Radiant Systems, Inc. Q1 2010 Earnings Call Transcript

Radiant Systems, Inc. Q1 2010 Earnings Call Transcript
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Radiant Systems, Inc. (RADS)

Q1 2010 Earnings Call Transcript

May 6, 2010 4:30 pm ET

Executives

John Heyman – CEO

Mark Haidet – CFO

Andy Heyman – COO

Analysts

Andrew Jeffrey – SunTrust

Terry Tillman – Raymond James

Rich Kugele – Needham & Company

Chad Bennett – Northland Securities

Gil Luria – Wedbush Securities

Scott Stevens – Strata Capital

Vincent Colicchio – Noble Financial

Brian Murphy – Sidoti & Company

Presentation

Operator

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Previous Statements by RADS
» Radiant Systems, Inc. Q3 2009 Earnings Call Transcript
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Good day and welcome to the Radiant Systems first quarter 2010 earnings release. At this time, I’d like to turn the call over to your host, Mr. John Heyman. Please go ahead.

John Heyman

Tim, thanks a lot. And thanks to everybody for joining us today, especially on a day that was so kind of topsy-turvy in the market. With me here today are Mark Haidet, our Chief Financial Officer; Andy Heyman, our Chief Operating Officer; and Rob Ellis, our Vice President of Finance and Accounting. Before I get started, I’m going to let Mark run through the forward-looking caveats.

Mark Haidet

Thanks, John. As always, certain statements contained in this conference call are forward-looking statements within the meaning of the Securities Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus perspective. 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 control. These risks are detailed in our most recent 10-K filed with the Securities and Exchange Commission.

During this call, we will also talk about certain non-GAAP financial measures. Reconciliation of these financial measures to comparable GAAP measures can be found in our earnings release and on our website at radiantsystems.com under Investor Relations.

John Heyman

Mark, thank you. First quarter was obviously an outstanding one for the company. It’s a great start to what we think is going to be a great year for Radiant Systems. It was our biggest first quarter ever, up 18% from last year and up 13% from our first quarter in 2008, which was our best revenue year ever. Both revenues and profits were ahead of our budgets and previously issued guidance.

I think a simple set of ingredients are coming together right now to produce the results we have seen in the quarter, and the increased momentum that we see in the business right now. Number one, our products are working exceptionally well resulting in an increased rollout with our customer base, systems sales were up over 27% from last year. Number two, our customer satisfaction continues to be very strong, which when combined with our value proposition has driven big new wins and robust pipeline.

Third, our Software-as-a-Service products continue to gain traction based on their high impact to operate our sites and areas of entry and affordability, leading to growth in excess of 25% in the quarter in this product line. And fourth, and finally, the channel businesses we have are improving due to the share gains we have experienced. Our channel partners are slowly adding sales capacity back, which would help us jointly gain share in the future.

Profitability was also solid, growing 18% from Q1 of last year. Operating margins were 10.5% and they will improve throughout the year, as I’ll discuss below.

Some highlights during the quarter. Number one, our SaaS based offerings and other recurring lines of businesses have continued their strong growth. As I said, the business grew above our high expectations and we see this growth lasting for literally years ahead based on increased sales capacity, adoption of current products, and the introduction of new ones.

Number two, on the heels are some very big contract signings last year that are now in rollout phase. Some new wins have already positioned us to visibly grow the direct business again for years to come. Brinker and Macaroni Grill are two examples where large companies have signed long-term contracts to invest in our solutions. These companies represent over 1,000 corporate sites that will be rolling out a wide range of our offerings. The starting point would be our point-of-sale products that will expand to other software products as well as certain of our SaaS based offerings in the future.

As a side note, I think these wins reflect our market leadership and the relevance of our value proposition. There is a lot of very old technology out there that inhibits operators from controlling costs and growing the businesses. Even in uncertain economic times, operators are investing in our products to serve their customers better, operate their sites more efficiently and achieve what we have established as an exceptional return on their investment.

The third highlight during the quarter is our channel businesses are recovering from a very tough 18 months. Current data reflect the businesses are up substantially this year though some remain behind peak level still. This performance is ahead of our plans, and though we are not counting on it, we are hopeful a continued economic environment positively impacts investment in our products.

Fourth, new products are also gaining momentum. Our new hardware platforms are lowering the initial entry costs for our solutions, and our new software and SaaS offerings are in high demand. We’ve got some exciting new innovations on the drawing board as well.

So in summary, and importantly, all of these factors are helping us develop a view towards 2010 and even 2011 that is stronger than just three months ago when we last spoke with the investment community. Growth this year is evident and it’s highly visible. In fact, the wins we are having on the direct side will drive growth for us into 2011 and beyond. We believe this growth is sustainable over the long-term for three key reasons.

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