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8-K - RADIANT SYSTEMS, INC. 8-K - RADIANT SYSTEMS INCa6613103.htm

Exhibit 99.1

Radiant Systems, Inc. Reports Fourth Quarter Results

The Company reports fourth quarter revenue growth with adjusted earnings of $0.33 per diluted share and GAAP earnings of $0.15 per diluted share.

ATLANTA--(BUSINESS WIRE)--February 15, 2011--Radiant Systems, Inc. (Nasdaq: RADS), announced today financial results for the fourth quarter ended December 31, 2010.

Summary financial results for the fourth quarter of 2010 compared to the same period in 2009 are as follows:

  • Total revenues of $90.6 million, an increase of 16%.
  • Recurring revenues (which are comprised of maintenance, subscription and transaction services) of $38.7 million, an increase of 9%.
  • Adjusted operating income (non-GAAP) of $12.5 million, an increase of 23%.
  • Adjusted net income (non-GAAP) of $13.4 million, or $0.33 per diluted share, an increase of $4.8 million, or $0.08 per diluted share. Amounts exclude amortization of acquisition-related intangible assets, employee stock compensation expense and other charges and income.
  • Adjusted net income includes reductions in the cash tax provision due to a true-up in the annual estimated cash tax rate to 14% and 23% for 2010 and 2009, respectively. These reductions increased adjusted net income by approximately $2.6 million, or $0.07 per diluted share, in 2010 and by approximately $1.2 million, or $0.04 per diluted share, in 2009.
  • Net income of $6.0 million, or $0.15 per diluted share, an increase of $23.0 million, or $0.66 per diluted share.
  • During the period, the Company recorded a $0.7 million charge resulting from the termination of a lease. During 2009, a $20.9 million impairment charge was recorded to write off a portion of the acquired assets of Quest Retail Technology. This impairment charge was a non-cash adjustment and had no tax impact.

Summary financial results for the year ended December 31, 2010 compared to the same period in 2009 are as follows:

  • Total revenues of $346.4 million, an increase of 21%.
  • Recurring revenues of $147.4 million, an increase of 11%.
  • Adjusted operating income (non-GAAP) of $46.3 million, an increase of 31%.
  • Adjusted net income (non-GAAP) of $39.1 million, or $1.05 per diluted share, an increase of $13.6 million, or $0.29 per diluted share. Amounts exclude amortization of acquisition-related intangible assets, employee stock compensation expense and other charges and income.
  • Net income for 2010, which includes net charges of $0.4 million, was $21.8 million, or $0.59 per diluted share, an increase of $31.2 million, or $0.88 per diluted share. Net loss for 2009, which included $22.1 million of net charges, was $9.4 million, or approximately $0.29 per diluted share.

John Heyman, the Company's chief executive officer said, “The fourth quarter was a strong finish to what has been a remarkable year for Radiant. Our revenues and earnings exceeded expectations and we continue to see opportunities for growth across our industries.”

Heyman added, “Our success in 2010 includes adding significant new customer relationships, improving our operational efficiency and maintaining high customer and employee engagement. All aspects of our business are stronger than ever and, with a robust pipeline of innovation, we are poised for growth in the years ahead.”

“We continue to see margin expansion and strong cash flow generation as we grow the business,” said Mark Haidet, the Company’s chief financial officer. “Our adjusted operating margin of 13.8% resulted in cash from operations of $15.2 million and free cash flow of $12.4 million for the quarter.”

Haidet continued, “Our success in 2010 provides a strong foundation for growth in 2011 and beyond. Our guidance represents revenue growth of 7% to 10% for the year with subscription services growth accelerating to approximately 30%. We have planned the year with adjusted operating margin expanding one hundred basis points providing adjusted operating income growth of 14% to 19%.”

The Company’s guidance is as follows:


Guidance (in millions, except EPS)     Quarter ended
March 31, 2011
  Year ended
Dec. 31, 2011
Revenue range     $86.0 to $87.0   $370.0 to $380.0
Adjusted operating income (non-GAAP)

$10.5 to $11.0

$53.0 to $55.0
Adjusted net income per share (non-GAAP)

$0.19 to $0.20

$0.95 to $0.98
Cash tax rate 25% 25%
Effective tax rate 35% 35%
Diluted shares 41.0 42.0
Amortization expense $2.2 $7.8
Stock compensation expense $1.6 $6.6
Capital expenditures     $3.0 to $4.0   $14.0 to $16.0
 

Guidance figures are based on the Company’s current estimates and are subject to change by factors outside the Company’s control. While this guidance is provided to give investors insight into expectations for the period, actual results are likely to vary.

