Radiant Logistics, Inc.
Q4 2013 Earnings Call Transcript

Published: 2 Oct 2013

[Operator:]

Greetings. This afternoon, Bohn Crain, Radiant Logistics' Founder and CEO, will discuss financial results for the company's 3 months and year ended June 30, 2013, and the recent acquisition of On Time Express. Following his comments, we will open the call to questions. This conference is scheduled for 30 minutes. This conference may include forward-looking statements within the meaning of Securities Acts 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 be in the future to 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 addition of future performance. Now I'd like to pass the call over to Radiant's Founder and CEO, Bohn Crain. Thank you. You may begin.

[Bohn H. Crain:]

Thank you. Good afternoon, everyone, and thank you for joining in on today's call. I have a lot of information to share with you today, so let's get started. For those of you that may be new to the Radiant story, a quick recap. We are a non-asset based third-party logistics provider of domestic and international freight forwarding services. We started the business in January of 2006 through the acquisition of Airgroup Corporation here in Bellevue, Washington. Through a combination of acquisition and organic growth, today, we estimate our current platform, including our recent acquisition of On Time Express which we will talk in more detail about shortly, to be at a run rate of $15 million to $16 million of adjusted EBITDA on approximately $350 million of revenue. We believe there is significant operating leverage in our scalable non-asset based business model, which we will also discuss in more detail later in our call this morning. We believe we remain well positioned to continue to drive profitable growth and further margin expansion with continued focus on bringing value to the agent-based forwarding community, leveraging our status as a public company to provide our operating partners with an opportunity to share in the value that they helped create, providing a robust platform in terms of people, process and technology to our business partners and offering a unique opportunity in terms of succession planning and liquidity for our independent station owners. This approach has made us unique in the marketplace and been key to our demonstrated ability to grow, and our commitment to this strategy is unwavering. For the quarter ended March -- excuse me, for the quarter ended June 30, 2013, we posted adjusted EBITDA of $3.2 million, up $9 million and 39.1% over the comparable prior-year period. Consistent with past quarters, we also continue to make good progress in leveraging our scalable business model to drive margin expansion. For the quarter ended June 30, '13, our adjusted EBITDA, expressed as a function of net revenues, increased 390 basis points, up from 10.2% to 14.1% for the comparable prior-year period. As we've previously discussed, our incremental cost of supporting that next dollar of gross margin is very small, and we are very excited about our opportunity to drive further margin expansion as we continue to scale the business and look for ways to drive operating efficiencies in our non-asset based business model. For the fiscal year ended June 30, '13, we posted adjusted EBITDA of $10.7 million, up $3.2 million and 42.2% over the comparable prior-year period. Our adjusted EBITDA, expressed as a function of net revenues, increased 320 basis points, up from 10.2% to 14.1% for the comparable prior-year period. As you may remember, in connection with the conversion of our agent station in Los Angeles, which was Marvir Logistics, to a company-owned store effective January 1, 2013, we were able to eliminate significant redundant facilities costs with the sublease of the old DBA facility, unlocking over $1 million in annual cost synergies. This was the single biggest driver in the step function increase in our sequential quarter-over-quarter profit where we posted $2.9 million in adjusted EBITDA for the quarter ended March and now the $3.2 million in adjusted EBITDA for the quarter ended June. In August of this year, we also announced our new $30 million senior credit facility with Bank of America. Radiant and its predecessors have enjoyed a relationship with BofA of over 20 years now, and they remain a great partner for us. The new facility replaces our previous $20 million facility with Bank of America and provides the company with higher advance rates and less restricted financial and operational covenants than the previous facility. We put the expanded facility to immediate good use, refinancing $2 million of our $10 million in sub debt and funding our acquisition of On Time Express. I will now shift my comments to a more detailed review of our financial results for the quarter and year ended June 30, and then I will provide an overview of our recent acquisition of On Time Express and then we'll open it up for Q&A. Consistent with our previous disclosures as we discuss our financial results, in addition to a discussion of reported net income, we also provide financial metrics in terms of EBITDA. EBITDA is an