depreciation and amortization		949		700			2,525			4,174
Property, technology, and equipment, net		11,380		10,538			—			21,918
Goodwill		50,801		21,497			—			72,298

As of and for Three Months Ended March 31, 2020
(In thousands)
Revenues	$	152,231	$	25,113		$	(123	)	$	177,221
Income (loss) from operations		3,540		1,829			(4,664	)		705
Other income (expense)		113		145			(735	)		(477	)
Income (loss) before income taxes		3,653		1,974			(5,399	)		228
Depreciation and amortization		1,200		589			2,493			4,282
Property, technology, and equipment, net		13,979		5,705			—			19,684
Goodwill		50,680		21,398			—			72,078

As of and for Nine Months Ended March 31, 2021						Corporate/
(In thousands)	United States		Canada			Eliminations			Total
Revenues	$	549,302	$	82,281		$	(369	)	$	631,214
Income (loss) from operations		24,671		8,807			(17,217	)		16,261
Other income (expense)		628		(123	)		(1,133	)		(628	)
Income (loss) before income taxes		25,299		8,684			(18,350	)		15,633
Depreciation and amortization		3,026		1,787			7,605			12,418
Property, technology, and equipment, net		11,380		10,538			—			21,918
Goodwill		50,801		21,497			—			72,298

As of and for Nine Months Ended March 31, 2020
(In thousands)
Revenues	$	504,209	$	75,990		$	(508	)	$	579,691
Income (loss) from operations		17,300		6,410			(13,987	)		9,723
Other income (expense)		183		101			(2,020	)		(1,736	)
Income (loss) before income taxes		17,483		6,511			(16,007	)		7,987
Depreciation and amortization		3,208		1,478			7,727			12,413
Property, technology, and equipment, net		13,979		5,705			—			19,684
Goodwill		50,680		21,398			—			72,078

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning set forth in United States securities laws and regulations – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as “anticipate,” “believe,” “estimates,” “expect,” “future,” “intend,” “may,” “plan,” “see,” “seek,” “strategy,” or “will” or the negative thereof or any variation thereon or similar terminology or expressions. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We have developed our forward-looking statements based on management’s beliefs and assumptions, which in turn rely upon information available to them at the time such statements were made. Such forward-looking statements reflect our current perspectives on our business, future performance, existing trends, and information as of the date of this report. These include, but are not limited to, our beliefs about future revenue and expense levels, growth rates, prospects related to our strategic initiatives and business strategies, along with express or implied assumptions about, among other things: our continued relationships with our strategic operating partners; the performance of our historic business, as well as the businesses we have recently acquired, at levels consistent with recent trends and reflective of the synergies we believe will be available to us as a result of such acquisitions; our ability to successfully integrate our recently acquired businesses; our ability to locate suitable acquisition opportunities and secure the financing necessary to complete such acquisitions; transportation costs remaining in-line with recent levels and expected trends; our ability to mitigate, to the best extent possible, our dependence on current management and certain larger strategic operating partners; our compliance with financial and other covenants under our indebtedness; the absence of any adverse laws or governmental regulations affecting the transportation industry in general, and our operations in particular; the impact of COVID-19 on our operations and financial results; and such other factors that may be identified from time to time in our Securities and Exchange Commission (“SEC”) filings and other public announcements, including those set forth under the caption “Risk Factors” in our Form 10-K for the year ended June 30, 2020. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of these risks. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Readers are cautioned not to place undue reliance on our forward-looking statements, as they speak only as of the date made. We disclaim any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis of our financial condition and result of operations should be read in conjunction with the condensed consolidated financial statements and the related notes and other information included elsewhere in this report.

Overview

We operate as a third-party logistics company, providing multi-modal transportation and logistics services primarily in the United States and Canada. We service a large and diversified account base consisting of consumer goods, food and beverage, manufacturing and retail customers, which we support from an extensive network of operating locations across North America as well as an integrated international service partner network located in other key markets around the globe. We provide these services through a multi-brand network, which includes over 100 locations operated exclusively on our behalf by independent agents, who we also refer to as our “strategic operating partners”, as well as approximately 20 Company-owned offices. As a third-party logistics company, we have a vast carrier network of asset-based transportation companies, including motor carriers, railroads, airlines, and ocean lines in our carrier network. We believe shippers value our services because we are able to objectively arrange the most efficient and cost-effective means, type, and provider of transportation service without undue influence caused by the ownership of transportation assets. In addition, our minimal investment in physical assets affords us the opportunity for a higher return on invested capital and net cash flows than our asset-based competitors.

