RADIANT LOGISTICS, INC. CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning set forth inUnited 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 of our 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; and such other factors that may be identified from time to time in ourSecurities 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 endedJune 30, 2020 . 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 inthe United States andCanada . 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 acrossNorth 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 locations operated exclusively on our behalf by independent agents, who we also refer to as our "strategic operating partners", as well as 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 acrossNorth 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 andUPS . 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 and customs house brokerage ("CHB") services to complement our core transportation service offering. 26 -------------------------------------------------------------------------------- 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. COVID-19 The COVID-19 pandemic continues to have widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The pandemic has created significant volatility, uncertainty and economic disruption. We are closely monitoring the impact of the pandemic on all aspects of our business, our customers, employees and business partners. The overall demand for transportation services have been significantly impacted. COVID-19 has adversely affected most of our operations, financial condition, and results of operations in fiscal year 2020 and the first quarter of our fiscal year 2021. Beginning in April of 2020, we have experienced decreased customer demands in many parts of our business while seeing improvements in the demand in certain segments of business. We have been working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response to our declining revenues. However, the relative effectiveness will depend on the severity and duration of the pandemic. We face significant risks related to the spread of COVID-19 and the recent developments surrounding the global pandemic have had, and will continue to have, significant effects on our business, financial condition, results of operations, and cash flows. We are facing increased operational challenges from the need to protect employee health and safety. We expect to continue to incur additional costs as we continue to implement operational changes in response to the pandemic. We face significant risks related to the global economic downturn and severe reduction in revenues caused by the pandemic. These risks include materially reduced demand for our services and challenges to the ongoing viability of some of our customers. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. The effect of the COVID-19 pandemic may last for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including: the severity and duration of the outbreak; governmental, business and other actions; the impact of the pandemic on economic activity; the effect on consumer confidence and spending, customer demand and buying patterns; the health of and the effect on our workforce and our ability to meet staffing needs; any impairment in value of our tangible or intangible assets that could be recorded as a result of weaker economic conditions; and the potential effects on our internal controls including those over financial reporting as a result of changes in working environments. Provisions for bad debt expense may increase given the financial difficulty faced by our customers, which could impact our ability to borrow under our revolving credit facility. Due to the unprecedented and evolving nature of the COVID-19 pandemic, it remains very difficult to predict the extent of the impact on our industry generally and our business in particular. While we anticipate that our results of operations will continue to be impacted by this pandemic in fiscal year 2021, we are unable to reasonably estimate the extent of the impact on our full-year results of operations, our liquidity or our overall financial position. We may face similar risks in connection with any future public health crises. Our business model has also shown its strength in the diversity of our service offerings. Although the pandemic has had a substantial negative impact on many of the industry verticals and customers that we serve, the Radiant network is proud to be playing an active role in the fight against COVID-19: delivering personal protective equipment, food and beverage, consumer goods, technology and other essential products for our customers inNorth America and around the world. Notwithstanding this great effort by our team, we anticipate the contraction in our business from the shelter-at-home mandates, closing of manufacturing facilities and general global economic slowdown will more than off-set any financial benefit from our support of essential businesses. The effects of COVID-19, however, will not be fully reflected in our financial results until future periods. The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers' ability to pay for our services on an ongoing basis. This uncertainty also affects management's accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance. 27 --------------------------------------------------------------------------------
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.
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.
28
--------------------------------------------------------------------------------Results of Operations
Three months ended
The following table summarizes revenues, cost of transportation and other
services, and net revenues by reportable operating segments for the three months
ended
Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
Corporate/ Corporate/
(In thousands) United States Canada Eliminations Total United States Canada Eliminations Total
Revenues
Transportation $ 152,461 $ 17,523 $ (144 ) $ 169,840 $ 171,463 $ 20,498 $ (172 ) $ 191,789
Value-added services 2,304 3,733 - 6,037 4,421 4,333 - 8,754
154,765 21,256 (144 ) 175,877 175,884 24,831 (172 ) 200,543
Cost of transportation and
other services
Transportation 114,024 13,864 (144 ) 127,744 124,731 16,561 (172 ) 141,120
Value-added services 1,776 391 - 2,167 2,919 971 - 3,890
115,800 14,255 (144 ) 129,911 127,650 17,532 (172 ) 145,010
Net revenues (1)
Transportation 38,437 3,659 - 42,096 46,732 3,937 - 50,669
Value-added services 528 3,342 - 3,870 1,502 3,362 - 4,864
$ 38,965 $ 7,001 $ - $ 45,966 $ 48,234 $ 7,299 $ - $ 55,533
Net margin
Transportation 25.2 % 20.9 % N/A 24.8 % 27.3 % 19.2 % N/A 26.4 %
Value-added services 22.9 % 89.5 % N/A 64.1 % 34.0 % 77.6 % N/A 55.6 %
(1)Net revenues are revenues net of cost of transportation and other services.
