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Radiant Communications Announces Third Quarter 2009 Results
Company records 24% revenue growth with positive net income and cash flows
November 25, 2009 (Vancouver, BC) – Radiant Communications Corp. (TSX-V: RCN), Canada's leading supplier of Broadband Solutions for Business™, today announced its financial results for its 2009 third quarter ended September 30, 2009.
HIGHLIGHTS:
- Revenue of $7.7 million for the quarter increased by 22.5% compared with revenue of $6.3 million in the same period in 2008.
- Year to date revenue of $22.3 million increased by 24.5% compared with revenue of $17.9 million for the nine months ended September 30, 2008.
- Gross margin was $3.0 million or 39.0% for the quarter and $9.4 million or 42.2% for the nine months ended September 30, 2009.
- The Company recorded EBITDA of $498,395 in the third quarter and $1.7 million in the nine months ended September 30, while continuing to grow the recurring revenue base.
- Net income for the third quarter was $115,178 and was $593,428 or $0.05 per share for the nine months ended September 30.
- The Company ended the quarter with cash and short-term investments of $3.3 million, an increase of $1.0 million in the nine months ended September 30, 2009.
- Radiant ended the quarter with over 3,500 AlwaysThere Hosted Exchange™ seats installed and the AlwaysThere product portfolio is now generating annualized revenue of more than $880,000 a year.
- Radiant has now provisioned more than 3300 locations for one significant customer on our MPLS (Multi Protocol Label Switching) private network and this customer now accounts for over 19% of revenue for Radiant.
- In the third quarter Radiant received significant add-on orders for new locations from two of our largest customers and signed large new multi-year agreements to provide services to a Toronto based community services organization and a national retail clothing chain.
“Our third quarter continues to demonstrate strong revenue growth accompanied by disciplined and effective cost control,” said David Buffett, President and CEO of Radiant. “During the economic downturn, we reduced our spend on sales and marketing in recognition of delayed purchasing decisions by our customers. We anticipate a stronger push in the coming quarters based on key developments in the market including the continuing move to outsource applications and the demonstrated cost benefit of cloud computing for medium and small business.”
Financial Review
Revenues for the quarter ended September 30, 2009 increased 22.5% to $7.7 million compared with $6.3 million in the third quarter of 2008. The increase is a result of ongoing installation and activation of new services directed at retailers and larger national businesses as well as the addition of new locations and services to existing customers. Radiant’s revenues are primarily recurring in nature and due to extended two and three year customer contracts quarterly revenue growth is relatively predictable and consistent over time. One-time hardware revenues can fluctuate from quarter to quarter depending on the requirements of customer rollouts that occur each quarter.
Revenue in the third quarter of 2009 increased by 4.1% sequentially compared with the preceding second quarter of 2009, with the increase attributable to the addition of new locations for a major customer. The AlwaysThere Hosted Exchange™ product continued to achieve market success with more than 3,500 seats active and being billed by the end of Q3, representing more than $880,000 of annualized revenue. Sales of new connectivity services and virtual grid services were somewhat slower in the nine months ended September 30, 2009 as customers continued to make investment decisions cautiously. Radiant continues to have a strong funnel of opportunities and a backlog of orders.
For the quarter ended September 30, 2009, the Company’s gross profit increased to $3.0 million compared with $2.8 million in the third quarter of 2008. Gross profit as a percentage of revenue was 39.0% for the quarter ended September 30, 2009 compared with 44.8% for the same period in 2008 and 44.3% in the immediately preceding quarter. Approximately 90% of all the Company’s access and bandwidth costs vary directly with revenue, and accordingly, margin percentages are relatively predictable. During periods of very high growth margins may also be negatively impacted due to the various up-front costs and activities required to activate and install complex and time sensitive networks. Although many of these costs are amortized over the contract life, the growth in Radiant’s business has required additional effort in certain implementation activities.
