Radiant Communications Announces Second Quarter 2010 Results

VANCOUVER, Aug. 24 /CNW/ - Radiant Communications Corp. ("Radiant") (TSX-V:RCN), Canada's leading supplier of Broadband Solutions for Business™, today announced its financial results for its second quarter and six months ended June 30, 2010.

HIGHLIGHTS:

  • Revenue of $7.8 million for the quarter ended June 30, 2010 increased by 5.2% compared to revenue of $7.4 million for the quarter ended June 30, 2009.
  • Gross margin was 38.9% in the quarter;
  • EBITDA in the second quarter was $124,778 compared to $670,854 in the second quarter of 2009.
  • Net loss in the second quarter of $198,062 amounted to a loss of $0.01 per share.
  • The Company ended the quarter with cash and short-term investments of $6.8 million and generated cash from operations of $425,473 during the second quarter.
  • During the second quarter Radiant commercially launched the new Surelink service and signed up over 40 new customers. Surelink uses existing copper infrastructure to provide the reliability and bandwidth of fiber at a far more economical price point with a much lower installation cost.
  • In the second quarter Radiant announced and completed two non- brokered private placements. A total of 4.2 million shares were issued at $1.00 for net proceeds of $4.0 million. Proceeds will be used to accelerate the launch and roll out of the new services using the MTS Allstream Inc. facilities.
  • Subsequent to the close of the financing Johnny Ciampi was appointed to the Board of Directors.

"Our second quarter established the building blocks and foundation for our strategic vision," said David Buffett, President and CEO of Radiant. "During the quarter we closed a significant financing that brought in a new long term investor and board member. We lit up 10 Surelink capable central offices and commercially launched the Surelink product. We established a new inside sales group to sell Surelink in selected markets. As a result of these initiatives we sold over 40 Surelink circuits in the quarter with an average revenue per circuit of over $500 while maintaining a positive EBITDA and continued to serve our existing recurring revenue base. As we invest in these early days of our new product portfolio we see significant opportunities for bundled services and synergies with our well established grid computing cloud."

Financial Review

Revenues for the quarter ended June 30, 2010 increased 5.2% to $7.8 million compared to $7.4 million in the second quarter of 2009. 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.

The new Ethernet First Mile, (EFM), product which has been branded as Surelink, was launched in trial format in the second quarter. The service is available in certain locations in Toronto and Vancouver dictated by proximity to the local central office. Our initial offering of the Surelink product in a very limited regional basis was very successful with annual revenue of over $240,000 under contract at the end of June. We are continuing to aggressively expand our product footprint, direct sales team and marketing and promotion efforts.

Revenue in the second quarter of 2010 decreased by 0.7% compared to the preceding first quarter of 2010. This decrease is attributable to both the slow economy for retailers as well as efforts by the Company to consolidate and improve processes after a sustained period of very high growth. In the second quarter we re-signed several large customers at new reduced prices. We also retroactively adjusted the billed revenue for the US locations of a larger customer to reflect the stronger Canadian dollar which reduced revenue on a one time basis by approximately $30,000. The AlwaysThere Hosted Exchange™ product continued to achieve market success and in the second quarter exceeded over $1.5 million of annualized revenue. Our initial offering of the Surelink product in a very limited regional basis was very successful with over annual revenue of over $240,000 under contract at the end of June.

For the quarter ended June 30, 2010, the Company's gross profit was $3.0 million compared to $3.3 million in the second quarter of 2009. Gross profit as a percent of revenue was 38.9% for the quarter ended June 30, 2010 compared to 44.3% for the same period in 2009 and 40.6% in the immediately preceding quarter. In both the first and second quarters of 2010 Radiant has invested in additional monthly backhaul expenses for the new Surelink Central Office locations. We have also re-signed several of our core long term customers to new multi-year contracts with lower monthly revenue.

Operating expenses, including sales and marketing, general and administrative, and amortization costs of $3.2 million in the second quarter of 2010 increased by 10.1% compared to $2.9 million in the second quarter of 2009 and increased by 5.8% compared to the immediately preceding first quarter of 2010. Historically 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 the Surelink product and sees an immediate opportunity to capture market share. In the second quarter Radiant established an inside sales organization and launched a focused marketing campaign targeted directly at the Surelink market. As a result of these investments headcount increased by 8 heads and marketing and related costs increased by over $200,000 in the quarter.

Sales and marketing expenses include compensation expenses, agent and channel distribution, and marketing costs. For the quarter ended June 30, 2010, sales and marketing expense increased 31.4% to $648,791 compared to $493,887 in the second quarter of 2009. As previously mentioned this increase is primarily attributable to the investment in the Surelink product. Sales and marketing expenses in the second quarter of 2010 increased by 31.6% compared to sales and marketing costs in the first quarter of 2010.

