Radiant Logistics, Inc. (RLGT) Q2 2015 Earnings Call Transcript

Hello. This afternoon, Bohn Crain, Radiant Logistics' Founder and CEO; and Radiant Logistics' Chief Financial Officer, Todd Macomber, will discuss financial results for the company's second fiscal quarter and 6 months ended December 31, 2014. Following their comments, we will open the call to questions. This conference is scheduled for 30 minutes. This 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 www.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. Thank you, sir. You may begin.

Thank you. Good afternoon, everyone, and thank you for joining in on today's call. I'll start with an apology for doing a call on a Friday afternoon heading into a long weekend. So thank you, guys, for hanging around for the call. Certainly, not our normal practice, but with the investor conferences in Florida last -- this last week and heading into the long weekend, we didn't have a lot of choice in the matter. So thanks again for your participation today. We continue to make great progress in executing our growth strategy at Radiant and topped $100 million in revenue this quarter, a new milestone for the company. We also continue to steadily grow our adjusted EBITDA, which was $3.8 million for the quarter ended December 31, 2014. As we referenced in our earnings release, we also made significant progress in one of our organic growth initiatives, adding 6 new operating locations from 4 different competing networks in recent months. On-boarding new strategic operating partners has historically been an important contributor to our organic growth, and we believe this group of new operating partners will contribute as much as $25 million in revenue and $1.5 million in incremental EBITDA to our bottom line on a run-rate basis starting in calendar 2015. Based on the commission incentives we extended to these locations as part of the on-boarding process, our adjusted EBITDA results for the quarter ended December 31 of '14 did not include any benefit from this new group of locations. The full benefit of these 6 new locations will be reflected starting with the quarter ended March 31 of '15. We continue to gain momentum in the agent-based forwarding community with more and more logistics entrepreneurs looking to align themselves with a strong financial partner with the technology, purchasing power and global network to deliver world-class solutions to our customers. We are in active discussions with a number of additional agent-station candidates and look forward to providing further updates as we welcome new partners to the network. We also continue to look for productivity improvements. And in this quarter, we took the opportunity to rightsize our New Jersey facilities and exited what was the former corporate headquarters from one of our earlier acquisitions, Distribution By Air. We estimate that the annual savings associated with our transition to the new facilities in New Jersey will be approximately $0.5 million per year. And our big news as of late is our planned acquisition of Wheels, which we believe represents a great opportunity for our operating partners, shareholders and the end customers that we serve. Since we launched Radiant back in 2006, we have been looking for a platform acquisition in support of the brokerage area to complement our core forwarding operations. Wheels is one of the largest bimodal brokerage operators in Canada, offering both truck and rail brokerage services, and also has a significant presence in the U.S. The Wheels transaction will bring us both geographic and service line expansion and uniquely positions us as one of the premier nonasset-based third-party logistics providers in North America. Those who have been following our story for a while will appreciate that the heart of our growth strategy has been our ability to differentiate ourselves in the marketplace by bringing new value to the agent-based forwarding community that we serve. One of the ways that we do this is providing our operating partners with a robust and differentiated platform from which to service our end customers. Quite simply, no other agent-based forwarding network has the bimodal brokerage capabilities or Canadian-based solutions that we will now enjoy as part of the Radiant organization. We believe this will not only enhance and facilitate cross-sell opportunities across the combined Radiant-Wheels network, but also make it that much easier to attract additional operating partners to our platform. The financial attributes of the combined organization are also noteworthy. We have provided preliminary guidance for our fiscal year ending June 30 of '16, and excluding the impact of any further acquisitions or other unusual items, we are projecting adjusted EBITDA in the range of $27.4 million to $31.2 million on approximately $775 million to $825 million in revenues, which equates to adjusted net income available to common shareholders in the range of $10.7 million to $13 million or $0.27 to $0.33 per basic and $0.26 to $0.32 per fully diluted share. Going forward, we will continue to execute our multi-pronged growth strategy that includes both organic and acquisition growth initiatives. As we think about our opportunities for growth through acquisition, we do not see ourselves being limited by good acquisition opportunities. We have a robust acquisition pipeline. We do not see ourselves limited by access to capital. We continue to have ready access to capital to execute acquisitions. Our real limiting factor is the rate at which we can onboard and integrate the acquisitions that we make. Historically, all of our acquisitions have been done from our forwarding platform. Through the Wheels acquisition, we will effectively have 3 platforms from which we can continue to complete tuck-in acquisitions: our legacy forwarding operations based here in Bellevue, Washington; our bimodal brokerage operations based in Chicago; and our Canadian platform based in Toronto. We will continue to cultivate acquisition opportunities across each of these platforms, and based on our current pipeline, expect to achieve run rate revenues approaching $1 billion in calendar 2015. And we look forward to providing updates on the acquisition front as things continue to develop. With that, I'll turn it over to Todd to walk us through the detailed numbers.

