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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
June 30, 2000 0-22065
RADIANT SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Georgia 11-2749765
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3925 Brookside Parkway, Alpharetta, Georgia 30022
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (770) 576-6000
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
------------ -----------
The number of the registrant's shares outstanding as of August 9, 2000 was
27,546,509.
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RADIANT SYSTEMS, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE NO.
Item 1: Financial Statements
<S> <C> <C>
Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended 4
June 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended 5
June 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 6-8
Item 2: Management's Discussion and Analysis of Financial Condition and Results of 9-14
Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risks 14
Item 4: Submission of Matters to a Vote of Security Holders 15
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 16
Signatures: 16
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<S> <C> <C>
June 30, December 31,
2000 1999
----------- ------------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 51,333 $ 53,435
Accounts receivable, net 19,718 17,929
Inventories 13,585 13,141
Other short-term assets 4,019 3,256
--------------- ---------------
Total current assets 88,655 87,761
Property and equipment, net 12,581 7,857
Software development costs, net 6,706 5,394
Other long-term assets 12,493 10,987
--------------- ---------------
$120,435 $111,999
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 10,265 $ 14,466
Client deposits and unearned revenue 6,824 7,243
Current portion of long-term debt -- 105
--------------- ---------------
Total current liabilities 17,089 21,814
Long-term debt, less current portion -- 4,250
--------------- ---------------
Total liabilities 17,089 26,064
Shareholders' equity
Common stock, no par value; 100,000,000 shares authorized;
27,509,787 and 25,475,888 shares issued and outstanding 0 0
Additional paid-in capital 113,543 100,872
Accumulated deficit (10,197) (14,937)
--------------- ---------------
Total shareholders' equity 103,346 85,935
--------------- ---------------
$120,435 $111,999
=============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
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RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- ------- ------- -------
Revenues:
<S> <C> <C> <C> <C>
System sales $18,956 $21,316 $40,086 $38,551
Client support, maintenance and other services 11,321 9,264 22,607 16,303
------- ------- ------- -------
Total revenues 30,277 30,580 62,693 54,854
Cost of revenues:
System sales 8,596 10,519 18,585 19,003
Client support, maintenance and other services 9,458 7,234 18,170 13,120
------- ------- ------- -------
Total cost of revenues 18,054 17,753 36,755 32,123
------- ------- ------- -------
Gross profit 12,223 12,827 25,938 22,731
Operating Expenses:
Product development 2,963 2,945 5,154 5,520
Sales and marketing 3,280 3,159 6,181 6,086
Depreciation and amortization 1,802 1,551 3,407 2,930
General and administrative 4,049 3,194 7,428 6,353
------- ------- ------- -------
Income from operations 129 1,978 3,768 1,842
Interest income, net 885 342 1,592 685
------- ------- ------- -------
Income before income tax provision and extraordinary 1,014 2,320 5,360 2,527
item
Income tax provision 406 928 2,140 1,011
------- ------- ------- -------
Income before extraordinary item 608 1,392 3,220 1,516
Extraordinary item:
Gain on early extinguishment of debt, net of taxes -- -- 1,520 --
------- ------- ------- -------
Net income $ 608 $ 1,392 $ 4,740 $ 1,516
======= ======= ======= =======
Basic income per share:
Income before extraordinary item $ 0.02 $ 0.06 $ 0.12 $ 0.06
Extraordinary income on early extinguishment of
debt -- -- 0.06 --
------- ------- ------- -------
Total basic income per share $ 0.02 $ 0.06 $ 0.18 $ 0.06
======= ======= ======= =======
Diluted income per share:
Income before extraordinary item $ 0.02 $ 0.05 $ 0.11 $ 0.06
Extraordinary income on early extinguishment of debt -- -- 0.05 --
------- ------- ------- -------
Total diluted income per share $ 0.02 $ 0.05 $ 0.16 $ 0.06
======= ======= ======= =======
Weighted average shares outstanding:
Basic 27,410 24,470 26,975 24,318
======= ======= ======= =======
Diluted 29,803 26,948 29,879 26,702
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements
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RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
For the six months ended
June 30,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,740 $ 1,516
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on early extinguishment of debt (1,518) --
Amortization of deferred compensation 26 51
Depreciation and amortization 4,299 3359
