SEC Info - Radiant Logistics, Inc. - ‘10-Q’ for 9/30/20

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Radiant Logistics, Inc. – ‘10-Q’ for 9/30/20

On: Monday, 11/9/20, at 4:55pm ET · For: 9/30/20 · Accession #: 1564590-20-52578 · File #: 1-35392

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

11/09/20  Radiant Logistics, Inc.           10-Q        9/30/20   86:11M                                    ActiveDisclosure/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

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13: R3          Condensed Consolidated Balance Sheets               HTML     38K 
                (Parenthetical)                                                  
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                Income                                                           
15: R5          Condensed Consolidated Statements of Changes in     HTML     73K 
                Equity                                                           
16: R6          Condensed Consolidated Statements of Cash Flows     HTML    115K 
17: R7          The Company and Basis of Presentation               HTML     33K 
18: R8          Recent Accounting Guidance                          HTML     37K 
19: R9          Summary of Significant Accounting Policies          HTML    196K 
20: R10         Earnings Per Share                                  HTML     62K 
21: R11         Leases                                              HTML    195K 
22: R12         Property, Technology, and Equipment                 HTML     76K 
23: R13         Goodwill and Intangible Assets                      HTML    121K 
24: R14         Notes Payable                                       HTML     81K 
25: R15         Derivatives                                         HTML     29K 
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27: R17         Variable Interest Entity and Related Party          HTML     29K 
                Transactions                                                     
28: R18         Fair Value Measurements                             HTML    112K 
29: R19         Income Taxes                                        HTML     47K 
30: R20         Share-Based Compensation                            HTML    101K 
31: R21         Commitments and Contingencies                       HTML     67K 
32: R22         Operating and Geographic Segment Information        HTML    149K 
33: R23         Subsequent Events                                   HTML     27K 
34: R24         Summary of Significant Accounting Policies          HTML    250K 
                (Policies)                                                       
35: R25         Summary of Significant Accounting Policies          HTML    150K 
                (Tables)                                                         
36: R26         Earnings Per Share (Tables)                         HTML     61K 
37: R27         Leases (Tables)                                     HTML    200K 
38: R28         Property, Technology, and Equipment (Tables)        HTML     75K 
39: R29         Goodwill and Intangible Assets (Tables)             HTML    122K 
40: R30         Notes Payable (Tables)                              HTML     73K 
41: R31         Fair Value Measurements (Tables)                    HTML    107K 
42: R32         Income Taxes (Tables)                               HTML     43K 
43: R33         Share-Based Compensation (Tables)                   HTML    101K 
44: R34         Commitments and Contingencies (Tables)              HTML     65K 
45: R35         Operating and Geographic Segment Information        HTML    145K 
                (Tables)                                                         
46: R36         The Company and Basis of Presentation - Additional  HTML     27K 
                Information (Detail)                                             
47: R37         Recent Accounting Guidance - Additional             HTML     46K 
                Information (Detail)                                             
48: R38         Summary of Significant Accounting Policies -        HTML     60K 
                Additional Information (Detail)                                  
49: R39         Summary of Significant Accounting Policies -        HTML     59K 
                Disaggregation of Gross Revenues by Major Service                
                Lines and Geographic Markets and Timing of Revenue               
                Recognition (Detail)                                             
50: R40         Earnings Per Share - Computations of the Numerator  HTML     45K 
                and Denominator of Basic and Diluted Income Per                  
                Share (Detail)                                                   
51: R41         Leases - Additional Information (Detail)            HTML     26K 
52: R42         Leases - Components of Lease Expense (Detail)       HTML     35K 
53: R43         Leases - Supplemental Cash Flow Information         HTML     36K 
                Related to Leases (Detail)                                       
54: R44         Leases - Supplemental Balance Sheet Information     HTML     58K 
                Related to Leases (Detail)                                       
55: R45         Leases - Maturities of Lease Liabilities (Detail)   HTML     64K 
56: R46         Property, Technology, and Equipment - Schedule of   HTML     62K 
                Property, Technology, and Equipment (Detail)                     
57: R47         Property, Technology, and Equipment - Additional    HTML     32K 
                Information (Detail)                                             
58: R48         Goodwill and Intangible Assets - Schedule of        HTML     29K 
                Changes in Goodwill (Detail)                                     
59: R49         Goodwill and Intangible Assets - Additional         HTML     29K 
                Information (Detail)                                             
60: R50         Goodwill and Intangible Assets - Schedule of        HTML     43K 
                Intangible Assets (Detail)                                       
61: R51         Goodwill and Intangible Assets - Schedule of        HTML     35K 
                Future Amortization Expense (Detail)                             
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63: R53         Notes Payable - Schedule of Maturities of Notes     HTML     40K 
                Payable (Detail)                                                 
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66: R56         Stockholders' Equity - Additional Information       HTML     46K 
                (Detail)                                                         
67: R57         Variable Interest Entity and Related Party          HTML     41K 
                Transactions - Additional Information (Detail)                   
68: R58         Fair Value Measurements - Schedule of Financial     HTML     37K 
                Assets (Liabilities) Measured at Fair Value on                   
                Recurring Basis (Detail)                                         
69: R59         Fair Value Measurements - Fair Value Assets         HTML     50K 
                (Liabilities) Measured on Recurring Basis                        
                Unobservable Input Reconciliation (Detail)                       
70: R60         Fair Value Measurements - Additional Information    HTML     26K 
                (Detail)                                                         
71: R61         Fair Value Measurements - Summary of Quantitative   HTML     39K 
                Information about Significant Unobservable Inputs                
                Used in Fair Value Measurement of Contingent                     
                Consideration (Detail)                                           
72: R62         Fair Value Measurements - Summary of Quantitative   HTML     26K 
                Information about Significant Unobservable Inputs                
                Used in Fair Value Measurement of Contingent                     
                Consideration (Parenthetical) (Detail)                           
73: R63         Income Taxes - Schedule of Components of Income     HTML     35K 
                Tax Expense (Detail)                                             
74: R64         Income Taxes - Additional Information (Detail)      HTML     46K 
75: R65         Share-Based Compensation - Additional Information   HTML     58K 
                (Detail)                                                         
76: R66         Share-Based Compensation - Schedule of Share Based  HTML     46K 
                Compensation Restricted Stock Activity (Detail)                  
77: R67         Share-Based Compensation - Schedule of Share-Based  HTML     58K 
                Compensation Stock Options Activity (Detail)                     
78: R68         Commitments and Contingencies - Additional          HTML     30K 
                Information (Detail)                                             
79: R69         Commitments and Contingencies - Schedule of         HTML     35K 
                Potential Earn-Out Payments (Detail)                             
80: R70         Operating and Geographic Segment Information -      HTML     29K 
                Additional Information (Detail)                                  
81: R71         Operating and Geographic Segment Information -      HTML     63K 
                Segment Reporting (Detail)                                       
82: R72         Subsequent Events - Additional Information          HTML     34K 
                (Detail)                                                         
84: XML         IDEA XML File -- Filing Summary                      XML    162K 
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‘10-Q’ — Quarterly Report
Document Table of Contents

Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Condensed Consolidated Balance Sheets as of September 30, 2020 and June 30, 2020 Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019 Condensed Consolidated Statements of Changes in Equity for the three months ended September 30, 2020 and 2019 Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2020 and 2019 Controls and Procedures Exhibits Financial Statements (unaudited) Item 1 Item 1A Item 2 Item 3 Item 4 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to Condensed Consolidated Financial Statements Part I. Financial Information Part Ii. Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures
1	1st Page – Filing Submission
"	Part I. Financial Information
"	Item 1
"	Financial Statements (unaudited)
"	Condensed Consolidated Balance Sheets as of September 30, 2020 and June 30, 2020
"	Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2020 and 2019
"	Condensed Consolidated Statements of Changes in Equity for the three months ended September 30, 2020 and 2019
"	Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019
"	Notes to Condensed Consolidated Financial Statements
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures About Market Risk
"	Item 4
"	Controls and Procedures
"	Part Ii. Other Information
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Item 6
"	Exhibits
"	Signatures

This is an HTML Document rendered as filed. [ Alternative Formats ]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM i 10-Q

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

For the quarterly period ended i September 30, 2020

i ☐	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 i 001-35392

i RADIANT LOGISTICS, INC.

(Exact name of registrant as specified in its charter)

i Delaware

i 04-3625550

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

i 405 114^th Avenue S.E., i Third Floor

i Bellevue, i Washington i 98004

(Address of principal executive offices) (Zip Code)

( i 425) i 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
i Common Stock, $.001 Par Value		i RLGT		i 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. i 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). i 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	☐	i Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	i ☒
Emerging growth company	i ☐

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 i ☐ No ☒

There were i 49,680,067 shares outstanding of the registrant’s common stock as of November 2, 2020.

RADIANT LOGISTICS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2020 and June 30, 2020	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Changes in Equity for the three months ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 6.	Exhibits	35
Signatures		36

RADIANT LOGISTICS, INC.

Condensed Consolidated Balance Sheets

	September 30,			June 30,
(In thousands, except share and per share data)		2020		2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	i 23,881		$	i 34,841
Accounts receivable, net of allowance of $ i 1,925 and $ i 1,990, respectively		i 76,602			i 71,838
Contract assets		i 17,684			i 16,312
Income tax receivable		i 974			i 780
Prepaid expenses and other current assets		i 15,322			i 16,817
Total current assets		i 134,463			i 140,588

Property, technology, and equipment, net		i 19,251			i 18,712

Goodwill		i 71,071			i 72,199
Intangible assets, net		i 47,834			i 51,192
Operating lease right-of-use assets		i 11,601			i 12,580
Deposits and other assets		i 4,642			i 4,769
Total other long-term assets		i 135,148			i 140,740
Total assets	$	i 288,862		$	i 300,040

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	i 72,277		$	i 65,003
Operating partner commissions payable		i 10,781			i 9,131
Accrued expenses		i 7,944			i 6,538
Current portion of notes payable		i 3,937			i 3,800
Current portion of operating lease liability		i 5,645			i 6,121
Current portion of finance lease liability		i 698			i 688
Current portion of contingent consideration		i 2,127			i 2,127
Other current liabilities		i 382			i 308
Total current liabilities		i 103,791			i 93,716

Notes payable, net of current portion		i 27,330			i 48,091
Operating lease liability, net of current portion		i 6,593			i 7,192
Finance lease liability, net of current portion		i 2,307			i 2,476
Contingent consideration, net of current portion		i 2,813			i 2,813
Deferred income taxes		i 7,399			i 7,484
Other long-term liabilities		i 95			i 93
Total long-term liabilities		i 46,537			i 68,149
Total liabilities		i 150,328			i 161,865

Commitments and contingencies (Note 15)

Stockholders' equity:
Common stock, $ i i 0.001 / par value, i i 100,000,000 / shares authorized; i 50,307,481 and i 50,188,486 shares issued, and i 49,674,634 and i 49,555,639 shares outstanding, respectively		i 32			i 32
Additional paid-in capital		i 102,060			i 102,214
Treasury stock, at cost, i i 632,847 / shares		( i 2,749	)		( i 2,749	)
Retained earnings		i 40,512			i 37,424
Accumulated other comprehensive income (loss)		( i 1,551	)		i 445
Total Radiant Logistics, Inc. stockholders’ equity		i 138,304			i 137,366
Non-controlling interest		i 230			i 809
Total equity		i 138,534			i 138,175
Total liabilities and equity	$	i 288,862		$	i 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 September 30,
(In thousands, except share and per share data)	2020			2019
Revenues	$	i 175,877		$	i 200,543

Operating expenses:
Cost of transportation and other services		i 129,911			i 145,010
Operating partner commissions		i 18,589			i 24,178
Personnel costs		i 12,777			i 14,847
Selling, general and administrative expenses		i 5,654			i 7,664
Depreciation and amortization		i 4,159			i 4,036
Transition, lease termination, and other costs		i —			( i 9	)
Change in fair value of contingent consideration		i —			i 15
Total operating expenses		i 171,090			i 195,741

Income from operations		i 4,787			i 4,802

Other income (expense):
Interest income		i 9			i 15
Interest expense		( i 580	)		( i 707	)
Foreign currency transaction gain (loss)		i 21			( i 23	)
Change in fair value of interest rate swap contracts		( i 21	)		i —
Other		i 91			i 31
Total other expense		( i 480	)		( i 684	)

Income before income taxes		i 4,307			i 4,118

Income tax expense		( i 1,078	)		( i 787	)

Net income		i 3,229			i 3,331
Less: net income attributable to non-controlling interest		( i 141	)		( i 96	)

Net income attributable to Radiant Logistics, Inc.	$	i 3,088		$	i 3,235

Other comprehensive income (loss):
Foreign currency translation gain (loss)		( i 1,996	)		i 114
Comprehensive income	$	i 1,233		$	i 3,445