General and administrative expenses, which include customer care, technical, network, executive and administrative staff, systems development, hardware, software, premises, office and general expenses, were 6.0% higher at $2.3 million for the quarter ended June 30, 2010 compared to $2.2 million in the second quarter of 2009. 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 high growth rate. In the second quarter, the company expended significant time and effort developing its high bandwidth/high reliability product strategy in concert with MTS Allstream as announced in January. General and administrative expenses in the second quarter of 2010 were 0.5% higher compared to the first quarter of 2010.

For the quarter ended June 30, 2010 amortization expenses of $271,151 were up 4.2% to amortization expenses in the second quarter of 2009 of $260,322 and 3.7% higher compared to amortization expense in the first quarter of 2010. Radiant anticipates that amortization expense will increase over the next two years given the investments anticipated as part of the Surelink product strategy.

The Company had a net loss of $198,092 or a loss of $0.01 per share for the quarter ended June 30, 2010 compared to a net income of $224,076 or $0.02 per share in the second quarter of 2009. The weighted average number of shares outstanding for the second quarter of 2010 was 14.4 million and for the second quarter of 2009 was 10.9 million.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2010 Radiant had cash and short term investments of $6.8 million compared to $3.8 million at December 31, 2009. 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 2010 on the existing business. During the quarter Radiant completed two non-brokered private placements for net proceeds of $4.0 million. The use of proceeds is specifically targeted at rolling out the Surelink product and accelerating the time to market of the new product. The Company believes it has sufficient funds to ensure ongoing operations and will not require additional funding from capital markets or other sources in 2010.

EBITDA


Earnings before Interest, Taxes, Depreciation and Amortization is calculated as follows:

($000s)                                                                                                                                     Q2 2010 Q2 2009
Operating Income (loss) $ (207) $ 338
Amortization 271 260
Stock-based compensation expense 61 73
EBITDA $ 125 $ 671

In the second quarter of 2010, Radiant achieved EBITDA of $124,778 compared to EBITDA of $670,854 in the second quarter of 2009.


     
($000s)


Six months ended
June 30, 2010
Six months
ended June 30,
2009
Operating Income (loss)                    $ (85) $ 571
Amortization 532 523
Stock-based compensation expense 146 137
EBITDA                                                                                                             $ 593 $ 1,231

In the six months ended June 30, 2010 Radiant achieved positive EBITDA of $593,142 compared to positive EBITDA of $1.2 million in the comparable period of 2009.

Additional details on the quarter results, including the unaudited Financial Statements and Management Discussion and Analysis, will be made available at href="www.sedar.com">www.sedar.com under Radiant Communications Corp.

Radiant will hold a conference call to discuss its results for the quarter ended June 30, 2010 on August 25, at 1:00 p.m. PDT (4:00 p.m. EDT). Access to the call may be obtained by calling the operator at 1.888.231.8191 (Toll Free North America), or 1.647.427.7450 (International) 10 minutes prior to the scheduled start time. 7 days after the call at 1.800.642.1687 (Toll Free North America) or 416-915-1035 (International). The passcode for the playback is 94582962. The audio web cast will be archived for replay on Radiant's web site at href="www.radiant.net">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.

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 and Montreal.

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.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.



RADIANT COMMUNICATIONS CORP.

BALANCE SHEET
(Expressed in Canadian dollars)
(Unaudited)


 

  June 30, 2010
    December 31,
2009
           
Assets          
Current assets          
     Cash and cash equivalents $ 6,233,110   $ 3,412,781
     Short-term investments   533,376     424,376
     Restricted short-term investment   -     109,000
     Trade accounts receivable   2,868,470     2,512,832
     Inventories   240,610     358,136
     Prepaid expenses and deposits   422,313     295,052
     Deferred costs   1,059,417     1,473,487
    11,357,296     8,585,664
           
Property and equipment   1,922,160     1,568,829
Right of Access   840,678     -
Goodwill   1,574,228     1,574,228
           
  $ 15,694,362   $ 11,728,721
           
Liabilities and Shareholders' Equity          
Current liabilities          
     Accounts payable and accrued liabilities $ 3,453,801   $ 3,244,082
     Customer deposits   122,115     122,115
     Deferred revenue   4,401,379     4,679,804
     Current portion of deferred lease inducements   33,463     16,050
     Current portion of obligations under capital leases   47,828     49,700
    8,058,586     8,111,751
           
Deferred lease inducements   48,269     75,192
Obligations under capital leases   16,724     44,040
    8,123,579     8,230,983
           
Shareholders' equity          
     Share capital   7,511,130     3,601,872
     Contributed surplus   4,673,392     4,433,931
     Deficit                                                                                                              (4,613,739)     (4,538,065)
    7,570,783     3,497,738
           
  $ 15,694,362   $ 11,728,721





RADIANT COMMUNICATIONS CORP.

STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME (LOSS) AND DEFICIT
(Expressed in Canadian dollars)
(Unaudited)


 
 
Three months ended June 30,     Six months ended June 30,
                                                                                  2010   2009     2010   2009
Revenue $ 7,758,217 $ 7,374,185   $ 15,568,986 $ 14,640,373
Cost of sales   4,738,033   4,105,573     9,378,022   8,207,038
                   
Gross profit   3,020,184   3,268,612     6,190,964   6,433,335
                   
Expenses                  
     Sales and marketing   648,791   493,887     1,141,931   1,031,686
     General and administrative   2,306,749   2,176,077     4,602,352   4,307,807
     Amortization   271,151   260,322     532,513   522,538
                   
    3,226,691   2,930,286     6,276,796   5,862,031
                   
Income (loss) before undernoted   (206,507)   338,326     (85,832)   571,304
                   
Interest expense   5,052   14,439     11,817   31,438
Other (income) expenses   (13,467)   99,811     (21,975)   61,616
                   
Net earnings (loss) and
     comprehensive income (loss) for
     the period
  (198,092)   224,076     (75,674)   478,250
                   
Deficit, beginning of period   (4,415,647)   (4,357,475)     (4,538,065)   (4,611,649)
                   
Deficit, end of period $ (4,613,739) $ (4,133,399)   $ (4,613,739) $ (4,133,399)
                   
Basic and diluted earnings (loss)
     per share
$ (0.01) $ 0.02   $ (0.01) $ 0.04
                   
Weighted average common
     shares, used in computing
     basic and diluted earnings
     (loss) per share
  14,433,356   10,925,664     14,777,598   10,925,664




RADIANT COMMUNICATIONS CORP.

STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)

 
  Three months ended
June 30,
  Six months ended
June 30,
                                                                                                  2010   2009     2010   2009
                   
Cash flows from operating activities:                  
     Income (loss) for the period $ (198,092) $ 224,076   $ (75,674) $ 478,250
     Items not involving cash:                  
          Amortization   255,188   260,322     513,316   522,538
          Amortization of right of access   15,963   -     19,197   -
          Stock-based compensation   60,134   72,206     146,461   137,304
          Amortization of deferred lease
            inducements
  (8,468)   2,671     (9,510)   5,342
          Foreign exchange (gain) loss   (9,458)   98,932     373   78,142
    115,267   658,207     594,163   1,221,576
     Change in non-cash working capital:                  
          Trade accounts receivable   294,898   736,447     (355,638)   398,661
          Inventories   69,168   (99,204)     117,526   140,254
          Prepaid expenses and deposits   (4,341)   (160,173)     (127,261)   (277,728)
          Deferred costs   201,352   (207,630)     414,070   (245,814)
          Accounts payable and accrued
            liabilities
  (128,405)   130,359     209,719   268,259
          Customer deposits   -   (750)     -   (1,351)
          Deferred revenue   (122,466)   145,876     (278,425)   200,311
    425,473   1,203,132     574,154   1,704,168
                   
Cash flows from investing activities:                  
     Purchase of property and equipment   (278,716)   (149,030)     (871,400)   (311,890)
     Payments for right of access   (687,875)   -     (859,875)   -
    (966,591)   (149,030)     (1,731,275)   (311,890)
                   
Cash flows from financing activities:                  
     Payments under capital leases   (12,320)   (42,085)     (24,435)   (102,534)
     Proceeds from issuance of common
       shares
  4,002,258   -     4,002,258   -
    3,989,938   (42,085)     3,977,823   (102,534)
                   
Foreign exchange gain (loss) on cash held
  in foreign currency
  9,458   (98,932)     (373)   (78,142)
                   
Increase in cash and cash equivalents   3,458,278   913,085     2,820,329   1,211,602
                   
Cash and cash equivalents, beginning of period   2,774,832   2,108,995     3,412,781   1,810,478
                   
Cash and cash equivalents, end of
  period
$ 6,233,110 $ 3,022,080   $ 6,233,110 $ 3,022,080


For further information: For further information:

Investors and Media: Chuck Leighton, CFO, 604-692-4531, cleighton@radiant.net, or David Feick, Investor Relations, The Equicom Group, 403-538-4787, dfeick@equicomgroup.com

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