Through our operating locations across North America, we offer domestic, international air and ocean freight forwarding services and freight brokerage services, including truckload services, LTL services, and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. Our primary business operations involve arranging the shipment, on behalf of our customers, of materials, products, equipment, and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL, and UPS. Our services include arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. We also provide other value-added logistics services, including materials management and distribution (“MM&D”) services and customs house brokerage (“CHB”) services to complement our core transportation service offering.

The Company expects to grow its business organically and by completing acquisitions of other companies with complementary geographical and logistics service offerings. The Company’s organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of the Company’s truck brokerage and intermodal service offerings, while continuing its efforts on the organic build-out of the Company’s network of strategic operating partner locations. In addition, as the Company continues to grow and scale its business, the Company believes that it is creating density in its trade lanes, which creates opportunities for the Company to more efficiently source and manage its transportation capacity.

In addition to its focus on organic growth, the Company will continue to search for acquisition candidates that bring critical mass from a geographic and purchasing power standpoint, along with providing complementary service offerings to the current platform. As the Company continues to grow and scale its business, it also remains focused on leveraging its back-office infrastructure and technology systems to drive productivity improvement across the organization.

COVID-19

The COVID-19 pandemic continues to have widespread implications and while we see improvements in the broader economy, it is difficult to predict how COVID-19 will impact the overall economy in the future. Many countries have begun the process of vaccinating their residents against COVID-19. However, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may impact the economy as well as our operations in the future. Our results for the third quarter of fiscal 2021 showed encouraging recovery as we navigate through this unique environment as we saw revenue increase from the second quarter of fiscal 2021. While we are seeing positive results despite the current COVID-19 environment, there remains uncertainty regarding how COVID-19 will impact the Company's results in the future.

The effect of the COVID-19 pandemic may last for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict.

Our business model has also shown its strength in the diversity of our service offerings. Although the pandemic has had a substantial negative impact on many of the industry verticals and customers that we serve, the Radiant network is proud to be playing an active role in the fight against COVID-19: delivering personal protective equipment, food and beverage, consumer goods, technology and other essential products for our customers in North America and around the world. The effects of COVID-19, however, will not be fully reflected in our financial results until future periods. The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers' ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.

Performance Metrics

Our principal source of income is derived from freight forwarding and freight brokerage services we provide to our customers. As a third-party logistics provider, we arrange for the shipment of our customers’ freight from point of origin to point of destination. Generally, we quote our customers a turnkey cost for the movement of their freight. Our price quote will often depend upon the customer’s time-definite needs (first day through fifth day delivery), special handling needs (heavy equipment, delicate items, environmentally sensitive goods, electronic components, etc.), and the means of transport (motor carrier, air, ocean or rail). In turn, we assume the responsibility for arranging and paying for the underlying means of transportation.

Our transportation revenue represents the total dollar value of services we sell to our customers. Our cost of transportation includes direct costs of transportation, including motor carrier, air, ocean, and rail services. Our net transportation revenue (gross transportation revenue less the direct cost of transportation) is the primary indicator of our ability to source, add value and resell services provided by third parties, and is considered by management to be a key performance measure. In addition, management believes measuring its operating costs as a function of net transportation revenue provides a useful metric, as our ability to control costs as a function of net transportation revenue directly impacts operating earnings.

Our operating results will be affected as acquisitions occur. Since all acquisitions are made using the acquisition method of accounting for business combinations, our financial statements will only include the results of operations and cash flows of acquired companies for periods subsequent to the date of acquisition.

Net revenues, a non-GAAP financial measure, is our total revenue minus our total cost of transportation and other services (excluding depreciation and amortization, which are reported separately) and net margin is net revenues as a percentage of our total revenue. We believe that these provide investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

Our GAAP-based net income will be affected by non-cash charges relating to the amortization of customer related intangible assets and other intangible assets attributable to completed acquisitions. Under applicable accounting standards, purchasers are required to allocate the total consideration in a business combination to the identified assets acquired and liabilities assumed based on their fair values at the time of acquisition. The excess of the consideration paid over the fair value of the identifiable net assets acquired is to be allocated to goodwill, which is tested at least annually for impairment. Applicable accounting standards require that we separately account for and value certain identifiable intangible assets based on the unique facts and circumstances of each acquisition. As a result of our acquisition strategy, our net income will include material non-cash charges relating to the amortization of customer related intangible assets and other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets (e.g. customer relationships). Thus, we believe that earnings before interest, taxes, depreciation and amortization, or EBITDA, is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business.