Transportation revenue was$169.8 million and$191.8 million for the three months endedSeptember 30, 2020 and 2019, respectively. The decrease of$22.0 million , or 11.5%, is primarily attributable to the impact of COVID-19. Net transportation revenue was$42.1 million and$50.7 million for the three months endedSeptember 30, 2020 and 2019, respectively. Net transportation margins decreased from 26.4% to 24.8%, primarily due to shifts in product mix and certain lower margin business. Value-added services revenue was$6.0 million and$8.8 million , for the three months endedSeptember 30, 2020 and 2019, respectively. The decrease of$2.8 million , or 31.8%, is primarily attributable to slowdown in our contract logistics and custom brokerage services offerings as the result of COVID-19. Net value-added services revenue was$3.9 million for the three months endedSeptember 30, 2020 , compared to$4.9 million for the comparable prior year period. Net value-added services revenue margins increased from 55.6% to 64.1%, primarily due to lower personnel and warehousing costs as a percentage of revenue.
The following table provides a reconciliation for the three months ended
(In thousands) Three Months EndedSeptember 30 , Reconciliation of net revenues to GAAP gross profit 2020
2019
Revenues$ 175,877
(129,911 ) (145,010 )
Depreciation and amortization (2,943 ) (3,103 )
GAAP gross profit $ 43,023 $ 52,430
Depreciation and amortization 2,943 3,103
Net revenues $ 45,966 $ 55,533
GAAP gross margin (GAAP gross profit as a percentage of revenues)
24.5 % 26.1 %
Net margin (net revenues as a percentage of revenues) 26.1 % 27.7 %
29
-------------------------------------------------------------------------------- The following table compares condensed consolidated statements of comprehensive income data by reportable operating segments for the three months endedSeptember 30, 2020 and 2019: Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Corporate/ Corporate/ (In thousands) United States Canada Eliminations Total United States Canada Eliminations Total Net revenues (1)$ 38,965 $ 7,001 $ -$ 45,966 $ 48,234 $ 7,299 $ -$ 55,533 Operating expenses: Operating partner commissions 18,589 - - 18,589 24,178 - - 24,178 Personnel costs 8,928 3,173 676 12,777 10,434 3,488 925 14,847 Selling, general and administrative expenses 3,738 1,069 847 5,654 4,929 1,458 1,277 7,664 Depreciation and amortization 1,090 528 2,541 4,159 988 415 2,633 4,036 Transition, lease termination, and other costs - - - - (9 ) - - (9 ) Change in fair value of contingent consideration - - - - - - 15 15 Total operating expenses 32,345 4,770 4,064 41,179 40,520 5,361 4,850 50,731 Income (loss) from operations 6,620 2,231 (4,064 ) 4,787 7,714 1,938 (4,850 ) 4,802 Other income (expense) 215 (103 ) (592 ) (480 ) (5 ) 12 (691 ) (684 ) Income (loss) before income taxes 6,835 2,128 (4,656 ) 4,307 7,709 1,950 (5,541 ) 4,118 Income tax expense - - (1,078 ) (1,078 ) - - (787 ) (787 ) Net income (loss) 6,835 2,128 (5,734 ) 3,229 7,709 1,950 (6,328 ) 3,331 Less: Net income attributable to non-controlling interest (141 ) - - (141 ) (96 ) - - (96 ) Net income (loss) attributable to Radiant Logistics, Inc. $ 6,694$ 2,128 $ (5,734 ) $ 3,088 $ 7,613$ 1,950 $ (6,328 ) $ 3,235 Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Operating expenses as a Corporate/ Corporate/ percent of net revenues: United States Canada Eliminations Total United States Canada Eliminations Total Operating partner commissions 47.7 % 0.0 % N/A 40.4 % 50.1 % 0.0 % N/A 43.5 % Personnel costs 22.9 % 45.3 % N/A 27.8 % 21.6 % 47.8 % N/A 26.7 % Selling, general and administrative expenses 9.6 % 15.3 % N/A 12.3 % 10.2 % 20.0 % N/A 13.8 % Depreciation and amortization 2.8 % 7.5 % N/A 9.0 % 2.0 % 5.7 % N/A 7.3 %
(1)Net revenues are revenues net of cost of transportation and other services.
