Radiant Communications Corp.
TSX VENTURE : RCN

Radiant Communications Corp.

November 25, 2009 20:25 ET

Radiant Communications Announces Third Quarter 2009 Results

Company records 24% revenue growth with positive net income and cash flows

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 25, 2009) - Radiant Communications Corp. (TSX VENTURE: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.

Non-GAAP Measures

The Company reports EBITDA because it is a key measure used by management to evaluate the Company's performance. The Company believes that EBITDA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and other non-cash expenses. EBITDA is not a recognized measure under Canadian GAAP, and accordingly investors are cautioned that EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with Canadian GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows. The Company's method of calculating EBITDA differs from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers. Please see the schedule below that sets out the Company's EBITDA calculations.

EBITDA



Earnings before Interest, Taxes, Depreciation and Amortization is
calculated as follows:
--------------------------------------------------------------------------
($000s) Q3 2009 Q3 2008
--------------------------------------------------------------------------
Operating Income (Loss) $ 167 $ (158)
Amortization 256 245
Stock-based compensation expense 75 76
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EBITDA $ 498 $ 163
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--------------------------------------------------------------------------
($000s) Nine months Nine months
ended September ended September
30, 2009 30, 2008
--------------------------------------------------------------------------
Operating Income (loss) $ 739 $ (469)
Amortization 779 716
Stock-based compensation expense 212 182
--------------------------------------------------------------------------
EBITDA $ 1,730 $ 429
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ABOUT RADIANT COMMUNICATIONS

Headquartered in Vancouver, Canada, Radiant Communications (www.radiant.net) provides businesses with a comprehensive range of IP-based data communications services including the largest on-net DSL footprint across Canada & the US, T1 and E10/E100 fibre broadband, coupled with MPLS, IPSec, and SSL private networking. From its data centres in Toronto and Vancouver, Radiant also delivers cloud computing services connected directly into customers' private networks. The cloud computing services include hosting mission-critical applications, disaster recovery/business continuity, and fully managed Microsoft Exchange.

In operation since 1996, the company currently serves over 20,000 business locations in Canada and the United States from its offices in Vancouver, Toronto, Montreal, Calgary, and Edmonton.

Broadband Solutions for Business and AlwaysThere are registered trademarks of Radiant Communications Corp. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.

This press release may contain forward-looking statements, including statements regarding the business and anticipated financial performance of Radiant, which involve risks and uncertainties. These risks and uncertainties may cause Radiant's actual results to differ materially from those contemplated by the forward-looking statements. Factors that might cause or contribute to such differences include, among others, competitive pressures, the growth rate of the Internet and telecommunications concerns, constantly changing technology and market acceptance of Radiant's products and services. Investors are also directed to consider the other risks and uncertainties discussed in Radiant's required financial statements and filings. All other companies and products listed herein may be trademarks or registered trademarks of their respective holders.



RADIANT COMMUNICATIONS CORP.
BALANCE SHEET
(Expressed in Canadian dollars)
(Unaudited)
--------------------------------------------------------------------------
September 30, December 31,
2009 2008
--------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 2,786,219 $ 1,810,478
Short-term investments 424,376 424,000
Restricted short-term investment 109,000 109,000
Trade accounts receivable 2,741,395 2,534,797
Inventories 423,336 674,717
Prepaid expenses and deposits 456,979 275,913
Deferred costs 1,456,816 1,254,309
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8,396,121 7,083,214

Property and equipment 1,372,820 1,648,465
Goodwill 1,574,228 1,574,228
--------------------------------------------------------------------------

$ 11,343,169 $ 10,305,907
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 2,344,426 $ 2,333,222
Customer deposits 160,115 162,086
Deferred revenue 4,691,825 4,329,351
Current portion of deferred
lease inducements 16,050 16,050
Current portion of obligations
under capital leases 58,862 176,218
--------------------------------------------------------------------------
7,271,278 7,016,927