important metric for us for a couple of reasons. First, we believe EBITDA is a useful measure with respect to understanding our earnings trends without the impact of certain noncash charges associated with purchase accounting and the amortization of the acquired customer relationship and tangible assets, and EBITDA is used by our sub-debt lenders in assessing debt covenant compliance. For the 3 months ended June 30, '13, we reported net income attributable to common shareholders of $2,352,000 on $80.7 million of revenues, a $0.07 per basic and fully diluted share, including a gain of $1,875,000 in change in contingent consideration. For the 3 months ended June 30, '12, we reported net income attributable to common shareholders of $903,000 on $81.8 million of revenues, a $0.03 per basic and fully diluted share, including a gain of $920,000 in change in contingent consideration. For the 3 months ended June 30, '13, we also reported adjusted net income attributable to common shareholders of $1,764,000 or $0.05 per basic and fully diluted share. For the 3 months ended June 30, '12, Radiant reported adjusted net income to common shareholders of $1,305,000 or $0.04 per basic and fully diluted shares. On an EBITDA basis, we reported adjusted EBITDA of $3,243,000 for the 3 months ended June 30, '13, compared to adjusted EBITDA of $2,332,000 for the 3 months ended June 30, '12, an increase of $912,000 and 39.1%. Net revenues were relatively flat at $23.1 million for the 3 months ended June 30, '13, compared to $22.9 million for the 3 months ended June 30, '12. Our adjusted EBITDA, expressed as a function of net revenues, again increased 390 basis points, up from 10.2% to 14.1% for the comparable prior-year period. For the full year, we reported net income attributable to common shareholders of $3,657,000 on $310.8 million of revenues or $0.11 per basic and $0.10 per fully diluted share, including a gain of $368,000 in connection with the DBA arbitration, a gain of $2,825,000 in connection with contingent consideration and a loss of $1,439,000 associated with the lease termination of the redundant facilities in Los Angeles. For the 12 months ended June 30, '12, we reported net income attributable to common shareholders of $1,901,000 on $297 million of revenues or $0.06 per basic and fully diluted share, including a gain of $900,000 on change in contingent consideration. For the 12 months ended June 30, '13, we reported adjusted net income attributable to common shareholders of $5,589,000 or $0.17 per basic and $0.16 per fully diluted share. For the 12 months ended June 30, '12, we reported adjusted net income attributable to common shareholders of $4,789,000 or $0.15 per basic and $0.14 per fully diluted share. On an EBITDA basis, we reported adjusted EBITDA of $10,693,000 for the 12 months ended June 30, '13, compared to adjusted EBITDA of $7,519,000 for the comparable prior-year period or an increase of $3,174,000 and 42.2% over the comparable prior-year period. We reported net revenues of $88.4 million for the 3 months -- excuse me, for the period. Our adjusted EBITDA expressed as a function of net revenues increased 320 basis points, up from 9.8% to 12.1% for the comparable prior-year period. A reconciliation of the company's adjusted net income and adjusted EBITDA to the most directly comparable GAAP measure for both of the 3 and 12 month periods ended June 30, '13, appears at the end of our earnings release. As we also highlighted in our earnings release, while we continue to make good progress on expanding our EBITDA margins, we have some work to do to improve organic growth in our net revenues. To this end, we are investing in our sales organization and effective July 1, '13, we reorganized and added to our leadership team, rolling out a new regional reporting structure with eastern, central, western and Mexico regions with the express purpose of providing a heightened focus in individual accountability for growth. Each of our regional managers is responsible for helping our existing stations grow their business, same-store growth, as well as developing and on-boarding new agent stations, new store growth, within their respective geographic areas of responsibility. At the same time, we have more formally defined business owners for our service lines, both domestic and international services, and tasked each of these managers to grow the contribution from their respective areas of responsibility. It's obviously very early stages, but we are working hard to cultivate a strong sales culture that we believe over time will translate into more favorable net revenue growth. In keeping with the theme of profitable growth, I will now talk about our recent acquisition of On Time Express, which we closed yesterday, October 1. On Time Express, OTE, is a non-asset based logistics company with offices in Phoenix, Dallas and Atlanta, that has developed an extensive, scalable, dedicated line haul network that it leverages in delivering customized, time-critical domestic and international logistics solutions to an account base that includes customers in the aviation, aerospace, plastic injection molding, medical