EBITDA is a non-GAAP measure of income and does not include the effects of preferred stock dividends, interest, and taxes, and excludes the “non-cash” effects of depreciation and amortization on long-term assets. Companies have some discretion as to which elements of depreciation and amortization are excluded in the EBITDA calculation. We exclude all depreciation charges related to property, technology, and equipment and all amortization charges (including amortization of leasehold improvements). We then further adjust EBITDA to exclude changes in fair value of contingent consideration, expenses specifically attributable to acquisitions, transition and lease termination costs, foreign currency transaction gains and losses, share-based compensation expense, litigation expenses unrelated to our core operations, and other non-cash charges. While management considers EBITDA and adjusted EBITDA useful in analyzing our results, it is not intended to replace any presentation included in our condensed consolidated financial statements.

Our operating results are also subject to seasonal trends when measured on a quarterly basis. The impact of seasonality on our business will depend on numerous factors, including the markets in which we operate, holiday seasons, consumer demand, and economic conditions. Since our revenue is largely derived from customers whose shipments are dependent upon consumer demand and just-in-time production schedules, the timing of our revenue is often beyond our control. Factors such as shifting demand for retail goods and/or manufacturing production delays could unexpectedly affect the timing of our revenue. As we increase the scale of our operations, seasonal trends in one area of our business may be offset to an extent by opposite trends in another area. We cannot accurately predict the timing of these factors, nor can we accurately estimate the impact of any particular factor, and thus, we can give no assurance any historical seasonal patterns will continue in future periods.

Results of Operations

Three months ended March 31, 2021 and 2020 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by reportable operating segments for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31, 2021												Three Months Ended March 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Revenues
Transportation	$	201,854		$	26,611		$	(125	)	$	228,340		$	148,941		$	21,217		$	(123	)	$	170,035
Value-added services		2,182			6,010			—			8,192			3,290			3,896			—			7,186
		204,036			32,621			(125	)		236,532			152,231			25,113			(123	)		177,221
Cost of transportation and other services
Transportation		154,868			22,241			(125	)		176,984			109,657			17,383			(123	)		126,917
Value-added services		1,293			1,455			—			2,748			2,073			450			—			2,523
		156,161			23,696			(125	)		179,732			111,730			17,833			(123	)		129,440
Net revenues (1)
Transportation		46,986			4,370			—			51,356			39,284			3,834			—			43,118
Value-added services		889			4,555			—			5,444			1,217			3,446			—			4,663
	$	47,875		$	8,925		$	—		$	56,800		$	40,501		$	7,280		$	—		$	47,781
Net margin
Transportation		23.3	%		16.4	%	N/A				22.5	%		26.4	%		18.1	%	N/A				25.4	%
Value-added services		40.7	%		75.8	%	N/A				66.5	%		37.0	%		88.4	%	N/A				64.9	%

(1) Net revenues are revenues net of cost of transportation and other services.

Transportation revenue was $228.3 million and $170.0 million for the three months ended March 31, 2021 and 2020, respectively. The increase of $58.3 million, or 34.3%, is primarily attributable to increased volume with certain customers. Net transportation revenue was $51.4 million and $43.1 million for the three months ended March 31, 2021 and 2020, respectively. Net transportation margins decreased from 25.4% to 22.5%, primarily due to product mix and increased cost of purchased transportation related to extremely tight capacity experienced in air, ocean, intermodal and trucking moving from the West Coast.

Value-added services revenue was $8.2 million and $7.2 million, for the three months ended March 31, 2021 and 2020, respectively. The increase of $1.0 million, or 14.0%, is primarily attributable to an increase the warehouse revenues of our Canada segment. Net value-added services revenue was $5.4 million for the three months ended March 31, 2021, compared to $4.7 million for the comparable prior year period. Net value-added services revenue margins increased from 64.9% to 66.5%, primarily due to lower warehousing costs as a percentage of revenue.

The following table provides a reconciliation for the three months ended March 31, 2021 and 2020 of net revenues to gross profit, the most directly comparable GAAP measure:


(In thousands)	Three Months Ended March 31,
Reconciliation of net revenues to GAAP gross profit	2021			2020
Revenues	$	236,532			$	177,221
Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)		(179,732	)			(129,440	)
Depreciation and amortization		(3,017	)			(2,977	)
GAAP gross profit	$	53,783			$	44,804
Depreciation and amortization		3,017				2,977
Net revenues	$	56,800			$	47,781

GAAP gross margin (GAAP gross profit as a percentage of revenues)		22.7	%			25.3	%
Net margin (net revenues as a percentage of revenues)		24.0	%			27.0	%

The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31, 2021											Three Months Ended March 31, 2020
(In thousands)	United States			Canada		Corporate/ Eliminations			Total			United States			Canada		Corporate/ Eliminations			Total
Net revenues (1)	$	47,875		$	8,925	$	—		$	56,800		$	40,501		$	7,280	$	—		$	47,781

