Redknee Reports Profitable Growth in Q3-2009



    TORONTO, Aug. 5 /CNW/ - Redknee (TSX:RKN), a leading provider of
business-critical software and services for communications service providers,
including end-to-end converged billing, real-time charging, rating and
personalization, today announced its results for the third quarter of fiscal
2009, ended June 30, 2009.

    
    Q3 Highlights:
    --------------
    -   Third quarter 2009 revenue up 21% to $14.5M (Q3 2008: $11.9M)
    -   Gross margin increased to 79% (Q3 2008: 64%)
    -   EBITDA profit of $2.5M (Q3 2008: loss of $2.5M)
    -   Operating profit of $0.8M (Q3 2008: operating loss of $3.6M)
    -   Signed a multi-million dollar contract for the Turnkey Converged
        Billing ("TCB") solution in EMEA
    -   Signed multi-million dollar license expansion with a Tier-1 EMEA
        operator
    -   Secured a service bureau contract with a leading Asia Pacific
        operator
    -   Recognized by Stratecast as a "Top 10" To Watch In OSS/BSS Elite
    -   Cash and investments at $22.4M (September 30, 2008: $15.3M)
    -   Received another patent (17 granted patents, 50 pending applications)
    

    "Redknee continues to execute on our stated corporate growth strategy. We
remain focused on annual growth with emphasis on increasing our recurring
revenues, while continuing to take market share in the real-time monetization
space" noted Lucas Skoczkowski, CEO for Redknee. He added "Our disciplined
execution has resulted in increased revenue, a strong cash position, and
another profitable quarter. While our focus remains on driving annual
profitable growth, quarter to quarter revenue volatility and foreign exchange
headwind will continue to present challenges.

    Please see section regarding Forward-Looking Statements which form an
integral part of this release. These results, along with the unaudited
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

    
    OVERVIEW
    --------
    Redknee remains focused on the three core elements of its corporate
strategy:

    1.  Continued expansion and evolution of our business-critical solutions
        to our global customer base;
    2.  Market share growth and leadership in our served addressable market;
        and
    3.  An increasing proportion of sustainable recurring revenues.

    --------------------------------------
    (1) Earnings Before Interest Expense, Income Taxes, Depreciation, and
        Amortization (EBITDA) is a non-GAAP measure. While useful in
        understanding Company operational results, EBITDA is not standardized
        and may not be comparable to similar results reported by other
        companies. EBITDA described above is calculated as Income (loss) from
        operations, net of foreign exchange gain/loss, amortization and
        stock-based compensation.
    

    Sales of Redknee's business-critical solutions have continued to grow in
the third quarter of fiscal 2009, with our Turnkey Converged Billing and Next
Generation Rating & Charging solutions contributing more than 95% of revenue.
    Stratecast/Frost and Sullivan, an industry analyst, presented Redknee the
Stratecast Global OSS/BSS Top Ten to Watch Award. This recognition is awarded
to responsive and well-managed companies that have emerged as real competitors
to the established OSS/BSS elite. Stratecast specifically recognized Redknee
for delivering a well-defined and clearly differentiated product offering,
along with a level of agility and a culture of innovation that stands out
amongst the competition around the globe.
    Redknee's market leading solutions continue to be recognized globally by
telecom providers. In the third quarter Redknee:

    
    -   Signed a multi-million dollar contract for Redknee's Turnkey
        Converged Billing ("TCB") solution. This solution enables the EMEA
        operator to manage its wireless, fixed, and broadband services with a
        complete converged billing solution, providing a seamless triple-play
        experience to its subscribers.

    -   Signed a multi-million dollar license expansion agreement for its
        Next Generation Rating and Charging (NGRC) solution, which provides
        advanced rating and charging capabilities and facilitates the
        increased adoption and consumption of the EMEA operator's growing
        data services.

    -   Expanded its customer base in the high growth markets by adding a
        leading Tier-1 operator in the Asia Pacific (APAC) region.

