Radiant Communications Announces Third Quarter 2010 Results

VANCOUVER, Nov. 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 third quarter and the nine months ended September 30, 2010.

HIGHLIGHTS:

• Revenue of $7.8 million for the quarter ended September 30, 2010 increased by 1.9% compared to revenue of $7.7 million for the quarter ended September 30, 2009;
  
  
• Gross margin was 40.3% in the quarter;
  
  
• EBITDA in the third quarter was $422,152 compared to $498,395 in the third quarter of 2009;
  
  
• Net income in the third quarter of $25,432 amounted to a gain of $0.00 per share;
  
  
• The Company ended the quarter with cash and short-term investments of $6.3 million and generated cash from operations of $1.3 million during the period;
  
  
• During the third quarter Radiant expanded the geographic footprint of the Surelink service and increased the inside sales force to 11 people. Radiant has signed up more than 70 new customers since the product launch;
  
  
• In the third quarter Radiant built out a second cloud datacenter in Toronto in order to offer geographically redundant, fully Canadian based cloud services to new and existing customers;

"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."

Financial Review

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.

EBITDA

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

($000s)		Q3 2010	Q3 2009
Operating Income (loss)		$ 58	$ 167
Amortization		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
Amortization			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

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  

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 US, 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.

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)

			September 30, 2010		December 31, 2009
Assets
Current assets
	Cash and cash equivalents	$	5,751,437	$	3,412,781
	Short-term investments		533,376		424,376
	Restricted short-term investment		-		109,000
	Trade accounts receivable		2,913,255		2,512,832
	Inventories		267,107		358,136
	Prepaid expenses and deposits		443,940		295,052
	Deferred costs		912,143		1,473,487
			10,821,258		8,585,664
Property and equipment			2,410,244		1,568,829
Right of Access			1,776,009		-
Goodwill			1,574,228		1,574,228
		$	16,581,739	$	11,728,721
Liabilities and Shareholders' Equity
Current liabilities
	Accounts payable and accrued liabilities	$	4,355,796	$	3,244,082
	Customer deposits		122,115		122,115
	Deferred revenue		4,335,081		4,679,804
	Current portion of deferred lease inducements		32,235		16,050
	Current portion of obligations under capital leases		48,698		49,700
			8,893,925		8,111,751
Deferred lease inducements			41,029		75,192
Obligations under capital leases			4,218		44,040
			8,939,172		8,230,983
Shareholders' equity
	Share capital		7,511,130		3,601,872
	Contributed surplus		4,719,744		4,433,931
	Deficit		(4,588,307)		(4,538,065)
			7,642,567		3,497,738
		$	16,581,739	$	11,728,721

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

			Three months ended September 30,				Nine months ended   September 30,
			2010		2009		2010		2009
Revenue		$	7,824,010	$	7,675,557	$	23,392,996	$	22,315,930
Cost of sales			4,673,248		4,681,888		14,051,270		12,888,926
Gross profit			3,150,762		2,993,669		9,341,726		9,427,004
Expenses
	Sales and marketing		618,708		359,213		1,760,639		1,390,900
	General and administrative		2,156,253		2,210,652		6,758,606		6,518,459
	Amortization		318,026		256,451		850,539		778,989
			3,092,988		2,826,316		9,369,784		8,688,348
Income (loss) before undernoted			57,774		167,353		(28,058)		738,656
Interest expense			1,752		566		13,569		32,004
Other (income) expenses			30,590		51,609		8,615		113,224
Net earnings (loss) and comprehensive income (loss) for the period			25,432		115,178		(50,242)		593,428
Deficit, beginning of period			(4,613,739)		(4,133,399)		(4,538,065)		(4,611,649)
Deficit, end of period		$	(4,588,307)	$	(4,018,221)	$	(4,588,307)	$	(4,018,221)
Basic and diluted earnings (loss) per share		$	0.00	$	0.01	$	(0.00)	$	0.05
Weighted average common shares, used in computing basic and diluted earnings (loss) per share			15,125,664		10,925,664		13,510,279		10,925,664

RADIANT COMMUNICATIONS CORP.
STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)

						Three months ended September 30,				Nine months ended September 30,
						2010		2009		2010		2009
Cash flows from operating activities:
			Income (loss) for the period		$	25,432	$	115,178	$	(50,242)	$	593,428
			Items not involving cash:
				Amortization		287,277		256,451		800,593		778,989
				Amortization of right of access		30,749		-		49,946		-
				Stock-based compensation		46,352		74,591		192,813		211,895
				Change in deferred lease inducements		(8,468)		2,670		(17,978)		8,012
				Foreign exchange (gain) loss		14,160		37,998		14,533		116,140
						395,502		486,888		989,665		1,708,464
			Change in non-cash working capital:
				Trade accounts receivable		(44,785)		(605,259)		(400,423)		(206,598)
				Inventories		(26,497)		111,127		91,029		251,381
				Prepaid expenses and deposits		(21,627)		96,662		(148,888)		(181,066)
				Deferred costs		147,274		43,307		561,344		(202,507)
				Accounts payable and accrued liabilities		901,995		(257,055)		1,111,714		11,204
				Customer deposits		-		(620)		-		(1,971)
				Deferred revenue		(66,298)		162,163		(344,723)		362,474
						1,285,564		37,213		1,859,718		1,741,381
Cash flows from investing activities:
			Increase in short-term investment			-		(376)		-		(376)
			Purchase of property and equipment			(775,361)		(191,454)		(1,646,761)		(503,344)
			Payments for right of access			(966,080)		-		(1,825,955)		-
						(1,741,441)		(191,830)		(3,472,716)		(503,720)
Cash flows from financing activities:
			Payments under capital leases			(11,636)		(45,246)		(36,071)		(147,780)
			Proceeds from issuance of common shares			-		-		4,002,258		-
						(11,636)		(45,246)		3,966,187		(147,780)
Foreign exchange gain (loss) on cash held in foreign currency						(14,160)		(37,998)		(14,533)		(116,140)
Increase (decrease) in cash and cash equivalents						(481,673)		(237,861)		2,338,656		973,741
Cash and cash equivalents, beginning of period						6,233,110		3,022,080		3,412,781		1,810,478
Cash and cash equivalents, end of period					$	5,751,437	$	2,784,219	$	5,751,437	$	2,784,219

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