Redknee Solutions Reports Fiscal Fourth Quarter and Full Year 2013 Results

TORONTO, Dec. 11, 2013 /CNW/ - Redknee Solutions Inc. (TSX: RKN), a leading provider of business-critical billing and charging software for communications service providers, today reported results for its fiscal fourth quarter and full year ended September 30, 2013. All figures are in U.S. dollars.

Fiscal Q4 2013 Financial Highlights (compared to Q4 2012)

  • Revenue of $57.4 million, up 295% from $14.5 million
  • Recurring revenue was 57% of total revenue compared to 47%
  • Gross margin was 54% compared to 69%
  • Adjusted EBITDA of $4.5 million versus $1.9 million
  • Net loss was $1.0 million or $0.01 per share versus net income of $1.9 million or $0.03 per share
  • Cash increased to $80.1 million at year end
  • Order backlog at $160.4 million

Fiscal Year 2013 Highlights (Compared to FY 2012)

  • Revenue increased 150% to a record $142.0 million
  • Recurring revenue increased to 55% of total revenue compared to 50%
  • Adjusted EBITDA of $11.3 million versus $7.3 million
  • Net loss was $0.3 million or $0.00 per share versus net income of $5.3 million or $0.08 per share

Fiscal Q4 2013 Operational Highlights

  • Tokyu Group's iTSCOM, a leading Japanese Cable TV service provider and existing Redknee customer, signed an additional multi-year contract for Redknee's converged billing and customer care solution
  • BH Telecom, the largest operator in Bosnia and Herzegovina and an acquired customer, signed a multi-million dollar deal to upgrade to the latest version of Redknee's converged billing, charging, policy and customer care solution
  • Multi-million dollar customer contracts announced throughout the quarter across all regions
  • Awarded the Stratecast Frost & Sullivan Award for Global Growth Leadership in Communications Service Provider (CSP) billing
  • Highlighted by Infonetics Research for the innovation leadership of Redknee's integrated charging and policy solution

"In 2013, we completed a transformative acquisition that made us the largest independent real-time monetization and subscriber management software company globally, with more than 200 customers and a strong base of recurring revenue" said Lucas Skoczkowski, CEO of Redknee. "Customers are responding positively to Redknee and we continue to make excellent progress with our integration strategy.  This is reflected in our financial results for the quarter, as well as a growing pipeline, driven by renewals with existing customers, a healthy demand for upgrades, and a general sales momentum.  In 2014, we will continue to emphasize high quality customer service, while we focus on cross-selling and increasing revenue opportunities with our existing customer base and acquiring new customers."

Q4 2013 Financial Results

Revenue in Q4 2013 was $57.4 million, compared to $14.5 million in Q4 2012. The increase was primarily due to the Nokia Siemens Networks BSS acquisition, as well as license expansions, license upgrades, and third-party hardware and software sales.

Recurring revenue was 57% of total revenue compared to 47% for Q4 2012. The increase was due to a higher level of sales and renewals of customer support services, software subscriptions, and term licenses. Recurring revenue consists of support and maintenance, long-term service contracts, and revenue from term-based licenses.

Gross margin was 54% compared to 69% in Q4 2012. This expected decrease in gross margin relates to the change in mix of the revenue recorded and lower support margin from the acquired BSS business.

Adjusted EBITDA was $4.5 million, compared to $1.9 million in the same quarter in the prior year (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net loss totalled $1.0 million or $0.01 per diluted share compared to net income $1.9 million or $0.03 per diluted share in Q4 2012. Q4 2013 net income included $1.7 million of acquisition-related costs.

Contracted order backlog reached $160 million at quarter-end, which included the impact of the acquisition of the BSS business unit.

Full-Year 2013 Financial Results

Revenue in fiscal 2013 increased to $142.0 million, from $56.9 million in fiscal 2012. Recurring revenue for the fiscal year increased to 55% of total revenue, compared to 50% in fiscal 2012, primarily driven by sales to new customers acquired through to the BSS acquisition.