Income per share:
Basic	$	i 0.06		$	i 0.07
Diluted	$	i 0.06		$	i 0.06

Weighted average common shares outstanding:
Basic		i 49,578,590			i 49,662,540
Diluted		i 50,925,387			i 51,428,013

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

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Changes in Equity

(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)

Amount

Capital

Stock

Earnings

Income (Loss)

Equity

Interest

Equity

Balance as of June 30, 2020

i 49,555,639

i 32

i 102,214

( i 2,749

)

i 37,424

i 445

i 137,366

i 809

i 138,175

Issuance of common stock upon vesting of

restricted stock awards, net of taxes withheld

and paid

i 112,864

i —

( i 301

)

i —

( i 301

)

i —

( i 301

)

Issuance of common stock upon exercise of stock

options, net of taxes withheld and paid

i 6,131

i —

i 3

i —

i 3

i —

i 3

Distribution to non-controlling interest

i —

( i 720

)

( i 720

)

Share-based compensation

i —

i 144

i —

i 144

i —

i 144

Net income

i —

i 3,088

i —

i 3,088

i 141

i 3,229

Other comprehensive loss

i —

( i 1,996

)

( i 1,996

)

i —

( i 1,996

)

Balance as of September 30, 2020

i 49,674,634

i 32

i 102,060

( i 2,749

)

i 40,512

( i 1,551

)

i 138,304

i 230

i 138,534

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

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Changes in Equity (continued)

(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)

Amount

Capital

Stock

Earnings

Income (Loss)

Equity

Interest

Equity

Balance as of June 30, 2019

i 49,586,464

i 31

i 100,186

( i 253

)

i 26,883

i 187

i 127,034

i 246

i 127,280

Issuance of common stock upon vesting of

restricted stock awards, net of taxes withheld

and paid

i 138,147

i —

( i 314

)

i —

( i 314

)

i —

( i 314

)

Issuance of common stock upon exercise of stock

options, net of taxes withheld and paid

i 82,627

i —

( i 146

)

i —

( i 146

)

i —

( i 146

)

Distribution to non-controlling interest

i —

( i 180

)

( i 180

)

Share-based compensation

i —

i 430

i —

i 430

i —

i 430

Net income

i —

i 3,235

i —

i 3,235

i 96

i 3,331

Other comprehensive income

i —

i 114

i —

i 114

Balance as of September 30, 2019

i 49,807,238

i 31

i 100,156

( i 253

)

i 30,118

i 301

i 130,353

i 162

i 130,515

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

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three Months Ended September 30,
(In thousands, except share and per share data)		2020			2019
OPERATING ACTIVITIES:
Net income	$	i 3,229		$	i 3,331
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Share-based compensation		i 144			i 430
Amortization of intangible assets		i 2,538			i 2,630
Depreciation and amortization of property, technology, and equipment		i 1,621			i 1,406
Deferred income tax benefit		( i 85	)		( i 229	)
Amortization of debt issuance costs		i 104			i 55
Other		( i 63	)		i —
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable		( i 4,472	)		( i 3,689	)
Contract assets		( i 1,364	)		( i 4,328	)
Income tax receivable		( i 185	)		( i 937	)
Prepaid expenses, deposits and other assets		i 3,251			i 1,307
Accounts payable		i 7,453			i 2,859
Operating partner commissions payable		i 1,650			( i 1,353	)
Accrued and other liabilities		( i 377	)		( i 1,353	)
Net cash provided by operating activities		i 13,444			i 129

INVESTING ACTIVITIES:
Purchases of property, technology, and equipment		( i 2,065	)		( i 1,697	)
Proceeds from sale of property, technology, and equipment		i 11			i 15
Net cash used for investing activities		( i 2,054	)		( i 1,682	)

FINANCING ACTIVITIES:
Proceeds from revolving credit facility		i —			i 193,860
Repayment of revolving credit facility		( i 20,000	)		( i 187,322	)
Repayments of notes payable and finance lease liability		( i 653	)		( i 1,059	)
Distribution to non-controlling interest		( i 720	)		( i 180	)
Proceeds from exercise of stock options		i 11			i —
Payments of employee tax withholdings related to vesting of restricted stock awards		( i 301	)		( i 314	)
Payments of employee tax withholdings related to cashless exercise of stock options		( i 8	)		( i 146	)
Net cash provided by (used for) financing activities		( i 21,671	)		i 4,839

Effect of exchange rate changes on cash and cash equivalents		( i 679	)		i 512

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		( i 10,960	)		i 3,798
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		i 34,841			i 5,420

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	i 23,881		$	i 9,218

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid	$	i 1,346		$	i 1,990
Interest paid	$	i 468		$	i 650

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 i 100 operating locations (including i 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, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The pandemic has created significant volatility, uncertainty and economic disruption. We are closely monitoring the impact of the pandemic on all aspects of our business, our customers, employees and business partners. The overall demand for transportation services have been significantly impacted. COVID-19 has adversely affected most of our operations, financial condition, and results of operations in this first quarter of our fiscal year 2021. Beginning in April of 2020, we have experienced decreased customer demands in many parts of our business while seeing improvements in the demand in certain segments of business. We have been working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response to our declining revenues. However, the relative effectiveness will depend on the severity and duration of the pandemic.

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.

/ i

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), which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of March 12, 2020 and applies to contract modifications made before December 31, 2022. The Company is assessing the impact of this guidance on its consolidated financial statements and disclosures.

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 i 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 i July 1, 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

/ i

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 i 40% owned by Radiant Global Logistics, Inc. (“RGL”) and i 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.

/ i

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.

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 i 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.

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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. i i No / impairment losses of long-lived assets were recorded during the quarters ended September 30, 2020 and 2019.

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 i ten years, trademarks and trade names are amortized using the straight-line method over i 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 1^st 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 i 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 months ended September 30, 2020 and 2019 are as follows:

Three Months Ended September 30, 2020

(In thousands)

United States

Canada

Corporate/ Eliminations

Total

Major Service Lines:

Transportation services

i 152,461

i 17,523

( i 144

)

i 169,840

Value-added services ⁽¹⁾

i 2,304

i 3,733

i —

i 6,037

Total

i 154,765

i 21,256

( i 144

)

i 175,877

Timing of Revenue Recognition:

Services transferred over time

i 154,294

i 21,256

( i 144

)

i 175,406

Services transferred at a point in time

i 471

i —

i 471

Total

i 154,765

i 21,256

( i 144

)

i 175,877

Three Months Ended September 30, 2019

(In thousands)

United States

Canada

Corporate/ Eliminations

Total

Major Service Lines:

Transportation services

i 171,463

i 20,498

( i 172

)

i 191,789

Value-added services ⁽¹⁾

i 4,421

i 4,333

i —

i 8,754

Total

i 175,884

i 24,831

( i 172

)

i 200,543

Timing of Revenue Recognition:

Services transferred over time

i 175,093

i 24,831

( i 172

)

i 199,752

Services transferred at a point in time

i 791

i —

i 791

Total

i 175,884

i 24,831

( i 172

)

i 200,543

⁽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 $ i 306 for the three months ended September 30, 2020 and $ i 332 for the three months ended September 30, 2019.

