10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended December 31, 2021


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

For the transition period from to

Commission File Number 001-35392

RADIANT LOGISTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3625550

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

Triton Tower Two

700 S Renton Village Place, Seventh Floor

Renton, Washington 98057

(Address of principal executive offices) (Zip Code)

(425) 462-1094

(Registrant’s telephone number, including area code)

N/A

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

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


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

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

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

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


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

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

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

There were 49,443,305 shares outstanding of the registrant’s common stock as of February 1, 2022.

RADIANT LOGISTICS, INC.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

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

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

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

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

	Notes to Condensed Consolidated Financial Statements	8

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	39

Item 6.	Exhibits	41

Signatures		42

RADIANT LOGISTICS, INC.

Condensed Consolidated Balance Sheets


	December 31,			June 30,
(In thousands, except share and per share data)	2021			2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	17,195		$	13,696
Accounts receivable, net of allowance of $2,051 and $1,489, respectively		158,950			117,349
Contract assets		73,268			27,753
Prepaid expenses and other current assets		35,354			17,512
Total current assets		284,767			176,310

Property, technology, and equipment, net		26,145			24,151

Goodwill		85,925			72,582
Intangible assets, net		53,832			41,404
Operating lease right-of-use assets		35,955			39,022
Deposits and other assets		3,316			3,124
Long-term restricted cash		635			648
Total other long-term assets		179,663			156,780
Total assets	$	490,575		$	357,241

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	136,309		$	87,941
Operating partner commissions payable		19,395			13,779
Accrued expenses		10,588			6,801
Income tax payable		1,411			2,713
Current portion of notes payable		4,508			4,446
Current portion of operating lease liability		7,326			6,989
Current portion of finance lease liability		676			743
Current portion of contingent consideration		2,600			2,600
Other current liabilities		1,200			345
Total current liabilities		184,013			126,357

Notes payable, net of current portion		92,091			24,000
Operating lease liability, net of current portion		32,496			34,899
Finance lease liability, net of current portion		1,497			1,809
Contingent consideration, net of current portion		2,618			4,663
Deferred income taxes		8,528			4,021
Other long-term liabilities		39			89
Total long-term liabilities		137,269			69,481
Total liabilities		321,282			195,838

Commitments and contingencies (Note 15)

Equity:
Common stock, $0.001 par value, 100,000,000 shares authorized; 51,171,531 and 50,832,205 shares issued, and 49,398,982 and 49,930,389 shares outstanding, respectively		33			32
Additional paid-in capital		105,256			104,228
Treasury stock, at cost, 1,772,549 and 901,816 shares, respectively		(10,914	)		(4,658	)
Retained earnings		74,394			60,367
Accumulated other comprehensive income		219			1,141
Total Radiant Logistics, Inc. stockholders’ equity		168,988			161,110
Non-controlling interest		305			293
Total equity		169,293			161,403
Total liabilities and equity	$	490,575		$	357,241

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 December 31,						Six Months Ended December 31,
(In thousands, except share and per share data)	2021			2020			2021			2020
Revenues	$	332,768		$	218,805		$	618,884		$	394,682

Operating expenses:
Cost of transportation and other services		261,179			163,504			482,411			293,416
Operating partner commissions		31,049			24,036			59,514			42,625
Personnel costs		16,688			13,735			32,304			26,512
Selling, general and administrative expenses		8,352			5,568			15,143			11,224
Depreciation and amortization		4,447			4,085			8,702			8,243
Change in fair value of contingent consideration		455			1,850			455			1,850
Total operating expenses		322,170			212,778			598,529			383,870

Income from operations		10,598			6,027			20,355			10,812

Other income (expense):
Interest income		4			3			6			12
Interest expense		(749	)		(728	)		(1,357	)		(1,308	)
Foreign currency transaction gain (loss)		104			(193	)		375			(172	)
Change in fair value of interest rate swap contracts		(378	)		(110	)		(424	)		(130	)
Other		91			291			108			382
Total other expense		(928	)		(737	)		(1,292	)		(1,216	)

Income before income taxes		9,670			5,290			19,063			9,596

Income tax expense		(2,646	)		(1,402	)		(4,874	)		(2,479	)

Net income		7,024			3,888			14,189			7,117
Less: net income attributable to non-controlling interest		(76	)		(76	)		(162	)		(217	)

Net income attributable to Radiant Logistics, Inc.	$	6,948		$	3,812		$	14,027		$	6,900

Other comprehensive income (loss):
Foreign currency translation gain (loss)		117			1,602			(922	)		(394	)
Comprehensive income	$	7,141		$	5,490		$	13,267		$	6,723

Income per share:
Basic	$	0.14		$	0.08		$	0.28		$	0.14
Diluted	$	0.14		$	0.07		$	0.28		$	0.14

Weighted average common shares outstanding:
Basic		49,657,547			49,815,191			49,789,304			49,696,891
Diluted		50,775,714			51,115,524			50,946,096			51,020,456

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

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Changes in Equity

Three and Six Months Ended December 31, 2021

(unaudited)


	RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY
	Common Stock					Additional Paid-in			Treasury			Retained		Accumulated Other Comprehensive			Total Radiant Logistics, Inc. Stockholders'			Non- Controlling			Total
(In thousands, except share and per share data)	Shares			Amount		Capital			Stock			Earnings		Income (Loss)			Equity			Interest			Equity
Balance as of June 30, 2021		49,930,389		$	32	$	104,228		$	(4,658	)	$	60,367	$	1,141		$	161,110		$	293		$	161,403
Repurchase of common stock		(254,894	)		—		—			(1,675	)		—		—			(1,675	)		—			(1,675	)
Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		115,616			—		(342	)		—			—		—			(342	)		—			(342	)
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		21,553			—		124			—			—		—			124			—			124
Share-based compensation		—			—		350			—			—		—			350			—			350
Net income		—			—		—			—			7,079		—			7,079			86			7,165
Other comprehensive loss		—			—		—			—			—		(1,039	)		(1,039	)		—			(1,039	)
Balance as of September 30, 2021		49,812,664		$	32	$	104,360		$	(6,333	)	$	67,446	$	102		$	165,607		$	379		$	165,986

Issuance of common stock to shareholders of acquired business		40,000			—		244			—			—		—			244			—			244
Repurchase of common stock		(615,839	)		—		—			(4,581	)		—		—			(4,581	)		—			(4,581	)
Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid		43,326			1		(50	)		—			—		—			(49	)		—			(49	)
Issuance of common stock upon exercise of stock options, net of taxes withheld and paid		118,831			—		280			—			—		—			280			—			280
Distribution to non-controlling interest		—			—		—			—			—		—			—			(150	)		(150	)
Share-based compensation		—			—		422			—			—		—			422			—			422
Net income		—			—		—			—			6,948		—			6,948			76			7,024
Other comprehensive income		—			—		—			—			—		117			117			—			117
Balance as of December 31, 2021		49,398,982		$	33	$	105,256		$	(10,914	)	$	74,394	$	219		$	168,988		$	305		$	169,293

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

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Changes in Equity (continued)

Three and Six Months Ended December 31, 2020

(unaudited)


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

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

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

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six Months Ended December 31,
(In thousands)	2021			2020
OPERATING ACTIVITIES:
Net income	$	14,189		$	7,117
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES
Share-based compensation		772			471
Amortization of intangible assets		5,126			5,075
Depreciation and amortization of property, technology, and equipment		3,576			3,168
Deferred income tax benefit		(534	)		(426	)
Amortization of debt issuance costs		253			264
Change in fair value of contingent consideration		455			1,850
Other		275			(318	)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable		(25,324	)		(24,804	)
Contract assets		(44,123	)		(5,312	)
Income tax receivable/payable		(3,421	)		1,204
Prepaid expenses, deposits, and other assets		(13,620	)		400
Accounts payable		40,952			12,355
Operating partner commissions payable		5,616			4,387
Accrued expenses and other liabilities		(2,467	)		(3,518	)
Payment of contingent consideration		(1,377	)		—
Net cash (used for) provided by operating activities		(19,652	)		1,913

INVESTING ACTIVITIES:
Payments to acquire intangible assets		(34,548	)		—
Purchases of property, technology, and equipment		(4,487	)		(4,846	)
Proceeds from sale of property, technology, and equipment		158			13
Net cash used for investing activities		(38,877	)		(4,833	)

FINANCING ACTIVITIES:
Proceeds from revolving credit facility		80,119			—
Repayment of revolving credit facility		(9,619	)		(20,000	)
Repayments of notes payable and finance lease liability		(2,528	)		(2,261	)
Proceeds from sale of common stock		244			—
Repurchases of common stock		(6,256	)		—
Payments of contingent consideration		(1,123	)		(1,027	)
Distribution to non-controlling interest		(150	)		(870	)
Proceeds from exercise of stock options		407			1,159
Payments of employee tax withholdings related to vesting of restricted stock awards		(392	)		(334	)
Payments of employee tax withholdings related to cashless exercise of stock options		(3	)		(88	)
Net cash provided by (used for) financing activities		60,699			(23,421	)

Effect of exchange rate changes on cash and cash equivalents		1,316			(1,192	)

NET INCREASE (DECREASE) IN CASH,CASH EQUIVALENTS, AND RESTRICTED CASH		3,486			(27,533	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD		14,344			35,433

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	17,830		$	7,900

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents	$	17,195		$	7,269
Long-term restricted cash		635			631
Total cash, cash equivalents, and restricted cash, end of period	$	17,830		$	7,900

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid	$	9,100		$	1,743
Interest paid	$	1,008		$	947

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”, “we” or “us”), operates 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 operating locations. Included in these operating locations are a number of independent agents, who we also refer to as our “strategic operating partners” that operate exclusively on our behalf, and 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.