Gross margin for the fiscal year was 56% from 69% in fiscal year 2012.

Net loss totalled $0.3 million, or $0.00 per basic and diluted share, compared to net income of $5.3 million, or $0.08 per basic and diluted share, in fiscal 2012. The year over year decrease relates to acquisition-related costs incurred as a result of the BSS acquisition.

Adjusted EBITDA was $11.3 million, or 8% of revenue, in fiscal 2013, increasing 53% from $7.3 million, or 13% of revenue, in fiscal 2012.

At September 30, 2013, cash and investments were $80.1 million, compared to $17.8 million at September 30, 2012.

Please refer to the section regarding forward-looking statements which form an integral part of this release. These results, along with the audited consolidated financial statements and the company's MD&A, are available on the company's website at www.redknee.com and on SEDAR at www.sedar.com.

Conference Call

The company will host a conference call tomorrow (Thursday, December 12, 2013) to discuss these results. CEO Lucas Skoczkowski and CFO David Charron will host the presentation starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date: Thursday, December 12, 2013
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1 (888) 231-8191
International: 1 (647) 427-7450
Conference ID#: 97301217

The presentation will be webcast live and available for replay via either the Investors section of Redknee's website (www.redknee.com or http://bit.ly/1aUED5e .

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

If you have any difficulty connecting with the conference call, please contact TMX Equicom at 1 (416) 815-0700, ext. 253.

A replay of the call will be available after 11:30 a.m. Eastern time on the same day through December 19, 2013.

Toll-Free Replay Number: 1 (855) 859-2056 International Replay Number: 1 (416) 849-0833 Replay PIN: 9730121

About Redknee Solutions Inc.

Redknee is a leading global provider of innovative communication software products, solutions and services. Redknee's award-winning solutions enable service providers to monetize new services, business models and content and to deliver a comprehensive customer experience. Redknee's revenue and subscriber management platform provides innovative converged billing, charging, customer care, and payments solutions for voice, messaging and data services to over 200 service providers in over 90 countries. Established in 1999, Redknee Solutions Inc. (TSX: RKN) is the parent of the wholly-owned operating subsidiary Redknee Inc. and its various subsidiaries. References to Redknee refer to the combined operations of those entities. For more information about Redknee and its solutions, please go to www.redknee.com.

Adjusted EBITDA

Beginning in the first fiscal quarter of 2013, the company has begun to report adjusted EBITDA, which is not a financial measure calculated and presented in accordance with International Financial Reporting Standards (IFRS), and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, or as an alternative to cash flow from operating activities as a measure of liquidity. The company defines adjusted EBITDA as net income (loss) from continuing operations excluding amounts for depreciation and amortization, other (income) / expenses, finance costs, finance income, income taxes, foreign exchange (gain) loss, share-based compensation, and acquisition-related costs. EBITDA is not a measure of financial performance under IFRS, and should not be considered in isolation or as a substitute for consolidated net income (loss) as a measure of performance.

Other companies (including competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in Redknee's industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Redknee or is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA in isolation or as a substitute for analysis of the company's results as reported under IFRS. See "Reconciliation of Net Income (Loss) to adjusted EBITDA" below for further information on this non-IFRS measure.

Forward-Looking Statements 

Certain statements in this document may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this document, such statements use such words as "may," "will," "expect," "continue," "believe," "plan," "intend," "would," "could," "should," "anticipate" and other similar terminology. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Persons reading this news release are cautioned that such information may not be appropriate for other purposes.

Such forward-looking statements include the statements regarding financial and other projections as well as statements regarding Redknee's future plans, objectives or performance for the current period and subsequent periods and regarding the markets for our products. These statements reflect current assumptions and expectations regarding future events and operating performance and speak only as of the date of this document. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward-looking statements, including, but not limited to, the inability of Redknee's products to perform as expected, a material adverse change in the affairs of Redknee, and the factors discussed under the "Risk Factors" section of Redknee's most recently filed AIF which is available on SEDAR at www.sedar.com and on Redknee's web-site at www.redknee.com. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements.