Deferred lease inducements 72,521 64,509
Obligations under capital leases 56,779 87,203
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7,400,578 7,168,639
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Shareholders' equity
Share capital 3,601,872 3,601,872
Contributed surplus 4,358,940 4,147,045
Deficit (4,018,221) (4,611,649)
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3,942,591 3,137,268
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$ 11,343,169 $ 10,305,907
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RADIANT COMMUNICATIONS CORP.
STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME (LOSS) AND DEFICIT
(Expressed in Canadian dollars)
(Unaudited)

---------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
---------------------------------------------------------------------------

Revenue $ 7,675,557 $ 6,267,542 $ 22,315,930 $ 17,918,891
Cost of sales 4,681,888 3,457,226 12,888,926 9,726,490
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Gross profit 2,993,669 2,810,316 9,427,004 8,192,401
---------------------------------------------------------------------------

Expenses
Sales and marketing 359,213 617,583 1,390,900 1,775,699
General and
administrative 2,210,652 2,105,746 6,518,459 6,170,288
Amortization 256,451 244,604 778,989 715,308
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2,826,316 2,967,933 8,688,348 8,661,295
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Income (loss) before
undernoted 167,353 (157,617) 738,656 (468,894)

Interest expense 566 20,399 32,004 78,854
Other (income)
expenses 51,609 (53,951) 113,224 (119,642)
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Net earnings (loss)
and comprehensive
income (loss) for
the period 115,178 (124,065) 593,428 (428,106)

Deficit, beginning
of period (4,133,399) (4,384,257) (4,611,649) (4,080,216)
---------------------------------------------------------------------------

Deficit, end of
period $ (4,018,221) $ (4,508,322) $ (4,018,221) $ (4,508,322)
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Basic and diluted
earnings (loss) per
share $ 0.01 $ (0.01) $ 0.05 $ (0.04)

Weighted average
common shares, used
in computing basic
and diluted earnings
(loss) per share 10,925,664 10,925,664 10,925,664 10,925,664
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RADIANT COMMUNICATIONS CORP.
STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)

---------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
---------------------------------------------------------------------------

Cash flows from
operating activities:
Income (loss) for the
period $ 115,178 $ (124,065) $ 593,428 $ (428,106)
Items not involving
cash:
Amortization 256,451 244,604 778,989 715,308
Stock-based
compensation 74,591 76,181 211,895 182,300
Amortization of
deferred lease
inducements 2,670 5,456 8,012 402
Foreign exchange (gain)
loss 37,998 (33,645) 116,140 (53,502)
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486,888 168,531 1,708,464 416,402
Change in non-cash
working capital:
Trade accounts
receivable (605,259) 20,986 (206,598) (37,153)
Inventories 111,127 (332,881) 251,381 (375,951)
Prepaid expenses and
deposits 96,662 (94,881) (181,066) (159,518)
Deferred costs 43,307 (80,922) (202,507) (517,997)
Accounts payable and
accrued liabilities (257,055) 568,014 11,204 419,837
Customer deposits (620) (963) (1,971) (2,793)
Deferred revenue 162,163 77,827 364,474 514,046
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37,213 325,711 1,741,381 256,873

Cash flows from
investing activities:
Increase in short-term
investment (376) - (376) -
Purchase of property
and equipment (191,454) (476,469) (503,344) (948,312)
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(191,830) (476,469) (503,720) (948,312)

Cash flows from
financing activities:
Payments under capital
leases (45,246) (68,729) (147,780) (207,432)
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Foreign exchange gain
(loss) on cash held
in foreign currency (37,998) 33,645 (116,140) 53,502
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Increase (decrease) in
cash and cash
equivalents (237,861) (185,842) 973,741 (845,369)

Cash and cash
equivalents,
beginning of period 3,022,080 1,874,744 1,810,478 2,534,271
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Cash and cash
equivalents,
end of period $ 2,784,219 $ 1,688,902 $ 2,784,219 $ 1,688,902
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