Operating expenses:
Operating partner commissions		23,761			—		—			23,761			20,352			—		—			20,352
Personnel costs		9,899			3,335		995			14,229			10,216			3,278		918			14,412
Selling, general and administrative expenses		4,090			1,610		988			6,688			5,193			1,584		1,250			8,027
Depreciation and amortization		949			700		2,525			4,174			1,200			589		2,493			4,282
Change in fair value of contingent consideration		—			—		2,500			2,500			—			—		3			3

Total operating expenses		38,699			5,645		7,008			51,352			36,961			5,451		4,664			47,076

Income (loss) from operations		9,176			3,280		(7,008	)		5,448			3,540			1,829		(4,664	)		705
Other income (expense)		136			159		294			589			113			145		(735	)		(477	)

Income (loss) before income taxes		9,312			3,439		(6,714	)		6,037			3,653			1,974		(5,399	)		228
Income tax expense		—			—		(976	)		(976	)		—			—		(102	)		(102	)

Net income (loss)		9,312			3,439		(7,690	)		5,061			3,653			1,974		(5,501	)		126
Less: Net income attributable to non-controlling interest		(77	)		—		—			(77	)		(73	)		—		—			(73	)

Net income (loss) attributable to Radiant Logistics, Inc.	$	9,235		$	3,439	$	(7,690	)	$	4,984		$	3,580		$	1,974	$	(5,501	)	$	53


	Three Months Ended March 31, 2021										Three Months Ended March 31, 2020
Operating expenses as a percent of net revenues (1):	United States			Canada			Corporate/ Eliminations	Total			United States			Canada			Corporate/ Eliminations	Total
Operating partner commissions		49.6	%		0.0	%	N/A		41.8	%		50.3	%		0.0	%	N/A		42.6	%
Personnel costs		20.7	%		37.4	%	N/A		25.1	%		25.2	%		45.0	%	N/A		30.2	%
Selling, general and administrative expenses		8.5	%		18.0	%	N/A		11.8	%		12.8	%		21.8	%	N/A		16.8	%
Depreciation and amortization		2.0	%		7.8	%	N/A		7.3	%		3.0	%		8.1	%	N/A		9.0	%

(1) Net revenues are revenues net of cost of transportation and other services.

Operating partner commissions increased $3.4 million, or 16.8%, to $23.8 million for the three months ended March 31, 2021. The increase is primarily due to increased net revenues generated from operating partner stations, offset by the conversion of two agent stations to Radiant owned stores in February 2020. As a percentage of net revenues, operating partner commissions decreased 76 basis points to 41.8% from 42.6% for the three months ended March 31, 2021 and 2020, respectively, as a result of a higher percentage of net revenues coming from company owned stores.

Personnel costs decreased $0.2 million, or 1.3%, to $14.2 million for the three months ended March 31, 2021. The decrease is primarily due to workforce reductions and changes in commissionable sales product mix. As a percentage of net revenues, personnel costs decreased 511 basis points to 25.1% from 30.2% for the three months ended March 31, 2021 and 2020, respectively.

Selling, general and administrative (“SG&A”) expenses decreased $1.3 million, or 16.7%, to $6.7 million for the three months ended March 31, 2021. The decrease is primarily attributable to decreased bad debt expense, claims, travel, sales expense, event expense, and professional services. As a percentage of net revenues, SG&A decreased 500 basis points to 11.8% from 16.8% for the three months ended March 31, 2021 and 2020, respectively.

Depreciation and amortization costs were $4.2 million for the three months ended March 31, 2021 and $4.3 million for the three months ended March 31, 2020.

Change in fair value of contingent consideration caused a loss of $2.5 million for the three months ended March 31, 2021, compared to a loss of $0.003 million for the three months ended March 31, 2020. The change in each year is attributable to a change in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other income and expenses were $0.6 million income and $0.5 million expense for the three months ended March 31, 2021 and 2020, respectively. The additional income is primarily attributable to gain on forgiveness of certain PPP loans, partially offset by the change in fair value of interest rate swap contract.

Our increase in net income is driven principally by increased net revenue, increased other income, and partially offset by increased operating expenses compared to the comparable prior year period.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions as well as gains or losses from changes in fair value of contingent consideration that are difficult to predict.