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. We also provide other value-added logistics services including materials management and distribution services (collectively, “Materials Management and Distribution” or “MM&D” services), and customs house brokerage (“CHB”) services to complement our 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. Federal and state governments have implemented measures to contain the virus including vaccination programs. Even as efforts to contain the pandemic have made progress, new variants of the virus may cause additional outbreaks. The COVID-19 pandemic has impacted and may continue to impact our business operations and financial results. Although some of the effects have lessened over time, there is substantial uncertainty in the nature and degree of its continued effects over time. As the world continues to respond to COVID-19, we are working to do our part by ensuring the safety of our employees, striving to protect the health and well-being of the communities in which we operate.

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, 2021.

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

NOTE 2 - RECENT ACCOUNTING GUIDANCE

Recent Accounting Guidance Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) and subsequent amendments to the initial guidance: ASU 2021-01, which provides temporary optional expedients and exceptions to the current guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments are effective as of March 12, 2020 and applies to contract modifications made before December 31, 2022. As of December 31, 2021, the Company has not utilized any of the expedients discussed within this ASU, however, it continues to assess its agreements to determine if LIBOR is included and if the expedients would be utilized through the allowed period of December 31, 2022.

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Principles of Consolidation

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

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

b) Use of Estimates

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

c) Cash, Cash Equivalents, and Restricted Cash

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. Restricted cash includes five months interest in a debt service reserve account for a senior secured Canadian term loan, which will mature on April 1, 2024. The Company includes restricted cash along with the cash balance for presentation in the Condensed Consolidated Statement of Cash Flows.

d) Accounts Receivable

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

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

e) Property, Technology, and Equipment

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

f) Goodwill

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

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

If a quantitative assessment is performed, a reporting unit’s fair value is compared to its carrying value. A reporting unit’s fair value is determined based upon consideration of various valuation methodologies, including the income approach, which utilizes projected future cash flows discounted at rates commensurate with the risks involved, and multiples of current and future earnings, and market approach, which utilizes a selection of guideline public companies. 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.

As of December 31, 2021, management believes there are no indications of impairment.

g) Long-Lived Assets

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

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

h) Business Combinations

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

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

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

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

i) Revenue Recognition

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

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

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

Other services include primarily customs house brokerage (“CHB”) services sold on a standalone basis as a single performance obligation. The Company recognizes revenue from this performance obligation at a point in time, which is the completion of the services. Duties and taxes collected from the customer and paid to the customs agent on behalf of the customers are excluded from revenue. The Company also captures revenue through fees related to the use of its technology platform. The technology-related revenue includes platform fees, operational fees, and purchase order management fees.

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

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


	Three Months Ended December 31, 2021
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	292,184	$	31,430	$	(963	)	$	322,651
Value-added services (1)		2,507		7,610		—			10,117
Total	$	294,691	$	39,040	$	(963	)	$	332,768

Timing of Revenue Recognition:
Services transferred over time	$	293,853	$	39,040	$	(963	)	$	331,930
Services transferred at a point in time		838		—		—			838
Total	$	294,691	$	39,040	$	(963	)	$	332,768

	Six Months Ended December 31, 2021
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	539,825	$	60,763	$	(981	)	$	599,607
Value-added services (1)		5,221		14,056		—			19,277
Total	$	545,046	$	74,819	$	(981	)	$	618,884

Timing of Revenue Recognition:
Services transferred over time	$	543,333	$	74,819	$	(981	)	$	617,171
Services transferred at a point in time		1,713		—		—			1,713
Total	$	545,046	$	74,819	$	(981	)	$	618,884


	Three Months Ended December 31, 2020
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	188,763	$	23,454	$	(100	)	$	212,117
Value-added services (1)		1,738		4,950		—			6,688
Total	$	190,501	$	28,404	$	(100	)	$	218,805

Timing of Revenue Recognition:
Services transferred over time	$	189,966	$	28,404	$	(100	)	$	218,270
Services transferred at a point in time		535		—		—			535
Total	$	190,501	$	28,404	$	(100	)	$	218,805

	Six Months Ended December 31, 2020
(In thousands)	United States		Canada		Corporate/ Eliminations			Total
Major Service Lines:
Transportation services	$	341,224	$	40,977	$	(244	)	$	381,957
Value-added services (1)		4,042		8,683		—			12,725
Total	$	345,266	$	49,660	$	(244	)	$	394,682

Timing of Revenue Recognition:
Services transferred over time	$	344,260	$	49,660	$	(244	)	$	393,676
Services transferred at a point in time		1,006		—		—			1,006
Total	$	345,266	$	49,660	$	(244	)	$	394,682

(1) Value-added services include MM&D, CHB, technology platform fees, 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.

Contract assets was $73,268 and $27,753, as of December 31, 2021 and June 30, 2021, respectively. The change in the balances is due to larger than normal accrual of revenue for December, as a result of delayed posting of revenue caused by the ransomware incident discussed in Note 18.

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 estimates and 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 $328 and $684 for the three and six months ended December 31, 2021, respectively, and $268 and $575 for the three and six months ended December 31, 2020, respectively.

k) Income Taxes

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

The Company records a liability for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Interest and penalties, if any, are recorded as a component of interest expense or other expense, respectively. Currently, the Company does not have any accruals for uncertain tax positions.

l) Share-Based Compensation

The Company grants restricted stock awards, restricted stock units and stock options to certain directors, officers, and employees. The share-based 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 U.S. 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 income (loss). Gains and losses on transactions of monetary items denominated in a foreign currency are recognized in other income (expense) in the condensed consolidated statements of comprehensive income.

o) Leases

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

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Annually, we perform an impairment analysis on ROU assets, and as of December 31, 2021, there was no material impairment to ROU assets.

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

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

p) Derivatives

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

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

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

NOTE 4 – EARNINGS PER SHARE

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


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands, except share data)	2021		2020		2021		2020
Numerator:
Net income attributable to Radiant Logistics, Inc.	$	6,948	$	3,812	$	14,027	$	6,900

Denominator:
Weighted average common shares outstanding, basic		49,657,547		49,815,191		49,789,304		49,696,891
Dilutive effect of share-based awards		1,118,167		1,300,333		1,156,792		1,323,565

Weighted average common shares outstanding, diluted		50,775,714		51,115,524		50,946,096		51,020,456

Potentially dilutive common shares excluded		100,000		133,367		117,392		212,865

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 May 2032 with options to renew for varying terms at the Company’s sole discretion. The Company has not included these options to extend or terminate in its calculation of right-or-use assets or lease liabilities as it is not reasonably certain to exercise these options.