device, furniture and automotive industries. We are very proud to welcome Bart Wilson and Eric Kunz and the entire On Time Express team to the Radiant organization. On Time brings Radiant a diverse and unique service offering, along with a best-of-class domestic line haul structure that is poised for expansion. As an organization, we are constantly looking for ways to bring value to our network participants, and we believe this transaction truly delivers. We are excited to have On Time on board and expecting them to make an immediate and positive impact. We talked for some time about our interest in developing Radiant Transportation Services as a brother-sister company to our forwarding operations to act as a capacity provider for our forwarding network. We have been incubating a truck brokerage offering here in Bellevue. Now with On Time, we are accelerating and broadening this strategy with our own dedicated line haul network. I'm not aware of any direct competitor that has a comparable service offering, and we believe On Time and its line haul network will serve as a catalyst for margin expansion in our existing business and a competitive differentiator to help us secure new customers and attract additional agent stations to our network. Based on historical financial statements provided by its management, On Time Express generated approximately $3.5 million in normalized EBITDA on approximately $26 million in revenue for the 12 months ended June 30, '13. With the benefit of a full 12 months of On Time operations, we are projecting the run rate profitability of the combined business to be in excess of $15 million in adjusted EBITDA on approximately $350 million in revenue. We are providing preliminary guidance for our fiscal quarter ended December 31, '13, with adjusted EBITDA in the range of $3 million to $3.8 million on approximately $80 million to $90 million in revenue, which equates to adjusted net income in the range of $1.6 million to $2 million or $0.04 to $0.06 per diluted share. Our estimate of future revenues and profits is based on the assumption that the cumulative historical financial results of operations of the company and On Time Express for the most recent 12 months ended June 30, '13, are indicative of the future financial performance of the combined group. A reconciliation of adjusted EBITDA to net income, the most directly comparable GAAP measure, appears at the end of the OTE press release. The On Time transaction itself was structured using our traditional earn-out framework, with the valuation of the base purchase price geared off of $4 million in EBITDA and a 5x multiple. Accordingly, the transaction provides for an aggregate base purchase price of $20 million, consisting of $7.5 million to be paid at closing, $500,000 in company stock to be paid at closing, $2 million payable in 4 quarterly installments commencing on the 90-day anniversary of the closing and an additional $10 million payable over the next 4 years in a combination of cash and company stock based on the future performance of OTE. Cash provided at closing is subject to certain holdback provisions and a working capital adjustment as of the closing date. The company may, at its sole option, elect to satisfy up to 25% of each of the performance-based Tier 1 Earn-Out Payments through the issuance of company stock valued at that time. In addition to the base purchase price, the transaction also provides an additional performance-based incentive calculated as an amount equal to 50% of the amount, if any, by which the cumulative adjusted EBITDA, as defined within the stock purchase agreement, exceeds $16 million over the course of the 4-year earn-out period. Here, the company may, at its sole option, elect to satisfy up to 50% of the Tier 2 Earn-Out Payment through the issuance of company stock, which would be valued at that time. As a last point, I will try to address our existing debt profile. At August 31, '13, we had $27 million in gross availability and net advances and letters of credit of approximately $8 million, leaving us with approximately $19 million in remaining availability under our BofA credit facility. As we highlighted in our earnings release, we recently took the opportunity to begin to reduce our cost of debt using the BofA facility to pay down $2 million of our $10 million in sub debt, effectively refinancing $2 million at a rate of approximately 4% rather than 13.5%. With the OTE transaction, we funded $7 million in cash at close. We'll fund another $2 million in satisfying the OTE installments and anticipate paying out another $1 million to $2 million as part of the post-closing working capital true-up. This additional $10 million to $11 million in advances will take our total outstandings to the range of $18 million to $19 million and leaves us with another $8 million to $9 million in remaining availability under the facility. We will continue to evaluate our options relative to the remaining $8 million in sub debt as we look at capital allocation and our acquisition pipeline. With that, I'll turn the call back over to our moderator to facilitate any Q&A from our callers.