The following table provides a reconciliation for the three months ended March 31, 2021 and 2020 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):


	Three Months Ended March 31, 2021												Three Months Ended March 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net income (loss) attributable to Radiant Logistics, Inc.	$	9,235		$	3,439		$	(7,690	)	$	4,984		$	3,580		$	1,974		$	(5,501	)	$	53
Income tax expense		—			—			976			976			—			—			102			102
Depreciation and amortization		949			700			2,525			4,174			1,200			589			2,493			4,282
Net interest expense		—			—			608			608			—			—			735			735

EBITDA		10,184			4,139			(3,581	)		10,742			4,780			2,563			(2,171	)		5,172

Share-based compensation		121			57			125			303			211			60			138			409
Change in fair value of contingent consideration		—			—			2,500			2,500			—			—			3			3
Acquisition related costs		—			—			—			—			—			—			183			183
Litigation costs		—			—			256			256			—			—			400			400
Transition, lease termination, and other costs		—			—			—			—			59			—			—			59
Change in fair value of interest rate swap contracts		—			—			512			512			—			—			—			—
Gain on forgiveness of debt		—			—			(1,414	)		(1,414	)		—			—			—			—
Foreign currency transaction loss (gain)		(64	)		50			—			(14	)		(24	)		(145	)		—			(169	)

Adjusted EBITDA	$	10,241		$	4,246		$	(1,602	)	$	12,885		$	5,026		$	2,478		$	(1,447	)	$	6,057
Adjusted EBITDA as a % of net revenues (1)		21.4	%		47.6	%	N/A				22.7	%		12.4	%		34.0	%	N/A				12.7	%

(1) Net revenues are revenues net of cost of transportation and other services.

Adjusted EBITDA increased $6.8 million, or 112.7% to $12.9 million for the quarter ended March 31, 2021.

Nine months ended March 31, 2021 and 2020 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by reportable operating segments for the nine months ended March 31, 2021 and 2020:


	Nine Months Ended March 31, 2021												Nine Months Ended March 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Revenues
Transportation	$	543,078		$	67,588		$	(369	)	$	610,297		$	492,567		$	63,402		$	(508	)	$	555,461
Value-added services		6,224			14,693			—			20,917			11,642			12,588			—			24,230
		549,302			82,281			(369	)		631,214			504,209			75,990			(508	)		579,691
Cost of transportation and other services
Transportation		411,122			55,336			(369	)		466,089			359,512			51,659			(508	)		410,663
Value-added services		4,384			2,675			—			7,059			7,575			2,181			—			9,756
		415,506			58,011			(369	)		473,148			367,087			53,840			(508	)		420,419
Net revenues (1)
Transportation		131,956			12,252			—			144,208			133,055			11,743			—			144,798
Value-added services		1,840			12,018			—			13,858			4,067			10,407			—			14,474
	$	133,796		$	24,270		$	—		$	158,066		$	137,122		$	22,150		$	—		$	159,272
Net margin
Transportation		24.3	%		18.1	%	N/A				23.6	%		27.0	%		18.5	%	N/A				26.1	%
Value-added services		29.6	%		81.8	%	N/A				66.3	%		34.9	%		82.7	%	N/A				59.7	%

(1) Net revenues are revenues net of cost of transportation and other services.

Transportation revenue was $610.3 million and $555.5 million for the nine months ended March 31, 2021 and 2020, respectively. The increase of $54.8 million, or 9.9%, is primarily attributable to increased volume with certain customers. Net transportation revenue was $144.2 million and $144.8 million for the nine months ended March 31, 2021 and 2020, respectively. Net transportation revenue margins decreased from 26.1% to 23.6%, primarily due to product mix and increased cost of purchased transportation related to extremely tight capacity experienced in air, ocean, intermodal and trucking moving from the West Coast.

Value added services revenue was $20.9 million and $24.2 million for the nine months ended March 31, 2021 and 2020, respectively. The decrease of $3.3 million, or 13.7%, is primarily attributable to a slowdown in our contract logistics and custom brokerage services offerings during the first and second quarters offset by improvements experienced during the three months ended March 31, 2021. Net value added services revenue was $13.9 million for the nine months ended March 31, 2021, compared to $14.5 million for the comparable prior year period. Net value added services revenue margins increased from 59.7% to 66.3%, primarily due to lower personnel and warehousing costs as a percentage of revenue.

