Filing Delays Overshadow Radiant Logistics’ (RLGT) Impressive Cash Production

(Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

SOPA Images/LightRocket via Getty Images

Radiant Logistics (RLGT) released preliminary operating results for Q2 of fiscal 2023 last night. While revenues and earnings for the period fell 15% and 7% to $283.5 million and 13 cents and came in lighter than the $345.0 million and 16 cents analysts were expecting, they’re actually better than they appear in my view and quite consistent with the company’s previously communicated expectation for its operations to return to more normalized levels and growth rates (from the elevated ones it had been enjoying amid the pandemic) as the economy keeps slowing.

In particular, the quarterly revenues figure includes pass-through costs for transportation and other services that can fluctuate greatly from quarter-to-quarter due to the high level of volatility in these expenses (which include fuel). Excluding these costs, net revenues actually increased by 5% to $75.2 million. Similarly, its earnings include the amortization of intangible assets, which is a commonly excluded noncash expense by most firms. Had RLGT followed the same convention, we estimate it would have increased the bottom line by about $2 million or 4 cents per share to 17 cents.

This understated operating performance on a cash basis is also evident in the fact that RLGT generated a whopping $42.3 million in cash from its operations during the quarter. And while there were clearly other factors that contributed to this unusually high level of cash production, which were not disclosed in this preliminary report, it doesn’t change the fact that this allowed the company to end the quarter with a net cash position for the very first time in its history.

That’s why I think the real reason these preliminary results failed to provide any lift to RLGT’s shares is because of the continued delay in the filing of its latest 10-K annual report for fiscal 2022 and subsequent 10-Qs for the latest two quarters. As the company has previously noted, it needs to complete the restatement of each interim quarterly financial statement filed during fiscal 2021 and 2022 to correct historical errors related principally to the timing of recognition of the company’s estimated accrual of in-transit revenues and related costs before it can formally file these reports.

Yet what’s important is that based on the work done to resolve these accounting matters so far, RLGT still expects the net effect of the restatements to earnings per share during the affected periods to be relatively modest—amounting to a reduction of roughly a penny per share in both fiscal 2021 and for the first nine months of fiscal 2022. Thus, the fact that fiscal 2022 was a record year that left RLGT with historically low leverage on its balance sheet and good financial flexibility to continue to execute its strategy moving forward is unlikely to change. This has me optimistic that the stock will resume its recent upward trend and climb to the much higher level I continue to believe it’s worth once RLGT brings all of its filings current as it expects to do soon.

Taesik Yoon, CFA is the editor of the Forbes Special Situation Survey and Forbes Investor investment newsletters. Radiant Logistics (RLGT) is a current recommendation in the Forbes Investor. To access this and the other stocks being recommended through the Forbes Investor, click here to subscribe.

Taesik Yoon

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