[Operator:]

[Operator Instructions] Our first question comes from Marco Rodriguez with Stonegate Securities.

[Marco Rodriguez:]

I was wondering if you could talk a little bit more about the sales and marketing restructuring. First of all, the regional managers that will be supporting this effort, are these internal people that were promoted or going to be promoted, or did you hire additional people for this? And to kind of clarify, are they supporting only the independent agent stations?

[Bohn H. Crain:]

Yes, thanks, Marco. So we moved a few folks around, and we also added a couple of folks. So to kind of give you the profile, historically, John Klesch was running sales and marketing for the entire organization. And Mark Spisak was responsible for operate -- head of operations role. So as part of the reconfiguration, John Klesch has been given responsibility for the central region, and Mark Spisak has assumed responsibility for the Western region. We hired in one new salesperson who came from a competitor, who will go unnamed, who joined us, and he's running our East Coast operations, and that's Tim O'Brien [ph]. All of these guys are seasoned veterans. They have a lot of field experience and are spending a lot of time out supporting all of our stations, both company-owned and agent stations, to help drive growth out across the network. At the same time, from a service line standpoint, we have Michael von Loesch, an existing -- kind of a long-time member of the leadership team who came to us through the Adcom acquisition, who is spearheading our international service line. And then on the domestic side, we have Noel Howard. Historically, Noel was wearing a couple of hats responsible for domestic services as well as IT. We kind of pulled him off of the IT side of his responsibilities to allow him to focus exclusively on growing the domestic service offering. And then we hired in another gentleman by the name of Mark Rowe [ph], who's joined us to lead our IT efforts. So that's a long way of saying we added 2 -- kind of 2 net incremental resources as part of this restructuring.

[Marco Rodriguez:]

I see. And so they're going to be supporting both the company-owned stores and the independent agent stations, is that correct?

[Bohn H. Crain:]

That is correct. They're responsible to all locations within their territory.

[Marco Rodriguez:]

Okay. And then wondering if you could then maybe talk a little bit more about the accountability aspect that you're kind of lining up here for these regional managers. I'm just kind of curious on the independent agent station side, what's sort of kind of an incentive structure is in place here? I mean, just kind of given the fact that the independent agents are independent and not necessarily -- and that structure doesn't basically lead to your typical employer-employee relationship. So what sort of kind of systems or structures are in place to kind of motivate the independent stations to kind of listen and take directions from the regional managers?

[Bohn H. Crain:]

Well, I guess a couple of comments. Fundamentally, I would offer to you that the independent stations, by their nature, are naturally motivated. These guys and girls are entrepreneurs. They have a -- they have to live off of their own success. Their individual locations is how they're paying their mortgages, and meeting their local payroll and putting their kids through school. So from my standpoint, we've got a very engaged and motivated group of independent stations out there that are working hard to grow their business, not only for their individual account, but also they have the opportunity to optimize their business as they would think about a potential exit strategy or conversion as they would look to transition the business to us over time. So I think there is a fair amount of incentive kind of just built into the nature and fabric of these agent-based forwarding networks. And we are here to support these stations and where stations invite us to come help, we'll jump in and we'll do all we can to support them.

[Marco Rodriguez:]

Right. I guess -- and that I guess was kind of my point and I was -- probably didn't communicate too effectively. Obviously, the independent stations are highly motivated because it's kind of running their own business there. But I'm just kind of wondering on the regional manager side, I'm just wondering what sort of incentive or disincentive that they have to really kind of work with these independent agents because like you said, they're naturally motivated. They're going to be out there trying to make as much money as possible. What are the regional managers going to be able to bring to the table? I mean, how are they going to be measured?

[Bohn H. Crain:]

Ultimately, that's -- okay. That's a slightly different question than what I understood you to be asking. We are -- we will be monitoring, tracking and scoring kind of year-over-year, quarter-over-quarter comparable growth for each regional manager, as well as each service line for that matter, with a particular focus not on gross revenue but on gross margin. As we've talked about, we view ourselves ultimately in being -- to grow our gross margin dollars and then getting as many of those gross margin dollars to the bottom line, expanding our margins in that format. So we -- it's not appropriate to kind of get into the details of it, but there are some reward systems in place for these regional managers to incent them to do their part in this growth. And there's a little friendly rivalry, camaraderie amongst the team as well. Everybody knows the spotlight's on them and wants to show well.

[Marco Rodriguez:]

Fair enough. And then kind of switching gears here on your acquisition of OTE. Can you provide any sort of color in regards to their historical growth rate for revenues and EBITDA?

[Bohn H. Crain:]

They have -- I'm going to hold off on responding to that at this point in time. We've got an 8-K coming out that has their audited financial statements in the pro forma information. I want to limit my disclosures here to what publicly -- what's publicly available. And so that information should be readily available in the coming days, and I'm sure I'm going to get a gold star from my general counsel from punting [ph] on that particular question. But that information will be readily available in the form of the audited financials, 8-K and pro forma financials that we'll be filing here in the coming days.