Imputed interest on shareholder note 57 113
Changes in assets and liabilities:
Accounts receivable (779) (2,804)
Inventories (444) (261)
Other assets 868 608
Accounts payable and accrued liabilities (4,432) 3,380
Client deposits and deferred revenue (1,603) 2,665
-------- --------
Net cash provided by operating activities 1,214 8,627
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of TimeCorp, Inc. (6,000) --
Purchases of property and equipment (7,424) (2,645)
Capitalized software development costs (2,233) (1,683)
-------- --------
Net cash used in investing activities (15,657) (4,328)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of employee stock options 1,767 2,528
Repurchase of common stock -- (514)
Issuance of shareholder loans, net -- (306)
Stock issued under employee stock purchase plan 878 507
Issuance of common stock 10,000 --
Principal payments under capital lease obligations -- (16)
Principal payments under long-term debt (304) (107)
-------- --------
Net cash provided by financing activities 12,341 2,092
-------- --------
(Decrease) increase in cash and cash equivalents (2,102) 6,391
Cash and cash equivalents at beginning of year 53,435 25,536
-------- --------
Cash and cash equivalents at end of period $ 51,333 $ 31,927
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 7
-------- --------
Income taxes $ -- $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles applicable
to interim financial statements, the instructions to Form 10-Q and Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Radiant Systems, Inc. (the "Company") management, these
condensed consolidated financial statements contain all adjustments (which
comprise only normal and recurring accruals) necessary for fair presentation of
the consolidated financial condition and results of operations for these
periods. The interim results for the three and six months ended June 30, 2000
are not necessarily indicative of the results to be expected for the full year.
These statements should be read in conjunction with the Company's consolidated
financial statements as filed in its Annual Report on Form 10-K for the year
ended December 31, 1999, as amended.
2. Net Income Per Share
Basic net income per common share is computed by dividing net income by the
weighted-average number of shares outstanding. Diluted net income per share
includes the dilutive effect of stock options.
A reconciliation of the weighted average number of common shares outstanding
assuming dilution is as follows (in thousands):
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
----------------------------- ---------------------------
2000 1999 2000 1999
----------------------------- ---------------------------
<S> <C> <C> <C> <C>
Average common shares outstanding 27,410 24,470 26,975 24,318
Dilutive effect of outstanding stock options 2,393 2,478 2,904 2,384
----------------------------- ---------------------------
Average common shares outstanding assuming dilution 29,803 26,948 29,879 26,702
============================= ===========================
</TABLE>
For the three and six month periods ended June 30, 2000, options to purchase
approximately 237,000 and 36,000 shares of common stock, respectively, were
excluded from the above reconciliation, as the options were antidilutive for the
periods then ended. For the three and six month periods June 30, 1999, options
to purchase approximately 77,000 and 129,000 shares of common stock,
respectively, were excluded from the above reconciliation, as the options were
antidilutive for the periods then ended.
On April 1, 2000 the Company effected a 3-for-2 stock split. As such, all
historical shares and weighted average shares have been restated to account for
this split.
3. Segment Reporting Data
Prior to January 1, 2000 the Company operated through two primary reportable
segments (i) Global Solutions and (ii) Regional Solutions. Effective January 1,
2000, the Company restructured its business units and as a result, currently
operates under one segment, providing enterprise technology solutions to
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businesses that serve the consumer. To date, the Company's product
applications have been focused on the convenience store, food service,
entertainment and convenient automotive service center markets, as these markets
require many of the same product features and functionality. Revenues from
these markets for the three and six months ended June 30, 2000 and 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
--------- -------- ---------- ----------
Convenience store $17,813 $15,919 $33,892 $ 27,996
Entertainment and cinema 5,721 6,229 13,621 11,686
Food service 6,405 7,818 14,265 14,068
Automotive service centers 338 614 915 1,104
------- ------- ------- -------
Total revenues $30,277 $30,580 $62,693 $54,854
======= ======= ======= =======
</TABLE>
The Company distributes it's technology both within the United States and
internationally, however, to date, international sales have not been material.
