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Radiant Heats Up

|Includes: Radiant Logistics, Inc. (RLGT)

Radiant Logistics (NYSEMKT:RLGT) looks to be in a very good position at this point, for a number of reasons:

a) cheap financing via preferred offering

b) reduced transportation expense due to OTE acquisition

c) more agent station conversions in the hopper

Here is Crain's plan, as it's taking shape:

1. acquire networks (done)

2. acquire company owned gateway locations, especially at cross border locations (NY, LA, Laredo, now DFW, ATL, PHX)

3. develop density in trade lanes to improve transportation margin (OTE acquisition)

4. funnel volume through company owned gateways, capture more of the margin

5. internalize truck brokerage, customs brokerage, etc. to capture more margin. Crain mentioned that if Radiant acquired a $100M truck broker, "most" (51%?) of the $10M of gross margin would be captured as ebitda. Going by recent acquisitions of truck brokers, it looks like Radiant could do a deal at 2.5 - 3x post-synergy multiple

6. do more agent conversions, esp at gateway locations. Crain listed some of the targets in the most recent presentation (Miami, Detroit, Houston were mentioned)

7. set up company station overseas (already setting up HK location)

So Crain is essentially developing a feeder and toll booth structure - generate the volume at the agent stations and then feed it through the company owned linehaul network and company owned gateway stations. It's very clever way to leverage the agent volume. And OTE is a good fit because the network serves all of the same airports. Essentially it runs a taxi service between the airports, as its largest customer is probably an airline.

Disclosure: I am long RLGT.