Radiant Communications Announces First Quarter 2010 Results

VANCOUVER, May 25 /CNW/ - Radiant Communications Corp. ("Radiant") (TSX-V:RCN), Canada's leading supplier of Broadband Solutions for Business(TM), today announced its financial results for its first quarter ended March 31, 2010.


    -   Revenue of $7.8 million for the quarter ended March 31, 2010
        increased by 7.5% compared to revenue of $7.3 million for the quarter
        ended March 31, 2009;

    -   Gross margin was 40.6% in the quarter;

    -   EBITDA in the first quarter was $468,364 compared to $560,291 in the
        first quarter of 2009;

    -   Net Income in the first quarter of $122,418 amounted to $0.01 per

    -   The Company ended the quarter with cash and short-term investments of
        $3.3 million and generated cash from operations of $148,681 during
        the period;

    -   In January Radiant announced a National Broadband Network Investment
        Agreement with MTS Allstream Inc. that will allow both companies to
        provide reliable, next generation, high capacity broadband services
        to Canadian businesses. The new Ethernet First Mile or EFM service
        has been branded as Surelink;

    -   Subsequent to the end of the 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 $4.17 million. Proceeds will
        be used to accelerate the launch and roll out of the new services
        using the MTS Allstream Inc. facilities.

"Radiant is now very well positioned move ahead with our strategic vision," said David Buffett, President and CEO of Radiant. "We finished 2009 with a nation-wide business quality MPLS network, a robust stable of large successful customers and a high opportunity product suite of hosted virtual applications. In Q1 we signed a National Broadband Network Investment Agreement with MTS Allstream Inc, and this in turn was the catalyst to raise additional capital in April which provides us with the ability to accelerate our time to market and new customer acquisition. With a very competitively priced, highly reliable, high capacity service available to medium and small business we have a service offering that will meet the needs of today's small and medium business well into the future".

Financial Review

Total revenues increased 7.5% to $7.8 million for the quarter ended March 31, 2010, compared to $7.3 million in the first 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. Radiant continues to have a strong funnel of opportunities.

Gross profit increased to $3.2 million for the quarter ended March 31, 2010, compared to $3.2 million in the first quarter of 2009. Gross profit as a percent of revenue was 40.6% for the quarter ended March 31, 2010 compared to 43.6% for the same period in 2009 and 40.1% in the immediately preceding quarter. Approximately 90% of all the Company's access and bandwidth costs are directly variable 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 upfront costs and activities required to activate and install complex and time sensitive networks.

Operating expenses, including sales and marketing, general and administrative, and amortization costs were $3.1 million in the first quarter of 2010 an increased of 4.0% compared to $3.0 million in the first quarter of 2009, but were down by 3.0% compared to the fourth quarter of 2009. 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. During 2010 Radiant plans to establish an inside sales organization and focused marketing campaign targeted directly at the Surelink market. The strategy is in place and Radiant expects that headcount and associated expenses will increase over the next three quarters.

Sales and marketing expense decreased 8.3% to $493,140 for the quarter ended March 31, 2010, compared to $537,800 in the first quarter of 2009. Sales and marketing expenses include compensation expenses, agent and channel distribution, and marketing costs. Radiant has focused its existing sales resources on growing the higher value virtual products customer base and we have altered the compensation structure and sales channel effort to promote these products to produce a more cost effective sell through process. Sales and marketing expenses in the first quarter of 2010 decreased by 13.2% compared to sales and marketing costs in the fourth quarter of 2009. Sales and marketing expenses are traditionally higher in the fourth quarter of the financial year.

General and administrative expenses, which include customer care, technical, network, executive and administrative staff, systems development, hardware, software, premises, office and general expenses, increased 7.7% to $2.3 million for the quarter ended March 31, 2010 compared to $2.1 million in the first 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 first 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 first quarter of 2010 were 2.0% lower compared to the fourth quarter of 2009.

For the quarter ended March 31, 2010 amortization expenses of $261,362 were flat compared to amortization expenses in the first quarter of 2009 of $262,216 and 12.9% higher compared to amortization expense in the fourth quarter of 2009. Radiant anticipates that amortization expense will increase over the next two years given the investments anticipated as part of the recently announced Surelink product strategy.

Interest on the Company's outstanding equipment loans decreased to $6,765 for the quarter ended March 31, 2010 from $16,699 for the first quarter of 2009. The decrease is the result of a decrease in the balance of capital lease obligations. Other income in the first quarter of 2010 was $8,508 compared to other income of $38,196 in the first quarter of 2009.

Net income was $122,418 or $0.01 per share for the quarter ended March 31, 2010 compared to a net income of $254,174 or $0.02 per share in the first quarter of 2009. The weighted average number of shares outstanding was 10.9 million for the first quarter of 2010, and 10.9 million for the first quarter of 2009.