4. Significant Events
On June 22, 2000, the Company consummated the acquisition of TimeCorp, Inc.
("TimeCorp"), a workforce management and planning software business operation
owned by VeriFone, Inc., a subsidiary of Hewlett-Packard, Inc. The purchase
price consisted of $6.0 million and included substantially all the assets of
TimeCorp, including software products, intellectual property and client
contracts. Intangibles of approximately $6.4 million were recorded, which are
being amortized over four to ten years.
On March 30, 2000 the Company and the former sole shareholder of RapidFire
Software, Inc. and EquiLease Financial Services, Inc. (collectively "RapidFire")
reached an agreement whereby the Company paid to the former shareholder $200,000
and forgave a $1.5 million note receivable, and in return, was relieved in full
of its indebtedness to the shareholder. This indebtedness consisted of a
noninterest-bearing note with a lump-sum payment of $6.0 million due October 31,
2005 ($4.3 million at December 31, 1999) and was issued October 31, 1997 as part
of the Company's acquisition of RapidFire. As a result of this early
extinguishment of debt, the Company recorded an extraordinary gain of
approximately $1.5 million, net of tax, during the first quarter ended March 31,
2000.
On March 3, 2000, the Company finalized an agreement with America Online, Inc.
("AOL") and MovieFone, Inc., a subsidiary of AOL ("MF"), to form a strategic
relationship in the retail point of sale business. This relationship, among
other aspects, entails a ten-year marketing and development agreement whereby
the Company will develop and manufacture point of sale systems and services for
sale to the entertainment industry pursuant to MF's specifications, which will
make such point of sale systems interoperable with MF's remote entertainment and
event ticketing services. The relationship also contemplates future
collaborative efforts between the companies. As part of this relationship, AOL
purchased $10.0 million of the Company's common stock at a price of $15 per
share. In addition, AOL has agreed to invest $25.0 million in a to be formed
subsidiary of the Company to engage in consumer interactive businesses other
than in the entertainment industry (e.g., interactive fuel and dispenser
business and interactive restaurant self-ordering business). In return for its
investment, AOL will receive a 15% equity interest in the form of preferred
stock of this subsidiary. To the extent AOL does not invest $25.0 million in the
to be formed subsidiary, AOL has agreed to invest the balance in another to be
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formed subsidiary of the Company or purchase common stock of the Company at the
then current market price.
On March 1, 2000, the Company and Microsoft Corporation jointly announced,
subject to execution of a definitive agreement, that both companies have joined
forces to develop and market an integrated Web-enabled management system and
supply chain solution to enable retailers to conduct business to business e-
commerce over the Internet. In addition, Microsoft agreed to make an equity
investment in the Company and committed to support the Company's solution
through joint marketing programs, funding for product development, consulting
services, developer support, and distribution via the Microsoft/(R)/
bCentral(TM) small-business portal. Further, Microsoft and the Company have
created an open structure that allows for other strategic and equity
participants.
5. Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
Company will be required to adopt FAS 133 for the quarter ended March 31, 2001.
The Company does not expect the adoption to have a material impact on its
results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). In June 2000,
the SEC staff issued SAB 101B to provide registrants additional time to
implement guidance contained in SAB 101. SAB 101B delays the implementation date
of SAB 101 until no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. The Company is evaluating the implications of
SAB 101 and to date nothing has been identified that would significantly change
the Company's historical practices with respect to the events that trigger
revenue recognition and the measurement of revenue.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
-------------
Overview
Radiant Systems, Inc. (the "Company" or "Radiant") provides enterprise-wide
technology solutions to businesses that serve the consumer. The Company offers
fully integrated retail automation solutions including point of sale systems,
consumer-activated ordering systems, back office management systems,
headquarters-based management systems and Web-enabled decision support systems.
The Company's products provide integrated, end-to-end solutions that span from
the consumer to the supply chain. The Company's products enable retailers to
interact electronically with consumers, capture data at the point of sale,
manage site operations, analyze data, communicate electronically with their
sites, and interact with vendors through electronic data interchange and Web-
based marketplaces. The Company also develops and markets a variety of
intelligent, Windows CE based devices that are specific to the retail industry.