[Marco Rodriguez:]

Got it. Okay. That's helpful. And then -- and maybe you can talk a little bit about the implied EBITDA margins in your press release kind of, say, your normalized -- the normalized EBITDA margins for OTE are running around, looks like the last 12 months, about 13.5%. That's higher than Radiant. I'm just kind of wondering what's driving that?

[Bohn H. Crain:]

I think it's the configuration of their model and the leverage inefficiency with which they've been able to deploy assets. And so we hope to take advantage of that as we move forward. So I think -- I'm not looking to kind of tie people's particular expectations to a certain margin at this point in time. But we feel really good about our opportunity to continue to drive improvement, and we'll kind of -- rather than predict the future, we'll share it with you as it unfolds. But we feel really good about just kind of the fundamental opportunity. As we've continued to scale and grow the business, we've got some freight volume density and some trade lanes that are really -- that line up very well with the network that On Time has in place. So we're looking forward to see how we can partner with the forwarding side of the house to leverage those resources to hopefully improve the margin characteristics of our existing business, as well as use this for a differentiator in the marketplace to go out and win new customers and potentially, even attract some additional agent stations to our network.

[Marco Rodriguez:]

Got it. And then just wondering if you maybe can talk a little bit through your thought process on paying down a couple million of the sub debt. I obviously understand the lowering of the interest rate, but why not just kind of take the whole thing out? And then also, did you guys have to pay a penalty to repay that?

[Bohn H. Crain:]

We did not have to pay a penalty. Our sub-debt lender worked with us on that point. And so we -- there are no penalties associated with that paydown. We -- ultimately, and as you've anticipated in many of these calls, you know that from our standpoint, financial flexibility is an important part of ultimately how we try to configure ourselves. And so we spend a lot of time out cultivating relationships that we think might be additive to the network. And so it's important that we remain actionable, have some dry powder to take advantage of opportunities. If we had one or more of our agent stations raise their hand and say that they are ready to convert to a company-owned store, we want to make sure that we haven't so narrowed our financing alternatives to not be able to make good on those types of opportunities as they present themselves. With all that said, when we initially did that $10 million of sub debt, I think we were probably, call it, a $6 million to $8 million EBITDA business as opposed to the $15 million to $16 million EBITDA business we are today. So as we continue to grow and scale the business and prove out the business model with our success, the financing options available to us continues to expand. So we can't say with any specificity as to the what or the when, but we feel good that we're going to be able to improve upon that situation, and it's one of our priorities here moving ahead.

[Operator:]

Our next question comes from Jeff Martin with Roth Capital.

[Jeff Martin:]

Could you help us to understand what -- how the margin gains from OTE could come in over time? What sorts of things need to happen to get those gains? And if you could give us a sense of the magnitude and if that's fairly quick because you're extending your loads through there, or if it's something that happens gradually over time?

[Bohn H. Crain:]

Well, I think it will be a little bit of both, candidly. The fact is, and kind of culturally the way we've organized ourselves, On Time will have to win business from our network through price and service. So they'll have to kind of demonstrate their ability to support the network where we have company-owned locations. And that's an increasing part of our overall spend and make-up as a network. We have more direct influence over the company-owned locations and their support of the On Time network. So I think we'll see some immediate traction there, and we're already have -- as part of the pre-integration work, we've already done some pre-work with our Los Angeles location. And we should hopefully start seeing some Los Angeles-controlled business begin to move on the On Time network as early as next week. And then if -- we'll digest that and make sure it's working the way that we expect it to, and then we'll continue to roll it out to the broader network. By no coincidence, we actually have arranged a series of regional sales meetings happening here over the month of October. So next week, we'll be in Chicago; the week after that, Atlanta; and the week after that in Los Angeles. But on a regional basis, we're bringing all of the stations together to really roll out and reinforce the new regional sales structure, the importance of organic growth. Some of the progress that we've made with Radiant comes from services in Radiant Hong Kong. And now the, I guess, the showpiece of those meetings will be this new line haul network and what that means as an additional sales tool for our various locations. So we're really excited. I don't want to -- I guess, I don't want to oversell it. But I'm really looking forward to coming back in the coming quarters and kind of sharing with you what I think is going to be a pretty exciting story.