Although the forward-looking statements contained in this document are based upon what Redknee believes are reasonable assumptions, Redknee cannot assure investors that our actual results will be consistent with these forward-looking statements. Redknee assumes no obligation to update or revise these forward-looking statements to reflect new events or circumstances, except as required by securities law.

REDKNEE SOLUTIONS INC.
Consolidated Statements of Financial Position
(Expressed in U.S. dollars)
 
September 30, 2013 and 2012
           
    2013    2012
         
Assets        
         
Current assets:        
  Cash and cash equivalents  $  79,054,757  $  16,878,523
  Trade accounts and other receivables    66,393,041   10,394,639
  Unbilled revenue     39,421,584    12,125,089
  Prepaid expenses    1,943,986   799,901
  Other assets     832,516   649,272
  Inventories     6,644,580   580,171
  Total current assets      194,290,464    41,427,595
         
Restricted cash     1,011,361    913,270
Property and equipment     10,890,910   726,818
Deferred income taxes    1,923,409    659,260
Investment tax credits    378,923   550,000
Other assets    3,179,724   3,170,308
Intangible assets    38,732,447    3,671,306
Goodwill    7,638,590   7,638,590
         
Total assets   $  258,045,828  $  58,757,147
         
Liabilities and Shareholders' Equity        
         
Current liabilities:        
  Trade payables  $  15,707,464  $  1,756,532
  Accrued liabilities     59,532,922   7,156,844
  Provisions    1,201,050   -
  Income taxes payable    2,445,616    2,036,864
  Deferred revenue     14,935,451   7,258,759
  Loans and borrowings    375,000    -
  Total current liabilities    94,197,503   18,208,999
         
Deferred revenue    4,149,940   78,002
Other liabilities    1,892,576    439,398
Pension and non-pension post-employment benefit obligation   814,335   -
Contingent consideration    24,833,537    -
Loans and borrowings    32,956,036   5,461,970
Embedded derivative liability    900,570    -
Deferred income taxes    744,652   408,156
Total liabilities    160,489,149    24,596,525
         
Shareholders' equity:        
  Share capital    109,017,145   46,543,100
  Treasury stock    (132,050)    (264,584)
  Contributed surplus    4,357,175   4,787,549
  Deficit    (17,182,622)    (16,918,912)
  Accumulated other comprehensive income    1,497,031   13,469
  Total shareholders' equity    97,556,679   34,160,622
         
Total liabilities and shareholders' equity  $  258,045,828  $  58,757,147


REDKNEE SOLUTIONS INC.
Consolidated Statements of Comprehensive Income
(Expressed in U.S. dollars)
 
Years ended September 30, 2013 and 2012
 
    2013    2012
         
Revenue:        
  Software, services and other  $  68,066,282  $  33,859,929
  Support    73,981,190   23,004,219
    142,047,472    56,864,148
         
Cost of revenue    63,114,358    17,865,463
         
Gross profit    78,933,114    38,998,685
         
Operating expenditures:        
  Sales and marketing    25,133,152   14,704,054
  General and administrative    20,653,701    9,247,155
  Research and development    34,421,619    9,382,866
  Acquisition and related costs    12,963,575    -
    93,172,047    33,334,075
         
Income (loss) from operations    (14,238,933)    5,664,610
         
Foreign exchange loss    (676,151)    (38,881)
Other income (expenses)     15,814,798    (13,938)
Finance income    31,292    99,718
Finance costs     (1,011,314)   (449,753)
         
Income (loss) before income taxes    (80,308)    5,261,756
         
Income taxes (recovery):        
  Current    1,920,688    964,069
  Deferred    (1,737,286)    (1,004,370)
    183,402   (40,301)
       
Net income (loss)    (263,710)    5,302,057
         
Other comprehensive income:        
  Actuarial gain on pension and non-pension post-employment
  benefit plans, net of income tax of $ 753,101
  1,483,562    -
         
Total comprehensive income  $  1,219,852  $  5,302,057
         
Net income per common share:        
  Basic  $  0.00  $  0.08
  Diluted    0.00   0.08
         