In addition, the Company offers professional services focusing on technical
implementation, process improvement and change management as well as hardware
maintenance services and 24-hour help desk support.
The Company derives its revenues primarily from the sale of integrated systems,
including software, hardware and related support and consulting services. As
discussed below, in the second quarter of 2000, the Company announced and began
offering these products pursuant to a new subscription-based pricing model. In
addition, the Company offers implementation and integration services which are
billed on a per diem basis. The Company's revenues from its various technology
solutions are, for the most part, dependent on the number of installed sites a
client has. Accordingly, while the typical sale is the result of a long,
complex process, the Company's clients usually continue installing additional
sites over an extended period of time. Revenues from software and systems sales
are recognized as products are shipped, provided that collection is probable and
no significant post shipment vendor obligations remain. Revenues from client
support, maintenance and other services are generally recognized as the service
is performed.
In 1999, the Company began developing its new generation of management systems
products--WAVE. This product architecture is designed to combine and expand the
functionality of its Site Management Systems and Headquarter-Based Management
Systems. The Company's architecture and platforms for these products are
entirely web-based, which the Company believes will enable it to increase the
functionality while decreasing the costs of implementing and maintaining
technology solutions for retailers. Additionally, the Company has extended its
WAVE technology to include web-enabled, centrally hosted management software and
integrated purchasing software built around industry-specific marketplaces.
Management believes that these products will strengthen its product offerings by
providing integrated, end-to-end solutions that span from the consumer to the
supply chain.
The Company intends to offer its WAVE software through the application service
provider, or "ASP", delivery model. In the ASP delivery model, the Company
would remotely host applications from an off-site central server that users can
access over dedicated lines, virtual private networks or the Internet.
Additionally, the Company plans to offer the product through installations
directly in client locations as "client-hosted" systems. The Company also
intends to offer Internet solutions that will allow its clients to utilize the
Internet to enhance site management and conduct business-to-business e-commerce.
The Company is continuing to develop its WAVE solution and to establish
strategic relationships to facilitate these product offerings.
In connection with its strategy to develop ASP-delivered products, the Company
announced in April 2000 that it plans to begin converting certain new and
existing products to a subscription-based pricing model. Under this
subscription-pricing model, clients will pay a fixed, monthly fee for use of the
Company's site and headquarters solutions and the computer hardware necessary to
utilize those applications and
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solutions. This represents a change in the Company's historical pricing model in
which clients were charged an initial licensing fee for use of the Company's
products and continuing maintenance and support over the license period. The
Company began offering its products and services on the subscription-pricing
model in the second quarter of 2000. The Company will initially continue to
derive a majority of its revenue from its traditional sales model of one-time
software license revenues, hardware sales and software maintenance and support
fees that will be paid by its existing clients. However, as a result of the
transition to the subscription-pricing model, the Company expects to see a
decline in the one-time revenues from software license fees and hardware sales,
replaced over time by monthly subscription fees. In addition, the Company
expects revenue from maintenance and support from existing clients to decline
and to be replaced by subscription fees as existing clients convert to the
subscription-pricing model. The Company expects the percentage of revenue that
is recurring in nature to increase substantially as a result of the change to a
subscription-pricing model.
This change in the Company's product strategy to develop and offer ASP-delivered
and Internet solutions and the transition to a subscription-pricing model
involve certain risks and assumptions. There can be no assurance that the
Company will successfully implement these changes in its organization, product
strategy or pricing model or that the changes will not have a material adverse
effect on the Company's business, financial condition or results of operations.
On April 1, 2000 the Company effected a 3-for-2 stock split. As such, all
historical shares and weighted average shares have been restated to account for
this split.