In the third quarter the Company determined that certain costs to complete the large customer roll-out, which would normally be deferred, were in excess of the revenue allocated to these efforts. An excess amount of approximately $125,000 was expensed directly to cost of sales and not deferred. This one-time event negatively impacted gross margin by 1.6%. Radiant has completed the large customer implementation and does not anticipate any additional similar gross margin impacts in future quarters.
Operating expenses, including sales and marketing, general and administrative, and amortization costs of $2.8 million in the third quarter of 2009 decreased by 4.8% compared with $3.0 million in the third quarter of 2008, and were down 3.5% sequentially compared with $2.9 million in the second quarter of 2009. Radiant has held headcount flat and is committed to managing expenses in a conservative manner while the economic environment begins to stabilize. At the same time, the company is investing in new operating and billing systems to accommodate higher growth rates and thus far has been able to make these investments without increasing overall operating expense.
Sales and marketing expenses include compensation expenses, agent and channel distribution, and marketing costs. For the quarter ended September 30, 2009, sales and marketing expense decreased 41.8% to $359,213 compared with $617,583 in the third quarter of 2008. Radiant has focused its existing sales resources on growing the higher value virtual products customer base and has altered the compensation structure and sales channel effort to promote these products, which has resulted in a more cost effective sell through process. Sales and marketing expenses in the third quarter of 2009 decreased by 27.2% compared with sales and marketing costs in the second quarter of 2009. The Company expects sales and marketing expenses to increase slightly during the fourth quarter of 2009 as new resources are being allocated to the AlwaysThere product portfolio and the Company is engaged in a comprehensive marketing and branding effort to consolidate the sales opportunities in this growing market arena.
General and administrative expenses, which include customer care, technical, network, executive and administrative staff, systems development, hardware, software, premises, office and general expenses, were 5.0%, or $104,906, higher at $2.2 million for the quarter ended September 30, 2009 compared with $2.1 million third quarter of 2008. The increase is primarily due to the ongoing product development activities mentioned previously as well as investments in our provisioning and billing systems to accommodate our recent higher growth rate. In the third quarter, Radiant implemented and went live with new CRM application integrated with a real-time web enabled trouble ticket and customer care application that is in turn integrated with the existing provisioning and billing system. Additional features will be rolled out in the fourth quarter and during 2010. General and administrative expenses in the third quarter of 2009 were higher by $34,575 compared to the second quarter of 2009.
The Company had net income of $115,178, or $0.01 per share, for the quarter ended September 30, 2009 compared to a net loss of $124,065, or $0.01 per share, in the third quarter of 2008. The weighted average number of shares outstanding for the third quarter of 2009 was 10.9 million and for the third quarter of 2008 was also 10.9 million.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2009 Radiant had cash and short-term investments of $3.3 million compared with $2.3 million at December 31, 2008. Of this amount, $109,000 is restricted as it has been pledged as collateral for letters of credit which guarantee the Company’s capital lease financing and the primary operating facility operating lease. Radiant has established a consistent record of positive cash flows from operating activities that are sufficient to fund all expected capital acquisitions and non-cash working capital requirements in 2009. The Company believes it has sufficient funds to ensure ongoing operations and will not require additional funding from capital markets or other sources in 2009.
Additional details on the third quarter results, including the unaudited Financial Statements and Management Discussion and Analysis, will be made available at www.sedar.com under Radiant Communications Corp.
Radiant will hold a conference call to discuss its results for the quarter ended September 30, 2009 on November 26, at 10:00 a.m. PST (1:00 p.m. EST). Access to the call may be obtained by calling the operator at 1-866-233-4566 (Toll Free North America), or 1-416-640-5940 (International) 10 minutes prior to the scheduled start time. 7 days after the call at 1-866-245-6755 (Toll Free North America) or 416-915-1035 (International). The passcode for the playback is 324859. The audio web cast will be archived for replay on Radiant's web site at www.radiant.net.
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