Radiant Logistics' (RLGT) CEO Bohn Crain on Q2 2016 Results - Earnings Call Transcript

| About: Radiant Logistics, (RLGT)

Radiant Logistics, Inc. (NYSEMKT:RLGT)

Q2 2015 Earnings Conference Call

February 16, 2016 04:30 PM ET

Executives

Bohn Crain - Founder and Chief Executive Officer

Todd Macomber - Chief Financial Officer

Analysts

Kevin Sterling - BB&T Capital Markets

Mark Argento - Lake Street Capital Markets

Jason Seidl - Cowen and Company

Jeff Kauffman - Buckingham Research

Marco Rodriguez - Stonegate Capital Markets

Doug Weiss - DSW Investment

Matt Miller - Boyles Asset Management

Operator

This afternoon, Bohn Crain, Radiant Logistics' Founder and CEO and Radiant's Chief Financial Officer, Todd Macomber, will discuss financial results for the company's Second Fiscal Quarter and Six Months Ended December 31, 2015. Following their statements, we will open the call to questions. This conference is scheduled for 30 minutes.

The conference call may include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The company has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the company that may cause the company's actual results or achievements to be materially different from the results or achievements expressed or implied by such forward-looking statements.

While it is impossible to identify all the factors that may cause the company's actual results or achievements to differ materially from those set forth in our forward-looking statements, such factors include those that have in the past, and may in the future, be identified in the company's SEC filings and other public announcements, which are available on the Radiant website at ww.radiantdelivers.com. In addition, past results are not necessarily an indication of future performance.

Now, I'd like to pass the call over to Radiant's Founder and CEO, Bohn Crain.

Bohn Crain

Thank, Doug. Good afternoon, everyone, and thank you for joining in on today's call. We are pleased to report record results for the quarter ended December 31, 2015, and our continuing trend of profitable growth not withstanding some isolated headwinds from our On Time operations.

We posted revenues of $207 million, up $101 million or 95.3%; net revenues of $47.6 million, up $20 million or 72.5% and adjusted EBITDA of $6.2 million, up $2.4 million or 65% over the comparable prior-year period.

We also continue to make good progress on leveraging our personnel and general administrative costs as a function of our net revenues with adjusted EBITDA, normalized to exclude the SBA back-office operations at the percentage of net revenues improving 100 basis points from 13.5% to 14.5% for the comparable prior-year period.

In addition, we also reported cash from operations for the six months of $15.7 million. Excluding the impact of On Time which we’ll get to in a minute, we also made good progress in our efforts to drive organic growth, growing our quarterly net revenues organically by 10.5% relative to the comparable prior-year period.

These record results are inclusive of some isolated challenges we encountered with On Time Express, our Phoenix line haul operations which reported an adjusted EBITDA loss of $473,000 for the quarter compared to adjusted EBITDA contribution of $705,000 for the comparable prior-year period, as a result of the loss of the significant piece of business from one of its customers.

Excluding OTE’s adjusted EBITDA loss, we would have reported normalized adjusted EBITDA of $7.4 million for the quarter ended December. We move aggressively to right-size the organization and expect OTE to return to profitability over the second half of our fiscal year-ended June 30, ‘16.

In addition, we wrote-off the remaining $300,000 in contingent earn-out payments and recognized the $3.7 million pre-tax loss on an impairment of the acquired intangible assets we were carrying on our books in connection with that acquisition. More broadly, the balance of the platform continues to deliver solid results.

There is obviously a fair bit of economic uncertainty as we head into the second half of our fiscal year, the good news for Radiant is we sit in the strongest financial position in the company’s history, low leverage, a $65 million ABL facility that remains untapped, solid free cash flow and poised to take advantage of market opportunities as they present themselves.

We also remain committed to our long-standing strategy to deliver profitable growth through a combination of organic and acquisition growth initiatives. On the organic front, we recently added Joe Bento to our leadership team and we are excited about his impact on the organization going forward.

On the acquisition side, we continue to focus on tuck-in acquisitions with a particular interest in buying in agent station locations both inside and outside our network. Given the current weakness in our stock price we also announced the stock buyback earlier this year and will be continuing to evaluate the repurchase of up to 5 million shares of our stock as we consider how best to allocate our capital.

In addition, should we choose, starting in April this year, we have the opportunity to use our ABL facility which is priced at LIBOR plus 150 to payoff $25 million in sub-debt which carries a rate of 10.5%. This would represent approximately $2 million in annual pre-tax savings to the company. In short, we continue to be very bullish on Radiant’s current position and long-term prospects, and we enjoy a number of levers to drive shareholder value.