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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.

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 months ended September 30, 2020 and 2019 are immaterial.

Certain of our 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 months ended September 30, 2020 and 2019 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 September 30, 2020, the Company does i 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).

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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 September 30,
(In thousands, except share data)	2020		2019
Numerator:
Net income attributable to Radiant Logistics, Inc.	$	i 3,088	$	i 3,235

Denominator:
Weighted average common shares outstanding, basic		i 49,578,590		i 49,662,540
Dilutive effect of share-based awards		i 1,346,797		i 1,765,473

Weighted average common shares outstanding, diluted		i 50,925,387		i 51,428,013

Potentially dilutive common shares excluded		i 292,363		i 333,214

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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 i November 2027 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.

The components of lease expense were as follows:

	Three Months Ended September 30,
(In thousands)	2020		2019
Operating:
Operating lease cost	$	i 1,773	$	i 1,809

Financing:
Reduction of right-of-use assets		i 153		i 155
Interest on lease liabilities		i 37		i 46

Total finance lease cost	$	i 190	$	i 201

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Supplemental cash flow information related to leases was as follows:

(In thousands)	Three Months Ended September 30, 2020		Three Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows arising from operating leases	$	i 1,872	$	i 1,837
Operating cash flows arising from finance leases		i 37		i 46
Financing cash flows arising from finance leases		i 172		i 167

Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	i 572	$	i —

/ /

Supplemental balance sheet information related to leases was as follows:

	September 30,			June 30,
(In thousands)	2020			2020
Operating lease:
Operating lease right-of-use assets	$	i 11,601		$	i 12,580

Current portion of operating lease liability		i 5,645			i 6,121
Operating lease liability, net of current portion		i 6,593			i 7,192

Total operating lease liabilities	$	i 12,238		$	i 13,313

Finance lease:
Property, technology, and equipment, net	$	i 3,101		$	i 3,254

Current portion of finance lease liability		i 698			i 688
Finance lease liability, net of current portion		i 2,307			i 2,476

Total finance lease liabilities	$	i 3,005		$	i 3,164

Weighted average remaining lease term:
Operating leases	i 2.9 years			i 2.9 years
Finance leases	i 4.9 years			i 5.0 years

Weighted average discount rate:
Operating leases		i 3.23	%		i 3.22	%
Finance leases		i 4.56	%		i 4.52	%

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As of September 30, 2020, 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)	$	i 4,714		$	i 619
2022		i 4,464			i 813
2023		i 1,545			i 632
2024		i 807			i 560
2025		i 742			i 533
Thereafter		i 557			i 176

Total lease payments		i 12,829			i 3,333

Less imputed interest		( i 591	)		( i 328	)

Total lease liability	$	i 12,238		$	i 3,005

NOTE 6 – PROPERTY, TECHNOLOGY, AND EQUIPMENT

		September 30,			June 30,
(In thousands)	Useful Life	2020			2020
Computer software	i 3 - i 5 years	$	i 22,285		$	i 21,884
Trailers and related equipment	i 3 - i 15 years		i 6,796			i 6,733
Office and warehouse equipment	i 3 - i 15 years		i 5,348			i 3,980
Leasehold improvements	⁽¹⁾		i 3,804			i 3,799
Computer equipment	i 3 - i 5 years		i 3,197			i 3,054
Furniture and fixtures	i 3 - i 15 years		i 1,112			i 1,017

			i 42,542			i 40,467
Less: accumulated depreciation and amortization			( i 23,291	)		( i 21,755	)

		$	i 19,251		$	i 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 $ i 1,621 for the three months ended September 30, 2020 and $ i 1,406 for the three months ended September 30, 2019. Computer software includes approximately $ i 1,568 and $ i 174 of software in development as of September 30, 2020 and June 30, 2020, respectively.

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NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The table below reflects the changes in the carrying amounts of goodwill for the three months ended September 30, 2020:

(In thousands)	Total
Balance as of June 30, 2020	$	i 72,199
Foreign currency translation loss		( i 1,128	)

Balance as of September 30, 2020	$	i 71,071

We considered the uncertainties from COVID-19 as part of our determination as to whether any triggering events occurred during the quarter ended September 30, 2020, 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, i no impairment was identified for our goodwill as of September 30, 2020.

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 September 30, 2020 and June 30, 2020, respectively:

September 30, 2020

(In thousands)

Weighted

Average

Amortization

Period

Gross

Carrying

Amount

Accumulated

Amortization

Net

Carrying

Amount

Customer related

i 4.8 years

i 100,763

( i 62,707

)

i 38,056

Trade names and trademarks

i 9.4 years

i 14,670

( i 5,410

)

i 9,260

Covenants not to compete

i 4.1 years

i 1,433

( i 915

)

i 518

i 116,866

( i 69,032

)

i 47,834

June 30, 2020

(In thousands)

Weighted

Average

Amortization

Period

Gross

Carrying

Amount

Accumulated

Amortization

Net

Carrying

Amount

Customer related

i 5.1 years

i 102,153

( i 61,227

)

i 40,926

Trade names and trademarks

i 9.6 years

i 14,977

( i 5,268

)

i 9,709

Covenants not to compete

i 4.3 years

i 1,433

( i 876

)

i 557

i 118,563

( i 67,371

)

i 51,192

Amortization expense amounted to $ i 2,538 for the three months ended September 30, 2020 and $ i 2,630 for the three months ended September 30, 2019. i Future amortization expense for each of the next five fiscal years ending June 30 are as follows:

(In thousands)
2021 (remaining)	$	i 7,582
2022		i 9,555
2023		i 9,077
2024		i 8,701
2025		i 6,710

NOTE 8 – NOTES PAYABLE

Notes payable consist of the following:

	September 30,			June 30,
(In thousands)	2020			2020
Revolving Credit Facility	$	i 10,000		$	i 30,000
Senior Secured Loans		i 15,669			i 16,302
Other debt		i 5,925			i 5,925
Unamortized debt issuance costs		( i 327	)		( i 336	)

Total notes payable		i 31,267			i 51,891
Less: current portion		( i 3,937	)		( i 3,800	)

Total notes payable, net of current portion	$	i 27,330		$	i 48,091

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

(In thousands)
2021 (remaining)	$	i 2,929
2022		i 4,138
2023		i 10,346
2024		i 4,181
2025		i 10,000

	$	i 31,594

Revolving Credit Facility

The Company entered into a $ i 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 i five years, matures on i March 13, 2025, and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company. i Borrowings under the Revolving Credit Facility accrue interest (at the Company’s option), at the Lenders’ base rate plus i 1.00% or LIBOR plus i 2.00% and can be subsequently adjusted based on the Company’s consolidated leverage ratio under the facility at the Lenders’ base rate plus i 1.00% to i 1.75% or LIBOR plus i 2.00% to i 2.75%. / As of September 30, 2020, this interest rate used was i 2.14%.