Operating partner commissions decreased$5.6 million , or 23.1%, to$18.6 million for the three months endedSeptember 30, 2020 . The decrease is primarily due to decreased net revenues from operating partners. As a percentage of net revenues, operating partner commissions decreased 310 basis points to 40.4% from 43.5% for the three months endedSeptember 30, 2020 and 2019, respectively, as a result of a higher percentage of net revenues coming from company owned stores. Personnel costs decreased$2.1 million , or 13.9%, to$12.8 million for the three months endedSeptember 30, 2020 . The decrease is primarily due to temporary workforce reductions and temporary compensation reductions as a result of managements response to COVID-19. As a percentage of net revenues, personnel costs increased 106 basis points to 27.8% from 26.7% for the three months endedSeptember 30, 2020 and 2019, respectively. Selling, general and administrative ("SG&A") expenses decreased$2.0 million , or 26.2%, to$5.7 million for the three months endedSeptember 30, 2020 . The decrease is primarily attributable to decreased spending for professional services fees, bad debt & claims, and travel for the quarter. As a percentage of net revenues, SG&A decreased 150 basis points to 12.3% from 13.8% for the three months endedSeptember 30, 2020 and 2019, respectively. Depreciation and amortization costs increased$0.2 million , or 3.1%, to$4.2 million for the three months endedSeptember 30, 2020 . The increase is due to investments in technology infrastructure and increased amortizable intangible assets associated with recent acquisitions of two operating partner locations.
Other expenses were
Our change in net income is driven principally by decreased net revenues, partially offset by decreased operating expenses and decreased income taxes compared to the comparable prior year period.
30
--------------------------------------------------------------------------------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
Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
Corporate/ Corporate/
(In thousands) United States Canada Eliminations Total United States Canada Eliminations Total
Net income (loss)
attributable to Radiant
Logistics, Inc. $ 6,694 $ 2,128 $ (5,734 ) $ 3,088 $ 7,613 $ 1,950 $ (6,328 ) $ 3,235
Income tax expense - - 1,078 1,078 - - 787 787
Depreciation and
amortization 1,090 528 2,541 4,159 988 415 2,633 4,036
Net interest expense - - 571 571 - - 692 692
EBITDA 7,784 2,656 (1,544 ) 8,896 8,601 2,365 (2,216 ) 8,750
Share-based compensation (39 ) 53 130 144 245 44 141 430
Change in fair value of
contingent consideration - - - - - - 15 15
Acquisition related costs - - 34 34 - - 285 285
Litigation costs - - 152 152 - - 184 184
Transition, lease
termination, and other
costs - - - - (9 ) - - (9 )
Change in fair value of
interest rate swap
contracts - - 21 21 - - - -
Foreign exchange loss
(gain) (123 ) 102 - (21 ) 36 (13 ) - 23
Adjusted EBITDA $ 7,622 $ 2,811 $ (1,207 ) $ 9,226 $ 8,873 $ 2,396 $ (1,591 ) $ 9,678
Adjusted EBITDA as a % of
net revenues (1) 19.6 % 40.2 % N/A 20.1 % 18.4 % 32.8 % N/A 17.4 %
(1)Net revenues are revenues net of cost of transportation and other services.