[Jeff Martin:]

You kind of touched on the next topic I wanted to go over was organic growth in terms of -- do you think that the market right now or your industry right now is at a point where you can grow organically? And what's it going to take internally to be able to make that happen? I know you've put the sales force organization in place. But if you could talk to some specifics and your level of conviction into growing the business organically from here on out, that would be helpful.

[Bohn H. Crain:]

Yes, well, I think probably the first place to start is, just so we're all -- or at least people understand how we're thinking about organic growth, we're really thinking about organic growth at the gross margin line item, not necessarily top line revenues. And we've talked about mix of domestic versus international and how that can affect some of the absolute gross margin percentage. But ultimately, we want to bring focus to grow in gross margin dollars. As part of the regional sales meetings, we're actually going to be rolling out a sales incentive program, kind of a recognition for all of the sales folks, with different kind of targets and thresholds and recognition associated with some progress on that front. I don't know how to kind of convey my conviction to you over the phone relative to organic growth. But certainly, if you walk the hallways here and ask people what the top priority of the organization is right now, it's growth. But it's not just net revenue growth. It's really margin expansion, coming back to our people, process and technology. We think that we can continue to drive improvement in the business. And looking at what we've been able to do over time as we think about our EBITDA as a function of net revenues, it's really been very, very positive. And I think that there's still a lot of room to run as we continue to build that out. So we rolled out the sales organization in July, right. So we really haven't had a chance yet to get together with all of our stations to really roll it out, to communicate it and try to get everybody aligned. So it's a little early to start trying to, I guess, to paint ourselves into a corner around growth targets. But I expect that we're going to see some meaningful improvement. And just -- I can tell you, the organizational dynamic around the new structure has been very positive, and we'll see how it goes. But we're committed to moving the needle and committed to making changes if we don't.

[Jeff Martin:]

Okay. At the risk of being redundant to some of Marco's questions, is the sales organization primarily going to be trying to go out and sign up new agent stations to the network? And if not, what are kind of the primary priorities externally?

[Bohn H. Crain:]

No, no. I would say that would be a feature of each of the regional guys is trying to develop those types of opportunities in their region. But that's secondary or maybe even a little bit further down the list. The first priority is to go out and help existing stations grow their business to -- we have some stations that do -- that just do domestic as an example. We want to help them drive international opportunities in their existing accounts, and the inverse of that also applies. We have stations that just do international. And we've got a great domestic capability. So we want to help them further penetrate those existing accounts, as well as help them land new incremental customers and go on joint sales calls and be in the field. And then ultimately, these regional guys are advocates back in the corporate environment to make sure that from a back-office standpoint, that we're servicing the stations the way that we need to be servicing them. So that's really job one for these guys. And just in -- I can tell you, just in terms of time on the road and travel, these guys that I've -- whose names I laid out for you, their offices are here but they're not. They're out in the field well over 50% of the time at this point, with boots on the ground, trying to help grow this business.

[Jeff Martin:]

Okay. And then in terms of modeling the business with OTE in the mix, how does that affect cost of transportation, agent commissions and personnel cost? I would imagine cost of transportation stays pretty much the same, agent commissions will come down as a percentage and personnel cost will come down as a percentage. Is that the right way to think about it?

[Bohn H. Crain:]

I suspect cost of transportation will probably go down a little bit, right. So we could see some gross margin dollar expansion. So what will be an expense on the books of Radiant Global Logistics will be revenue on the books of On Time Express. And that will eliminate in consolidation with kind of the net incremental cost being whatever the cost structure was on the books of On Time Express. Just kind of think of it consolidating P&L, that will be mechanically what's going on.

[Jeff Martin:]

And then agent commissions, personnel costs, maybe don't change too much as a percentage of revenue as a direct function of the OTE combination?

[Bohn H. Crain:]

That's -- I think that's correct.

[Operator:]

[Operator Instructions] There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.

[Bohn H. Crain:]

Great. Let me close by saying that we remain very excited with our progress and prospects here at Radiant. We've made tremendous progress in executing our strategy, leveraging the Radiant platform to bring value to the agent forwarding community. We believe that we remain uniquely positioned to bring value to our network participants. And we look forward to providing future updates to share our progress as we bring the benefits of the On Time line haul structure to our forwarding network and the end customers that we serve. It's the network that delivers. It's the network that delivers On Time. Thanks for listening in and your interest in Radiant Logistics.

[Operator:]

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for participation.