Thanks, Bohn, and good afternoon, everyone. Today, we will be discussing our financial results, including adjusted net income and adjusted EBITDA for the 3 and 6 months ended December 31, 2014. Quarterly results in reviewing net income. For the 3 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, including a $171,000 gain on change in contingent consideration and a $195,000 charge for lease termination costs. Additionally, included in these numbers is approximately $250,000 of commission incentives given to new stations who have recently migrated over to the Radiant platform as well as significant acquisition costs incurred, too. For the 3 months ended December 31, 2013, we recorded net income attributable to common shareholders of $195,000 on $84.1 million of revenues or $0.01 per basic and fully diluted share. This represents an increase of approximately $132,000 or approximately 67.8% over the comparable prior year period. In reviewing adjusted net income. For the 3 months ended December 31, 2014, we reported adjusted net income attributable to common stockholders of $1,552,000 or $0.04 per basic and fully diluted share, which, I'd like to highlight, includes the $250,000 of commission incentive expense for the quarter. For the 3 months ended December 31, 2013, we reported adjusted net income attributable to common stockholders of $1,790,000 or $0.05 per basic and fully diluted share, a decrease of approximately $238,000 or 13%. In reviewing adjusted EBITDA for the quarter. We reported adjusted EBITDA of $3,766,000 for the 3 months ended December 31, 2014, compared to adjusted EBITDA of $3,640,000 for the 3 months ended December 31, 2013. This represents an increase of $126,000 or approximately 3.5% of the comparable prior year period and does not exclude the roughly $250,000 of commission incentives for the quarter. For the 6 months. In reviewing net income, for the 6 months ended December 31, 2014, we recorded net income attributable to common stockholders of $1,337,000 on $204.2 million of revenues or $0.04 per basic and fully diluted share, including a $721,000 gain on change in contingent consideration, offset by a $395,000 charge for the lease termination costs as well as the $250,000 of commission incentives I referred to earlier. For the 6 months ended December 31, 2013, we recorded net income attributable to common stockholders of $1,287,000 on $160.8 million of revenues or $0.04 per basic and fully diluted share, including a $213,000 gain on contingent consideration. This represents an increase of approximately $50,000, or about 3.9% over the comparable prior year period. In reviewing adjusted net income. For the 6 months ended December 31, 2014, we recorded adjusted net income attributable to common stockholders of $3,069,000 or $0.09 per basic and fully diluted share, which was negatively impacted by the $250,000 commission incentives. For the 6 months ended December 31, 2013, we recorded adjusted net income attributable to common stockholders of $3,317,000 or $0.10 per basic and $0.09 per fully diluted share, a decrease of approximately $245,000 or approximately 7.5%. In reviewing adjusted EBITDA for the 6 months. We recorded adjusted EBITDA of $7,427,000 for the 6 months ended December 31, 2014, compared to adjusted EBITDA of $6,752,000 for the 6 months ended December 31, 2013. This represents an increase of approximately $675,000 or about 10% over the comparable prior year period. With that, I will turn the call back over to our moderator to facilitate any Q&A from our callers.

[Operator Instructions] Our first question comes from Jason Seidl with Cowen and Company.

This is actually Matt Elkott for Jason. My question relates to net revenue margins. As you guys continue to implement your acquisition strategy and diversify your product offering, can you talk about the impact that the -- the impact on net revenue margins and where you envision that going forward in the long term?