The Revolving Credit Facility includes a $ i 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 i 3.00 and minimum consolidated fixed charge coverage ratio of i 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 September 30, 2020, the borrowings outstanding on the Revolving Credit Facility was $ i 10,000 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$ i 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 i April 1, 2024 and accrues interest at a rate of i 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 $ i 600 is recorded as deposits and other assets in the accompanying condensed consolidated financial statements. The Company made interest-only payments for the first i twelve months followed by monthly principal and interest payments of CAD$ i 390 that will be paid through maturity.

In connection with the Company’s acquisition of Lomas, Radiant Canada obtained a CAD$ i 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$10,000 Credit Facilities Loan Agreement. The Company and its US and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on i June 1, 2024 and accrues interest at a fixed rate of i 6.65% per annum. The loan repayment consists of monthly principal and interest payments of CAD$ i 149.

The loans may be prepaid in whole at any time providing the Company gives at least i 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 September 30, 2020, the Company was in compliance with all of its covenants.

Paycheck Protection Program Loans

On May 4, 2020, the Company received loan proceeds of $ i 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 $ i 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 i two years. The annual interest rate on the PPP Loans is i 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 (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 condensed consolidated balance sheet as notes payable and will be derecognized if and when forgiven.

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 i 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 $ i 20,000 notional amount, for fixed interest cash outflows at i 0.635%. On i 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 $ i 10,000 notional amount, for fixed interest cash outflows at i 0.5865%. Both interest rate swap contracts mature and terminate on i i 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 September 30, 2020, the derivative instrument had a total notional amount of $ i i 30,000 / and a fair value of $ i 579 recognized in deposits and other assets 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 $ i 600. Both interest rate swap contracts are not designated as hedges; gains and losses from changes in fair value are recognized in other income (expense).

/ i

NOTE 10 – STOCKHOLDERS’ EQUITY

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

Common Stock

In March 2018, the Company’s board of directors authorized the repurchase of up to i 5,000,000 shares of the Company’s common stock through i December 31, 2019. On February 4, 2020, the Company announced that its board of directors has 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 i 541,049 shares of its common stock at an average cost of $ i 4.61 per share for an aggregate cost of $ i 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 i 40% by RGL and i 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 $ i 236 in profits, of which RCP’s distributable share was $ i 141 for the three months ended September 30, 2020. RLP recorded $ i 162 in profits, of which RCP’s distributable share was $ i 96 for the three months ended September 30, 2019. 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.

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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 September 30, 2020
	Level 3			Total
Contingent consideration	$	( i 4,940	)	$	( i 4,940	)
Interest rate swap contracts (derivatives)		i 579			i 579

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

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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	$	( i 375	)	$	i —
Increase related to accounting for acquisitions		( i 3,140	)		i —
Contingent consideration paid		i 327			i —
Change in fair value		( i 1,752	)		i 600

Balance as of June 30, 2020	$	( i 4,940	)	$	i 600
Change in fair value		i —			( i 21	)

Balance as of September 30, 2020	$	( i 4,940	)	$	i 579

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 $ i 10,500 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

Targets

Contingent consideration

( i 4,940

)

Discounted cash flows

Actual and projected EBITDA over three-year earnout period

i 8,600

Risk adjusted discount rate

i 18

Derivative instruments are carried at fair value on the condensed consolidated balance sheets. Interest rate swap contracts are included in deposits and other assets.

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 months ended September 30, 2020 and 2019, respectively, the Company’s income tax expense is composed of the following:

	Three Months Ended September 30,
(In thousands)	2020			2019
Current income tax expense	$	i 1,163		$	i 1,016
Deferred income tax benefit		( i 85	)		( i 229	)

Income tax expense	$	i 1,078		$	i 787

The Company’s effective tax rates prior to discrete items for the three months ended September 30, 2020 and 2019 are higher than the US federal statutory rates primarily due to earnings in foreign operations and state taxes. The actual income tax through the three months ended September 30, 2020 results in an effective tax rate of i 26%, which is higher than the US federal statutory rate due to earnings in foreign operations and state taxes and reduced by $ i 21 of share-based compensation benefits, which is discretely recognized in the quarter and is not a component of the Company’s annualized forecasted fiscal year 2021 effective tax rate. The Company does i not have any uncertain tax positions.

The Company and its wholly owned US subsidiaries file a consolidated Federal income tax return. The Company also files unitary or separate returns in various state, local, and non-US jurisdictions based on state, local and non-US filing requirements. The tax years that remain subject to examination by US authorities are the years ended June 30, i 2017 through June 30, i 2020. Tax years that remain subject to examination by state authorities are the years ended June 30, i 2016 through June 30, i 2020. Tax years that remain subject to examination by non-US authorities are the periods ended June 30, i 2016 through June 30, i 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's fiscal year 2018 federal income tax return is no longer being examined by the IRS and there were no adjustments to the Company's federal income taxes.

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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 i 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 i one share of common stock and generally vest after i 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 $ i 157 for the three months ended September 30, 2020 and $ i 257 for the three months ended September 30, 2019. As of September 30, 2020, there was $ i 2,511 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 i 2.29 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		i 755,872		$	i 5.07
Vested		( i 165,259	)		i 5.05
Granted		i 222,852			i 4.99
Forfeited		( i 51,045	)		i 5.05

Unvested balance as of September 30, 2020		i 762,420		$	i 5.05

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 i ten years. Generally, grants under each plan vest i 20% annually over a five-year period from the date of grant. The Company recognized share-based compensation expense and reversals of previously recorded share-based compensation expense due to forfeited options totaling a gain of $ i 13 for the three months ended September 30, 2020 and expense of $ i 173 for the three months ended September 30, 2019. The aggregate intrinsic value of options exercised was $ i 27 for the three months ended September 30, 2020 and $ i 570 for the three months ended September 30, 2019. As of September 30, 2020, there was $ i 53 of total unrecognized share-based compensation cost for stock options. Such costs are expected to be recognized over a weighted average period of approximately i 1.10 years.