Results of Operations
Three and six months ended June 30, 2000 compared to three and six months ended
June 30, 1999
System Sales. The Company derives the majority of its revenues from sales and
licensing fees of its headquarters-based, back office management, and point of
sale solutions. System sales decreased 11.1% to $19.0 million for the quarter
ended June 30, 2000 (the "second quarter 2000"), compared to $21.3 million for
the quarter ended June 30, 1999 (the "second quarter 1999"). This decrease was
primarily the result of the Company's strategy to begin converting certain new
and existing products and clients to the subscription-pricing model. System
sales increased 4.0% to $40.1 million for the six months ended June 30, 2000
(the "fiscal period 2000"), compared to $38.6 for the six months ended June 30,
1999 (the "fiscal period 1999"). This increase was due to increased sales and
license fees from new and existing clients during the first quarter 2000 offset
by lower sales during the second quarter 2000 due to the implementation of the
subscription-pricing model.
Client Support, Maintenance and Other Services. The Company also derives
revenues from client support, maintenance and other services, which increased
22.2% to $11.3 million for the second quarter 2000, compared to $9.3 million for
the second quarter 1999 and increased 38.7% to $22.6 million for the fiscal
period 2000, compared to $16.3 million for the fiscal period 1999. These
increases were due primarily to increased support and maintenance revenues
within existing markets, which resulted from an increased installed base.
Cost of System Sales. Cost of system sales consists primarily of hardware and
peripherals for site-based systems and labor. These costs are expensed as
products are shipped. Cost of system sales decreased 18.3% to $8.6 million for
the second quarter 2000, compared to $10.5 million for the second quarter 1999.
This decrease was directly attributable to reduced system sales in the second
quarter 2000 over the second quarter 1999 due to the implementation of the
subscription-pricing model. Cost of system sales decreased 2.2% to $18.6
million for the fiscal period 2000 from $19.0 million for the fiscal period 1999
due to increased software-only sales as a percentage of total systems sales
during fiscal period 2000. Cost of system sales as a percentage of system sales
decreased to 45.3% for the second quarter 2000 from 49.3%
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for the second quarter 1999, and from 46.4% during fiscal period 2000 from 49.3%
for fiscal period 1999. The decreases were due primarily to increased
efficiencies associated with the manufacturing of site-based systems, as well as
increased sales of software-only licenses. Amortization of capitalized software
development costs was approximately $452,000 and $251,000 for the second quarter
2000 and 1999, respectively, and approximately $922,000 and $430,000 for fiscal
periods 2000 and 1999, respectively.
Cost of Client Support, Maintenance and Other Services. Cost of client support,
maintenance and other services consists primarily of personnel and other costs
associated with the Company's services operations. Cost of client support,
maintenance and other services increased 30.7% to $9.5 million for the second
quarter 2000 from $7.2 million for the second quarter 1999 and increased 38.5%
to $18.2 million for fiscal period 2000 from $13.1 million for fiscal period
1999. The increases were due primarily to increased wages associated with the
effort of supporting higher revenues in this area. Cost of client support,
maintenance and other services as a percentage of client support, maintenance
and other services revenues increased to 83.5% from 78.1% for the second quarter
2000 and 1999, respectively, due primarily to new employees in training and
other non-billable roles during the period. Cost of client support, maintenance
and other services as a percentage of client support, maintenance and other
services revenues decreased slightly to 80.4% from 80.5% for the fiscal periods
2000 and 1999, respectively, as these revenues grew at a slightly faster pace
than the related costs of revenues.
Product Development Expenses. Product development expenses consist primarily of
wages and materials expended on product development efforts. Product
development expenses increased 0.6% to $3.0 million for the second quarter 2000,
compared to $2.9 million for the second quarter 1999. This increase was due
primarily to new hires during the second quarter 2000 over the same period a
year ago. Product development expenses decreased 6.6% to $5.2 million for fiscal
period 2000, compared to $5.5 million for fiscal period 1999. This decrease was
due primarily to higher capitalization of software costs associated with the
Company's development of its WAVE and Lighthouse generation of products. In the
second quarter 2000 and 1999, the Company capitalized software development costs
of $1.2 million, or 29.4% and $829,000, or 22.0%, of its total product
development costs, respectively. For fiscal period 2000 and 1999, the Company
capitalized software development costs of $2.2 million, or 30.2%, and $1.7
million, or 23.4%, of its total product development costs, respectively. Product
development expenses as a percentage of total revenues increased to 9.8% from
9.6% for the second quarter 2000 and 1999, respectively, as product development
expenses increased while associated revenues declined. Product development
expenses as a percentage of total revenues decreased to 8.2% from 10.1% for
fiscal periods 2000 and 1999, respectively, as total revenues increased while
product development expenses decreased.