Sure. Thanks, Matt. So good question. Ultimately, this will come back to kind of the concept of mix. And it ultimately will get impacted not only when we do acquisitions, but even when we onboard individual agent stations, the kind of the ultimately -- depending whether they're more heavily domestic or international, that can also -- there can also be some variability in that as we continue to go. Historically, in all of our -- kind of our roots come from the domestic and international forwarding space, but most of our business came from the domestic side, which ultimately, being the time-definite, high-value, high-velocity stuff was always the highest margin kind of sector in the nonasset-based 3PL space. So we'll continue to grow that element of what we do. But as we continue to onboard and broaden the toolbox and the network and the types of folks that we come on, as a function of mix, we will see those numbers transition. If we look at Wheels and their gross margins, as an example, on a gross profit percentage basis, we're going to see dilution expressed on that basis as we continue to move forward. Having said that, and I appreciate the question because -- for those who have spent any time looking at our MD&A, we spend a lot of time looking at and monitoring and measuring our EBITDA as a function of gross margin. Ultimately, that gets to the kind of the scalability of our back-office infrastructure. And we know that the incremental cost of supporting that next dollar of gross margin is very, very small. And for those of you who would have looked at some of our most recent investor deck, it kind of lays out how those numbers have performed over time. And I think kind of in the earliest years, if we look to EBITDA as a function of gross margin, it was -- I believe the math was 4.9%. And for our June 30 of year ending '14, it was up to 14.9%. So a really solid trend line. And we always make the point, if we look at that same math for the Expeditors and C.H. Robinsons of the world and look at their EBITDA as a function of gross margin, ultimately, we'll see that they're tracking at the net 30% to 35% range. So that's the kind of the slope of the curve that we're going to continue to march up. And while you're correct to call out this dynamic that there's going to be some "compression" on GP percentage as we grow our brokerage business, which carries a lower gross margin characteristic, ultimately, we're still growing those gross margin dollars and getting a heck of a lot more gross margin to the bottom line. What I always like to use as an example, if we had an opportunity to onboard $100 million of truck brokerage business at a 10% gross margin, that would obviously diminish our gross margin percentage. But if we could get that -- if we could get $9 million of those $10 million gross margin dollars to the bottom line, that would be a wildly successful transaction for us. So although we're focused and interested in gross margin percentage, what really carries the day is our ability to manage our controllable personnel and SG&A costs as a function of those gross margin dollars. And I know folks want to do some modeling and try to plot the trend line and what this is going to look like over time, and the ultimate answer is, it depends, right? It depends on the nature of which transactions, which happens next. And ultimately, we're talking to lots of different folks that would fit within our overall business strategy, and those can have some different margin characteristics. So I'm reluctant to say that our average gross margin percentage is going to be 26% or 24%, and I would try to focus you more on, if you continue to watch our EBITDA as a function of gross margin, we're going to continue to steadily see that trend line moving up and to the right as we have consistently executed on over the past 9 years.

Got you. That's very helpful, Bohn. My next question relates to the ongoing West Coast port shutdowns and slowdowns. I just wanted to see if you guys are seeing any impact from that and if you saw any impact in the fourth quarter that can be dissected out of the numbers, whether negative or positive?

I don't know that we're in a position to kind of parse that within the quarter. But I think, over time, that dynamic, ultimately, we would expect that, that's going to create more need for expedited-type transportation services as things kind of -- as the gridlock ultimately unwinds, when we get to that point, because there's been -- and this is obviously creating disruption in the supply chains of our customers and pain points, and we have solutions to help tackle those and try to get things back on track or get things repositioned just as quickly as we can. So things that customers may have originally anticipated moving on a more deferred basis depending on the nature of the particular shipment, they're more likely to move it on an expedited or even an airfreight basis depending on a particular circumstance. And ultimately, that should translate into more opportunities for us to help them work through that.

Our next question comes from Marco Rodriguez with Stonegate Capital.

Bohn, I was wondering if you could help me out understanding something here in terms of these commission incentives. I think I heard remarks that there was a $250,000, I guess, impact from the commission incentives. But earlier comments, you were talking about you hadn't seen about a $1.5 million incremental EBITDA from these new locations, which kind of...