The following table provides a reconciliation for the nine months ended March 31, 2021 and 2020 of net revenues to gross profit, the most directly comparable GAAP measure:


(In thousands)	Nine Months Ended March 31,
Reconciliation of net revenues to GAAP gross profit	2021			2020
Revenues	$	631,214			$	579,691
Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)		(473,148	)			(420,419	)
Depreciation and amortization		(8,906	)			(9,119	)
GAAP gross profit	$	149,160			$	150,153
Depreciation and amortization		8,906				9,119
Net revenues	$	158,066			$	159,272

GAAP gross margin (GAAP gross profit as a percentage of revenues)		23.6	%			25.9	%
Net margin (net revenues as a percentage of revenues)		25.0	%			27.5	%

The following table compares consolidated statements of comprehensive income data by reportable operating segments for the nine months ended March 31, 2021 and 2020:


	Nine Months Ended March 31, 2021												Nine Months Ended March 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada		Corporate/ Eliminations			Total
Net revenues (1)	$	133,796		$	24,270		$	—		$	158,066		$	137,122		$	22,150	$	—		$	159,272

Operating expenses:
Operating partner commissions		66,386			—			—			66,386			69,899			—		—			69,899
Personnel costs		28,124			9,707			2,910			40,741			31,617			10,136		2,734			44,487
Selling, general and administrative expenses		11,589			3,969			2,352			17,910			14,770			4,126		3,474			22,370
Depreciation and amortization		3,026			1,787			7,605			12,418			3,208			1,478		7,727			12,413
Transition, lease termination, and other costs		—			—			—			—			328			—		—			328
Change in fair value of contingent consideration		—			—			4,350			4,350			—			—		52			52

Total operating expenses		109,125			15,463			17,217			141,805			119,822			15,740		13,987			149,549

Income (loss) from operations		24,671			8,807			(17,217	)		16,261			17,300			6,410		(13,987	)		9,723
Other income (expense)		628			(123	)		(1,133	)		(628	)		183			101		(2,020	)		(1,736	)

Income (loss) before income taxes		25,299			8,684			(18,350	)		15,633			17,483			6,511		(16,007	)		7,987
Income tax expense		—			—			(3,455	)		(3,455	)		—			—		(1,850	)		(1,850	)

Net income (loss)		25,299			8,684			(21,805	)		12,178			17,483			6,511		(17,857	)		6,137
Less: net income attributable to non- controlling interest		(294	)		—			—			(294	)		(262	)		—		—			(262	)

Net income (loss) attributable to Radiant Logistics, Inc.	$	25,005		$	8,684		$	(21,805	)	$	11,884		$	17,221		$	6,511	$	(17,857	)	$	5,875


	Nine Months Ended March 31, 2021										Nine Months Ended March 31, 2020
Operating expenses as a percent of net revenues (1):	United States			Canada			Corporate/ Eliminations	Total			United States			Canada			Corporate/ Eliminations	Total
Operating partner commissions		49.6	%		0.0	%	N/A		42.0	%		51.0	%		0.0	%	N/A		43.9	%
Personnel costs		21.0	%		40.0	%	N/A		25.8	%		23.1	%		45.8	%	N/A		27.9	%
Selling, general and administrative expenses		8.7	%		16.4	%	N/A		11.3	%		10.8	%		18.6	%	N/A		14.0	%
Depreciation and amortization		2.3	%		7.4	%	N/A		7.9	%		2.3	%		6.7	%	N/A		7.8	%

(1) Net revenues are revenues net of cost of transportation and other services.

Operating partner commissions decreased $3.5 million, or 5.0%, to $66.4 million for the nine months ended March 31, 2021. The decrease is primarily due to decreased net revenues generated from operating partner stations, including the conversion of two agent stations to Radiant owned stores in February 2020. As a percentage of net revenues, operating partner commissions decreased 189 basis points to 42.0% from 43.9% for the nine months ended March 31, 2021 and 2020, respectively.

Personnel costs decreased $3.8 million, or 8.4%, to $40.7 million for the nine months ended March 31, 2021. The decrease is primarily due to increased cost controls resulting in reduced headcount, hours, and compensation as a result of the COVID-19 pandemic. As a percentage of net revenues, personnel costs decreased 216 basis points to 25.8% from 27.9% for the nine months ended March 31, 2021 and 2020, respectively.

Selling, general and administrative (“SG&A”) expenses decreased $4.5 million, or 19.9%, to $17.9 million for the nine months ended March 31, 2021. The decrease is primarily attributable to decreased bad debt expense, claims, travel, sales expense, event expense, and professional services. As a percentage of net revenues, SG&A decreased 271 basis points to 11.3% from 14.0% for the nine months ended March 31, 2021 and 2020, respectively.

Depreciation and amortization costs was $12.4 million for both the nine months ended March 31, 2021 and 2020, respectively.

Change in fair value of contingent consideration resulted in a loss of $4.4 million for the nine months ended March 31, 2021, compared to a loss of $0.05 million for the nine months ended March 31, 2020. The change in each year is attributable to a change in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other income and expenses were expenses of $0.6 million and $1.7 million for the nine months ended March 31, 2021 and 2020, respectively. The additional income is primarily attributable to gain on forgiveness of debt resulting from the forgiveness of certain PPP loans, sublease income, and partially offset by the change in fair value of interest rate swap contracts.