Sales and Marketing Expenses. Sales and marketing expenses increased 3.8% to
$3.3 million during the second quarter 2000, compared to $3.2 million in the
second quarter 1999 and increased 1.6% to $6.2 million during fiscal period
2000, compared to $6.1 million for fiscal period 1999. These increases were
associated with continued expansion of sales activities including new hires and
increased commission expense attributable to higher sales. Sales and marketing
expenses as a percentage of total revenues were 10.8% and 10.3% for the second
quarter 2000 and 1999, respectively, as sales and marketing expenses increased
while revenues declined over the period a year ago. Sales and marketing expense
as a percentage of total revenues were 9.9% and 11.1% for fiscal periods 2000
and 1999, respectively as total revenues increased at a pace higher than related
sales and marketing expenses.
Depreciation and Amortization. Depreciation and amortization expenses increased
16.2% to $1.8 million for the second quarter 2000, compared to $1.6 million for
the second quarter 1999 and increased 16.3% to $3.4 million for fiscal period
2000, compared to $2.9 million for fiscal period 1999. The increases resulted
from an increase in computer equipment, leasehold improvements and other assets
required to support an increased number of employees and locations. Depreciation
and amortization as a percentage of total revenues was 6.0% and 5.1% for the
second quarter 2000 and 1999, respectively, and 5.4% and 5.3% for
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fiscal periods 2000 and 1999, respectively. These increases were primarily due
to associated personnel support costs increasing at a pace higher than
associated revenues.
General and Administrative Expenses. General and administrative expenses
increased 26.8% to $4.0 million for the second quarter 2000, compared to $3.2
million for the second quarter 1999 and increased 16.9% to $7.4 million for
fiscal period 2000, compared to $6.4 million for fiscal period 1999. The
increases were due primarily to personnel increases needed to support additional
revenues, as well as to support the Company's move to the subscription-pricing
model. General and administrative expenses as a percentage of total revenues
were 13.4% and 10.4% for the second quarter 2000 and 1999, respectively, and
11.8% and 11.6% for fiscal periods 2000 and 1999, respectively, as personnel and
related expenses grew at a pace faster than associated total revenues.
Interest Income, Net. Net interest income increased 158.8% to $885,000 for the
second quarter 2000, compared to $342,000 for the second quarter 1999. For
fiscal period 2000, net interest income increased 132.4% to $1.6 million,
compared to net interest income of $685,000 for fiscal period 1999. The
Company's interest income is derived from the investment of its cash and cash
equivalents. The increases in net interest income resulted primarily from an
increase in cash and cash equivalents from an average cash balance of $31.5
million during the second quarter 1999 and $28.7 million during the fiscal
period 1999 to an average cash balance of $54.5 million during the second
quarter 2000 and $52.4 million during the fiscal period 2000. See "--Liquidity
and Capital Resources."
Income Tax Provision. The Company recorded a tax provision of 40.0% in both
the second quarter 2000 and the second quarter 1999, as well for fiscal year
2000 and fiscal period 1999.
Extraordinary Item. On March 30, 2000, the Company and the former sole
shareholder of RapidFire reached an agreement whereby the Company paid to the
former shareholder $200,000 and forgave a $1.5 million note receivable, and in
return, was relieved in full of its indebtedness to the shareholder. This
indebtedness consisted of a noninterest-bearing note with a lump-sum payment of
$6.0 million due October 31, 2005 ($4.3 million at December 31, 1999) and was
issued October 31, 1997 as part of the Company's acquisition of RapidFire. As a
result of this early extinguishment of debt, the Company recorded an
extraordinary gain of approximately $1.5 million, net of tax, during the first
quarter 2000. No such item was recorded in the first quarter 1999.