Yes, yes. So let me try to speak to that broadly because I get questions from time to time around that. So one of the principal takeaways is -- because people are trying to understand kind of what the -- what is our investment or what do we -- what's it costing us to onboard stations. And the short version is not much in terms of physical cash outlays, right? So -- but what we do -- what we will do from time to time -- and I'll take the opportunity that any agent stations participating and competitors networks listening in on this call, and we get them from time to time, so I'll do a little commercial in the middle of responding to your question, is that what we have done with success as part of having people come our way is we'll effectively give them a bit of a holiday on paying the corporate fee associated with the transaction. So if you'll remember, we'll do this quickly, we share in the gross margins with our agent stations, and typically, for domestic services, we retain somewhere between 8% and 11% of the top line revenue, and for the international services, we typically retain 30%, and they keep 70% of the gross margins on the international shipments. But as part of the program to help them work through their own economics of joining and kind of making the transition is we'll say for the first month or 2 months, you keep 100% of the gross margin. So what we saw in this quarter is we -- basically, we had the revenue flowing through. But we didn't retain -- if you think of us as the house, the house didn't retain any of the gross margin. The station got to retain 100% of the benefit of that gross margin through December 31. So I mean, just to kind of frame it for you, so we might be talking to someone, and as part of the conversation, they're looking for those types of incentives. And ultimately, what we said is we'll let you ride for free effectively through December 31. So the sooner you join, the bigger benefit you have. So long story short is we've handled a lot of business from these new stations that's been impactful at the top line, but we didn't get any of the benefit flowing through for the quarter ended December. But everybody's paying full fare effectively starting January 1. So our numbers will realize the full benefit and impact of all of our new partners as we report the quarter ended March 31.

Understood. But -- and so is the charge in the quarter or rather the reduction in the cost of transportation, is that the $250,000 that you saw in the quarter? Or is it...

It actually shows up in the operating partner commissions. So those operating partner commissions are $250,000 more than they otherwise would be. That's where they get their economics, in that line item.

Understood. Okay. And then kind of switching gears here. I just wanted to see if I can better understand a little bit of the cost cutting opportunities that you might be envisioning for the Wheels acquisition. I mean, prior to the announced acquisition, it was about a year ago, you revamped the sale structure to kind of focus on more organic growth, and also the OTE acquisition was supposed to provide some cross-selling opportunities. So with this Wheels acquisition that is coming on, I mean, how do you kind of see the sales structure forming? And how are you going to drive these cross-selling opportunities?

Sure, so let me tackle that. So -- and to give a little bit of context for folks who might not have been on all of our calls. About a year or so ago, we rolled out a regional structure -- so we've got a series of regional VPs, East, Central and West Coast who've got P&L accountability within the business to drive their regions, both in terms of on-boarding new stations and profitability and so on. And so we're trying to -- as we think about the Wheels transaction and how we're organizing ourselves moving forward, as we're going out of our way to try not to end up with a U.S. company and a Canadian company, right, with lots of vice presidents and kind of being top-heavy. So we're really taking a matrixed approach where we've got service line business owners and then geographic business owners as well. So taking that to its kind of logical extension, so we'll have Dan Stegemoller continuing to run our forwarding operations. We'll have Tim Boyce running brokerage operations for North America. And then on the geographic basis, just like we have our regional VPs, we'll have Peter Jamieson as the Country Manager for Canada. So we've got some kind of joint accountability as we think about the respective businesses. And then we're also exploring and in conversations with some folks about bringing on more sea level sales type folks as we continue to build out our leadership team and tasking them specifically with focus -- giving someone specific and precise accountability for the cross-sale and organic growth objectives of the company. But I can tell you, it's pretty interesting. And we have to kind of remind ourselves, we haven't closed on the Wheels transaction yet, right. So we're anticipating that's going to close in, in early April. But it's really exciting to see how our network participants are already reaching across the aisle, if you will, and beginning to work with each other and connect and share in opportunities and work with each other, both up in Canada as well as in Chicago, with brokerage opportunities. So it's pretty exciting to watch folks start to interact with each other and the momentum and energy that's coming around that.