With respect to our guidance for fiscal ‘16, we in assuming the economy continues to hold, we believe adjusted EBITDA in-line with current consensus estimates of approximately $30 million is still achievable.

Given the possibility of further softening in the economy, is at least a possibility, we are updating our guidance to reflect adjusted EBITDA in the range of $28 million to $30 million.

Based on the recent deterioration in fuel price which is generally a pass-through in our business, we are also reducing our guidance for top-line revenues to $836 million to $852 million with net revenues of $188.8 million to $192.4 million. This equates to adjusted net income attributable to common shareholders of the range of $9.9 million to $11.2 million, $0.20 to $0.23 per basic and fully diluted share, and does not give a fact for the potential benefit and interest expense reduction available to us if we ultimately choose to use our ABL facility to retire our $25 million sub-debt.

With that, I’ll now turn it over to Todd Macomber, our CFO, to walk us through our detailed financial results and then we will open it up for Q&A.

Todd Macomber

Thanks, Bohn, and good afternoon everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the three and six months ended December 31, 2015.

Quarterly net income results. For the three months ended December 31, 2015, we reported a net loss attributable to common stockholders of $2.527 million on $207 million of revenues or a loss of $0.05 per basic and fully diluted share, included in that is a $3.7 million impairment for the customer list of On Time, $1.157 million of transition and lease termination costs, and $598,000 of expense on change in contingent considerations, and additionally approximately $412,000 in legal costs we anticipate will be non-recurring.

For the three months ended December 31, 2014, we reported net income attributable to common stockholders of $327,000 on $105.9 million of revenues or $0.01 per basic and fully diluted share. This represents a decrease of approximately $2.854 million or approximately 872.9% over the comparable prior-year period.

In reviewing the quarterly adjusted net income results, for the three months ended December 31, 2015, we reported adjusted net income attributable to common stockholders of $3.027 million or $0.06 per basic and fully diluted share. For the three months ended December 31, 2014, we reported adjusted net income attributable to common shareholders of $1.689 million or $0.05 per basic and fully diluted share. This represents an increase of approximately $1.338 million or 79.2%.

In reviewing the quarterly adjusted EBITDA results, we reported adjusted EBITDA of $6.152 million for the three months ended December 31, 2015 compared to adjusted EBITDA of $3.728 million for the three months ended December 31, 2014. This represents an increase of $2.424 million or approximately 65%.

If we add back the transition costs associated with SBA's back-office, which represents an additional $737,000, adjusted EBITDA would have been $6.889 million or an increase of $3.164 million or $86.8%.

Now moving along to the six months results are as follows. Six-month net income results, the six months ended December 31, 2015 we reported a net loss attributable to common stockholders of $2.7 million on $425.6 million of revenues or a loss of $0.06 per basic and fully diluted share which includes the $3.7 million impairment on the customer list of On Time Express, additionally $4.32 million of transition and lease termination cost and $186,000 expense on changing contingent consideration and additionally $722,000 in legal costs we expect will be non-recurring.

For the six months ended December 31, 2014, we reported net income attributable to common stockholders of $1.337 million on $204.2 million of revenues or $0.04 per basic and fully diluted shares. This represents a decrease of approximately $4.037 million or approximately 301.9% over the comparable prior-year period.

In reviewing the six months adjusted net income results, for the six months ended December 31, 2015, we reported adjusted net income attributable to common stockholders of $7.236 million or $0.15 per basic and fully diluted shares.

For the six months ended December 31, 2014, we reported adjusted net income attributable to common stockholders of $3.342 million or $0.10 per basic and $0.09 per fully diluted share. This represents an increase of approximately $3.893 million or approximately 116.5%.

In reviewing the six months adjusted EBITDA results, we reported adjusted EBITDA of $14.336 million for the six months ended December 31, 2015 compared to adjusted EBITDA of $7.315 million for the six months ended December 31, 2014. This represents an increase of $7.021 million or approximately 95.9%.

Adding back the transition cost associated with SBA’s back-office represents an additional $1.378 million and adjusted EBITDA would have been $15.713 million or an increase of $8.398 million or 114.8%.

With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of Kevin Sterling from BB&T Capital Markets. Please proceed with your question.

Kevin Sterling

Well, thank you, good afternoon Bohn and Todd.