The following table summarizes stock option activity under the plans:

Number of

Weighted

Average

Exercise Price

Weighted

Average

Remaining

Contractual Life

(Years)

Aggregate

Intrinsic Value

(In thousands)

Outstanding as of June 30, 2020

i 1,995,368

i 3.46

3.75

i 1,653

Exercised

( i 23,345

)

i 3.64

—

i 27

Forfeited

( i 50,000

)

i 3.37

—

Outstanding as of September 30, 2020

i 1,922,023

i 3.46

3.44

i 3,380

Exercisable as of September 30, 2020

i 1,867,023

i 3.44

3.38

i 3,309

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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 i no potentially material legal proceedings as of September 30, 2020.

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. i Earn-out payments are generally due annually on November 1st and i 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	$	i 2,127	$	i 1,633	$	i 789	$	i 391	$	i 4,940

Total estimated earn-out payments	$	i 2,127	$	i 1,633	$	i 789	$	i 391	$	i 4,940

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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 i i 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 September 30, 2020

Corporate/

(In thousands)

United States

Canada

Eliminations

Total

Revenues

i 154,765

i 21,256

( i 144

)

i 175,877

Income (loss) from operations

i 6,620

i 2,231

( i 4,064

)

i 4,787

Other income (expense)

i 215

( i 103

)

( i 592

)

( i 480

)

Income (loss) before income taxes

i 6,835

i 2,128

( i 4,656

)

i 4,307

Depreciation and amortization

i 1,090

i 528

i 2,541

i 4,159

Property, technology, and equipment, net

i 13,442

i 5,809

i —

i 19,251

Goodwill

i 50,801

i 20,270

i —

i 71,071

As of and for Three Months Ended September 30, 2019

(In thousands)

Revenues

i 175,884

i 24,831

( i 172

)

i 200,543

Income (loss) from operations

i 7,714

i 1,938

( i 4,850

)

i 4,802

Other income (expense)

( i 5

)

i 12

( i 691

)

( i 684

)

Income (loss) before income taxes

i 7,709

i 1,950

( i 5,541

)

i 4,118

Depreciation and amortization

i 988

i 415

i 2,633

i 4,036

Property, technology, and equipment, net

i 14,827

i 5,500

i —

i 20,327

Goodwill

i 43,991

i 21,398

i —

i 65,389

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NOTE 17 – SUBSEQUENT EVENTS

In October 2020, we signed a new lease for i 20,025 square feet of office space in Renton, Washington commencing i May 2021. The lease has an eleven-year term, and rental costs of approximately $ i 38,000 per month.

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 of our 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, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The pandemic has created significant volatility, uncertainty and economic disruption. We are closely monitoring the impact of the pandemic on all aspects of our business, our customers, employees and business partners. The overall demand for transportation services have been significantly impacted. COVID-19 has adversely affected most of our operations, financial condition, and results of operations in fiscal year 2020 and the first quarter of our fiscal year 2021. Beginning in April of 2020, we have experienced decreased customer demands in many parts of our business while seeing improvements in the demand in certain segments of business.

We have been working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response to our declining revenues. However, the relative effectiveness will depend on the severity and duration of the pandemic. We face significant risks related to the spread of COVID-19 and the recent developments surrounding the global pandemic have had, and will continue to have, significant effects on our business, financial condition, results of operations, and cash flows. We are facing increased operational challenges from the need to protect employee health and safety. We expect to continue to incur additional costs as we continue to implement operational changes in response to the pandemic. We face significant risks related to the global economic downturn and severe reduction in revenues caused by the pandemic. These risks include materially reduced demand for our services and challenges to the ongoing viability of some of our customers. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business.

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, including: the severity and duration of the outbreak; governmental, business and other actions; the impact of the pandemic on economic activity; the effect on consumer confidence and spending, customer demand and buying patterns; the health of and the effect on our workforce and our ability to meet staffing needs; any impairment in value of our tangible or intangible assets that could be recorded as a result of weaker economic conditions; and the potential effects on our internal controls including those over financial reporting as a result of changes in working environments. Provisions for bad debt expense may increase given the financial difficulty faced by our customers, which could impact our ability to borrow under our revolving credit facility.

Due to the unprecedented and evolving nature of the COVID-19 pandemic, it remains very difficult to predict the extent of the impact on our industry generally and our business in particular. While we anticipate that our results of operations will continue to be impacted by this pandemic in fiscal year 2021, we are unable to reasonably estimate the extent of the impact on our full-year results of operations, our liquidity or our overall financial position. We may face similar risks in connection with any future public health crises.

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. Notwithstanding this great effort by our team, we anticipate the contraction in our business from the shelter-at-home mandates, closing of manufacturing facilities and general global economic slowdown will more than off-set any financial benefit from our support of essential businesses. 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 September 30, 2020 and 2019 (unaudited)

The following table summarizes revenues, cost of transportation and other services, and net revenues by reportable operating segments for the three months ended September 30, 2020 and 2019:

	Three Months Ended September 30, 2020												Three Months Ended September 30, 2019
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Revenues
Transportation	$	152,461		$	17,523		$	(144	)	$	169,840		$	171,463		$	20,498		$	(172	)	$	191,789
Value-added services		2,304			3,733			—			6,037			4,421			4,333			—			8,754
		154,765			21,256			(144	)		175,877			175,884			24,831			(172	)		200,543
Cost of transportation and other services
Transportation		114,024			13,864			(144	)		127,744			124,731			16,561			(172	)		141,120
Value-added services		1,776			391			—			2,167			2,919			971			—			3,890
		115,800			14,255			(144	)		129,911			127,650			17,532			(172	)		145,010
Net revenues⁽¹⁾
Transportation		38,437			3,659			—			42,096			46,732			3,937			—			50,669
Value-added services		528			3,342			—			3,870			1,502			3,362			—			4,864
	$	38,965		$	7,001		$	—		$	45,966		$	48,234		$	7,299		$	—		$	55,533
Net margin
Transportation		25.2	%		20.9	%	N/A				24.8	%		27.3	%		19.2	%	N/A				26.4	%
Value-added services		22.9	%		89.5	%	N/A				64.1	%		34.0	%		77.6	%	N/A				55.6	%

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

Transportation revenue was $169.8 million and $191.8 million for the three months ended September 30, 2020 and 2019, respectively. The decrease of $22.0 million, or 11.5%, is primarily attributable to the impact of COVID-19. Net transportation revenue was $42.1 million and $50.7 million for the three months ended September 30, 2020 and 2019, respectively. Net transportation margins decreased from 26.4% to 24.8%, primarily due to shifts in product mix and certain lower margin business.