The components of lease expense were as follows:


	Six Months Ended December 31,
(In thousands)	2021		2020
Operating:
Operating lease cost	$	4,811	$	3,516

Financing:
Amortization of leased assets		312		304
Interest on lease liabilities		55		72

Total finance lease cost	$	367	$	376

Supplemental cash flow information related to leases was as follows:


	Six Months Ended December 31,
(In thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows arising from operating leases	$	3,940	$	3,730
Operating cash flows arising from finance leases		55		73
Financing cash flows arising from finance leases		369		351

Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	1,694	$	569

Supplemental balance sheet information related to leases was as follows:


	December 31,			June 30,
(In thousands)	2021			2021
Operating lease:
Operating lease right-of-use assets	$	35,955		$	39,022

Current portion of operating lease liability		7,326			6,989
Operating lease liability, net of current portion		32,496			34,899

Total operating lease liabilities	$	39,822		$	41,888

Finance lease:
Property, technology, and equipment, net	$	2,351		$	2,663

Current portion of finance lease liability		676			743
Finance lease liability, net of current portion		1,497			1,809

Total finance lease liabilities	$	2,173		$	2,552

Weighted average remaining lease term:
Operating leases	5.9 years			7.1 years
Finance leases	3.9 years			4.4 years

Weighted average discount rate:
Operating leases		4.11	%		4.11	%
Finance leases		4.66	%		4.75	%

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


(In thousands)	Operating			Finance
2022 (remaining)	$	4,743		$	414
2023		7,626			648
2024		7,153			572
2025		7,161			541
2026		6,646			176
2027		5,805			—
Thereafter		5,532			(1	)

Total lease payments		44,666			2,350

Less imputed interest		(4,844	)		(177	)

Total lease liability	$	39,822		$	2,173

NOTE 6 – PROPERTY, TECHNOLOGY, AND EQUIPMENT


		December 31,			June 30,
(In thousands)	Useful Life	2021			2021
Computer software	3 - 5 years	$	25,600		$	23,967
Trailers and related equipment	3 - 15 years		6,657			6,902
Office and warehouse equipment	3 - 15 years		9,637			8,650
Leasehold improvements	(1)		7,245			5,595
Computer equipment	3 - 5 years		4,429			3,885
Furniture and fixtures	3 - 15 years		1,813			1,720

Property, technology, and equipment			55,381			50,719
Less: accumulated depreciation and amortization			(29,236	)		(26,568	)

Property, technology, and equipment, net		$	26,145		$	24,151

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

Depreciation and amortization expenses related to property, technology, and equipment were $1,844 and $3,576 for the three and six months ended December 31, 2021, respectively and $1,548 and $3,168 for the three and six months ended December 31, 2020, respectively. Computer software includes approximately $674 and $568 of software in development as of December 31, 2021 and June 30, 2021, respectively.

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

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


(In thousands)	Total
Balance as of June 30, 2021	$	72,582
Acquisition		13,760
Foreign currency translation loss		(417	)

Balance as of December 31, 2021	$	85,925

We considered uncertainties including the ransomware incident discussed in Note 18 and COVID-19 as part of our determination as to whether any triggering events occurred during the quarter ended December 31, 2021, which would indicate an impairment of goodwill is more likely than not. Based on our assessment, there were no triggering events identified that would have an adverse impact on our business; and therefore, no impairment was identified for our goodwill as of December 31, 2021.

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

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

Intangible Assets

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


	December 31, 2021
(In thousands)	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer related	7.2 years	$	114,567	$	(74,631	)	$	39,936
Trade names and trademarks	8.4 years		16,495		(6,812	)		9,683
Developed technology	4.9 years		3,942		(73	)		3,869
Covenants not to compete	3.0 years		1,433		(1,089	)		344

		$	136,437	$	(82,605	)	$	53,832


	June 30, 2021
(In thousands)	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer related	4.2 years	$	102,713	$	(70,490	)	$	32,223
Trade names and trademarks	8.6 years		15,119		(6,349	)		8,770
Covenants not to compete	3.4 years		1,433		(1,022	)		411

		$	119,265	$	(77,861	)	$	41,404

Total amortization expense amounted to $2,603 and $5,126 for the three and six months ended December 31, 2021, respectively and $2,537 and $5,075 for the three and six months ended December 31, 2020, respectively. Future amortization expense for each of the next five fiscal years ending June 30 are as follows:


(In thousands)
2022 (remaining)	$	5,459
2023		10,841
2024		10,465
2025		8,475
2026		3,690
Thereafter		14,902

Total	$	53,832

NOTE 8 – NOTES PAYABLE

Notes payable consist of the following:


	December 31,			June 30,
(In thousands)	2021			2021
Revolving Credit Facility	$	85,500		$	15,000
Senior Secured Loans		11,284			13,690
Unamortized debt issuance costs		(185	)		(244	)

Total notes payable		96,599			28,446
Less: current portion		(4,508	)		(4,446	)

Total notes payable, net of current portion	$	92,091		$	24,000

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


(In thousands)
2022 (remaining)	$	2,217
2023		4,660
2024		4,407
2025		85,500

Total	$	96,784

Revolving Credit Facility

The Company entered into a $150,000 syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated on March 13, 2020. The Revolving Credit Facility was entered into with Bank of America Securities, Inc. as sole book runner and sole lead arranger, Bank of Montreal Chicago Branch, as lender and syndication agent, MUFG Union Bank, N.A as lender and documentation agent and Bank of America, N. A., KeyBank National Association and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”).

The Revolving Credit Facility has a term of five years, matures on March 13, 2025, and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company. Borrowings under the Revolving Credit Facility accrue interest (at the Company’s option), at the Lenders’ base rate plus 1.00% or LIBOR plus 2.00% and can be subsequently adjusted based on the Company’s consolidated leverage ratio under the facility at the Lenders’ base rate plus 1.00% to 1.75% or LIBOR plus 2.00% to 2.75%. As of December 31, 2021, this interest rate used was 2.10%.

The Revolving Credit Facility includes a $50,000 accordion feature to support future acquisition opportunities. For general borrowings under the Revolving Credit Facility, the Company is subject to the maximum consolidated leverage ratio of 3.00 and minimum consolidated fixed charge coverage ratio of 1.25. Additional minimum availability requirements and financial covenants apply in the event the Company seeks to use advances under the Revolving Credit Facility to pursue acquisitions or repurchase its common stock. As of December 31, 2021, the borrowings outstanding on the Revolving Credit Facility was $85,500 and the Company was in compliance with all of its covenants.

Senior Secured Loans

In connection with the Company’s acquisition of Radiant Canada (formerly, Wheels International Inc.), Radiant Canada obtained a CAD$29,000 senior secured Canadian term loan from Fiera Private Debt Fund IV LP (“FPD IV” formerly, Integrated Private Debt Fund IV LP) pursuant to a CAD$29,000 Credit Facilities Loan Agreement. The Company and its U.S. and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on April 1, 2024 and accrues interest at a rate of 6.65% per annum. The Company is required to maintain five months interest in a debt service reserve account to be controlled by FPD IV. As of December 31, 2021, the amount of $635 is recorded as long-term restricted cash in the accompanying condensed consolidated financial statements. The Company made interest-only payments for the first twelve months followed by monthly principal and interest payments of CAD$390 that will be paid through maturity.

In connection with the Company’s acquisition of Lomas, Radiant Canada obtained a CAD$10,000 senior secured Canadian term loan from Fiera Private Debt Fund V LP (formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000 Credit Facilities Loan Agreement. The Company and its U.S. and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on June 1, 2024 and accrues interest at a fixed rate of 6.65% per annum. The loan repayment consists of monthly principal and interest payments of CAD$149.

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

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

NOTE 9 – DERIVATIVES

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

The Company uses an interest rate swap for the management of interest rate risk exposure, as the interest rate swap effectively converts a portion of the Company’s Revolving Credit Facility from a floating to a fixed rate. The interest rate swap is an agreement between the Company and Bank of America to pay, in the future, a fixed-rate payment in exchange for Bank of America paying the Company a variable payment. The net payment obligation is based on the notional amount of the swap contract and the prevailing market interest rates. The Company may terminate the swap contract prior to its expiration date, at which point a realized gain or loss would be recognized. The value of the Company’s commitment would increase or decrease based primarily on the extent to which interest rates move against the rate fixed for each swap. As of December 31, 2021, the derivative instruments had a total notional amount of $30,000 and a fair value of $418 recorded in other current liabilities in the condensed consolidated balance sheets. As of June 30, 2021, the derivative instruments had a total notional amount of $30,000 and a fair value of $6 recognized in deposits and other assets on the condensed consolidated balance sheets. Both interest rate swap contracts are not designated as hedges; gains and losses from changes in fair value are recognized in other income (expense) in the condensed consolidated statements of comprehensive income. See Note 12 for discussion of fair value of the derivative instruments.

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue 5,000,000 shares of preferred stock, par value at $0.001 per share and 100,000,000 shares of common stock, $0.001 per share. No shares of preferred stock are issued or outstanding at December 31, 2021 or June 30, 2021.

Common Stock

The Company’s board of directors authorized the repurchase of up to 5,000,000 shares of the Company’s common stock through December 31, 2023. 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 870,733 shares of its common stock at an average cost of $7.18 per share for an aggregate cost of $6,256 during the six months ended December 31, 2021. The Company did not purchase any shares of common stock during the six months ended December 31, 2020.