The Company provides adjusted operating income, 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 operating income, adjusted net income and adjusted net income per share measures used by other companies. Adjusted operating income and adjusted net income exclude amortization of acquisition-related intangible assets, non-recurring items and compensation expense related to the issuance of employee stock options and stock grants. 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 fourth quarter 2010 conference call today at approximately 4:30 p.m. Eastern Time. This call is being webcast by Thomson Reuters and can be accessed at Radiant's web site at http://www.radiantsystems.com/ir. The call will also be available via telephone at 1-888-389-5997 – reference passcode 3527047.

Headquartered in Atlanta, Radiant Systems, Inc. (Nasdaq: RADS) is a global provider of innovative technology to the hospitality and retail industries. With more than 100,000 installations worldwide, our customers include leading brands and venues in the restaurant and food service, sports and entertainment, petroleum and convenience, and specialty retail markets. 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 factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties associated with the Company’s business and finances in general, including the ability to continue and manage its growth, 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 twelve months ended
December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009
 
Revenues:
Systems $ 43,514 $ 34,008 $ 162,079 $ 120,507
Maintenance, subscription and transaction services 38,650 35,499 147,419 132,281
Professional services   8,426     8,286     36,916   34,680  
Total revenues 90,590 77,793 346,414 287,468
 
Cost of revenues:
Systems 23,854 18,394 89,809 63,672
Maintenance, subscription and transaction services 17,880 17,711 69,903 65,141
Professional services   6,678     5,735     27,054   23,136  
Total cost of revenues   48,412     41,840     186,766   151,949  
 
Gross profit 42,178 35,953 159,648 135,519
 
Operating expenses:
Product development 7,201 5,720 25,768 22,345
Sales and marketing 13,296 10,953 48,670 42,331
Depreciation of fixed assets 1,638 1,165 6,054 4,789
Amortization of intangible assets 2,229 2,296 8,738 9,265
General and administrative 8,955 8,923 38,186 35,065
Other charges and income, net   695     20,899     382   22,052  
Total operating expenses 34,014 49,956 127,798 135,847
 
Income (loss) from operations 8,164 (14,003 ) 31,850 (328 )
 
Interest and other (income) expense, net   (2 )   524     797   2,250  
 
Income (loss) before taxes 8,166 (14,527 ) 31,053 (2,578 )
 
Income tax provision   2,204     2,499     9,230   6,820  
 
Net income (loss) $ 5,962   $ (17,026 ) $ 21,823 $ (9,398 )
 
 
Net income per share:
Basic $ 0.15   $ (0.51 ) $ 0.61 $ (0.29 )
Diluted $ 0.15   $ (0.51 ) $ 0.59 $ (0.29 )
 
 
Weighted average shares outstanding:
Basic   39,139     33,159     35,512   32,916  
Diluted   40,658     33,159     37,109   32,916  
 
 
Reconciliation of GAAP operating income (loss) to adjusted non-GAAP operating income:
 
GAAP operating income (loss) $ 8,164   $ (14,003 ) $ 31,850 $ (328 )
Equity-based compensation expense (a)
Cost of revenues 112 104 423 498
Operating expenses   1,262     806     4,922   3,968  
Total equity-based compensation expense 1,374 910 5,345 4,466
Amortization of purchased intangibles (b) 2,229 2,296 8,738 9,265
Other charges and income, net (c)   695     20,899     382   22,052  
 
Adjusted non-GAAP operating income $ 12,462   $ 10,102   $ 46,315 $ 35,455  
 
Reconciliation of GAAP net income (loss) to adjusted non-GAAP net income:
 