Net Income. Net income for the second quarter 2000 was approximately $608,000,
or $0.02 per diluted share compared to $1.4 million, or $0.05 per diluted share
in the second quarter 1999. Excluding the extraordinary gain described above,
net income for fiscal period 2000 was approximately $3.2 million, or $0.11 per
diluted share compared to $1.5 million, or $0.06 per diluted share, in fiscal
period 1999. Including the extraordinary gain, net income for fiscal period 2000
was $4.7 million, or $0.16 per diluted share compared to $1.5 million, or $0.06
per diluted share, in fiscal period 1999.
Liquidity and Capital Resources
As of June 30, 2000, the Company had $51.3 million in cash and cash equivalents
and working capital of $71.6 million. As more fully described in Note 4 of the
condensed consolidated financial statements, on June 22, 2000, the Company
acquired substantially all the assets of TimeCorp, Inc. for $6.0 million.
Additionally, on March 3, 2000 AOL purchased $10.0 million of the Company's
stock at a price of $15 per share and may invest an additional $25.0 million in
a to be formed subsidiary of the Company at a later date. Additionally, on
March 1, 2000, the Company and Microsoft Corporation jointly announced, subject
to execution of a definitive agreement, that both companies have joined forces
to develop and market an integrated Web-enabled management system and supply
chain solution to enable retailers to conduct business-to-business e-commerce
over the Internet. In addition to agreeing to make an equity investment in the
Company, Microsoft committed to support the Company's technology solution
through
12
<PAGE>
joint marketing programs, funding for product development, consulting services,
developer support, and distribution via the Microsoft(R) bCentral(TM) small-
business portal.
Cash provided by operating activities in fiscal period 2000 was $1.2 million
compared to $8.6 million in fiscal period 1999. In fiscal period 2000, cash
provided by operating activities consisted primarily of net income of $4.7
million during the period, offset by increased accounts receivable, inventory
and other assets, as well as decreased accounts payable and accrued liabilities
due to timing of certain vendor payments. Additionally, client deposits and
unearned revenues decreased during the fiscal period 2000 as the Company
delivered products and/or services previously paid for by clients. In fiscal
period 1999, cash provided by operating activities consisted primarily of net
income of $1.5 million during the period, as well as increased accounts payable
and accrued liabilities due to timing of certain vendor payments liabilities,
partially offset by decreases in accounts receivable, inventory and other
assets. Additionally, client deposits and unearned revenues increased during the
fiscal period 1999 as the Company received cash from clients in advance of
products and/or services being delivered.
Cash used in investing activities during fiscal period 2000 and 1999 was $15.7
million and $4.3 million, respectively. The uses of cash in investing activities
for fiscal period 2000 consisted primarily of the acquisition of TimeCorp, Inc.
for $6.0 million, as more fully described in Note 4 of the condensed
consolidated financial statements, and purchases of property and equipment for
$7.4 million and capitalized software costs of $2.2 million. The uses of cash in
investing activities during fiscal period 1999 consisted primarily of the
purchases of property and equipment of $2.6 million and capitalized software
costs of $1.7 million.
Cash of $12.3 million was provided by financing activities during fiscal period
2000 due primarily to cash received from AOL's purchase of $10.0 million of the
Company's stock at a price of $15 per share, as more fully described in Note 4
of the condensed consolidated financial statements and from the exercise of
employee stock options of $1.8 million. Cash of $2.1 million was provided by
financing activities during fiscal period 1999 due primarily to cash received
from the exercise of employee stock options of $2.5 million, partially offset by
the Company's purchase of common stock pursuant to its stock repurchase program
for approximately $514,000.
In April 2000, the Board of Directors of the Company authorized a stock
repurchase program pursuant to which management is authorized to repurchase up
to 1.0 million shares of common stock of the Company. As of August 9, 2000, the
Company had not repurchased in the open market any of its common stock. Should
the Company decide in the future to repurchase its common stock, any such
purchases will be financed from the Company's cash reserves.