NOTE 11 – VARIABLE INTEREST ENTITY AND RELATED PARTY TRANSACTIONS

RLP is owned 40% by RGL and 60% by RCP, a company for which the Chief Executive Officer of the Company is the sole member. RLP is a certified minority business enterprise that was formed for the purpose of providing the Company with a national accounts strategy to pursue corporate and government accounts with diversity initiatives. RCP’s ownership interest entitles it to 60% 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 members 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 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 $127 and $271 in net income, of which RCP’s distributable share was $76 and $162 for the three and six months ended December 31, 2021, respectively. RLP recorded $126 and $362 in net income, of which RCP’s distributable share was $76 and $217 for the three and six months ended December 31, 2020, respectively. The non-controlling interest recorded as a reduction of net income available to common stockholders in the condensed consolidated statements of comprehensive income represents RCP’s distributive share.

NOTE 12 – FAIR VALUE MEASUREMENT

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

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

•

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

•

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

•

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

Items Measured at Fair Value on a Recurring Basis

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


(In thousands)	Fair Value Measurements as of December 31, 2021
	Level 3			Total
Contingent consideration	$	(5,218	)	$	(5,218	)
Interest rate swap contracts (derivatives)		(418	)		(418	)

	Fair Value Measurements as of June 30, 2021
	Level 3			Total
Contingent consideration	$	(7,263	)	$	(7,263	)
Interest rate swap contracts (derivatives)		6			6

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, 2020	$	(4,940	)	$	600
Contingent consideration paid		2,027			—
Change in fair value		(4,350	)		(594	)

Balance as of June 30, 2021	$	(7,263	)	$	6
Contingent consideration paid		2,500			—
Change in fair value		(455	)		(424	)

Balance as of December 31, 2021	$	(5,218	)	$	(418	)

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 three 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 $5,973 through earn-out periods measured through January 2023, although there are no maximums on certain earn-out payments.

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

(In thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Contingent consideration

(5,218

)

Discounted cash flows

Actual and projected EBITDA over three-year earnout period

> $14,800

Risk adjusted discount rate

As discussed in Note 9, derivative instruments are carried at fair value on the condensed consolidated balance sheets. Interest rate swap contracts are included in other current liabilities on December 31, 2021 and in deposits and other assets on June 30, 2021.

Fair Value of Financial Instruments

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

NOTE 13 – INCOME TAXES

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


	Three Months Ended December 31,						Six Months Ended December 31,
(In thousands)	2021			2020			2021			2020
Current income tax expense	$	2,973		$	1,743		$	5,408		$	2,905
Deferred income tax benefit		(327	)		(341	)		(534	)		(426	)

Income tax expense	$	2,646		$	1,402		$	4,874		$	2,479

The Company’s effective tax rates prior to discrete items for the three months and six months ended December 31, 2021 and 2020 are higher than the U.S. federal statutory rates primarily due to earnings in foreign operations and state taxes. The actual income tax through the six months ended December 31, 2021 results in an effective tax rate of 25%, which is higher than the U.S. federal statutory rate due to earnings in foreign operations and state taxes and reduced by $174 of share-based compensation benefits, which is discretely recognized in the quarter and is not a component of the Company’s annualized forecasted effective tax rate for the fiscal year ending June 30, 2022. The Company does not have any uncertain tax positions.

NOTE 14 – SHARE-BASED COMPENSATION

On November 17, 2021, the Company’s stockholders, upon recommendation of the Board of the Company, approved the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (the “2021 plan”) at the 2021 annual meeting of stockholders. The Board previously approved the 2021 Plan, subject to approval by the Company’s stockholders, on September 27, 2021.

The 2021 Plan became effective immediately upon approval by the Company’s stockholders and will expire on November 16, 2031, unless terminated earlier by the Board. The 2021 plan replaces the 2012 Radiant Logistics, Inc. Stock Option and Performance Award Plan (the “2012 plan”). The remaining shares available for grant under the 2012 plan will roll over into the 2021 plan, and no new awards will be granted under the 2012 plan. The terms of the 2012 plan, as applicable, will continue to govern awards outstanding under the 2012 plan, until exercised, expired, paid or otherwise terminated or canceled. Other than the 2021 plan, we have no other equity compensation plans under which equity awards can be granted.

The 2021 Plan will permit the Company’s Audit and Executive Oversight Committee to grant to eligible employees, non-employee directors and consultants of the Company non-statutory and incentive stock options, stock appreciation rights (also known as SARs), restricted stock awards, restricted stock units (also known as RSUs), deferred stock units (also known as DSUs), performance awards, non-employee director awards, other cash-based awards and other stock-based awards. Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance under the 2021 Plan is 3,250,000 shares, plus (i) shares of our common stock remaining available for issuance under the 2012 Plan as of the date of stockholder approval of the 2021 Plan, but not subject to outstanding awards as of such date, plus (ii) the number of additional shares of our common stock subject to awards outstanding under the 2012 Plan as of the date of stockholder approval of the 2021 Plan that are subsequently forfeited, cancelled, expire or otherwise terminate without the issuance of such shares of our common stock after such date (which may otherwise be returned and available for grant under the term of the 2012 Plan and 2021 Plan).

Restricted Stock Awards

The Company recognized share-based compensation expense related to restricted stock awards of $410 and $737 for the three and six months ended December 31, 2021, respectively and $311 and $467 for the three and six months ended December 31, 2020, respectively. As of December 31, 2021, the Company had approximately $2,471 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 2.19 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, 2021		704,581		$	5.10
Vested		(219,836	)		4.63
Granted		270,626			6.48
Forfeited		(26,244	)		5.87

Unvested balance as of December 31, 2021		729,127		$	5.73

Stock Options

Stock options are granted at exercise prices equal to the fair value of the common stock at the date of the grant and have a term of ten years. Generally, grants under each plan vest 20% annually over a five-year period from the date of grant. The Company recognized share-based compensation expense related to stock options of $12 and $35 for the three and six months ended December 31, 2021, respectively and $16 and $4 for the three and six months ended December 31, 2020, respectively. The aggregate intrinsic value of options exercised was $568 and $583 for the three and six months ended December 31, 2021, respectively and $389 and $415 for the three and six months ended December 31, 2020, respectively. As of December 31, 2021, the Company had approximately $315 of total unrecognized share-based compensation cost for stock options. Such costs are expected to be recognized over a weighted average period of approximately 4.42 years.

The following table summarizes stock option activity under the plans:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding as of June 30, 2021		1,414,442		$	3.73		3.56	$	4,573
Exercised		(141,349	)		2.91		—		583
Forfeited		(6,050	)		5.52		—		—

Outstanding as of December 31, 2021		1,267,043		$	3.82		3.30	$	4,417

Exercisable as of December 31, 2021		1,167,043		$	3.50		2.77	$	4,417

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

On December 8, 2021, the Company detected a ransomware incident impacting certain of the Company’s operational and information technology systems. While the Company’s systems recovery efforts are substantially complete, and the Company’s operations are fully functional, the incident did result in a loss of revenue as well as certain incremental costs. In addition, following an extensive forensic investigation by a full team of cybersecurity experts, the Company confirmed that some data extraction related to the Company’s customers and employees occurred from the Company’s servers before the Company took its systems offline. Any failure of the Company to comply with data privacy or other laws and regulations related to this event could result in claims, legal or regulatory proceedings, inquiries or investigations.

Contingent Consideration and Earn-out Payments

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

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


(In thousands)	2022 (remaining)		2023		2024		Total
Earn-out payments:
Cash	$	-	$	2,600	$	2,618	$	5,218

Total estimated earn-out payments	$	-	$	2,600	$	2,618	$	5,218

NOTE 16 – OPERATING AND GEOGRAPHIC SEGMENT INFORMATION

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

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


As of and for Three Months Ended December 31, 2021						Corporate/
(In thousands)	United States		Canada			Eliminations			Total
Revenues	$	294,691	$	39,040		$	(963	)	$	332,768
Income (loss) from operations		10,880		3,844			(4,126	)		10,598
Other income (expense)		122		73			(1,123	)		(928	)
Income (loss) before income taxes		11,002		3,917			(5,249	)		9,670
Depreciation and amortization		1,095		893			2,459			4,447
Total assets		404,095		86,480			—			490,575
Property, technology, and equipment, net		12,933		13,212			—			26,145
Goodwill		64,561		21,364			—			85,925

As of and for Three Months Ended December 31, 2020
(In thousands)
Revenues	$	190,501	$	28,404		$	(100	)	$	218,805
Income (loss) from operations		8,876		3,296			(6,145	)		6,027
Other income (expense)		277		(179	)		(835	)		(737	)
Income (loss) before income taxes		9,153		3,117			(6,980	)		5,290
Depreciation and amortization		987		559			2,539			4,085
Total assets		267,840		32,367			—			300,207
Property, technology, and equipment, net		11,436		9,324			—			20,760
Goodwill		51,736		20,270			—			72,006

