Radiant Systems, Inc. Reports Third Quarter Results

October 29, 2009 4:01 PM EDT

The Company reports third quarter adjusted earnings of $0.18 per diluted share and GAAP earnings of $0.10 per diluted share

ATLANTA--(BUSINESS WIRE)-- Radiant Systems, Inc. (Nasdaq: RADS), announced today financial results for the third quarter ended September 30, 2009.

Summary financial results for the third quarter of 2009 are as follows:

    --  Total revenues of $70.9 million for the period exceeded Company guidance
        and represent a 14 percent decrease from revenues of $82.4 million for
        the same period in 2008.
    --  Recurring revenues (which are comprised of maintenance, subscription and
        transaction services) for the period were $33.5 million, an increase of
        14 percent over the same period in 2008 and represent 47 percent of
        total revenues.
    --  Adjusted net income (non-GAAP) for the period was $6.2 million, or $0.18
        per diluted share, exceeding Company guidance by $0.01 per diluted
        share. The results represent an increase of $0.2 million compared to the
        same period in 2008 and exclude amortization of acquisition-related
        intangible assets, non-recurring items and employee stock compensation
        expense.
    --  Net income for the period was $3.4 million, or $0.10 per diluted share,
        an increase of $1.8 million, or $0.05 per diluted share, compared to the
        same period in 2008.

Summary year-to-date financial results for the nine-month period ended September 30, 2009 are as follows:

    --  Total revenues for the period were $209.7 million, a decrease of 7
        percent from revenues of $226.3 million for the same period in 2008.
    --  Recurring revenues for the period were $96.8 million, an increase of 24
        percent over the same period in 2008 and represent 46 percent of total
        revenues.
    --  Adjusted net income (non-GAAP) for the period was $17.0 million, or
        $0.51 per diluted share. The results represent a decrease of $1.4
        million, or $0.04 per diluted share, compared to the same period in 2008
        and exclude amortization of acquisition-related intangible assets,
        non-recurring items and employee stock compensation expense.
    --  Net income for the period, which includes $1.2 million of net
        non-recurring charges, was $7.6 million, or approximately $0.23 per
        diluted share, a decrease of $1.5 million, or $0.04 per diluted share,
        compared to the same period in 2008.

John Heyman, the Company's chief executive officer said, "We are pleased with the continued performance of the business and our prospects for the future. Our revenues and earnings exceeded expectations and we continue to see opportunities for growth with a strong customer base. The business model we have built continues to show strength as our recurring revenue services provide an increasingly strong financial foundation for the Company, while our products address the critical needs of our customers."

Heyman added, "We continue to see that our strong customer relationships and proven ability to make their businesses more successful during these times will allow us to thrive. We feel our execution has been strong in 2009 in the face of challenges and we are optimistic about our prospects for growth in 2010."

"We were pleased with the strength of our operating model during the quarter," said Mark Haidet, the Company's chief financial officer. "Our cash flow generation was strong with cash from operations of $12.4 million and free cash flow of $9.7 million for the quarter. This has allowed us to reduce our net debt position by $10.9 million during the quarter, and $29.6 million year-to-date."

Haidet added, "Given the results of the third quarter and visibility into the fourth quarter, we are again increasing our revenue and earnings guidance."

The Company's guidance is as follows:

                             Revenue Range (millions)  Adjusted Earnings
                                                       (non-GAAP) / Share Range

Quarter ending December 31,  $71 to $73                $0.18 to $0.19
2009

Year ending December 31,     $278 to $282              $0.65 to $0.68
2009 - Previous

Year ending December 31,     $281 to $283              $0.69 to $0.70
2009 - Updated

The Company provides adjusted net income and adjusted net income per share in this press release as additional information relating to the Company's operating results. These measures are not in accordance with, or an alternative for, GAAP and may be different from adjusted net income and adjusted net income per share measures used by other companies. Adjusted net income excludes amortization of acquisition-related intangible assets, non-recurring items and compensation expense related to the issuance of employee stock options. The income tax provision is calculated on the Company's cash tax rate for the year (based on actual cash expected to be paid to domestic and foreign governments). The Company believes that this non-GAAP presentation provides useful information to investors regarding certain additional financial and business trends relating to the Company's financial condition and results of operations, and valuable insight into the Company's ongoing operations and earnings power.