Bohn Crain

Good afternoon.

Kevin Sterling

Congrats on another solid quarter in a challenging environment.

Bohn Crain

Thank you.

Kevin Sterling

Let’s see, Bohn, you talked about non-recurring transition costs with interim operation Service by Air, back-office operations, which I think cost you about $700,000 in EBITDA in the quarter. Are these costs done, would we see them in the third quarter?

Bohn Crain

I think they’re not done yet, I would expect most likely beginning in the new fiscal year they’ll be done. So, we’ll be continuing this transition process into next quarter and probably spilling over into our fourth fiscal quarter. But we would expect them to be gone as we enter the new fiscal year. And again, for folks not familiar with the concept, when we acquired Service by Air, they’ve got affectively redundant back-office infrastructure that we will be eliminating as we get the SBA operating location integrated into and supported by our back-office operations in Bellevue.

Kevin Sterling

Great. Can you remind me how much cost you can eliminate with Service by Air as you put them on your systems?

Bohn Crain

I think, and Todd can talk in here as well, but I believe kind of the add-back this quarter is reflective of the quarterly cost savings that we’ll be achieving commencing within our new fiscal year.

Todd Macomber

Yes, we break that out Bohn, so it’s on the page 6 of the press release, yes you were correct.

Kevin Sterling

Okay. So, on annual basis, I just want to make sure I got this right, on annual basis, we’re looking at potential cost savings against your EBITDA of almost $3 million, is that right in your next fiscal year?

Bohn Crain

I would probably haircut that a little bit, because as we make that transition we’ll probably have a modest offsetting increase and headcount in Bellevue this transition to work. But it will be substantially that number.

Kevin Sterling

Or maybe between $2.5 to $3 million?

Bohn Crain

Correct.

Kevin Sterling

Okay, great. And so, you had some moving parts this quarter, so if I adjust for the On Time loss, your EBITDA would have been $7.4 million, and then if I add-back the Service by Air, back-office charge, I get $8.1 million. Is that - am I doing the math right?

Bohn Crain

Todd, you want to respond to that?

Todd Macomber

Sure. I mean, the On Time was a loss of about $400,000. And adding back to normalized transition cost, it was around $6.9 million. So, I would take the $6.9 million and 4 - because immediately we’re going to at least get back to breakeven. So I would look at that more like around $7.3 million.

Kevin Sterling

Okay, thank you. And speaking of On Time Bohn, what were some of the challenges in this business, was there a customer loss or something else going on?

Bohn Crain

Yes, it was, the ultimate catalyst was a singular customer that - the short version is they put the business out to bid, and ultimately at a price that we weren’t willing to move forward with the business on. And that kind of set in motion some of the challenges at On Time.

I think there are two points I want to make relative to that. One is, we’ve heard only some rumblings that customer isn’t necessarily happy with the decision they’ve made. And so we continue to do business with that customer. We hope they aren’t some of that business back at a more commercially reasonable rate that full story is yet to be written.

And then the second point that I would make is that, excluding the impact of On Time, the business, the broader business has really performed well in this kind of crazy economic environment in which we’re operating in. And I was particularly happy to see the organic growth in our net revenues. For those that have been listening in on the calls for the last several quarters, have known our organic growth has been relatively anemic. We’ve been trying to bring some focus to that. And I was really happy to see the growth in our net revenue line item.

Kevin Sterling

Great, I was too. And so, Bohn, let’s just kind of back up to On Time real quick. It sounds like there was maybe sometimes the same old customer could have been little bit lower margin business, they put it out for bid, it was going to be even lower. You made the prudent decision to walk away. And now, if you get that business back or replace it, it could be with ultimately higher freight - higher margin freight. Am I thinking about that right?

Bohn Crain

Yes, I think, we acquired On Time with the thought that it could act as a strategic differentiator for us in providing a line haul capability for the network. And that customer that has now exited stage left was an inhibitor of us really being able to service the network, we were focused, our On Time was focused more on servicing that particular customer.

So, this may well be kind of a one-step backward so we can take two steps forward in getting the realization of some of the strategic benefits of the line haul service offering that we were envisioning when we made the original investment.

Kevin Sterling

Got you, that makes a lot of sense. Last question here and I’ll get back in line. You talked about the organic growth, how did January look and how does your churning so far in February?