As of and for Six Months Ended December 31, 2021						Corporate/
(In thousands)	United States		Canada			Eliminations			Total
Revenues	$	545,046	$	74,819		$	(981	)	$	618,884
Income (loss) from operations		21,894		7,254			(8,793	)		20,355
Other income (expense)		321		162			(1,775	)		(1,292	)
Income (loss) before income taxes		22,215		7,416			(10,568	)		19,063
Depreciation and amortization		2,030		1,691			4,981			8,702
Total assets		404,095		86,480			—			490,575
Property, technology, and equipment, net		12,933		13,212			—			26,145
Goodwill		64,561		21,364			—			85,925

As of and for Six Months Ended December 31, 2020
(In thousands)
Revenues	$	345,266	$	49,660		$	(244	)	$	394,682
Income (loss) from operations		15,494		5,527			(10,209	)		10,812
Other income (expense)		492		(282	)		(1,426	)		(1,216	)
Income (loss) before income taxes		15,986		5,245			(11,635	)		9,596
Depreciation and amortization		2,076		1,087			5,080			8,243
Total assets		267,840		32,367			—			300,207
Property, technology, and equipment, net		11,436		9,324			—			20,760
Goodwill		51,736		20,270			—			72,006

NOTE 17 – BUSINESS COMBINATION

On December 3, 2021, and effective as of November 30, 2021, the Company entered into a Stock Purchase Agreement, pursuant to which it acquired all of the issued and outstanding common shares of Navegate, Inc. (“Navegate”), a Minnesota based, privately held company from Saltspring Capital, LLC. Navegate is a technology-enabled supply chain management and third-party logistics services company that combines a robust digital platform and decades of expertise to manage international, cross border, and domestic freight from purchase order to final delivery. Navegate’s combination of tech-enabled services, customs brokerage expertise, and a full complement of international and domestic services significantly reduces costs and leads to better compliance and risk mitigation for its customers. Navegate will operate as a wholly owned subsidiary of Radiant Logistics, Inc. The goodwill recognized is attributable to expanded service lines and geographic footprint. The acquisition of Navegate was accounted for as purchases of a business under ASC 805 Business Combinations.

As consideration for the acquisition, the Company paid $35,000 in cash upon closing. The transaction was financed through proceeds received from the Company's existing credit facility.

The acquisition date fair value of the consideration transferred for the acquisitions consisted of the following:


(In thousands)
Cash	$	35,000

	$	35,000

The preliminary purchase price allocation for the acquisitions is as follows:


(In thousands)
Current assets	$	19,187
Technology and equipment, net		1,434
Intangible assets		17,834
Other long-term assets		1,621
Liabilities assumed		(18,836	)

Total identifiable net assets		21,240
Goodwill		13,760
	$	35,000

The fair values of the intangible assets were estimated by the Company with the assistance of valuation specialists. The fair value was estimated using a discounted cash flow approach with Level 3 inputs. Under this method, an intangible asset’s fair value 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 calculate fair value, the Company used 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 reflect market participant assumptions. The goodwill is recorded in the U.S. operating segment and is expected to be deductible for income tax purposes over a period of 15 years.

Intangible assets acquired and their respective useful lives are estimated as follows:


(In thousands)	Amount		Useful Life
Customer related	$	12,392	15.9 years
Developed technology		3,942	4.9 years
Trade name		1,500	9.9 years
	$	17,834

The preliminary fair value estimates for the assets acquired and liabilities assumed are based upon preliminary calculations and valuations. The estimates and assumptions are subject to change as additional information is obtained for the estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of the preliminary estimates not yet finalized relate to identifiable intangible assets.

The one-month results of operations from Navegate were included in the condensed consolidated financial statements. However, they were immaterial and thus no proforma presentation was necessary.

NOTE 18 – RANSOMWARE INCIDENT

As previously disclosed during the quarter ended December 31, 2021, the Company filed an 8-K on December 13, 2021, disclosing some of the Company’s systems were affected by a ransomware incident that encrypted information on its systems and disrupted customer and employee access to its applications and services. The Company immediately took steps to isolate the impact and prevent additional systems from being affected, including taking its network offline as a precaution. Promptly upon our detection of this incident, we initiated response and containment protocols and our security teams, supplemented by leading cyber defense firms, worked to remediate this incident. We notified law enforcement, contacted our customers to apprise them of the situation and will provide any notices that may be required by applicable law.

We undertook extensive efforts to identify, contain and recover from this incident quickly and securely. We systematically brought our information systems back online in a controlled, phased approach. Our teams worked to maintain our business operations and minimize the impact on our customers, operating partners, and employees.

The total ransomware incident related costs for the second quarter were approximately $0.8 million. These costs were primarily comprised of various third-party consulting services including forensic experts, legal counsel, and other IT professional expenses including additional software. We maintain a variety of insurance policies, including cyber insurance and business interruption insurance that are expected to partially off-set the costs related to this incident.

NOTE 19 – SUBSEQUENT EVENTS

On February 11, 2022, the Company's board of directors has approved the renewal of the repurchase program through December 31, 2023. The timing and extent to which we repurchase shares will depend on market conditions and other corporate considerations.

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

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning set forth in United States securities laws and regulations – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as “anticipate,” “believe,” “estimates,” “expect,” “future,” “intend,” “may,” “plan,” “see,” “seek,” “strategy,” or “will” or the negative thereof or any variation thereon or similar terminology or expressions. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We have developed our forward-looking statements based on management’s beliefs and assumptions, which in turn rely upon information available to them at the time such statements were made. Such forward-looking statements reflect our current perspectives on our business, future performance, existing trends, and information as of the date of this report. These include, but are not limited to, our beliefs about future revenue and expense levels, growth rates, prospects related to our strategic initiatives and business strategies, along with express or implied assumptions about, among other things: our continued relationships with our strategic operating partners; the performance of our historic business, as well as the businesses we have recently acquired, at levels consistent with recent trends and reflective of the synergies we believe will be available to us as a result of such acquisitions; our ability to successfully integrate our recently acquired businesses; our ability to locate suitable acquisition opportunities and secure the financing necessary to complete such acquisitions; transportation costs remaining in-line with recent levels and expected trends; our ability to mitigate, to the best extent possible, our dependence on current management and certain larger strategic operating partners; our compliance with financial and other covenants under our indebtedness; the absence of any adverse laws or governmental regulations affecting the transportation industry in general, and our operations in particular; the impact of COVID-19 on our operations and financial results; the Company’s ongoing assessment of the ransomware incident, adverse legal, reputational and financial effects on the Company resulting from the ransomware incident or future cyber incidents and the effectiveness of the Company’s business continuity plans in response to cyber incidents, like the ransomware incident; 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, 2021 and this Form 10-Q. 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 operating locations. Included in these operating locations are a number of independent agents, who we also refer to as our “strategic operating partners”, that operate exclusively on our behalf, and 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, customs house brokerage (“CHB”) services and technology platforms 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.

Ransomware Incident

The total ransomware incident related costs for the second quarter was approximately $0.8 million. These costs were primarily comprised various third-party consulting services including forensic experts, legal counsel, and other IT professional expenses including additional software. We maintain a variety of insurance policies, including cyber insurance and business interruption insurance that are expected to partially off-set the costs related to this incident.

We are making information technology investments in order to further strengthen our information security infrastructure. We engaged a leading cybersecurity defense firm that completed a forensics investigation of the ransomware incident, and we are taking appropriate actions in response to the findings. For example, in the short-term, we reset all credentials Company-wide and strengthened security tooling across our servers and workstations. In the long-term, we are continuing to advance the maturity and effectiveness of our information security resiliency strategy and capabilities. Our technology team has accelerated its roadmap to further strengthen the resiliency of our information security infrastructure across the Company that aims to enable us to detect, respond and recover more quickly from security and technical incidents. More specifically, we plan to take actions to improve our security monitoring capabilities and enhance the information security within the Company and stations.

COVID-19

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. The Company’s financial covenants with its lenders define an Adjusted EBITDA as a key component of its covenant calculations. The Company’s ability to grow Adjusted EBITDA is closely monitored by management as it’s directly tied to financial borrowing capacity and also is a frequent point of discussion with its investors as well as the Company’s earnings calls.