Radiant will hold its third quarter 2009 conference call today at approximately 4:30 p.m. Eastern Time. This call is being webcast by Thompson and can be accessed at Radiant's web site at http://phx.corporate-ir.net/phoenix.zhtml?c=115271&p=irol-irhome. The call will also be available via telephone at 1-800-768-6544 - reference passcode 3894237.

Headquartered in Atlanta, Radiant Systems, Inc. (Nasdaq: RADS) is a global provider of innovative technology to the hospitality and retail industries. For more than two decades, Radiant's point of sale hardware and software solutions have redefined the consumer experience in more than 100,000 restaurants, retail stores, stadiums, parks, arenas, cinemas, convenience stores, fuel centers and other customer-service venues. Radiant has offices in North America, Europe, Asia and Australia. For more information, visit www.radiantsystems.com.

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Forward-looking statements include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, its directors or its officers. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the Company's ability to control. Actual results may differ materially from those projected in the forward-looking statements. Among the key risks, assumptions and factors that may affect operating results, performance and financial condition are its ability to continue and manage its growth, liquidity and other capital resources issues, competition, global economic conditions and other factors discussed in detail in the Company's periodic filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements.

RADIANT SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

                For the three months ended    For the nine months ended

                September 30,  September 30,  September 30,  September 30, 2008
                2009           2008           2009

Revenues:

Systems         $ 29,619       $ 42,629       $ 86,499       $ 120,304

Maintenance,
subscription
and               33,501         29,465         96,781         78,182
transaction
services

Professional      7,820          10,260         26,395         27,799
services

Total revenues    70,940         82,354         209,675        226,285

Cost of
revenues:

Systems           16,051         22,837         45,278         63,167

Maintenance,
subscription
and               16,340         17,294         47,430         45,236
transaction
services

Professional      5,353          7,286          17,401         20,206
services

Total cost of     37,744         47,417         110,109        128,609
revenues

Gross profit      33,196         34,937         99,566         97,676

Operating
expenses:

Product           5,911          6,482          16,624         18,231
development

Sales and         10,288         10,322         31,378         27,102
marketing

Depreciation
of fixed          1,143          1,245          3,625          3,414
assets

Amortization
of intangible     2,380          2,377          6,969          5,481
assets

General and       7,701          8,916          26,142         24,142
administrative

Other charges
and income,       -              2,075          1,153          1,619
net

Total
operating         27,423         31,417         85,891         79,989
expenses

Income from       5,773          3,520          13,675         17,687
operations

Interest and
other expense,    505            1,251          1,726          4,080
net

Income from
operations        5,268          2,269          11,949         13,607
before income
taxes

Income tax        1,847          624            4,321          4,497
provision

Net income      $ 3,421        $ 1,645        $ 7,628        $ 9,110

Net income per
share:

Basic           $ 0.10         $ 0.05         $ 0.23         $ 0.28

Diluted         $ 0.10         $ 0.05         $ 0.23         $ 0.27

Weighted
average shares
outstanding:

Basic             33,002         32,399         32,834         32,245

Diluted           34,269         33,391         33,500         33,576

Reconciliation
of GAAP net
income to
adjusted
non-GAAP net
income:

GAAP net        $ 3,421        $ 1,645        $ 7,628        $ 9,110
income

Equity-based
compensation
expense (a)

Cost of           113            110            394            300
revenues

Operating         853            1,113          3,162          3,143
expenses

Total
equity-based      966            1,223          3,556          3,443
compensation
expense

Amortization
of purchased      2,380          2,377          6,969          5,481
intangibles
(b)

Other charges
and income,       -              2,075          1,153          1,619
net (c)

Tax effect of
adjustment
items,
difference
between the

Company's
effective tax     (565   )       (1,362 )       (2,295  )      (1,217  )
rate and cash
tax rate (d)

Adjusted
non-GAAP net    $ 6,202        $ 5,958        $ 17,011       $ 18,436
income

Adjusted
non-GAAP net    $ 0.18         $ 0.18         $ 0.51         $ 0.55
income per
diluted share

In addition to our GAAP results, Radiant Systems discloses adjusted net income
and adjusted net income per diluted share, referred to respectively as
"adjusted non-GAAP net income" and "adjusted non-GAAP net income per diluted
share". These items, which are collectively referred to as "non-GAAP measures",
exclude the impact of stock-based compensation, the amortization of
acquisition-related intangible assets and one-time charges/gains that are
non-recurring. From time to time, subject to the review and approval of the
audit committee of the Board of Directors, we may make other adjustments for
expenses and gains that we do not consider reflective of core operating
performance in a particular period and may modify the non-GAAP measures by
excluding these expenses and gains.