GAAP net income (loss) $ 5,962   $ (17,026 ) $ 21,823 $ (9,398 )
Equity-based compensation expense (a)
Cost of revenues 112 104 423 498
Operating expenses   1,262     806     4,922   3,968  
Total equity-based compensation expense 1,374 910 5,345 4,466
Amortization of purchased intangibles (b) 2,229 2,296 8,738 9,265
Other charges and income, net (c) 695 20,899 382 22,052
Tax effect of adjustment items, difference between the
Company's effective tax rate and cash tax rate (d)   3,104     1,478     2,857   (817 )
 
Adjusted non-GAAP net income $ 13,364   $ 8,557   $ 39,145 $ 25,568  
 
Adjusted non-GAAP net income per diluted share $ 0.33   $ 0.25   $ 1.05 $ 0.76  
 

In addition to our GAAP results, Radiant Systems discloses adjusted operating income, adjusted net income and adjusted net income per diluted share, referred to respectively as "adjusted non-GAAP operating income", "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 charges/gains that are unlikely to occur again in the normal course of business. 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 charges/gains that are unlikely to occur again in the normal course of business 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”) , 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. Charges/gains that are unlikely to occur again in the normal course of business 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. While these assets are regularly reviewed 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.

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 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 charges/gains are not expected to repeat themselves in the normal course of business, 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 cost of revenues and operating expenses represent stock-based compensation expense recorded during the period. Total stock-based compensation expense for the three months ended December 31, 2010 and 2009 was $1.4 million and $0.9 million, respectively, on a pre-tax basis. Total stock-based compensation expense for the twelve months ended December 31, 2010 and 2009 was $5.3 million and $4.5 million, respectively, on a pre-tax basis.

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

(c) Adjustments represent the elimination of charges/gains that are unlikely to occur again in the normal course of business. For 2010, this includes a $0.7 million charge resulting from the termination of a lease (fourth quarter 2010) and a $0.3 million non-cash gain related to an adjustment to the Company's goodwill impairment that was recorded in the fourth quarter of 2009 (second quarter 2010).

For 2009, these charges consisted of a $20.9 million non-cash charge related to goodwill impairment (fourth quarter 2009), 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 did 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).

(d) The Company reports its non-GAAP income tax provision on a cash tax rate basis which was approximately 14% and 23% for the years ended December 31, 2010 and 2009, respectively. Note that the Company estimated the cash tax rate to be 22% throughout 2010 and 28% throughout 2009. Therefore, an adjustment was made in the fourth quarter to reduce the estimated cash tax rate to the actual cash tax rate of 14% and 23% for the years ended December 31, 2010 and 2009, respectively.


RADIANT SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
       
 
ASSETS
 
December 31, December 31,
2010 2009
   
 
Current assets
Cash and cash equivalents $ 75,026 $ 15,521
Accounts receivable, net 51,204 42,515
Inventories 36,440 29,662
Deferred tax assets 6,737 5,690
Other current assets   2,325   4,587  
Total current assets 171,732 97,975
 
Property and equipment, net 24,297 24,923
Software development costs, net 13,290 11,810
Deferred tax assets, non-current 1,676 1,323
Goodwill 111,732 107,819
Intangibles, net 34,762 42,428
Other long-term assets   9,634   2,319  
 
Total assets $ 367,123 $ 288,597  
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
Current liabilities
Accounts payable and accrued liabilities $ 47,313 $ 41,186
Customer deposits and unearned revenues 21,820 21,157
Current portion of long-term debt and capital lease payments   6,424   6,842  
Total current liabilities 75,557 69,185
 
 
Long-term debt and capital lease payments, net of current portion 8,895 57,202
Deferred tax liabilities, non-current 4,540 4,265
Other long-term liabilities   12,024   4,602  
Total liabilities   101,016   135,254  
 
Shareholders' equity
Common stock, no par value; 100,000,000 shares authorized;
39,461,227 and 33,239,198 shares issued and outstanding, respectively - -
Additional paid-in capital 253,047 164,769
Retained earnings (accumulated deficit) 12,742 (9,081 )
Accumulated other comprehensive income (loss)   318   (2,345 )
Total shareholders' equity   266,107   153,343  
 
Total liabilities and shareholders' equity $ 367,123 $ 288,597  
 

CONTACT:
Radiant Systems, Inc
Karen Leytze, 770-576-6811
karen.leytze@radiantsystems.com