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 December 31, 2021 and 2020 (unaudited)

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


	Three Months Ended December 31, 2021												Three Months Ended December 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Revenues
Transportation	$	292,184		$	31,430		$	(963	)	$	322,651		$	188,763		$	23,454		$	(100	)	$	212,117
Value-added services		2,507			7,610			—			10,117			1,738			4,950			—			6,688
		294,691			39,040			(963	)		332,768			190,501			28,404			(100	)		218,805
Cost of transportation and other services
Transportation		231,802			26,543			(963	)		257,382			142,229			19,231			(100	)		161,360
Value-added services		1,746			2,051			—			3,797			1,315			829			—			2,144
		233,548			28,594			(963	)		261,179			143,544			20,060			(100	)		163,504
Net revenues (1)
Transportation		60,382			4,887			—			65,269			46,534			4,223			—			50,757
Value-added services		761			5,559			—			6,320			423			4,121			—			4,544
	$	61,143		$	10,446		$	—		$	71,589		$	46,957		$	8,344		$	—		$	55,301
Net margin
Transportation		20.7	%		15.5	%	N/A				20.2	%		24.7	%		18.0	%	N/A				23.9	%
Value-added services		30.4	%		73.0	%	N/A				62.5	%		24.3	%		83.3	%	N/A				67.9	%

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

Transportation revenue was $322.7 million and $212.1 million for the three months ended December 31, 2021 and 2020, respectively. The increase of $110.5 million, or 52.1%, is primarily attributable to increased volume of business in general coupled with significant surcharges on ocean, and some rail and trucking lanes and the inclusion of one month of our recent acquisition of Navegate. Net transportation revenue was $65.3 million and $50.8 million for the three months ended December 31, 2021 and 2020, respectively. Net transportation margins decreased from 23.9% to 20.2%, primarily due to surcharges associated with purchased transportation due to the extremely tight capacity experienced in certain lane segments primarily associated with ocean, and some intermodal, and trucking lanes.

Value-added services revenue was $10.1 million and $6.7 million, for the three months ended December 31, 2021 and 2020, respectively. The increase of $3.4 million, or 51.3%, is primarily attributable to the increase in warehouse revenues and other value-added services from our Canada segment. Net value-added services revenue was $6.3 million for the three months ended December 31, 2021, compared to $4.5 million for the comparable prior year period. Net value-added services revenue margins decreased from 67.9% to 62.5%, primarily due to additional startup costs associated with moving to a new warehouse at our Coleraine facility associated with our Canadian operations.

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


(In thousands)	Three Months Ended December 31,
Reconciliation of net revenues to GAAP gross profit	2021			2020
Revenues	$	332,768		$	218,805
Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)		(261,179	)		(163,504	)
Depreciation and amortization		(3,332	)		(2,946	)
GAAP gross profit	$	68,257		$	52,355
Depreciation and amortization		3,332			2,946
Net revenues	$	71,589		$	55,301

GAAP gross margin (GAAP gross profit as a percentage of revenues)		20.5	%		23.9	%
Net margin (net revenues as a percentage of revenues)		21.5	%		25.3	%

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


	Three Months Ended December 31, 2021											Three Months Ended December 31, 2020
(In thousands)	United States			Canada		Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net revenues (1)	$	61,143		$	10,446	$	—		$	71,589		$	46,957		$	8,344		$	—		$	55,301

Operating expenses:
Operating partner commissions		31,049			—		—			31,049			24,036			—			—			24,036
Personnel costs		12,611			3,994		83			16,688			9,297			3,199			1,239			13,735
Selling, general and administrative expenses		5,508			1,715		1,129			8,352			3,761			1,290			517			5,568
Depreciation and amortization		1,095			893		2,459			4,447			987			559			2,539			4,085
Change in fair value of contingent consideration		—			—		455			455			—			—			1,850			1,850

Total operating expenses		50,263			6,602		4,126			60,991			38,081			5,048			6,145			49,274

Income (loss) from operations		10,880			3,844		(4,126	)		10,598			8,876			3,296			(6,145	)		6,027
Other income (expense)		122			73		(1,123	)		(928	)		277			(179	)		(835	)		(737	)

Income (loss) before income taxes		11,002			3,917		(5,249	)		9,670			9,153			3,117			(6,980	)		5,290
Income tax benefit (expense)		—			—		(2,646	)		(2,646	)		—			—			(1,402	)		(1,402	)

Net income (loss)		11,002			3,917		(7,895	)		7,024			9,153			3,117			(8,382	)		3,888
Less: net income attributable to non-controlling interest		(76	)		—		—			(76	)		(76	)		—			—			(76	)

Net income (loss) attributable to Radiant Logistics, Inc.	$	10,926		$	3,917	$	(7,895	)	$	6,948		$	9,077		$	3,117		$	(8,382	)	$	3,812


	Three Months Ended December 31, 2021										Three Months Ended December 31, 2020
Operating expenses as a percent of net revenues (1):	United States			Canada			Corporate/ Eliminations	Total			United States			Canada			Corporate/ Eliminations	Total
Operating partner commissions		50.8	%		0.0	%	N/A		43.4	%		51.2	%		0.0	%	N/A		43.5	%
Personnel costs		20.6	%		38.2	%	N/A		23.3	%		19.8	%		38.3	%	N/A		24.8	%
Selling, general and administrative expenses		9.0	%		16.4	%	N/A		11.7	%		8.0	%		15.5	%	N/A		10.1	%
Depreciation and amortization		1.8	%		8.5	%	N/A		6.2	%		2.1	%		6.7	%	N/A		7.4	%

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

Operating partner commissions increased $7.0 million, or 29.2%, to $31.0 million for the three months ended December 31, 2021. The increase is primarily due to increased net revenues generated from operating partner stations. As a percentage of net revenues, operating partner commissions decreased 9 basis points to 43.4% from 43.5% for the three months ended December 31, 2021 and 2020, respectively, as a result of a higher percentage of net revenues coming from company owned stores.

Personnel costs increased $3.0 million, or 21.5%, to $16.7 million for the three months ended December 31, 2021. The increase is primarily due to increased workforce due to increase in business and fully restored compensation in the current period compared to the prior year period, which had COVID-related responses with lower headcount and reduced compensation, and one month of Navegate. As a percentage of net revenues, personnel costs decreased 153 basis points to 23.3% from 24.8% for the three months ended December 31, 2021 and 2020, respectively.

Selling, general and administrative (“SG&A”) expenses increased $2.8 million, or 50.0%, to $8.4 million for the three months ended December 31, 2021. The increase is primarily due to additional IT expenses including cyber incident costs the Company incurred in its second quarter, increased bad debt costs, third party costs incurred related to the acquisition of Navegate, an overall increase in SG&A from Navegate being part of the consolidated results of the organization, and an increase in sales and travel expenses. As a percentage of net revenues, SG&A increased 160 basis points to 11.7% from 10.1% for the three months ended December 31, 2021 and 2020, respectively.

Depreciation and amortization costs were $4.4 million for the three months ended December 31, 2021 and $4.1 million for the three months ended December 31, 2020.

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

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

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


	Three Months Ended December 31, 2021												Three Months Ended December 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net income (loss) attributable to Radiant Logistics, Inc.	$	10,926		$	3,917		$	(7,895	)	$	6,948		$	9,077		$	3,117		$	(8,382	)	$	3,812
Income tax expense		—			—			2,646			2,646			—			—			1,402			1,402
Depreciation and amortization		1,095			893			2,459			4,447			987			559			2,539			4,085
Net interest expense		—			—			745			745			—			—			725			725

EBITDA		12,021			4,810			(2,045	)		14,786			10,064			3,676			(3,716	)		10,024

Share-based compensation		369			53			—			422			129			65			133			327
Change in fair value of contingent consideration		—			—			455			455			—			—			1,850			1,850
Acquisition related costs		—			—			396			396			—			—			1			1
Ransomware incident related costs (recovery), net		—			—			751			751			—			—			—			—
Litigation costs		—			—			167			167			—			—			26			26
Change in fair value of interest rate swap contracts		—			—			378			378			—			—			110			110
Foreign exchange loss (gain)		(124	)		20			—			(104	)		14			179			—			193

Adjusted EBITDA	$	12,266		$	4,883		$	102		$	17,251		$	10,207		$	3,920		$	(1,596	)	$	12,531
Adjusted EBITDA as a % of net revenues (1)		20.1	%		46.7	%	N/A				24.1	%		21.7	%		47.0	%	N/A				22.7	%

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

Adjusted EBITDA increased $4.8 million, or 37.7% to $17.3 million for the quarter ended December 31, 2021.