Bohn Crain

Well, we don’t roll up all the numbers across the consolidated group they have absolute visibility. But we do maintain kind of station level postings to see kind of volumes and pricing. And as I think we mentioned before, there is lot of uncertainty happening in the economy and some kind of proverbial going up. And so, we’re still not - actively we’re still not seeing that in our numbers. So, I can’t tell you what’s going to happen next quarter. But as of right now, we still feel pretty upbeat all-in-all given the vagaries of the market. We think our model and our operations in the various locations are continuing to do pretty well.

Kevin Sterling

Yes, no, great. Thank you for your time. And I could say congrats on another solid quarter, I know it’s a difficult environment. Thank you.

Bohn Crain

Thank you.

Todd Macomber

Thanks.

Operator

Our next question comes from the line of Mark Argento from Lake Street Capital Markets. Please proceed with your question.

Mark Argento

Hi Bohn, hi Todd, just a couple of questions on, obviously the environment has, got a little more difficult as you referred to. Has that changed at all kind of your pipeline in terms of additional tuck-in acquisitions, are you guys like enough is enough, I’ve been doing this too long stressing out, look to sell this? And does your pipeline, has there been any changes to the pipeline as a result of the environment?

Bohn Crain

I would say, at this - what I’ll call this early stage no, not necessarily. But that I wouldn’t interpret that as a negative either. We have had and we continue to enjoy a pretty interesting pipeline of acquisitions. Kind of pulling on your question a little bit, I think the practicality is, our standard thought process is effectively to focus on the smaller tuck-in acquisitions and that’s in-line with our historical practice.

And from time to time look at larger acquisitions like Wheels transaction. I think the reality is in this environment, it’s even less likely that we would do our larger transaction, just given candidly we implied multiples on our own stock relative to what I would expect the market clearing multiples to be in the larger transactions.

So, we’re absolutely committed and as enthused as ever about M&A. But generally speaking people should expect us to be focused on our historical model, developing businesses plus or minus five times in using our earn-out structure.

And I guess the other point that I would make is, if we look back in time at what I’ll call the last cycle, what we can say is that environment did act as a catalyst to bring some sellers for the table and specifically it was the Add Tom [ph] transaction that we were able to complete back in 2008 kind of petting into a sub-cycle that really served us well through that time period.

Mark Argento

That’s helpful. Hopefully we don’t ever repeat of previous but seller showing up is never bad thing I guess. Turning to page, quickly just to the balance sheet, I think you talked a little bit about your ability to use the ABL much cheaper debt to potentially pay-down or pay-off some of the sub-debt. Would there be any penalty to prepaying the sub-debt, maybe just walk us through that the amount of that?

Bohn Crain

Yes, sure. There is a 3% penalty in year one, excuse me, let’s back up. When we put that piece of paper on the book, there was a no-prepayment in year-one, a 3% penalty in year-two, and then no penalty after that. So, we’re coming up on the one year anniversary. So if we were going to exercise our optionality around this particular piece of debt, then that $2 million in annual savings would be offset by a $750,000 penalty in year-one.

Mark Argento

Sounds like a no-brainer if there is such a thing. Anyways, thanks guys, I appreciate it.

Bohn Crain

Thank you.

Todd Macomber

Thank you.

Operator

Our next question comes from the line of Jason Seidl from Cowen and Company. Please proceed with your question.

Jason Seidl

Hi Bohn, hi Todd, how are you guys?

Bohn Crain

Good how are you?

Jason Seidl

Hanging in here. Talk a little bit about the integration with Wheels now and the cross-selling. Can you put any numbers behind that in terms of what percent of customers are now using both as opposed to what they were when you first had the transaction?

Bohn Crain

It’s hard to give very quantitative in response, but I can tell you, it’s continuing to build. We’ve got ongoing momentum around that and kind of going both ways. We’ve got what I’ll call our traditional freight forwarding customers bringing kind of Canadian centric solutions to their customers that the Toronto folks are able to support. The inverse of that also applies where we’ve been able to work with our U.S. operations being able to sell inter-modal capabilities and leveraging the capabilities there.

And as a third prong to that is we’re getting increasing traction with this, with our own stations using Wheels out of Chicago or truck brokerage opportunities, kind of what we’ve always talked about is kind of our dollars spend and the brokerage space with third parties and being able to begin to capture that internally.

So, all of those things are happening with an increasing frequency. But I can’t yet give you precise numbers around that connectedness. I guess, the other thing that I would point out is coming this - what will be this May, we’ll be having our Annual Meeting where we bring all of our stations together and it will be a kind of a good opportunity for the what I call the brokerage in the porting sides of the house to kind of reconnect more closely and continue to build on that momentum.