         
Weighted average number of common shares:        
  Basic    82,808,206   64,178,009
  Diluted    82,808,206    65,129,225


REDKNEE SOLUTIONS INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
 
Years ended September 30, 2013 and 2012
 
    2013    2012
         
Cash provided by (used in):        
         
Operating activities:        
  Net income (loss)  $  (263,710)  $  5,302,057
  Adjustments for:        
    Depreciation of property and equipment    2,779,362    226,606
    Amortization of intangible assets    3,699,363   727,572
    Finance income    (31,292)    (99,718)
    Finance costs    1,011,314    449,753
    Income tax expense (recovery)    183,402    (40,301)
    Unrealized foreign exchange loss (gain)    221,878    (93,760)
    Bargain purchase gain from acquisition    (15,814,798)    -
    Share-based compensation    6,065,374   729,160
    Revaluation of contingent consideration    1,271,305    6,588
  Change in non-cash operating working capital    (8,474,238)   1,075,803
    (9,352,040)   8,283,760
  Interest paid    (604,653)    (114,081)
  Interest received    40,258   99,590
  Income taxes paid    (1,088,213)   (1,293,995)
    (11,004,648)    6,975,274
         
Financing activities:        
  Proceeds from public offering    18,731,390    -
  Proceeds from private placement    41,060,376    -
  Proceeds from exercise of stock options     1,749,994    168,039
  Purchase of treasury stock      (714,608)
  Proceeds from loans and borrowings    30,000,000   5,911,319
  Repayment of loans and borrowings    -    (8,362,083)
  Transaction costs on loans and borrowings    (1,530,954)   (449,523)
    90,010,806    (3,446,856)
         
Investing activities:        
  Purchase of property and equipment    (2,403,507)   (575,411)
  Purchase of intangible assets    (493,868)    (42,357)
  Decrease in restricted cash    (98,091)   (128,450)
  Settlement of Nimbus Systems contingent consideration    -   (877,377)
  Acquisition of business     (13,612,580)    -
    (16,608,046)   (1,623,595)
         
Effect of foreign exchange rate changes
  on cash and cash equivalents 
  (221,878)    93,760
         
Increase in cash and cash equivalents    62,176,234   1,998,583
         
Cash and cash equivalents, beginning of year    16,878,523    14,879,940
         
Cash and cash equivalents, end of year  $  79,054,757  $  16,878,523


REDKNEE SOLUTIONS INC.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Expressed in U.S. dollars)
(Unaudited)
 
  Three months ended  Twelve months ended
  September 30,  September 30,
  2013  2012  2013  2012
         
Net income (loss) for the period  (969,927)  1,873,468  (263,710)  5,302,057
         
Add back / (subtract):        
  Depreciation of property and equipment  1,758,046  79,356  2,779,362  226,606
  Amortization of intangible assets  1,749,281  174,451  3,699,363  727,572
  Other (income) expenses  (4,017,973)  -  (15,814,798)  13,938
  Finance income  (8,633)  (28,061)  (31,292)  (99,718)
  Finance costs  568,819 152,580  1,011,314  449,753
  Income tax expense  (682,643)  (254,377)  183,402  (40,301)
  Share-based compensation  4,880,298  74,594  6,065,374  729,160
  Foreign exchange loss (gain)  (563,532)  (177,801)  676,151  38,881
         
EBITDA  2,713,736  1,894,210  (1,694,834)  7,347,948
         
Adjustments:    
  Acquisition and related costs  1,769,119  -  12,963,575  -
         
Adjusted EBITDA  $ 4,482,855  $ 1,894,210   $ 11,268,741  $ 7,347,948

 

SOURCE Redknee Solutions Inc.

For further information:

Investor Relations:
Robert Kelly
TMX Equicom
T: (416) 815-0700 ext. 253
rkelly@tmxequicom.com  

Craig Armitage
TMX Equicom
T: (416) 815-0700 ext. 278
carmitage@tmxequicom.com