RDM Corporation reports third quarter results



    Toronto Stock Exchange Symbol: RC

    WATERLOO, ON, July 31 /CNW/ - RDM Corporation (TSX: RC), a leading
provider of solutions for the electronic commerce and payment processing
markets, today reported its financial results for the three month period ended
June 30, 2008.

    
    Q3 2008 Highlights

    -   ITMS(R) end user locations increased from 11,500 to 13,333 during the
        third quarter.

    -   Total revenues were $5.2 million in Q3 2008, compared to $6.8 million
        in Q3 2007.

    -   Digital Imaging segment revenues were $4.3 million, compared to
        $5.5 million a year earlier.

    -   Gross profit was $1.9 million or 37% of revenues, compared to
        $2.8 million or 41% of revenues in the third quarter of 2007.

    -   The remaining proceeds from the Xign disposal totaling $1,062,000
        were received resulting in a gain of $559,000. Xign was disposed in
        2007.

    -   Net loss was $298,000 or $(0.01) per share in the third quarter of
        2008, compared to net earnings of $3,240,000 or $0.15 per share a
        year earlier.

    -   Cash and equivalents at June 30, 2008 were $17.1 million.

    -   Scanner volume for the third quarter of 2008 was 7,500 units compared
        to 10,480 units in the third quarter of 2007.

    -   Transaction volumes for RDM's Image & Transaction Management System
        (ITMS(R)) averaged 2.75 million items per week during the third
        quarter of fiscal 2008, compared to 1.5 million items per week a year
        earlier, and 2.5 million items per week during Q2 2008.

    -   RDM added four additional bank distributors and five new independent
        sales organizations (ISOs) during the quarter.
    

    "We continue to see positive momentum in our ITMS business. Strong
interest in our recently launched Simply Deposit(TM) product enabled us to
grow our ISO channel from one partner to six during the third quarter. We
processed an average of 300,000 more transactions per week than the previous
quarter, and established a new record by adding 1,833 new end user locations
to our network," said Douglas Newman, President and CEO of RDM Corporation.
"Scanner sales, which still constitute the majority of our revenues, were
lower than expected. We experienced delays in some anticipated large orders,
as well as an order for 5,000 units that was booked late in the quarter with
nearly half of the shipments sliding into the next period."
    Mr. Newman continued: "The remote deposit capture market represents an
excellent long-term opportunity, although I believe the rate of deployment has
slowed this year with U.S. banks being distracted by credit-related issues.
Heading into the fourth quarter, we expect to see sequential growth with
fourth quarter revenues returning to the range we saw in the first two
quarters of the fiscal year."

    Financial Review

    RDM recorded revenues of $5.2 million in the three months ended June 30,
2008, a decrease of $1.6 million from the comparable period of fiscal 2007.
The decrease in reported revenue was primarily caused by the rapid
appreciation over the past year of the Canadian dollar compared to the U.S.
dollar, and by a decrease in the volume of scanner sales. The Digital Imaging
segment generated $4.4 million of revenues, a decrease of 20% from Q3 2007, as
lower equipment sales were only partially offset by the continued growth in
ITMS revenues.
    RDM's main distribution channel for its remote deposit capture (RDC)
products and services has been U.S. financial institutions, which over the
past six months have faced challenging times due to asset valuation issues. As
a result of this financial uncertainty, a number of planned or anticipated RDC
initiatives by financial institutions have been delayed due to resource
constraints or shifted priorities. RDC adoption has not grown as quickly in
2008 as many had expected and overall seat deployment is lower than industry
projections made just 10 months ago.
    To both broaden RDM's distribution channel and to accelerate its growth
rate of ITMS revenue, RDM has developed Simply Deposit(TM), an RDC solution
targeted at the small business market. Simply Deposit(TM) can be offered to
businesses through the ISO channel without the need for the businesses to
change their depository relationship.
    Revenues in the Electronic Payments Solutions segment comprised of custom
development projects for government agencies and financial institution
customers, decreased $191,000 to $554,000 in the third quarter of 2008
compared to the third quarter of 2007. Revenues in the Quality Assurance
segment, comprised of quality control products sold to commercial check
printers and processors, were below expectations at $331,000, compared to
$579,000 in Q3 2007.
    Gross profit was $1.9 million in Q3 2008 compared to $2.8 million in the
third quarter of 2007. Expressed as a percentage of revenue, gross margin was
37% in Q3 2008 compared to 41% a year earlier, due to the impact of exchange
rates and a change in product mix.
    Sales and marketing expense increased to $1.3 million from $1.2 million
in Q3 2007, as efforts were focused on signing new ITMS banks and ISO
resellers, preparing for the introduction of a batch scanner, and the launch
of Simply Deposittm. Research and development expenses grew $6,000 to $888,000
as the Company maintained its investment in new product development. General
and administration expenses increased $193,000 to $584,000 during the quarter,
with the increase largely attributable to costs associated with the launch of
Simply Deposit(TM), as well as an unusually low G&A expense incurred in the
third quarter of 2007 due to the timing of certain expenses.
    RDM recorded a net loss of $298,000 in the third quarter of 2008, or
$(0.01) per share, compared to net earnings of $3,240,000 or $0.15 per share a
year earlier. The decrease was caused by a decrease in exchange income on the
forward contracts totaling $0.6 million, a difference in the gain on the sale
of Xign of $2.1 million as well as the impact of the dramatic changes in
exchange rates on revenues.
    RDM implemented a normal course issuer bid in May, and repurchased 12,700
shares during the quarter. The Company had 21,475,126 common shares
outstanding at June 30, 2008.