We define our core operating performance to be the revenues recorded in a
particular period and the expenses incurred within that period which management
has the capability of directly affecting in order to drive operating income.
Non-cash stock-based compensation, amortization of acquisition-related
intangible assets and non-recurring charges/gains are excluded from our core
operating performance because the decisions which gave rise to these expenses
were not made to drive revenue in a particular period, but rather were made for
our long-term benefit over multiple periods. While strategic decisions, such as
the decision to issue stock-based compensation, are made to further our
long-term strategic objectives and do impact our income statement under GAAP,
such items may affect multiple periods and management is not able to change or
affect these items within any particular period. As such, supplementing GAAP
disclosure with non-GAAP disclosure using the non-GAAP measures provides
management with an additional view of operational performance by excluding
expenses that are not directly related to performance in a particular period.

Prior to the adoption of FASB ASC Topic 718, Compensation-Stock Compensation
("ASC 718") in 2006, our practice was to exclude stock-based compensation
internally to evaluate performance and we presented investors our financial
information in this manner while disclosing the effects of stock-based
compensation. With the adoption of ASC 718, we continue to believe that
non-GAAP measures can provide relevant disclosure to investors and we have
presented non-GAAP measures that exclude and include those items noted above.
While these items are recurring and affect GAAP net income, we do not use them
to assess our operational performance for any particular period because (a)
these items affect multiple periods and are unrelated to business performance
in a particular period; (b) we are not able to change these items in any
particular period; and (c) these items do not contribute to the operational
performance of our business during any particular period.

We also use non-GAAP measures to operate the business because the excluded
expenses are not under the control of, and accordingly are not used in
evaluating the performance of, operations personnel within their respective
areas of responsibility. In the case of stock-based compensation expense, the
awarding of stock options is governed by the compensation committee of the
Board of Directors and, in the case of acquisition-related intangible assets,
acquisitions arise from strategic decisions which are not the responsibility of
most levels of operational management. The non-recurring charges/gains and the
non-cash portion of our effective tax rate, like our stock-based compensation
charges and amortization of acquisition-related intangible assets, are excluded
in management's internal evaluations of our operating results and are not
considered for management compensation purposes.

Our strategy is to use stock-based compensation to attract and retain key
employees and executives. It is principally aimed at long-term employee
retention, rather than to motivate or reward operational performance for any
particular period. Thus, stock-based compensation varies for reasons that are
generally unrelated to operational performance in any particular period. We use
quarterly and annual cash incentive payouts for executives and other employees
to motivate and reward the achievement of short-term operational objectives.

We view amortization of acquisition-related intangible assets as items arising
from pre-acquisition activities. These are costs that are determined at the
time of an acquisition. While they are continually viewed for impairment,
amortization of the costs is a static expense, one that is typically not
affected by operations during any particular period and does not contribute to
operational performance for any particular period.

Restructuring and impairment charges are excluded in our non-GAAP measures
because they are significantly different in magnitude and character from
routine personnel and facility adjustments that management makes when
monitoring and conducting the Company's core operations during any particular
period.

The gains recognized on our forward exchange contracts in 2008 are excluded
from our non-GAAP measures because such gains are not considered to be a normal
operating event of the Company. The forward exchange contracts were entered
into specifically for the purpose of locking in the US/Australian and US/Euro
exchange rates in preparation for the acquisitions of Quest and Orderman,
respectively.

Our historical non-GAAP effective tax rate differs from our GAAP effective tax
rates because of the exclusion of the non-GAAP adjustments previously mentioned
and the resulting impact on the realization of the Company's other tax assets.
We exclude the impact of these discrete tax items from our non-GAAP income tax
provision because management believes that they are not indicative of the
Company's tax obligations that will be paid in cash.