Value-added services revenue was $6.0 million and $8.8 million, for the three months ended September 30, 2020 and 2019, respectively. The decrease of $2.8 million, or 31.8%, is primarily attributable to slowdown in our contract logistics and custom brokerage services offerings as the result of COVID-19. Net value-added services revenue was $3.9 million for the three months ended September 30, 2020, compared to $4.9 million for the comparable prior year period. Net value-added services revenue margins increased from 55.6% to 64.1%, primarily due to lower personnel and warehousing costs as a percentage of revenue.

The following table provides a reconciliation for the three months ended September 30, 2020 and 2019 of net revenues to gross profit, the most directly comparable GAAP measure:

(In thousands)	Three Months Ended September 30,
Reconciliation of net revenues to GAAP gross profit	2020			2019
Revenues	$	175,877		$	200,543
Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)		(129,911	)		(145,010	)
Depreciation and amortization		(2,943	)		(3,103	)
GAAP gross profit	$	43,023		$	52,430
Depreciation and amortization		2,943			3,103
Net revenues	$	45,966		$	55,533

GAAP gross margin (GAAP gross profit as a percentage of revenues)		24.5	%		26.1	%
Net margin (net revenues as a percentage of revenues)		26.1	%		27.7	%

The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the three months ended September 30, 2020 and 2019:

	Three Months Ended September 30, 2020												Three Months Ended September 30, 2019
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada		Corporate/ Eliminations			Total
Net revenues⁽¹⁾	$	38,965		$	7,001		$	—		$	45,966		$	48,234		$	7,299	$	—		$	55,533

Operating expenses:
Operating partner commissions		18,589			—			—			18,589			24,178			—		—			24,178
Personnel costs		8,928			3,173			676			12,777			10,434			3,488		925			14,847
Selling, general and administrative expenses		3,738			1,069			847			5,654			4,929			1,458		1,277			7,664
Depreciation and amortization		1,090			528			2,541			4,159			988			415		2,633			4,036
Transition, lease termination, and other costs		—			—			—			—			(9	)		—		—			(9	)
Change in fair value of contingent consideration		—			—			—			—			—			—		15			15

Total operating expenses		32,345			4,770			4,064			41,179			40,520			5,361		4,850			50,731

Income (loss) from operations		6,620			2,231			(4,064	)		4,787			7,714			1,938		(4,850	)		4,802
Other income (expense)		215			(103	)		(592	)		(480	)		(5	)		12		(691	)		(684	)

Income (loss) before income taxes		6,835			2,128			(4,656	)		4,307			7,709			1,950		(5,541	)		4,118
Income tax expense		—			—			(1,078	)		(1,078	)		—			—		(787	)		(787	)

Net income (loss)		6,835			2,128			(5,734	)		3,229			7,709			1,950		(6,328	)		3,331
Less: Net income attributable to non-controlling interest		(141	)		—			—			(141	)		(96	)		—		—			(96	)

Net income (loss) attributable to Radiant Logistics, Inc.	$	6,694		$	2,128		$	(5,734	)	$	3,088		$	7,613		$	1,950	$	(6,328	)	$	3,235

	Three Months Ended September 30, 2020										Three Months Ended September 30, 2019
Operating expenses as a percent of net revenues:	United States			Canada			Corporate/ Eliminations	Total			United States			Canada			Corporate/ Eliminations	Total
Operating partner commissions		47.7	%		0.0	%	N/A		40.4	%		50.1	%		0.0	%	N/A		43.5	%
Personnel costs		22.9	%		45.3	%	N/A		27.8	%		21.6	%		47.8	%	N/A		26.7	%
Selling, general and administrative expenses		9.6	%		15.3	%	N/A		12.3	%		10.2	%		20.0	%	N/A		13.8	%
Depreciation and amortization		2.8	%		7.5	%	N/A		9.0	%		2.0	%		5.7	%	N/A		7.3	%

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

Operating partner commissions decreased $5.6 million, or 23.1%, to $18.6 million for the three months ended September 30, 2020. The decrease is primarily due to decreased net revenues from operating partners. As a percentage of net revenues, operating partner commissions decreased 310 basis points to 40.4% from 43.5% for the three months ended September 30, 2020 and 2019, respectively, as a result of a higher percentage of net revenues coming from company owned stores.

Personnel costs decreased $2.1 million, or 13.9%, to $12.8 million for the three months ended September 30, 2020. The decrease is primarily due to temporary workforce reductions and temporary compensation reductions as a result of managements response to COVID-19. As a percentage of net revenues, personnel costs increased 106 basis points to 27.8% from 26.7% for the three months ended September 30, 2020 and 2019, respectively.

Selling, general and administrative (“SG&A”) expenses decreased $2.0 million, or 26.2%, to $5.7 million for the three months ended September 30, 2020. The decrease is primarily attributable to decreased spending for professional services fees, bad debt & claims, and travel for the quarter. As a percentage of net revenues, SG&A decreased 150 basis points to 12.3% from 13.8% for the three months ended September 30, 2020 and 2019, respectively.

Depreciation and amortization costs increased $0.2 million, or 3.1%, to $4.2 million for the three months ended September 30, 2020. The increase is due to investments in technology infrastructure and increased amortizable intangible assets associated with recent acquisitions of two operating partner locations.

Other expenses were $0.5 million and $0.7 million for the three months ended September 30, 2020 and 2019, respectively.

Our change in net income is driven principally by decreased net revenues, partially offset by decreased operating expenses and decreased income taxes 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 September 30, 2020 and 2019 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

	Three Months Ended September 30, 2020												Three Months Ended September 30, 2019
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net income (loss) attributable to Radiant Logistics, Inc.	$	6,694		$	2,128		$	(5,734	)	$	3,088		$	7,613		$	1,950		$	(6,328	)	$	3,235
Income tax expense		—			—			1,078			1,078			—			—			787			787
Depreciation and amortization		1,090			528			2,541			4,159			988			415			2,633			4,036
Net interest expense		—			—			571			571			—			—			692			692

EBITDA		7,784			2,656			(1,544	)		8,896			8,601			2,365			(2,216	)		8,750

Share-based compensation		(39	)		53			130			144			245			44			141			430
Change in fair value of contingent consideration		—			—			—			—			—			—			15			15
Acquisition related costs		—			—			34			34			—			—			285			285
Litigation costs		—			—			152			152			—			—			184			184
Transition, lease termination, and other costs		—			—			—			—			(9	)		—			—			(9	)
Change in fair value of interest rate swap contracts		—			—			21			21			—			—			—			—
Foreign exchange loss (gain)		(123	)		102			—			(21	)		36			(13	)		—			23

Adjusted EBITDA	$	7,622		$	2,811		$	(1,207	)	$	9,226		$	8,873		$	2,396		$	(1,591	)	$	9,678
Adjusted EBITDA as a % of net revenues⁽¹⁾		19.6	%		40.2	%	N/A				20.1	%		18.4	%		32.8	%	N/A				17.4	%

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

Adjusted EBITDA decreased $0.5 million, or 4.7% to $9.2 million for the quarter ended September 30, 2020.