Got it. And last quick question. In terms of the guidance, obviously, you reiterated the fiscal '16 guidance. Just wondering if you could perhaps share any kind of color of how you're looking at the March quarter.

I'm going to dodge that -- responding to that question because I want to stay within what we put in the release, and we didn't put anything in the release. And my lawyer will come in and thump me between the eyes if I start talking about that because we'll have to file another 8-K. But I mean, from our other guidance that we've provided in terms of projections, I think people should be able to have a general sense of where we're going, and everything continues very positively. We've got a lot of good stuff going on, so I think I'll just give you the response of there shouldn't be -- we're not anticipating any negative surprises in the trajectory of the business.

Our next question comes from Jeff Martin with Roth.

Could you -- you mentioned in your press release that you could exit 2015 at a $1 billion run rate. Could you express to us what kind of capacity you feel you have and your management team has of taking on more acquisitions? Because Wheels is sizable, On Time Express is fairly sizable as well. What do you think your capacity is to take on acquisitions at a fairly rapid pace? And what do you see as the biggest risk of doing that?

All right. So thanks for the question. So the -- and I tried to kind of at least -- so there's a lot of different ways I can comment responding to that. So let me start by, I guess, pointing out -- because it's in our public filings and the 8-K, so that in connection with securing the commitment letters for the Wheels transaction and people look in the 8-Ks and the commitment letters that we receive from the lenders, they'll see that we already have effectively preapproved 2 other transactions outside of Wheels that we've secured approval for with the banks. So as we continue to do our due diligence process, we've got a few things that we're at least that far enough along, that we're able to have those types of conversations. And assuming those things work their way through the due diligence process appropriately, we have some -- a few other things that are relatively near-term before us. We have been acquisitive in the forwarding space. We maintain a robust pipeline in the forwarding arena. And at the same time, Wheels itself was the product of some M&A, and they've been cultivating a pipeline for a number of years themselves. And so that's creating some -- we're not -- no one's starting from a standing start, right. Everyone has been at this for a while. And as I've pointed out in my -- in the press release, right. So historically, we only had one platform to work from. And I view our constraint really not around an acquisition pipeline or access to capital to do what we're doing. It's more a function of our ability to onboard and integrate what we had. And as -- you know, you've been following us for a long time, we've taken a very disciplined approach ultimately acquiring a lot of homogenous-type businesses into our freight forwarding vertical, centralizing things, getting a lot of cost synergies, but we only had one platform to work from. But through the Wheels combination, we really are going to end up with 3 different platforms that we can really leverage as we think about our M&A -- kind of our capacity to do M&A. So while we're certainly going to stay true to our core and historical vision in the freight forwarding universe, so you should expect us to continue to do things there. But we've got 2 new tools in the toolbox or 2 new platforms in the form of the brokerage capabilities in Chicago as well as Wheels' presence in Toronto, each of which are more than capable in terms of technology and leadership teams there to support M&A in those categories. And then, anecdotally, what I would tell you, as we thought about the trends, the coming together of Radiant and Wheels, one of the things that we thought would happen in connection with bringing these 2 companies together is that it would, candidly, make us a little more interesting from a capital markets perspective in terms of revenues and EBITDA and share price and market cap and likely create some new conversations for us, which it has. But the part that I didn't expect, which we're also experiencing, is really the positive effect and perception from the industry side of things. We're getting a lot -- finding ourselves in a lot more interesting M&A-type conversations with larger and more impactful types of opportunities. So we're early in that process. We're going to continue to superimpose the same kind of discipline and philosophy that has brought us the success that we've had to date. But I'm really excited about where we sit and the opportunity that's in front of us. I was -- I had the opportunity to present at these conferences over the past couple of weeks. And kind of the punchline was, we're the overnight success 9 years in the making, right. We have been at this for a while. I think we've got a really good track record. We've got some really good experience on doing good accretive transactions, we're really focused on profitable growth. And we're looking to amplify that through the combination of the Radiant-Wheels transaction.

Our next question comes from Sal Vitale with Sterne Agee.

Just first, just a clarification. Can you give me a sense for the guidance that you provided in your release? Is that pretty much the same for fiscal '16 as what you provided on the conference call a few weeks ago?

