Vancouver, Canada, November 24, 2010 - Radiant Communications Corp. (“Radiant”) (TSX-V:RCN), Canada's leading supplier of Broadband Solutions for Business™, today announced its financial results for its third quarter and the nine months ended September 30, 2010.
“During the third quarter we continued to invest in our new Surelink and AlwaysThere products,” said David Buffett, President and CEO of Radiant. “We have established an eleven person inside sales force dedicated to rapidly growing our Surelink customer base. Since the product launch this new sales channel has sold over 70 Surelink contracts and we have rolled out the service to more than 30 Central Offices which reach more than 200,000 potential customers. On the AlwaysThere product we built out our new Toronto cloud data centre in the third quarter which recently went ‘live’ offering geographically redundant services housed and managed in Canada. We have invested significant capital and effort in these ventures but continue to ensure that we remain cash positive from operations as we grow our recurring revenue base.”
Revenues for the quarter ended September 30, 2010 increased 1.9% to $7.8 million compared to $7.7 million in the third quarter of 2009. The increase is a result of sales and installations of new AlwaysThere solutions and Surelink connections. 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 and in the third quarter the dedicated inside sales team was increased to 11 people. 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 limited regional basis was very successful with annual revenue of over $445,000 under contract at the end of September. We are continuing to aggressively expand our product footprint and marketing and promotion efforts.
Revenue in the third quarter of 2010 increased by 0.8% compared to the preceding second quarter of 2010. This increase is attributable to growth in both the AlwaysThere Hosted Exchange™ product as well as our new Surelink offering.
For the quarter ended September 30, 2010, the Company’s gross profit was $3.2 million compared to $3.0 million in the third quarter of 2009. Gross profit as a percent of revenue was 40.2% for the quarter ended September 30, 2010 compared to 39.0% for the same period in 2009 and 38.9% in the immediately preceding quarter. In the first three quarters of 2010 Radiant has invested in additional monthly backhaul expenses for the new Surelink Central Office locations and we have also re-signed several of our core long term customers to new multi-year contracts with lower monthly revenue. In the same period sales of our higher margin products have helped off-set these increased costs and resulted in higher margins in the third quarter.
Operating expenses, including sales and marketing, general and administrative, and amortization costs of $3.1 million in the third quarter of 2010 increased by 9.4% compared to $2.8 million in the third quarter of 2009 and decreased by 4.1% compared to the immediately preceding second 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 and third quarters of 2010 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 and marketing and related costs increased by over $300,000 compared to the prior year.
Sales and marketing expenses include compensation expenses, agent and channel distribution, and marketing costs. For the quarter ended September 30, 2010, sales and marketing expense increased 72.4% to $618,708 compared to $359,213 in the third quarter of 2009. As previously mentioned this increase is primarily attributable to the investment in the Surelink product. Sales and marketing expenses in the third quarter of 2010 decreased by 4.6% compared to sales and marketing costs in the second 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, decreased by 2.5% to $2.2 2.3 million for the quarter ended September 30, 2010 compared to $2.2 million in the third quarter of 2009. General and administrative expenses in the third quarter of 2010 were 3.7% lower compared to the second quarter of 2010.
For the quarter ended September 30, 2010 amortization expenses of $318,026 were up 24.0% compared to amortization expenses in the third quarter of 2009 of $256,451 and 17.3% higher compared to amortization expense in the second 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 income of $25,431 or $0.00 per share for the quarter ended September 30, 2010 compared to a net income of $115,178 or $0.01 per share in the third quarter of 2009. The weighted average number of shares outstanding for the third quarter of 2010 was 15.1 million and for the third quarter of 2009 was 10.9 million.
Liquidity and Capital Resources
At September 30, 2010 Radiant had cash and short term investments of $6.3 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 second quarter of 2010 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.
Earnings before Interest, Taxes, Depreciation and Amortization is calculated as follows:
|($000s)||Q3 2010||Q3 2009|
|Operating Income (loss)||$ 58||$ 167|
|Amoritization||$ 318||$ 256|
|Stock-based compensation expense||$ 46||$ 75|
|EBITDA||$ 422||$ 498|
In the third quarter of 2010, Radiant achieved EBITDA of $422,152 compared to EBITDA of $498,394 in the third quarter of 2009.
|($000s)||Nine months ended
September 30, 2010
|Nine months ended
September 30, 2009
|Operating Income (loss)||$ (29)||$ 739|
|Amoritization||$ 850||$ 779|
|Stock-based compensation expense||$ 192||$ 212|
|EBITDA||$ 1,013||$ 1,730|
In the nine months ended September 30, 2010 Radiant achieved positive EBITDA of $1.0 million compared to positive EBITDA of $1.7 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 www.sedar.com under Radiant Communications Corp.
Radiant will hold a conference call to discuss its results for the quarter ended September 30, 2010 on November 25, at 11:00 a.m. PST (2:00 p.m. EST). 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 416-849-0833 (International). The passcode for the playback is 27526094. The audio web cast will be archived for replay on Radiant's web site at www.radiant.net.
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.
In operation since 1996, Radiant currently serves over 20,000 business locations in Canada and the United States from its offices in Vancouver, Toronto and Montreal.
Headquartered in Vancouver, Canada, Radiant Communications (www.radiant.net) provides businesses across Canada with a comprehensive and innovative suite of data communications and cloud computing services: the largest on-net DSL footprint across Canada & the U.S., T1 and E10/E100 fibre broadband, MPLS private networking, and AlwaysThere Cloud Computing services. Many of Canada’s largest retail chains and thousands of other small to mid-sized businesses depend on Radiant solutions for their mission-critical data networks and enterprise-level applications.
For More Information
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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.
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