Despite lower net revenue, our increase in net income is driven principally by decreased operating expenses and decreased other expenses compared to the comparable prior year period.

The following table provides a reconciliation for the nine months ended March 31, 2021 and 2020 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:


	Nine Months Ended March 31, 2021												Nine Months Ended March 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net income (loss) attributable to Radiant Logistics, Inc.	$	25,005		$	8,684		$	(21,805	)	$	11,884		$	17,221		$	6,511		$	(17,857	)	$	5,875
Income tax expense		—			—			3,455			3,455			—			—			1,850			1,850
Depreciation and amortization		3,026			1,787			7,605			12,418			3,208			1,478			7,727			12,413
Net interest expense		—			—			1,905			1,905			—			—			2,020			2,020

EBITDA		28,031			10,471			(8,840	)		29,662			20,429			7,989			(6,260	)		22,158

Share-based compensation		211			175			388			774			723			154			429			1,306
Change in fair value of contingent consideration		—			—			4,350			4,350			—			—			52			52
Acquisition related costs		—			—			35			35			—			—			495			495
Litigation costs		—			—			433			433			—			—			832			832
Transition, lease termination, and other costs		—			—			—			—			387			—			—			387
Change in fair value of interest rate swap contracts		—			—			642			642			—			—			—			—
Gain on forgiveness of debt		—			—			(1,414	)		(1,414	)		—			—			—			—
Foreign currency transaction loss (gain)		(173	)		331			—			158			(19	)		(101	)		—			(120	)

Adjusted EBITDA	$	28,069		$	10,977		$	(4,406	)	$	34,640		$	21,520		$	8,042		$	(4,452	)	$	25,110
Adjusted EBITDA as a % of net revenues (1)		21.0	%		45.2	%	N/A				21.9	%		15.7	%		36.3	%	N/A				15.8	%

(1) Net revenues are revenues net of cost of transportation and other services.

Adjusted EBITDA increased $9.5 million, or 38.0% to $34.6 million for the nine months ended March 31, 2021.

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. Adapting to COVID-19, we have curtailed mergers and acquisitions activities and suspended stock buy-back. 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 March 31, 2021, we have $4.2 million in cash on hand to serve as adequate working capital.

Net cash provided by operating activities were $3.7 million for the nine months ended March 31, 2021. Net cash used for operating activities were $1.3 million for the nine months ended March 31, 2020. The cash used or provided primarily consisted of net income adjusted for depreciation and amortization and changes in accounts receivable, contract assets, accounts payable, income taxes, operating partner commissions payable, and accrued and other liabilities. Cash flow from operating activities for the nine months ended March 31, 2021 increased by $5.0 million, compared with the same period in fiscal year 2020, primarily due to increased net income offset by net change in operating assets and liabilities.

Net cash used for investing activities were $8.3 million and $13.8 million for the nine months ended March 31, 2021 and 2020, respectively. The primary use of cash was for purchases of property, technology, and equipment; and for business acquisition. Cash paid for purchases of property, technology, and equipment were $8.7 million and $4.7 million for the nine months ended March 31, 2021 and 2020, respectively. For the nine months ended March 31, 2020, cash paid for business acquisition was $9.2 million.

Net cash used for financing activities was $25.5 million for the nine months ended March 31, 2021. Net cash provided by financing activities were $24.1 million for the nine months ended March 31, 2020. Repayment of the Revolving Credit Facility were $20 million for the nine months ended March 31, 2021. Proceeds from the Revolving Credit Facility were $566.3 million for the nine months ended March 31, 2020, and Repayment of the Revolving Credit Facility were $534.2 million for the nine months ended March 31, 2020. Repayments of notes payable and finance lease liability were $3.5 million and $3.2 million for the nine months ended March 31, 2021 and 2020, respectively. Distributions to non-controlling interest were $1.0 million and $0.3 million for the nine months ended March 31, 2021 and 2020, respectively. Payments of employee tax withholdings related to vesting of restricted stock awards were $0.3 million for both the nine months ended March 31, 2021 and 2020. Payments of employee tax withholdings related to the cashless exercise of stock option were $0.1 million for both the nine months ended March 31, 2021 and 2020.

Revolving Credit Facility

The Company entered into a $150 million syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated as of March 13, 2020. On March 31, 2021, the borrowings outstanding on the Revolving Credit Facility was $10 million. The Revolving Credit Facility was entered into with Bank of America Securities, Inc. as sole book runner and sole lead arranger, Bank of Montreal Chicago Branch, as lender and syndication agent, MUFG Union Bank, N.A as lender and documentation agent and Bank of America, N. A., KeyBank National Association and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”).