Six months ended December 31, 2021 and 2020 (unaudited)

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


	Six Months Ended December 31, 2021												Six Months Ended December 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Revenues
Transportation	$	539,825		$	60,763		$	(981	)	$	599,607		$	341,224		$	40,977		$	(244	)	$	381,957
Value-added services		5,221			14,056			—			19,277			4,042			8,683			—			12,725
		545,046			74,819			(981	)		618,884			345,266			49,660			(244	)		394,682
Cost of transportation and other services
Transportation		424,966			51,432			(981	)		475,417			256,254			33,095			(244	)		289,105
Value-added services		3,492			3,502			—			6,994			3,091			1,220			—			4,311
		428,458			54,934			(981	)		482,411			259,345			34,315			(244	)		293,416
Net revenues (1)
Transportation		114,859			9,331			—			124,190			84,970			7,882			—			92,852
Value-added services		1,729			10,554			—			12,283			951			7,463			—			8,414
	$	116,588		$	19,885		$	—		$	136,473		$	85,921		$	15,345		$	—		$	101,266
Net margin
Transportation		21.3	%		15.4	%	N/A				20.7	%		24.9	%		19.2	%	N/A				24.3	%
Value-added services		33.1	%		75.1	%	N/A				63.7	%		23.5	%		85.9	%	N/A				66.1	%

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

Transportation revenue was $599.6 million and $382.0 million for the six months ended December 31, 2021 and 2020, respectively. The increase of $217.6 million, or 57.0%, is primarily attributable to increased volume of business in general coupled with significant surcharges on ocean and additionally some rail and trucking lanes. Net transportation revenue was $124.2 million and $92.9 million for the six months ended December 31, 2021 and 2020, respectively. Net transportation margins decreased from 24.3% to 20.7%, primarily due to the surcharges associated with the extremely tight capacity experienced in certain modes of transportation, most notably ocean.

Value-added services revenue was $19.3 million and $12.7 million, for the six months ended December 31, 2021 and 2020, respectively. The increase of $6.6 million, or 51.5%, is primarily attributable to the increase in warehouse revenues and other value-added services from our Canada segment. Net value-added services revenue was $12.3 million for the six months ended December 31, 2021, compared to $8.4 million for the comparable prior year period. Net value-added services revenue margins decreased from 66.1% to 63.7%, primarily due to additional startup costs associated with a moving to a new warehouse at our Coleraine facility in Canada.

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


(In thousands)	Six Months Ended December 31,
Reconciliation of net revenues to GAAP gross profit	2021			2020
Revenues	$	618,884		$	394,682
Cost of transportation and other services (exclusive of depreciation and amortization, shown separately below)		(482,411	)		(293,416	)
Depreciation and amortization		(6,331	)		(5,889	)
GAAP gross profit	$	130,142		$	95,377
Depreciation and amortization		6,331			5,889
Net revenues	$	136,473		$	101,266

GAAP gross margin (GAAP gross profit as a percentage of revenues)		21.0	%		24.2	%
Net margin (net revenues as a percentage of revenues)		22.1	%		25.7	%

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


	Six Months Ended December 31, 2021											Six Months Ended December 31, 2020
(In thousands)	United States			Canada		Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net revenues (1)	$	116,588		$	19,885	$	—		$	136,473		$	85,921		$	15,345		$	—		$	101,266

Operating expenses:
Operating partner commissions		59,514			—		—			59,514			42,625			—			—			42,625
Personnel costs		23,488			7,773		1,043			32,304			18,225			6,372			1,915			26,512
Selling, general and administrative expenses		9,662			3,167		2,314			15,143			7,501			2,359			1,364			11,224
Depreciation and amortization		2,030			1,691		4,981			8,702			2,076			1,087			5,080			8,243
Change in fair value of contingent consideration		—			—		455			455			—			—			1,850			1,850

Total operating expenses		94,694			12,631		8,793			116,118			70,427			9,818			10,209			90,454

Income (loss) from operations		21,894			7,254		(8,793	)		20,355			15,494			5,527			(10,209	)		10,812
Other income (expense)		321			162		(1,775	)		(1,292	)		492			(282	)		(1,426	)		(1,216	)

Income (loss) before income taxes		22,215			7,416		(10,568	)		19,063			15,986			5,245			(11,635	)		9,596
Income tax expense		—			—		(4,874	)		(4,874	)		—			—			(2,479	)		(2,479	)

Net income (loss)		22,215			7,416		(15,442	)		14,189			15,986			5,245			(14,114	)		7,117
Less: net income attributable to non- controlling interest		(162	)		—		—			(162	)		(217	)		—			—			(217	)

Net income (loss) attributable to Radiant Logistics, Inc.	$	22,053		$	7,416	$	(15,442	)	$	14,027		$	15,769		$	5,245		$	(14,114	)	$	6,900


	Six Months Ended December 31, 2021										Six Months Ended December 31, 2020
Operating expenses as a percent of net revenues (1):	United States			Canada			Corporate/ Eliminations	Total			United States			Canada			Corporate/ Eliminations	Total
Operating partner commissions		51.0	%		0.0	%	N/A		43.6	%		49.6	%		0.0	%	N/A		42.1	%
Personnel costs		20.1	%		39.1	%	N/A		23.7	%		21.2	%		41.5	%	N/A		26.2	%
Selling, general and administrative expenses		8.3	%		15.9	%	N/A		11.1	%		8.7	%		15.4	%	N/A		11.1	%
Depreciation and amortization		1.7	%		8.5	%	N/A		6.4	%		2.4	%		7.1	%	N/A		8.1	%

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

Operating partner commissions increased $16.9 million, or 39.6%, to $59.5 million for the six months ended December 31, 2021. The increase is primarily due to increased net revenues generated from operating partner stations. As a percentage of net revenues, operating partner commissions increased 152 basis points to 43.6% from 42.1% for the six months ended December 31, 2021 and 2020, respectively, as a result of a higher percentage of net revenues coming from operating partner locations over the prior year period.

Personnel costs increased $5.8 million, or 21.8%, to $32.3 million for the six months ended December 31, 2021. The increase is primarily due to increased workforce due to increase in business and fully restored compensation in the current period compared to the prior year period had COVID-related responses with lower headcount and reduced compensation, and one month of Navegate. As a percentage of net revenues, personnel costs decreased 251 basis points to 23.7% from 26.2% for the six months ended December 31, 2021 and 2020, respectively.

Selling, general and administrative (“SG&A”) expenses increased $3.9 million, or 34.9%, to $15.1 million for the six months ended December 31, 2021. The increase is primarily attributable to increased technology spend including costs incurred surrounding a ransomware incident, which represented $0.8 million for the six months ended December 31, 2021. These costs were primarily comprised various third-party consulting services including forensic experts, legal counsel, and other IT professional expenses including additional software. Additional increases in costs were, increased bad debt costs, increased professional services, and increased travel. As a percentage of net revenues, SG&A increased 1 basis points to 11.1% from 11.1% for the six months ended December 31, 2021 and 2020, respectively.

Depreciation and amortization costs were $8.7 million for the six months ended December 31, 2021 and $8.2 million for the six months ended December 31, 2020.

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

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


	Six Months Ended December 31, 2021												Six Months Ended December 31, 2020
(In thousands)	United States			Canada			Corporate/ Eliminations			Total			United States			Canada			Corporate/ Eliminations			Total
Net income (loss) attributable to Radiant Logistics, Inc.	$	22,053		$	7,416		$	(15,442	)	$	14,027		$	15,769		$	5,245		$	(14,114	)	$	6,900
Income tax expense		—			—			4,874			4,874			—			—			2,479			2,479
Depreciation and amortization		2,030			1,691			4,981			8,702			2,076			1,087			5,080			8,243
Net interest expense		—			—			1,351			1,351			—			—			1,296			1,296

EBITDA		24,083			9,107			(4,236	)		28,954			17,845			6,332			(5,259	)		18,918

Share-based compensation		556			119			97			772			90			118			263			471
Change in fair value of contingent consideration		—			—			455			455			—			—			1,850			1,850
Acquisition related costs		—			—			496			496			—			—			35			35
Ransomware incident related costs (recovery), net		—			—			751			751			—			—			—			—
Litigation costs		—			—			321			321			—			—			177			177
Change in fair value of interest rate swap contracts		—			—			424			424			—			—			130			130
Foreign currency transaction loss (gain)		(306	)		(69	)		—			(375	)		(109	)		281			—			172

Adjusted EBITDA	$	24,333		$	9,157		$	(1,692	)	$	31,798		$	17,826		$	6,731		$	(2,804	)	$	21,753
Adjusted EBITDA as a % of net revenues (1)		20.9	%		46.0	%	N/A				23.3	%		20.7	%		43.9	%	N/A				21.5	%

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

Adjusted EBITDA increased $10.0 million, or 46.2% to $31.8 million for the six months ended December 31, 2021.

Liquidity and Capital Resources

Generally, our primary sources of liquidity are cash generated from operating activities and borrowings under our Revolving Credit Facility, as described below. These sources also fund a portion of our capital expenditures and contractual contingent consideration obligations. Our level of cash and financing capabilities along with cash flows from operations have historically been sufficient to meet our operating and capital needs. As of December 31, 2021, we have $17.2 million in cash on hand to serve as adequate working capital.