Yes, yes, it is. What we did was we just expressed it -- and if you -- on the investor presentations, if you kind of look to that in detail, basically, we provided preliminary guidance from a kind of a low, medium and high case, and then we grabbed the medium case and rolled it forward in the subsequent pages of that kind of valuation exercise. And this -- kind of what's in the press release just brackets that same math on kind of the low and high case. So it's really just an affirmation of what we were -- what we had out in the PowerPoint decks.

Okay. Then can you give a sense -- I guess since you announced the acquisition, has there been any progress? Can you give us any update on any progress made? Maybe any additional headway in terms of securing additional cost savings?

I don't think we're in a position to do that at this point. What I would say is everything -- from everything we know today, we're still on track for an early April closing. There's nothing that has developed. So we're kind of hitting all of our marks, and everything is on track. So I'm happy to share that view of things. And on the cost synergies, we're not prepared at this point to get into those details, other than I will just kind of, I guess, take the opportunity to speak to the $3 million of cost synergies that were in the modeling to kind of remind everyone to deconstruct that $3 million. There was basically $1.5 million of contractual reductions and compensation to the founders, another $0.5 million in redundant pub co costs and then another $1 million in facilities cost savings that are anticipated for some facilities consolidations already underway in Toronto that would have happened independent of our transaction, as they're consolidating facilities in Toronto. But the ultimate takeaway is we haven't taken credit for any revenue or cost synergies in the numbers that we're sharing.

Okay. And then just switching gears to the quarter. So if I look at your gross revenue growth rate, 25.9%, can you give us a sense or ballpark of how much of that was organic?

I think Todd has the numbers, so I'm going to...

I have those numbers, I've just got to find the sheet. So for the quarter, the organic piece was 8.6%. And this is for the net revenues.

That's on net revenue?

On net revenues, yes, 8.6%.

Do you have any sense for what that was on gross?

On gross, it's a little higher. We've always focused, though, on the net revenue. And so I'd point it out, Sal, I mean, I just wrote that number down because I've always focused on the net revenue so...

But it's a little higher, are you saying?

Yes, it could be a little higher than that, but what it came out as far as net revenues was 8.6%.

Okay. Can you just refresh my memory? Since you have the net revenue, that's what you focus on, what was that for the 1Q?

I don't have the Q1.

We could just touch base after the call.

I mean, all I've got is Q2 coming in here for the call.

Our next question comes from David Campbell with Thompson, Davis.

I really have just kind of been following you. I've got the feeling that you are not interested in building a company with a lot of debt. And a lot of freight forwarding and nonasset-based companies have run into some problems with a lot of debt. Now following this Wheels acquisition, you're going to have a significant amount of long-term debt. And you're talking about hitting a run rate up to $1 billion by the end of this year. That's going to take more debt. So I'm just curious, what's your thinking these days about debt in your company?

Sure. So historically, we have always worked to negotiate our debt covenant package that would ultimately accommodate leverage up to 4x. But historically, we have never ever, ever -- I don't think we've ever been as high as 2.5x. So we've managed the business much more conservatively than that. And I believe when we do the math, and I don't have the coverage ratios right in front of me, but I think we're still well under 2.5x even on a combined basis here as we think about kind of the pro forma balance sheet and overall leverage on the business. So we view debt as an appropriate part of our capital structure in terms of creating shareholder value. And we think that plus or minus 2.5x is the right kind of longer-term zip code for where we would expect to work to manage our debt levels.

2.5x, 2.5x what? I'm sorry, I couldn't hear you.

EBITDA.

2.5x EBITDA. Okay. And so you're estimating that you're going to try to get to a run rate of $1 billion by the end of this year. The estimate you have for the fiscal '16 year is only what you currently have acquired or will acquire with Wheels. So is that correct?

That's correct.

So that's -- you feel pretty sure about getting these -- up to this $1 billion rate. I guess, you've got your hands on -- arms around a number of acquisitions that you will hope to complete, is that -- by the end of the year.

We certainly have a robust pipeline. The deals -- you never know until the deal's ultimately closed. But it's certainly achievable based upon the types of things that we're looking at in today's environment.