Jason Seidl

So, I guess to sum it up, it feels like it’s improving nowhere near where you think it could go to but it looks good?

Bohn Crain

Yes, that’s absolutely correct. I would say, we have an even, our numbers don’t begin to scratch the surface of kind of the natural opportunity for cross-sell between these two groups.

Jason Seidl

Okay, that’s fair enough. And getting back to that contract, one of the asset based carriers recently took a contract off a logistics player that was about $1 million in EBITDA. Is this about the similar size of the contract you guys lost for you or didn’t win I guess?

Bohn Crain

I’m sorry, ask, that question one more time.

Jason Seidl

The OTE contract, an asset based carrier recently won smaller contracts off of the logistics player for about $1 million EBITDA. Is this the same type of the size, just trying to see if it’s the similar type of contract?

Bohn Crain

Yes, I think, in rough orders of magnitude yes.

Jason Seidl

Okay. And are there any other instances like that where you guys would fear the loss of one major customer would cause a write-down than any other of the prior transactions?

Bohn Crain

No.

Jason Seidl

Okay, fair enough. Gentlemen, that’s all I have. Thank you for the time as always.

Todd Macomber

Thank you.

Bohn Crain

Thank you.

Operator

Our next question comes from the line of Jeff Kauffman from Buckingham Research. Please proceed with your question.

Jeff Kauffman

Thank you very much, hi guys.

Bohn Crain

Hi Jeff.

Todd Macomber

Hello.

Jeff Kauffman

Hi. Okay, couple of quick questions. You announced the share buyback a little while ago, any time to buyback during the fiscal second quarter. Have any shares been repurchased so far this fiscal third?

Bohn Crain

Not as of yet, no.

Jeff Kauffman

Okay. So we got the authority, we haven’t used it yet?

Bohn Crain

Yes.

Jeff Kauffman

One other thing I feel surprised at looking at the numbers is, the gross transportation revenues were down sequentially, the net transportation revenues were down sequentially. But the agent commissions’ expense was up sequentially. Can you help me understand some of the dynamics with that?

Bohn Crain

Yes, so, I think a big piece of it, or at least a component and we try to at least call it out in the press release was fuel, right. So, with fuel coming down, which is generally a path to in our business model, we’re seeing top-line revenues coming down with kind of gross margins largely staying intact, kind of gross margin dollars in terms of what’s going on.

There is a little bit of seasonality that coming into play. But also ultimately as if you’re member on the domestic, this is kind of a mouthful of, just kind of reminds people. On the domestic porting product, we generally don’t bear the risk of margin expansion or compression. And as fuel has come down and there has been - and fuel in gross margin for synergies have gone up, that benefit has slowed to the benefit of the agent station.

Jeff Kauffman

Got you, got you.

Bohn Crain

Hopefully that makes sense in response to your question.

Jeff Kauffman

It does, so I’m more likely to see the benefits of cost reduction activity and the personnel cost and SG&A line.

Bohn Crain

Correct. Yes, we continue to think about growing our gross margin dollars and getting as many of those gross margin dollars to the bottom line as we can which is why we look at EBITDA, a function of gross margin and we think those metrics will continue to improve and we’re dampened a little bit by some of the things going on with On Time. But we continue to think there is a lot of leverage and scale in the back-office.

Jeff Kauffman

Okay, then, one other, just trying to sort through the trees through the forest here. Once we get out and begin to anniversary the Wheels acquisition, I think in April, I love that the “same-store sales number” was up pretty strong this quarter. But how should we be thinking, assuming you do know more incremental deals about run rate top-line growth rate once we anniversary Wheels?

Bohn Crain

That’s a good question.

Jeff Kauffman

There is a lot of moving pieces.

Bohn Crain

Yes, exactly. The way that I try to organize my response to that question which we get regularly is, we think about having two flavors of organic, our same-store growth and our new store growth. Our same-store growth has been a GDP plus a little bit type story as we’re able to get some more traction around cross-sell opportunities and having Joe Bento on board in bringing some heightened focus in the commercial orientation to the business that we can improve upon that a little bit.

And so, hopefully that’s GD plus a couple of points. And then certainly you’ll guess that another historical big contributor to organic growth has been our on-board new agent stations, who are not acquiring but who just access their legacy net agents join our platform. So, historically that’s been a component part.