Because the non-GAAP measures are not calculated in accordance with GAAP, they
are used by our management as a supplement to, and not an alternative or
superior to, financial measures calculated in accordance with GAAP. There are a
number of limitations on the non-GAAP measures, including the following:

a. These non-GAAP measures do not have standardized meanings and may not be
comparable to similar non-GAAP measures used or reported by other software or
technology companies.

b. The non-GAAP measures do not reflect all costs associated with our
operations determined in accordance with GAAP.

c. Excluded expenses for stock-based compensation and amortization of
acquisition-related intangible assets will continue to recur and impact the
Company's GAAP results. While restructuring costs and other one-time
charges/gains are non-recurring activities, their occasional occurrence will
impact GAAP results.

Management compensates for these limitations by relying on these non-GAAP
measures only as a supplement to the Company's GAAP results.

(a) Under the Modified Prospective Method of ASC 718, we expense the fair value
of grants made under stock option programs over the vesting period of the
options. The adjustments to costs of sales and operating expenses represent
stock-based compensation expense recorded during the period. Total stock-based
compensation expense for the three months ended September 30, 2009 and 2008 was
$1.0 million and $1.2 million, respectively, on a pre-tax basis. Total
stock-based compensation expense for the nine months ended September 30, 2009
and 2008 was $3.6 million and $3.4 million, respectively, on a pre-tax basis.

(b) Adjustments represent amortization of intangible assets from prior
acquisitions.

(c) Adjustments represent the elimination of non-recurring charges and/or
gains. For 2009, these non-recurring charges consisted of a $0.7 million charge
related to severance and restructuring of the organization (first quarter 2009)
and a $0.5 million write-off of third-party software licenses that the Company
does not intend to use (first quarter 2009). These charges were partially
offset by a $0.1 million gain on the sale of a building (first quarter 2009).

For 2008, these non-recurring items were related to a $2.1 million lease
restructuring charge (third quarter 2008), a $0.5 million gain on a forward
exchange contract entered into as a result of the July 1, 2008 acquisition of
Orderman GmbH (second quarter 2008), a $0.3 million gain on a forward exchange
contract entered into as a result of the Quest Retail Technology acquisition
(first quarter 2008), offset by a $0.4 million charge related to the early
termination penalties and write-offs of debt issuance costs in relation to the
refinancing of a credit agreement (first quarter 2008).

(d) The Company reports its non-GAAP income tax provision on a cash tax rate
basis which was approximately 28% for the three and nine-month periods ended
September 30, 2009 and 24% for the three and nine-month periods ended September
30, 2008.

RADIANT SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

                                                 September 30,  December 31,

                                                   2009           2008

Current assets

 Cash and cash equivalents                       $ 14,703       $ 16,450

 Accounts receivable, net                          41,656         44,024

 Inventories, net                                  29,869         31,838

 Deferred tax assets                               8,020          7,982

 Other current assets                              3,938          2,628

 Total current assets                              98,186         102,922

Property and equipment, net                        23,849         23,031

Software development costs, net                    11,520         9,278

Goodwill                                           124,122        115,229

Intangibles, net                                   48,515         51,628

Other long-term assets                             2,428          1,454

 Total assets                                    $ 308,620      $ 303,542

LIABILITIES AND
SHAREHOLDERS' EQUITY

Current liabilities

 Accounts payable and accrued liabilities        $ 38,598       $ 34,724

 Customer deposits and unearned revenues           24,054         19,714

 Current portion of long-term debt and capital     6,876          6,906
 lease payments

 Total current liabilities                         69,528         61,344

Long-term debt and capital lease payments, net     62,401         93,672
of current portion

Deferred tax liabilities, non-current              4,594          3,066

Other long-term liabilities                        4,680          5,129

 Total liabilities                                 141,203        163,211

Shareholders' equity

 Common stock, no par value; 100,000,000 shares authorized;

 33,106,131 and 32,498,859 shares issued and       -              -
 outstanding, respectively

 Additional paid-in capital                        162,626        157,930

 Retained earnings                                 7,945          317

 Accumulated other comprehensive loss              (3,154  )      (17,916 )

 Total shareholders' equity                        167,417        140,331

 Total liabilities and shareholders' equity      $ 308,620      $ 303,542

    Source: Radiant Systems, Inc.

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