    Conference Call

    RDM will be hosting a conference call to discuss the Company's third
quarter financial results on July 31, 2008 at 9:00 a.m. ET. Dial-in numbers
are 416-644-3421 or 1-800-731-5319. The call will be webcast live and archived
at www.rdmcorp.com. Detailed financial results and management's discussion and
analysis for the third quarter of fiscal 2008 will be filed at www.sedar.com.

    About RDM Corporation

    RDM Corporation is headquartered in Waterloo, Ontario and trades on the
Toronto Stock Exchange under the symbol RC. RDM is a leading provider of
specialized software and hardware products for electronic payment processing.
RDM has pioneered electronic check conversion systems and web based image and
transaction management services for banks, retailers, payment processors and
government agencies as well as print quality control and image quality systems
for a variety of global customers. For further information, visit RDM's
website at www.rdmcorp.com.
    This news release contains forward-looking statements. Forward-looking
statements are based on estimates and assumptions made by RDM in light of its
experience and its perception of historical trends, current conditions and
expected future developments, as well as other factors that RDM believes are
appropriate in the circumstances. Many factors could cause RDM's actual
results, performance or achievements to differ materially from those expressed
or implied by forward-looking statements. Risk factors relating to RDM are
discussed in the Risks and Uncertainties section of RDM's Annual Information
Form and year-end Management's Discussion and Analysis. These factors should
be considered carefully, and readers should not place undue reliance on RDM's
forward-looking statements. RDM has no intention and undertakes no obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

    

                               RDM CORPORATION
                         Consolidated Balance Sheets
                 (Amounts In Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
                                           June 30, 2008  September 30, 2007
                                               Unaudited       Audited
    -------------------------------------------------------------------------
    Assets:

    Current assets:
      Cash and cash equivalents                 $ 17,107            $ 17,418
      Accounts receivable                          3,713               6,365
      Other receivable                                 -                 503
      Inventories                                  8,343               4,720
      Investment tax credit receivable             1,586               1,451
      Other                                          341               1,843
    -------------------------------------------------------------------------
    Total current assets                          31,090              32,300

    Furniture and equipment                        3,031               2,011
    Intangible assets                                279                 235
    -------------------------------------------------------------------------
    Total assets                                $ 34,400            $ 34,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity:

    Current liabilities:
      Accounts payable and accrued
       liabilities                              $  4,349            $  4,587
      Future income tax liability                    210                 210
      Deferred revenue                               390                 427
    -------------------------------------------------------------------------
    Total current liabilities                      4,949               5,224