So, that’s a long way are giving some foundational comments to say if I were throwing the proverb dart, I would probably [Technical Difficulty] mid single-digit kind of range, maybe 4% to 6% range.

Jeff Kauffman

All right, that’s the incremental acquisitions.

Bohn Crain

Correct.

Jeff Kauffman

Okay, well, congratulations guys. Best of luck to Joe, and thanks so much.

Bohn Crain

All right, thank you.

Todd Macomber

Thank you.

Operator

Our next question comes from the line of Marco Rodriguez from Stonegate Capital Markets. Please proceed with your question.

Marco Rodriguez

Good afternoon guys. Thanks for taking my questions. I wanted to kind of just quantify little bit to come back here on the OTE challenges in the quarter. Can you kind of quantify the revenue impact?

Bohn Crain

Todd, you want to take a crack at that, I can but?

Todd Macomber

I don’t have it at my fingertips.

Marco Rodriguez

Okay, great, we’ll move, I’ll follow back up with you at a later point on that. And a real quick housekeeping item before I ask my next question. When looking at the adjusted net income on adjusted EPS, what’s the weighted average total share count for that?

Todd Macomber

You say for the projections?

Marco Rodriguez

No, no, no, for your reporting?

Todd Macomber

Hold on.

Bohn Crain

I believe it’s 48.5 but I’ll let Todd answer.

Todd Macomber

Yes, let me just.

Marco Rodriguez

I can follow back up with you guys if that’s, I don’t want to take up too much of your time.

Bohn Crain

I think it is 48.5.

Marco Rodriguez

Okay, okay great. And then, next question here Bohn, in terms of the acquisition side, obviously you talked a little bit about the acquisitions, tuck-in acquisitions on a prior question. I was just wondering if you could shed a little bit more light on purchasing station locations particularly ones that are already inside of your network. Can you talk a little bit about the in terms of the drivers for these people that are already in there why they might want to basically sell to become part of the internal structure if you will?

Bohn Crain

Sure, they saw - that’s a great kind of a launching point. So, again for people who may not be estimated with radius, if you, at least one way to attract what we’ve been up to at Radiant is we’re in the business of partnering with logistics entrepreneurs. And ultimately our brand promise to our partners is quite simply prove you can be nice and we’ll be here to support you in your own exit strategy when you’re ready.

And over the past 10 years, we’ve had I’m happy to say quite a few folks come and join our network. What they saw is there was a built-in exit strategy available to them when they were ready to monetize their LIBOR. And so, there can be a number of contributing factors when making at this decision, that could be anything from age, and just approaching retirement age or it can be other dynamics that can come into play generally all on the personal side, where people just for whatever reason have that catalyst where they are ready to take some chips off the table and [Technical Difficulty] phase of their life. And we’re here to support them when we do that.

And one of the nice things is when we have the opportunity to do that, these folks are already free integrated, they’re already part of our organization at the time. And as we talked about when we do those transactions, when we do those conversions that manifests itself as margin expansion.

Because when we buy them in, the revenue doesn’t change, the gross margin doesn’t change. Effectively eliminate the agent station commission that we would be paying to them. On board they’re separate company personnel and SG&A cost, and that profit that we bought in will find its way to the bottom-line.

And then the second part of that, and we’ve also kind of highlighted this notion before is when we buy other agent based reporting networks, we know that they’re, we’ve done that back-office infrastructure and cost synergies available to us, we talked about that here today just to the SBA transaction. But we also have a similar opportunity at the node level of the network in locations where we already have company owned stores.

So, we have company owned locations in about 50 markets across North America today. And where we have an opportunity to buy in an agent station in one of those markets, there is also going to be cost synergy opportunities, which is that location it’s going to have its own facilities, its own rent, its own space, and its own back-office organization that will be in some respect duplicative of what we already have in that operating location.

Marco Rodriguez

Got it, that’s really helpful. And last quick question, I just kind of wanted to follow-up here on the guidance. Obviously it’s relatively a tough environment out there and you’ve expressed that in your prepared remarks and the press release as far as slightly reducing some of the ranges there. But at the same time, if I heard you correctly on the call, you said I believe that you really haven’t seen a lot of that softness in your markets.

I’m wondering if you can kind of help me kind of bridge the gap there, are we just trying to be little more conservative.

Bohn Crain

Yes, I mean, from where we sit today, we think we can still get $30 million of EBITDA which is in-line with consensus out there. But at the same time, I think we need to recognize that every newspaper I read says there is [Technical Difficulty]. So, I thought it was appropriate that we at least acknowledge that. And that ultimately there is, a lot of things beyond our control that could impact our ultimate results for the year.