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

    ($000s)                                            Q1 2010       Q1 2009
    Operating Income                              $        121  $        233
    Amortization                                           261           262
    Stock-based compensation expense                        86            66
    EBITDA                                        $        468  $        561

In the first quarter of 2010, Radiant achieved EBITDA of $468,364 compared to EBITDA of $560,291 in the first quarter of 2009.


At March 31, 2010 Radiant had cash and short term investments of $3.3 million compared to $3.9 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. Subsequent to the quarter end Radiant completed two non-brokered private placements for net proceeds of $4.1 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.

Additional details on the first 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 March 31, 2010 on May 26, at 11:00p.m. PDT (2:00p.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 77594230. 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.


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 18,000 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.

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

    (Expressed in Canadian dollars)

                                                    March 31,   December 31,
                                                      2010          2009

    Current assets
      Cash and cash equivalents                   $  2,774,832  $  3,412,781
      Short-term investments                           533,376       424,376
      Restricted short-term investment                       -       109,000
      Trade accounts receivable                      3,163,368     2,512,832
    Inventories                                        309,778       358,136
    Prepaid expenses and deposits                      417,972       295,052
    Deferred costs                                   1,260,769     1,473,487
                                                     8,460,095     8,585,664

    Property and equipment                           1,903,385     1,568,829
    Right of Access                                    168,766             -
    Goodwill                                         1,574,228     1,574,228

                                                  $ 12,106,474  $ 11,728,721

    Liabilities and Shareholders' Equity
    Current liabilities
      Accounts payable and accrued liabilities    $  3,582,206  $  3,244,082
      Customer deposits                                122,115       122,115
      Deferred revenue                               4,523,845     4,679,804
      Current portion of deferred lease
       inducements                                      33,872        16,050
      Current portion of obligations under
       capital leases                                   50,539        49,700
                                                     8,312,577     8,111,751

    Deferred lease inducements                          56,328        75,192
    Obligations under capital leases                    31,086        44,040
                                                     8,399,991     8,230,983

    Shareholders' equity
      Share capital                                  3,601,872     3,601,872
      Contributed surplus                            4,520,258     4,433,931
      Deficit                                       (4,415,647)   (4,538,065)
                                                     3,706,483     3,497,738

                                                  $ 12,106,474  $ 11,728,721

    (Expressed in Canadian dollars)

                                                 Three months ended March 31,
                                                      2010          2009

    Revenue                                       $  7,810,769  $  7,266,188
    Cost of sales                                    4,639,989     4,101,465

    Gross profit                                     3,170,780     3,164,723

      Sales and marketing                              493,140       537,800
      General and administrative                     2,295,603     2,131,730
      Amortization                                     261,362       262,216

                                                     3,050,105     2,931,746

    Income before undernoted                           120,675       232,977

    Interest expense                                     6,765        16,999
    Other (income) expense                              (8,508)      (38,196)

    Net earnings and comprehensive income
     for the period                                    122,418       254,174

    Deficit, beginning of period                    (4,538,065)   (4,611,649)

    Deficit, end of period                        $ (4,415,647) $ (4,357,475)

    Basic earnings per share                      $       0.01  $       0.02

    Weighted average common shares, used in
     computing basic earnings per share             10,925,664    10,925,664

    Diluted earnings per share                    $       0.01  $          -

    Weighted average common shares, used in
     computing diluted earnings per share           10,927,684             -


    (Expressed in Canadian dollars)

                                                 Three months ended March 31,
                                                      2010          2009

    Cash flows from operating activities:
      Income for the period                       $    122,418  $    254,174
      Items not involving cash:
        Amortization of property and equipment         258,128       262,216
        Amortization of right of access                  3,234             -
        Stock-based compensation                        86,327        65,098
        Amortization of deferred lease inducement       (1,042)        2,671
        Foreign exchange (gain) loss                     9,831       (20,790)
                                                       478,896       563,369
      Change in non-cash working capital:
        Trade accounts receivable                     (650,536)     (337,786)
        Inventories                                     48,358       239,458
        Prepaid expenses and deposits                 (122,920)     (117,555)
        Deferred costs                                 212,718       (38,184)
        Accounts payable and accrued liabilities       338,124       137,900
        Customer deposits                                    -          (601)
        Deferred revenue                              (155,959)       54,435
                                                       148,681       501,036

    Cash flows from investing activities:
      Purchase of property and equipment              (592,684)     (162,860)
      Payments for right of access                    (172,000)            -
                                                      (764,684)     (162,860)

    Cash flows from financing activities:
      Payments under capital leases                    (12,115)      (60,449)

    Foreign exchange gain (loss) on cash held
     in foreign currency                                (9,831)       20,790

    Increase (decrease) in cash and cash equivalents  (637,949)      298,517

    Cash and cash equivalents, beginning of period   3,412,781     1,810,478

    Cash and cash equivalents, end of period      $  2,774,832  $  2,108,995

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) 218-2839, dfeick@equicomgroup.com

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