Forward-Looking Statements
Certain statements contained in this filing are "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. These statements appear in a
number of places in this Annual Report and include all statements that are not
statements of historical fact regarding intent, belief or current expectations
of the Company, its directors or its officers with respect to, among other
things: (i) the Company's financing plans; (ii) trends affecting the Company's
financial condition or results of operations; (iii) the Company's growth
strategy and operating strategy (including the development of its products and
services); and (iv) the declaration and payment of dividends. The words "may,"
"would," "could," "will," "expect," "estimate," "anticipate," "believe,"
"intend," "plans," and similar expressions and variations thereof are intended
to identify forward-looking statements. 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 as a
13
<PAGE>
result of various factors. Among the key risks, assumptions and factors that may
affect operating results, performance and financial condition are the Company's
reliance on a small number of customers for a larger portion of its revenues,
fluctuations in its quarterly results, ability to continue and manage its
growth, liquidity and other capital resources issues, competition and the other
factors discussed in detail in the Company's Form 10-K (as amended) filed with
the Securities and Exchange Commission, including the "Risk Factors" therein.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
--------------------------------------------------------------------
The Company's financial instruments that are subject to market risks are its
cash and cash equivalents. During the three and six month periods ended June
30, 2000, the weighted average interest rate on its cash balances was
approximately 6.3% and 6.1%, respectively. A 10.0% decrease in this rate would
have impacted interest income by approximately $88,000 and $159,000,
respectively, during the three and six month periods ended June 30, 2000.
14
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
The Company held its 1999 Annual Meeting of Shareholders on June 23, 2000. Of
the 27,358,686 shares of common stock outstanding and entitled to vote at the
meeting, 25,021,494 shares were represented at the meeting in person or by
proxy. The following matters were voted upon:
1. The election to the Board of Directors of the Company of two persons named
as nominees for director in the Proxy Statement of the Company, to serve
as Class I directors of the Company for a term expiring at the 2003 annual
meeting of shareholders of the Company.
The voting results were as follows:
<TABLE>
<CAPTION>
Nominee For Against
------------------- -------------- ------------
<S> <C> <C>
Erez Goren 22,754,637 2,266,857
Alon Goren 22,842,813 2,178,681
</TABLE>
The term of office of the following other directors continued after the meeting:
Evan O. Grossman, John H. Heyman and James S. Balloun.
2. The approval of an amendment to the 1995 Stock Option Plan to increase the
number of shares available for grant thereunder from 9.0 million shares to 13.0
million shares of common stock. The result of the vote was 14,925,600 shares in
favor (representing 54.6% of the shares present), 6,287,890 against, 78,751
shares abstained and 3,729,253 Broker non-votes. Accordingly, the amendment was
approved.
3. The approval of an amendment to the Company's Amended and Restated Articles
of Incorporation to increase the number of authorized shares of capital stock
from 35,000,000 million to 105,000,000 and common stock from 30,000,000 to
100,000,000. The result of the vote was 21,691,292 shares in favor (representing
79.3% of the shares present), 3,275,803 against and 54,399 shares abstained.
Accordingly, the amendment was approved.
15
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits.
The following exhibit is filed with this Report:
10.1 Asset Purchase Agreement dated June 14, 2000 by and between
Radiant Systems, Inc., Hewlett-Packard Company and Verifone,
Inc.
10.2 Amendment No. 1 to Asset Purchase Agreement dated as of June 22,
2000 by and among Radiant Systems, Inc. Hewlett-Packard Company
and Verifone, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
(i) Form 8-K dated June 22, 2000 reporting acquisition of TimeCorp, Inc.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
RADIANT SYSTEMS, INC
<S> <C> <C>
Dated: August 11, 2000 By: /s/ John H. Heyman
------------------ ------------------------------------------
John H. Heyman, Executive
Vice President and Chief Financial Officer
(Duly authorized officer and principal
financial officer)
</TABLE>
16
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
-------------- ----------------------
10.1 Asset Purchase Agreement dated June 14, 2000 by and
between Radiant Systems, Inc., Hewlett-Packard Company
and Verifone, Inc.
10.2 Amendment No. 1 to Asset Purchase Agreement dated as of
June 22, 2000 by and among Radiant Systems, Inc.
Hewlett-Packard Company and Verifone, Inc.
27 Financial Data Schedule
17