Adjusted EBITDA decreased
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. Adapting to COVID-19, we have curtailed mergers and acquisitions activities and suspended stock buy-back. 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 ofSeptember 30, 2020 , we have$23.9 million in cash on hand to serve as adequate working capital. We believe that COVID-19 is likely to continue impacting general economic activity and demand in our markets, which could have an adverse effect on our results of operations, which in turn, could limit the amounts available to us under the Revolving Credit Facility and cause us to seek other external financing sources to meet our operating and capital needs. However, future conditions in the credit markets may be unpredictable alternative sources of credit may be reduced. Net cash provided by operating activities were$13.4 million for the three months endedSeptember 30, 2020 . Net cash provided by operating activities were$0.1 million for the three months endedSeptember 30, 2019 . 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 three months endedSeptember 30, 2020 increased by$13.3 million , compared with the same period in fiscal year 2019, primarily due to the net change in operating assets and liabilities. Net cash used for investing activities were$2.1 million and$1.7 million for the three months endedSeptember 30, 2020 and 2019, respectively. The primary use of cash was for purchases of property, technology, and equipment. Cash paid for purchases of property, technology, and equipment were$2.1 million and$1.7 million for the three months endedSeptember 30, 2020 and 2019, respectively. 31 -------------------------------------------------------------------------------- Net cash used for financing activities was$21.7 million for the three months endedSeptember 30, 2020 . Net cash provided by financing activities were$4.8 million for the three months endedSeptember 30, 2019 . Repayment of the Revolving Credit Facility were$20 million for the three months endedSeptember 30, 2020 . Proceeds from the Revolving Credit Facility were$193.9 million for the three months endedSeptember 30, 2019 , and Repayment of the Revolving Credit Facility were$187.3 million for the three months endedSeptember 30, 2019 . Repayments of notes payable and finance lease liability were$0.7 million and$1.1 million for the three months endedSeptember 30, 2020 and 2019, respectively. Distributions to non-controlling interest were$0.7 million and$0.2 million for the three months endedSeptember 30, 2020 and 2019, respectively. Payments of employee tax withholdings related to vesting of restricted stock awards were$0.3 million for both the three months endedSeptember 30, 2020 and 2019. Payments of employee tax withholdings related to the cashless exercise of stock option were$0.1 million for the three months endedSeptember 30, 2019 . 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 ofMarch 13, 2020 . OnSeptember 30, 2020 , the borrowings outstanding on the Revolving Credit Facility was$10 million . The Revolving Credit Facility was entered into withBank 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 andBank of America, N. A .,KeyBank National Association andWashington 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 onMarch 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%. 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. OnMarch 20, 2020 , and effectiveApril 17, 2020 , Radiant entered into an interest rate swap contract withBank 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%. OnApril 1, 2020 , and effectiveApril 2, 2020 , Radiant entered into an interest rate swap contract withBank 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 onMarch 13, 2025 .
Senior Secured Loan
OnApril 2, 2015 , Radiant Canada obtained aCAD$29.0 million senior secured Canadian term loan fromFiera Private Debt Fund IV LP ("FPD IV" formerly,Integrated Private Debt Fund IV LP ) pursuant to aCAD$29,000,000 Credit Facilities Loan Agreement (the "FPD IV Loan Agreement"). The Company and its US and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures onApril 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 aCAD$10.0 million senior secured Canadian term loan fromFiera Private Debt Fund V LP ("FPD V" formerly,Integrated Private Debt Fund V LP ) pursuant to aCAD$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 US and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures onJune 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. 32 --------------------------------------------------------------------------------
Paycheck Protection Program Loans
OnMay 4, 2020 , the Company received loan proceeds of$5.9 million pursuant to the Paycheck Protection Program (the "PPP") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. OnApril 28, 2020 , the Secretary of theU.S. Department of the Treasury stated that theSmall Business Administration will perform a full review of any PPP loan over$2 million before forgiving the loan. The certification made by the Company did not contain any objective criteria and is subject to interpretation. Despite the good-faith belief that given the Company's circumstances all eligibility requirements for the PPP Loans were satisfied, if it is later determined that the Company had violated any applicable laws or regulations or it is otherwise determined the Company was ineligible to receive the PPP Loans, it may be required to repay the PPP Loans in its entirety and/or be subject to additional penalties. The term of the Company's PPP Loans is two years. The annual interest rate on the PPP Loans is 1% and no payments of principal or interest are due until the conclusion of the deferral period. The deferral period will end on the earlier of (i) the date thatSmall Business Administration remits the loan forgiveness amount to the lender, or (ii) if the loan is not forgiven, ten months after the end of the 24-week loan forgiveness covered period. Under the terms of the PPP loans, all or a portion of the principal may be forgiven if the Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part. With respect to any portion of the PPP Loans that is not forgiven, the PPP Loans will be repayable on the terms set forth above. The PPP Loans are recognized on the Company'sJune 30, 2020 condensed consolidated balance sheet as notes payable and will be derecognized if and when forgiven.
For additional information regarding our indebtedness, see Note 8 to our unaudited condensed consolidated financial statements.
Working Capital
The ongoing impacts of COVID-19 have created significant uncertainties around the Company's operations during the quarter endedSeptember 30, 2020 . If these conditions continue unabated for more than the short-term, as most industry sources are predicting, the impact of COVID-19 is expected to significantly reduce our revenue, earnings and operating cash flow in future quarters. Since continued growth through strategic acquisitions would normally require additional draws from our sources of financing, the Company's search for new, potential acquisitions has been temporarily paused. Furthermore, the Company has temporarily suspended its stock repurchase program.
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