The Revolving Credit Facility includes a $50 million accordion feature to support future acquisition opportunities. For general borrowings under the Revolving Credit Facility, the Company is subject to the maximum consolidated leverage ratio of 3.00 and minimum consolidated fixed charge coverage ratio of 1.25. 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.

In conjunction with the Revolving Credit Facility, Radiant entered into two interest rate swap contracts. On March 20, 2020, and effective April 17, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade variable interest cash inflows at one-month LIBOR for a $20 million notional amount, for fixed interest cash outflows at 0.635%. On April 1, 2020, and effective April 2, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade the variable interest cash inflows at one-month LIBOR for a $10 million notional amount, for fixed interest cash outflows at 0.5865%. Both interest rate swap contracts mature and terminate on March 13, 2025.

Senior Secured Loan

On April 2, 2015, Radiant Canada obtained a CAD$29.0 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 “FPD IV Loan Agreement”). The Company and its US and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on April 1, 2024 and accrues interest at a rate of 6.65% per annum. We made interest-only payments for the first twelve months and blended principal and interest payments through maturity. In connection with the loan, we paid an amount equal to five months of interest payments into a debt service reserve account controlled by FPD IV.

In connection with our acquisition of Lomas, Radiant Canada obtained a CAD$10.0 million senior secured Canadian term loan from Fiera Private Debt Fund V LP (“FPD V” formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement (the “FPD V Loan Agreement,” and together with the FPD IV Loan Agreement, the “FPD Loan Agreements”). The Company and its US and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on June 1, 2024 and accrues interest at a 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 upon providing at least 30 days prior written notice and paying 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.

Paycheck Protection Program Loans

On May 4, 2020, the Company received loan proceeds of $5.9 million pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. On April 28, 2020, the Secretary of the U.S. Department of the Treasury stated that the Small Business Administration will perform a full review of any PPP loan over $2 million before forgiving the loan. The certification made by the Company did not contain any objective criteria and is subject to interpretation. Despite the good-faith belief that given the Company’s circumstances all eligibility requirements for the PPP Loans were satisfied, if it is later determined that the Company had violated any applicable laws or regulations or it is otherwise determined the Company was ineligible to receive the PPP Loans, it may be required to repay the PPP Loans in its entirety and/or be subject to additional penalties. The Company is in the process of seeking forgiveness for the PPP Loans.

The term of the Company’s PPP Loans is two years. The annual interest rate on the PPP Loans is 1% and no payments of principal or interest are due until the conclusion of the deferral period. The deferral period will end on the earlier of (i) the date that Small Business Administration remits the loan forgiveness amount to the lender, or (ii) if the loan is not forgiven, ten months after the end of the 24-week loan forgiveness covered period. Under the terms of the PPP loans, all or a portion of the principal may be forgiven if the Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part. With respect to any portion of the PPP Loans that is not forgiven, the PPP Loans will be repayable on the terms set forth above. The PPP Loans are recognized on the Company’s June 30, 2020 condensed consolidated balance sheet as notes payable and will be derecognized if and when forgiven.

As of March 31, 2021, certain Paycheck Protection Program (the “PPP”) Loans totaling $1.4 million and the interest previously accrued were forgiven. The Company is in the process of seeking forgiveness for the remaining $4.5 million PPP Loan.

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

Working Capital

We believe that our current working capital, anticipated cash flow from operations, and access to financing through the Revolving Credit Facility are adequate for funding existing operations for the next twelve months.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As a smaller reporting company, the Company is not required to provide information for Item 3.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

An evaluation of the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act as of March 31, 2021, was carried out by our management under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon that evaluation, our CEO and CFO concluded that, as of March 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2021, there was no change in our internal control over financial reporting that materially affected, or was reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended June 30, 2020.

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit

Number

Description

Filed/Furnished Herewith

Form

Period Ending

Exhibit Number

Filing Date

31.1

Certification by Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification by Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation

101.DEF

Inline XBRL Taxonomy Extension Definition

101.LAB

Inline XBRL Taxonomy Extension Label

101.PRE

Inline XBRL Taxonomy Extension Presentation

104

Cover Page Interactive Data (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		RADIANT LOGISTICS, INC.

Date: May 10, 2021		/s/ Bohn H. Crain
		Bohn H. Crain
		Chief Executive Officer
		(Principal Executive Officer)

Date: May 10, 2021		/s/ Todd E. Macomber
		Todd E. Macomber
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)