Marco Rodriguez

Got it, thanks a lot. I appreciate it guys.

Todd Macomber

Thank you.

Operator

Our next question comes from the line of Doug Weiss from DSW Investments. Please proceed with your question.

Doug Weiss

Hi, good afternoon. Could you talk a little bit about maybe this is not that much of an issue based on your customer base. But Amazon Logistics and whether that represents a new competitor to you and if you’re seeing any impact there?

Bohn Crain

We certainly haven’t seen any impact at this point, they’re obviously making lot of noise out there in the marketplace. We, and I haven’t been pulling what they’re doing particularly - we'll start to focus on that a little bit more particularly given that they’re riding our backyard and many of them are neighbors in my community.

But I think more broadly speaking our business is dramatically more business to business focus and for better or worse we have not made available a lot of kind of home delivery and kind of the e-fulfillment commerce world is not a big component of our business today. And so, I think they’re going to be doing or I would presume they are going to at least be focusing initially on kind of the small package to the drawer to the end-customer and candidly that’s just not a major part of our business in today’s environment.

Doug Weiss

And then, just another question on the - in terms of the impact of recession could have, are there parts to your business that are more vulnerable and could you kind of give a range of the kind of revenue impact you had in the last recession and how much of that you can offset with cost cutting and how much you really can’t offset and just how material the impact is in sort of the more moderate recession?

Bohn Crain

Yes, sure, again, we don’t like to try to get too quantitative but let’s make a few comments in that direction. One of the benefits of being non asset base is ultimately we can be very minimum responsive to what’s going on in the marketplace. Obviously it’s more fun to be adding people of growing the business, but when we need to we can move swiftly and take cost out of the organization [Technical Difficulty] in contrast to the line asset base guys who have a lot of capital hung up in trains, planes and automobiles.

So, ultimately we think we’re certainly not looking for trample in terms of a recession but if one comes, we think we are certainly in a better position than the asset based guys to respond to something like that. And in a better position ourselves individually than we’ve ever been in the history of this company, in our low leverage debt capacity, free cash flow that we’re generating in the business. So, I guess that’s in part another response to your question.

If I look back to the last recession in 2008, we didn’t have a silver bullet per say, and what I mean by that is as our customers were moving less free, we had - there was lots of opportunity, we use customers per say and that cycle but the customers that we enjoyed were moving less business.

So, my remembrance of that particular recession was that individually stations were down plus or minus 15%. But because of our companion M&A strategy, we were able to, on a consolidated basis, we were able to basically grow at a faster rate than the individual stations were being hit. So, on a consolidated basis, if you look at our historical results, we grew through the last cycle.

Doug Weiss

Right, okay. And then, someone asked about revenue synergies with Wheels. Are there cost opportunities there and where are you in that process?

Bohn Crain

Sure. So, it tackles few different aspects [Technical Difficulty] was the product of some M&A but they hadn’t done a lot of consolidation. So if you remember in Toronto alone, they still had three different facilities. And we got everybody under one facility in Toronto now and they’re realigning the organization, so there is definitely some cost synergies intra-Wheels that are - that we’re driving for right now.

So, Tim Boyd [ph] or Jameson and that team are doing a great job bringing focus to what I’ll call the intra-Wheels cost structure. And then ultimately I think we’ll have some cost synergy opportunities across the organization but that will be enabled somewhat by ongoing technology investments.

Doug Weiss

Okay, well, thank you for the answers.

Bohn Crain

Thank you.

Operator

Our next question is a follow-up question from the line of Kevin Sterling from BB&T Capital Markets. Please proceed with your question.

Kevin Sterling

Thanks Bohn and Todd. Real quick, with the reduction in On Time’s EBITDA metrics, how much are you saving in the payout, is it a wash essentially? Could you help us think about that?

Bohn Crain

So, I don’t know wash is the right term, but obviously when we do transactions where we can, we use ounce and there is a built-in risk in the internal payment. So we have written-off any future payments relative to On Time.

So, that’s part of what we acknowledge there. So, and having said that the business came back, we would end up having the right, the earn-out obligation back up, one of the kind of the nuances of contingent purchase price we have to every quarter update our estimates.