Net cash used in operating activities were $19.7 million for the six months ended December 31, 2021. Net cash provided by operating activities were $1.9 million for the six months ended December 31, 2020. The cash used or provided primarily consisted of net income adjusted for depreciation and amortization and changes in accounts receivable, contract assets, accounts payable, income taxes, operating partner commissions payable, and accrued and other liabilities. Cash flow from operating activities for the six months ended December 31, 2021 decreased by $21.6 million, compared with the same period in fiscal year 2021, primarily due to increased net income offset by net change in operating assets and liabilities.

Net cash used for investing activities were $38.9 million and $4.8 million for the six months ended December 31, 2021 and 2020, respectively. The primary use of cash was for business combination and purchases of property, technology, and equipment. During the six months ended December 31, 2021, cash paid for the acquisition of Navegate, Inc., net of the acquiree company's cash balance on the acquisition date, was $34.5 million. Cash paid for purchases of property, technology, and equipment were $4.5 million and $4.8 million for the six months ended December 31, 2021 and 2020, respectively. Proceeds from sale of property, technology, and equipment was $0.1 million for the six months ended December 31, 2021.

Net cash provided by financing activities was $60.7 million for the six months ended December 31, 2021. Net cash used for financing activities were $23.4 million for the six months ended December 31, 2020. Proceeds from the Revolving Credit Facility were $80.1 million while repayments of the Revolving Credit Facility were $9.6 million for the six months ended December 31, 2021. Repayment of the Revolving Credit Facility were $20.0 million for the six months ended December 31, 2020. Repayments of notes payable and finance lease liability were $2.5 million and $2.3 million for the six months ended December 31, 2021 and 2020, respectively. During the six months ended December 31, 2021, $0.2 million was received in exchange for issuance of common stock to former shareholders of Navegate, Inc. Financing cash outflows for contingent consideration were $1.1 million and $1.0 million for the six months ended December 31, 2021 and 2020. Distributions to non-controlling interest were $0.2 million and $0.9 million for the six months ended December 31, 2021 and 2020, respectively. Proceeds from exercise of stock options where $0.4 million and $1.2 million for the six months ended December 31, 2021 and 2020, respectively. Payments of employee tax withholdings related to vesting of restricted stock awards were $0.4 million and $0.3 million for the six months ended December 31, 2021 and 2020, respectively. Payments of employee tax withholdings related to the cashless exercise of stock option was $0.1 million for the six months ended December 31, 2020.

Revolving Credit Facility

The Company entered into a $150 million syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated as of March 13, 2020. On December 31, 2021, the borrowings outstanding on the Revolving Credit Facility was $85.5 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”). This replaces the Company's $75 million facility dated June 14, 2017.

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 U.S. 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 U.S. 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.

Working Capital

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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive and principal financial officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.

Based upon their evaluation, the principal executive and principal financial officers concluded that our disclosure controls and procedures were not effective as of December 31, 2021, due to the material weaknesses in our internal controls over financial reporting (“ICFR”) described below. A material weakness is a deficiency, or a combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

In December 2021, the Company became aware that it was exposed to a cyber incident in its Information Technology environment which interrupted systems and affected operations. The Company engaged a leading cyber security firm to perform a forensic investigation of this incident. Although Management has no indication that the accuracy and completeness of any financial information was impacted because of the incident, and the Company has performed extensive procedures to validate such accuracy and completeness, Management concluded that controls related to our IT environment have not been designed and/or operated effectively to prevent unauthorized access to our IT systems supporting financial information processing. We believe that, if the incident had gone differently, it could have potentially resulted in a material misstatement to the Company’s financial statements, which leads Management to conclude that the magnitude of these control deficiencies represents a material weakness in our IT general controls as of December 31, 2021.

At the date of this report, the Company has concluded its investigation and continues to work diligently through the established remediation plan to address the IT general controls material weakness in a timely manner. The Company continues to identify new controls to implement and has already begun implementing some of these new controls.

In addition to this cyber incident, the Company had previously reported that it did not maintain effective internal controls over the recording and processing of revenues transactions and the calculation of operating partner commissions. These deficiencies did not result in the revision of any of our previously issued financial statements and did not impact the Company’s financial statements for the period ended December 31, 2021, however, Management feels that if left unaddressed, the deficiencies could have a material impact to the Company’s financial statements in the future. Accordingly, Management has determined that these control deficiencies constitute material weaknesses, and the Company has begun implementing new processes and controls to remediate these control issues.

Changes in Internal Control over Financial Reporting

Other than the material weaknesses discussed above, there were no change in our ICFR that materially affected, or was reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

There have been no material changes in the risk factors disclosed by us under Part I, Item 1A. Risk Factors contained in the Annual Report on Form 10-K for the year ended June 30, 2021, except for the addition of the following risk factor:

Our business will be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate information technology systems.

We rely heavily on our information technology systems to efficiently run our business, and they are a key component of our growth strategy. To keep pace with changing technologies and customer demands, we must correctly interpret and address market trends and enhance the features and functionality of our technology platform in response to these trends, which may lead to significant ongoing software development or licensing costs. We may be unable to accurately determine the needs of our customers and strategic operating partners and the trends in the transportation services industry, or to design or license and implement the appropriate features and functionality of our technology platform in a timely and cost-effective manner, which could result in decreased demand for our services and a corresponding decrease in our revenues. Despite testing, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations. We have been and may in the future be subject to cybersecurity attacks and other intentional hacking. For example, as previously disclosed, on December 8, 2021, we detected a ransomware incident impacting certain of our operational and information technology systems. While our systems recovery efforts are substantially complete, and our operations are fully functional, the incident did result in a loss of revenue as well as certain incremental costs. In addition, following an extensive forensic investigation by a full team of cybersecurity experts, we confirmed that some data extraction related to the Company’s customers and employees occurred from the Company’s servers before the Company took its systems offline. Any failure to identify and address such defects or errors or prevent or remediate a cyber-attack could result in corruption or loss of our data, service interruptions, operational difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial cost. We must maintain and enhance the reliability and speed of our information technology systems to remain competitive and effectively handle higher volumes of freight through our network and the various service modes we offer. If our information technology systems are unable to manage additional volume for our operations as our business grows, or if such systems are not suited to manage the various service modes we offer or businesses we acquire, our service levels and operating efficiency could decline. We expect customers and strategic operating partners to continue to demand more sophisticated, fully integrated information systems from their supply chain services providers. If we fail to hire and retain qualified personnel to implement, protect and maintain our information technology systems or if we fail to upgrade our systems to meet our customers’ and strategic operating partners’ demands, our business and results of operations could be seriously harmed. This could result in a loss of customers or a decline in the volume of freight we receive from customers.

In addition, acquired companies will need to be integrated with our information technology systems, which may cause additional training or licensing cost, along with potential delays and disruption. In such event, our revenue, financial results and ability to operate profitably could be negatively impacted. The challenges associated with integration of our acquisitions may increase these risks.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

The Company’s board of directors authorized the repurchase of up to 5,000,000 shares of the Company’s common stock through December 31, 2023. Under this repurchase program the Company purchased the following shares of common stock during the three months ended December 31, 2021. As of December 31, 2021, future repurchases of up to 3,227,451 shares were available in the share repurchase program.


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
October 1 - 31, 2021		94,051		6.51		94,051		—
November 1 - 30, 2021		238,336		8.39		238,336		—
December 1 - 31, 2021		283,452		6.95		283,452

Total		615,839	$	7.44		615,839		—

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit

Number

Description

Filed/Furnished Herewith

Form

Period Ending

Exhibit Number

Filing Date

10.1

Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.1

11/23/2021

10.2

Form of Employee Restricted Stock Unit Award Agreement for use with the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.2

11/23/2021

10.3

Form of Employee Restricted Stock Unit Award Agreement (Canada) for use with the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.3

11/23/2021

10.4

Form of Non-Employee Director Restricted Stock Unit Award Agreement for use with the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.4

11/23/2021

10.5

Form of Employee Performance Unit Award Agreement for use with the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.5

11/23/2021

10.6

Form of Employee Non-Statutory Option Award Agreement for use with the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.6

11/23/2021

10.7

Form of Non-Employee Director Non-Statutory Option Award Agreement for use with the Radiant Logistics, Inc. 2021 Omnibus Incentive Plan (filed herewith)

8-K

10.7

11/23/2021

31.1

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

31.2

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

32.1

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

101.INS

Inline XBRL Instance

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation

101.DEF

Inline XBRL Taxonomy Extension Definition

101.LAB

Inline XBRL Taxonomy Extension Label

101.PRE

Inline XBRL Taxonomy Extension Presentation

104

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

SIGNATURES

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


		RADIANT LOGISTICS, INC.

Date: February 14, 2022		/s/ Bohn H. Crain
		Bohn H. Crain
		Chief Executive Officer
		(Principal Executive Officer)

Date: February 14, 2022		/s/ Todd E. Macomber
		Todd E. Macomber
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)