Right, right, right. So there's upside to that $800 million target for fiscal 2016 as well if you make more of these acquisitions, correct?

Absolutely. Well, just to be clear, calendar '15 is going to land before the end of fiscal '16, all right? So...

Right, right, right. And what about your plans? You sort of mentioned you really don't have any cost synergy plans other than what you've said, the $3 million will be from Wheels.

Well, no, I didn't say we didn't have any plans. I just didn't say I had any plans I was prepared to share with you on the phone call today.

Right, right, right. No, I understand, I understand. But do you think most of the employees in Canada will be retained? Or can't you say that right now?

Well, we certainly expect most of them to, for sure, right? In railroad speak, this is an end-to-end merger, right? So we're a traditional forwarding, they're a traditional brokerage, and so what they do is a little bit different than what we do. So historically, where we've had the opportunity to acquire other agent-based freight forwarding networks and effectively eliminate the redundant back-office infrastructure, that's really not the case here, that's not the flavor of what this particular opportunity was. This was complementary, but they are unique in terms of what they do. And it's one of the things that was exciting and interesting about the transaction. So I'm sure, over time, there will be -- there certainly will be some cost synergies. I know we're looking at sharing facilities in Los Angeles. I'm sure that if we're going to be able to do some things in how we think about technology spend and software, licensing and telecommunication costs and insurances and workman's comp and all those types of things. But we're not going -- we're certainly not anticipating there's going to be huge risks and large exits of people in connection with this transaction. That's not what this transaction was about. This transaction was more about pulling in some complementary services, putting more tools and capabilities in the hands of our operating partners. If you kind of take a step back, the real asset of our operating partners is their customer relationship asset, right? They partner with us because we give them the best platform from which to service, add value and monetize the relationships that they enjoy. And Wheels is just kind of a further extension of that thought and philosophy because now we have the -- they have the opportunity to go into their existing relationships that they've sold freight forwarding services to over the years, and now say, "Hey, how can we help you in Canada? We've been supporting you on the freight forwarding side. What do you have going on in the intermodal space? What are you doing on the truck brokerage side?" And I think that's going to create some interesting opportunities in and of itself. The inverse of that also applies for the Wheels installed customer base, and that's being able to mobilize an expedited solution for some of their customers. And then remember, David, our real bread and butter has been differentiating ourselves in the marketplace and attracting other agent stations to our network. And there is simply no other agent-based freight forwarder network on the planet that has the breadth of capabilities that we do. So I think this is just going to make it -- make us yet that much more attractive as a platform for those entrepreneurs out there that are saying, "Who's the best platform from which I should partner and align myself to support my customers and maximize the value of my customer relationships?"

All right. Then my last question is, most companies are saying railroad service is terrible in the United States. How does that affect the intermodal business of Wheels?

Well, I think it's probably a little premature for me to try to answer that question authoritatively since we don't yet own Wheels. But I think -- I worked for a railroad for 12 years, so I am sympathetic to those types of comments or concerns. And that's one of the reasons that these nonasset-based intermodal service providers exist, to try to bridge that gap around service expectations in interacting with the railroads. But oil price is going to come or go, but there's going to be a continuous push and pull between truck and rail as hours of service and fuel and aging of drivers all takes place. And we're in a relatively unique position to be able to offer customers this bimodal substitution of service capability depending on what's happening in the market. On Monday, it may make sense to move it by truck, but on Tuesday, it may make sense to move it by rail. And we can have that one holistic conversation with the customer that just simply we weren't even part of the -- we wouldn't be part of that dialogue pre-Wheels.

At this time, I would like to turn the call back over to management for closing comments.

Great. Thank you. Let me close by saying that we remain very excited with our progress and prospects here at Radiant. And we remain very bullish on the growth platform that we've created and the scalability of our nonasset-based business model. We continue to make good progress in executing our strategy, leveraging the Radiant platform to bring value to our operating partners, and we remain very excited about the opportunity to grow our business, both organically and through acquisitions of other companies that bring critical mass from a geographic standpoint, incremental purchasing power and/or complementary service offerings that 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 terms of both organic and acquisition initiatives in the quarters ahead. Thanks for listening and your support of Radiant Logistics.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.