And actually this year, we actually wrote-up I expect for future payouts based upon the positive performance of some locations but you’re making a good point. And that there certainly is an offsetting kind of cost savings if you will for not having to make any future earn-out payments based upon the future performance, kind of the currently expected to performance [Technical Difficulty] to get On Time firing on all cylinders. And hopefully someday we’ll be able to report back, we owe some money end of the earn-out, that’ll be a good thing.

Kevin Sterling

Yes, it would be a good thing, yes. Okay, thanks so much Bohn, I appreciate it.

Bohn Crain

Thank you.

Operator

Our last question in the queue comes from the line of Matt Miller from Boyles Asset Management. Please proceed with your question.

Matt Miller

Good afternoon everyone, I appreciate it. You have in the press release, an organic growth in net revenues 7.5% for the quarter excluding the impact of OTE. Do you happen to have that number including the impact of OTE?

Bohn Crain

It would be whatever - it would be the published result in the Q, I want to say it around 1.5% or something like that inclusive and it would be stated results that can be calculated on the face of the Q.

Matt Miller

The Wheels, are you able to give a specific number that relates to Wheels specifically organic growth in the quarter?

Bohn Crain

I don’t have that number, Todd may.

Todd Macomber

Yes, I don’t have that number, I’ve got it more at a holistic level is what I’ve got, so I don’t have it broken down by specific Wheels isolated.

Matt Miller

Okay, and I just wanted to…

Bohn Crain

I’ll give you a little color on Wheels, I think in the aggregate Wheels are Canadian-dollar based that has formed what I’ve thought in line with expectations. Gross revenues have been softer than we had expected but more than made up for in kind of below the line operating cost has come quicker than we would have expected. So there, the online financial contribution has been in line with expectations.

In Canadian dollars, we’ve got some currency exposure in dollars, so the Canadian portion of the business as converted into U.S. dollars has been a little less than what we would have expected originally. But for those of you who might remember in connection with the Wheels transaction, we put on CAD29 million debt, so we have a natural currency head built into the Wheels transaction and we’ll be servicing that Canadian dollar debt with the close from Wheels.

Matt Miller

Great. And the transition costs that are noted in the adjustments, I just wanted to clarify, I couldn’t understand if I heard something correctly or incorrectly. That $737,000 number in the quarter, this is reflective of what the reduction in cost would be after those adjustments are made or is this, the actual cost of those adjustments?

Todd Macomber

This is the existence of the back-office of SBA. And as Bohn mentioned earlier, as we transition the back-office to Bellevue we don’t pick up the full amount because we’re going to have to add some headcount to offset the movement of the work over to Bellevue. But we will get a significant portion of that.

Matt Miller

Right, okay. But it’s fair to say of that $737,000 number, the investment in that expense won’t create a further incremental benefit in future periods, is that right?

Bohn Crain

I’m not sure, I followed the question. The easiest way for me to express that is, that number principally represents [Technical Difficulty].

Matt Miller

Okay. And just quickly my last question was on CapEx. What was CapEx in the quarter, and then is this kind of still running at a couple of million dollars in your mind, the quarter going forward?

Todd Macomber

About $1.4 million for the current quarter and yes, it will be roughly $2 million to $2.5 million is my expectation going forward.

Matt Miller

Okay. So, this would add another $8 million CapEx?

Bohn Crain

I would think that’s a little high on an annual basis, I don’t think we’re expecting to spend, I think $4 million or so for the year might be a good number not $2 million a quarter.

Todd Macomber

Yes, I’m sorry, I misrepresented. I’d say more like $2 million to $2.5 million for the year is what my expectations are, not.

Matt Miller

Okay, all right. Well, okay, all right, I appreciate it.

Bohn Crain

You bet.

Operator

There are no further questions in queue. I’d like to turn the call back over to management for closing comments.

Bohn Crain

Thank you. Let me close by saying we remain very excited with our progress and prospects here at Radiant. And we remain very bullish on the growth platform that we created and the scalability of our non-asset based business model.

We are in strong financial position in the company’s history and enjoy the financial flexibility to take advantage of market opportunities as they present themselves. We continue to make good progress in executing our strategies, leveraging the Radiant platform to bring value to our operating partners.

And we remain very excited about the opportunity to grow our business organically both on a same-store and new store basis and by completing acquisitions of other companies that will bring critical mass from a geographic standpoint, incremental purchasing power and/or complementary service offerings, which will benefit the broader network.

At the right place, at the right time, with the right value proposition, we look forward to reporting further progress in both organic and acquisition initiatives in the quarters ahead. Thanks for listening and for your support of Radiant Logistics.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.

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