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 September 30, 2020, we have $23.9 million in cash on hand to serve as adequate working capital.

We believe that COVID-19 is likely to continue impacting general economic activity and demand in our markets, which could have an adverse effect on our results of operations, which in turn, could limit the amounts available to us under the Revolving Credit Facility and cause us to seek other external financing sources to meet our operating and capital needs. However, future conditions in the credit markets may be unpredictable alternative sources of credit may be reduced.

Net cash provided by operating activities were $13.4 million for the three months ended September 30, 2020. Net cash provided by operating activities were $0.1 million for the three months ended September 30, 2019. 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 three months ended September 30, 2020 increased by $13.3 million, compared with the same period in fiscal year 2019, primarily due to the net change in operating assets and liabilities.

Net cash used for investing activities were $2.1 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively. The primary use of cash was for purchases of property, technology, and equipment. Cash paid for purchases of property, technology, and equipment were $2.1 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively.

Net cash used for financing activities was $21.7 million for the three months ended September 30, 2020. Net cash provided by financing activities were $4.8 million for the three months ended September 30, 2019. Repayment of the Revolving Credit Facility were $20 million for the three months ended September 30, 2020. Proceeds from the Revolving Credit Facility were $193.9 million for the three months ended September 30, 2019, and Repayment of the Revolving Credit Facility were $187.3 million for the three months ended September 30, 2019. Repayments of notes payable and finance lease liability were $0.7 million and $1.1 million for the three months ended September 30, 2020 and 2019, respectively. Distributions to non-controlling interest were $0.7 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively. Payments of employee tax withholdings related to vesting of restricted stock awards were $0.3 million for both the three months ended September 30, 2020 and 2019. Payments of employee tax withholdings related to the cashless exercise of stock option were $0.1 million for the three months ended September 30, 2019.

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 September 30, 2020, 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 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%.

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 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.

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

Working Capital

The ongoing impacts of COVID-19 have created significant uncertainties around the Company’s operations during the quarter ended September 30, 2020. If these conditions continue unabated for more than the short-term, as most industry sources are predicting, the impact of COVID-19 is expected to significantly reduce our revenue, earnings and operating cash flow in future quarters. Since continued growth through strategic acquisitions would normally require additional draws from our sources of financing, the Company’s search for new, potential acquisitions has been temporarily paused. Furthermore, the Company has temporarily suspended its stock repurchase program.

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

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

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 September 30, 2020, was carried out by our management under the supervision and with the participation of our CEO and CFO. Based upon that evaluation, our CEO and CFO concluded that, as of September 30, 2020, our disclosure controls and procedures were not effective because of the material weakness in our internal control over financial reporting described below.

Material Weakness

We did not design and maintain effective internal controls over the goodwill and intangibles impairment review process. The Company identified an error in its evaluation of the annual goodwill impairment test performed as of April 1, 2020 and the interim goodwill and intangibles impairment evaluation test performed as of June 30, 2020. Specifically, we did not design and maintain effective controls to review in sufficient detail the carrying values of the Company’s reporting units for both the annual and interim goodwill impairment tests. In addition, we did not design and maintain effective controls at the proper precision level to determine whether an impairment evaluation triggering event occurred as of June 30, 2020.

A material weakness is a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. This material weakness did not result in a misstatement to the condensed consolidated financial statements. However, this material weakness could result in misstatements that would result in a material misstatement of the condensed consolidated financial statements that would not be prevented or detected.

Remediation of Material Weakness

We have evaluated the material weakness and begun developing and implementing a plan of remediation to strengthen our internal controls related to the control procedures applied to the goodwill and intangible asset impairment testing process.

Management is in the process of developing a detailed plan for remediation of the material weakness. We have begun conducting an in depth review of our controls over the goodwill and intangibles cycle to enhance our procedures and resources related to the identification and evaluation of triggering events that can impact our impairment assessments, particularly during the periods the Company is impacted by the COVID-19 environment. We are working toward enhancing the level of precision at which our internal controls over financial reporting relating to goodwill and intangible asset impairment assessments are performed, specifically in consideration of the factors analyzed in evaluating triggering events and performing management’s qualitative impairment assessment. We are also in the process of improving our documentation to strengthen the support for the judgments applied to the impairment analyses. If deemed necessary, we will provide additional training to staff involved in the control procedures over the goodwill and intangibles cycle and/or obtain assistance from third parties.

Changes in Internal Control Over Financial Reporting

During the three months ended September 30, 2020, 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

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 September 30, 2020.

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

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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: November 9, 2020		/s/ *Bohn H. Crain*
		Bohn H. Crain
		Chief Executive Officer
		(Principal Executive Officer)

Date: November 9, 2020		/s/ *Todd E. Macomber*
		Todd E. Macomber
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Dates Referenced Herein and Documents Incorporated by Reference

This ‘10-Q’ Filing	Date	Other Filings

	3/13/25
	6/1/24
	4/1/24
	12/31/22
	12/31/21	10-Q, NT 10-Q
Filed on:	11/9/20	8-K
	11/2/20
For Period end:	9/30/20
	7/1/20
	6/30/20	10-K, NT 10-K
	5/4/20
	4/28/20
	4/17/20
	4/2/20
	4/1/20	8-K
	3/20/20
	3/13/20	8-K
	3/12/20
	2/4/20
	12/31/19	10-Q
	9/30/19	10-Q, 4
	6/30/19	10-K
	6/30/17	10-K, 8-K
	6/30/16	10-K
	4/2/15	3, 4, 8-K, 8-K/A
		List all Filings

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Radiant Logistics, Inc. – ‘10-Q’ for 9/30/20

On: Monday, 11/9/20, at 4:55pm ET · For: 9/30/20 · Accession #: 1564590-20-52578 · File #: 1-35392

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