    Future income tax liability                       27                  32

    Shareholders' equity:
      Share capital                               28,279              27,978
      Contributed surplus                          1,310                 927
      Retained earnings (deficit)                   (165)                401
      Share purchase loans                             -                (16)
    -------------------------------------------------------------------------
    Total shareholders' equity                    29,424              29,290
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity  $ 34,400            $ 34,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                               RDM CORPORATION
              Consolidated Statements of Operations and Deficit
    (Amounts in Canadian Dollars, In Thousands, Except Per Share Amounts)

                                 Three months ended      Nine months ended
                                        June                    June
                                  2008        2007        2008        2007
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)
    -------------------------------------------------------------------------
    Revenue                     $  5,237    $  6,791    $ 19,131    $ 26,419
    Cost of revenue                3,293       4,021      11,746      15,817
    -------------------------------------------------------------------------
    Gross Profit                   1,944       2,770       7,385      10,602
    Operating expenses:
      Sales and marketing          1,269       1,182       3,564       3,085
      Research and development       888         882       2,846       2,792
      General and administration     584         391       1,471       1,399
      Depreciation and amortization  246         154         610         493
      Stock-based compensation       126         120         383         290
      Interest                      (181)       (123)       (512)       (252)
      Foreign exchange loss (gain)  (131)       (684)        153        (442)
      Gain on sale of long
       term investment              (559)     (2,707)       (559)     (2,707)
    -------------------------------------------------------------------------
                                   2,242        (785)      7,956       4,658
    -------------------------------------------------------------------------
    Earnings (loss) before taxes    (298)      3,555        (571)      5,944
    Future income Tax
     expense (recovery)                -         315          (5)        823
    -------------------------------------------------------------------------
    Net earnings (loss) and
     comprehensive
     earnings (loss)            $  (298)    $  3,240    $   (566)   $  5,121
    -------------------------------------------------------------------------
    Retained earnings (deficit),
     beginning of period        $   133     $ (3,475)   $     401   $ (5,356)
    -------------------------------------------------------------------------
    Retained earnings (deficit),
     end of period              $  (165)    $   (235)   $    (165)  $   (235)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share - basic  $  (.01)    $   0.15    $    (.03)  $   0.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share - basic
     and diluted                $  (.01)    $   0.15    $    (.03)   $  0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                               RDM CORPORATION
                    Consolidated Statements of Cash Flows
                 (Amounts in Canadian Dollars, In Thousands)

                                  Three months ended       Nine months ended
                                          June                    June
                                    2008        2007        2008        2007
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)
    -------------------------------------------------------------------------
    Cash provided by (used in):

    Operations:

    Net earnings (loss)
    Items not involving cash:   $   (298)   $  3,240    $   (566)   $  5,121
      Amortization of furniture
       and equipment                 235         144         580         469
      Amortization of intangible
       assets                         11          10          30          24
      Stock-based compensation       126         120         383         290
      Future income taxes              -         315          (5)        823
      Gain on sale of long-term
       investment                   (559)     (2,707)       (559)     (2,707)
    Change in non-cash operating
     working capital              (1,052)     (2,931)        121      (2,618)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operations                   (1,537)     (1,809)        (16)      1,402

    Financing:

    Issuance of share capital;
     net of issue costs                -         112         321       1,242
    Repayment of share purchase
     loans                             -           8          16          24
    -------------------------------------------------------------------------
    Cash provided by financing
     activities                        -         120         337       1,266

    Investing:

    Repurchase of share capital      (20)          -         (20)          -
    Cash proceeds on sale of
     long-term investment          1,062       8,600       1,062       8,600
    Purchase of furniture and
     equipment                      (232)       (162)     (1,600)       (591)
    Additions to intangible
     assets                          (16)        (27)        (74)        (67)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     investing activities            794       8,411        (632)      7,942
    Increase (decrease) in cash     (743)      6,722        (311)     10,610
    Cash and cash equivalents,
     beginning of period          17,850      10,062      17,418       6,174
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period              $ 17,107    $ 16,784    $ 17,107    $ 16,784
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Douglas Newman, Chief Executive Officer, RDM
Corporation, (519) 746-8483 ext. 340 phone, (519) 746-3317 fax,
dnewman@rdmcorp.com; James Merwin, Chief Financial Officer, RDM Corporation,
(519) 746-8483 ext. 284 phone, (519) 746-3317 fax, jmerwin@rdmcorp.com

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