    Financial Review
    ----------------
    
    For the third quarter of fiscal 2009, Redknee's revenue grew by 21 % to
$14.5 million compared to revenue of $11.9 million in the third quarter of
fiscal 2008. The majority of the Company's revenue is denominated in U.S.
dollars and thus revenues may be impacted by exchange rate fluctuations.
    Recurring revenue was enhanced by sales and renewals of customer support
services, software subscriptions and term licenses. On a four-quarter trailing
basis, recurring revenues were at 38 % of overall revenues.
    Gross margin in the period increased to $11.5 million or 79% of revenue
from $7.7 million or 64% of revenue in the third quarter of fiscal 2008.
    Redknee recorded an EBITDA profit of $2.5 million for the third quarter
of fiscal 2009 as compared to an EBITDA loss of $2.5 million for the third
quarter of fiscal 2008.
    For the nine month period ended June 30, 2009, the Company experienced a
foreign exchange gain of $ 0.9 million. For the quarter ended June 30, 2009,
the Company recognized a foreign currency exchange loss of $1.3 million, as
compared to a foreign currency exchange loss of $0.7 million in the same
period of fiscal 2008.
    Net income in Q3 fiscal 2009 was $0.5 million or $ 0.01 per share, as
compared to a loss of $3.9 million or $0.07 per share in Q3 fiscal 2008.
    Cash and investments as at June 30, 2009 was $22.4 million versus $15.3
million as at September 30, 2008.

    CONFERENCE CALL

    The Company will discuss the results on a conference call and webcast at
7:30 a.m. ET time on Thursday, August 6, 2009.
    To participate in the conference call please dial the following numbers
five minutes before the start of the call to ensure your participation:

    
    Local dial-in number           416-644-3431
    Toll-free North America        800-814-4859
    Toll-free United Kingdom       00 800 2288 3501

    A webcast will also be available at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2742300
    A copy of the presentation for the call will be available at:
http://redknee.com/investors/company_reports

    Conference Replay
    -----------------
    
    The conference call will be archived for replay by telephone at:
416-640-1917 or Toll-Free at 1-877-289- 8525 (Passcode 21311221 followed by
the number sign) from 10:30 am on August 6, to 11:59 pm on August 20, 2009.

    FORWARD-LOOKING STATEMENTS

    Certain statements in this Release which are not historical facts may
constitute forward-looking statements or forward-looking information within
the meaning of applicable securities laws ("forward-looking statements"). Any
statements related to Redknee's projected revenues, earnings, growth rates,
revenue mix, staffing and resources, and product plans are forward looking
statements as are any statements relating to future events, conditions or
circumstances. The use of terms such as "believes", "anticipated", "expected",
"projected", "targeting", "estimate", "intend" and similar terms are intended
to assist in identification of these forward-looking statements. Readers are
cautioned not to place undue reliance upon any such forward-looking
statements. Such forward-looking statements are not promises or guarantees of
future performance and involve both known and unknown risks and uncertainties
that may cause the actual results, performance, achievements or developments
of Redknee to differ materially from the results, performance, achievements or
developments expressed or implied by such forward-looking statements.
    Forward-looking statements are based on management's current plans,
estimates, projections, beliefs and opinions. Except as required by law,
Redknee does not undertake any obligation to update forward-looking statements
should assumptions related to these plans, estimates, projections, beliefs and
opinions change.
    The Company undertakes no obligation, except as required by law, to
update publicly or otherwise any forward-looking information, whether as a
result of new information, future events or otherwise, or the above list of
factors affecting this information.
    Many factors could cause the actual results of Redknee to differ
materially from the results, performance, achievements or developments
expressed or implied by such forward-looking statements, including, without
limitation, each of the following factors, which are further discussed in the
section of the Company's AIF entitled Risk Factors, and which is available on
SEDAR at www.sedar.com and on the Company's web-site at www.redknee.com.

    About REDKNEE:

    Redknee is a leading global provider of innovative communication software
products, solutions and services. Redknee's award-winning solutions enable
operators to monetize the value of each subscriber transaction while
personalizing the subscriber experience to meet mainstream, niche and
individual market segment requirements. Redknee's revenue generating solutions
provide advanced converged billing, rating, charging and policy for voice,
messaging and new generation data services to over 70 network operators in
over 50 countries. References to Redknee refer to the combined operations of
the parent Redknee Solutions Inc, and all wholly owned subsidiaries.
    Redknee(R), Redknee Solutions, and the Redknee logo are trademarks or
registered trademarks of Redknee Solutions Inc. All other company, product
names and any registered and unregistered trademarks mentioned (if any) are
used for identification purposes only and remain the exclusive property of
their respective owners.
    For more information, visit www.redknee.com.


    
    Redknee Solutions Inc.
    Interim Consolidated Balance Sheet
    (Unaudited)
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)
                                                           June    September
                                                             30,          30,
                                                           2009         2008
                                                              $            $

    Assets

    Current assets
    Cash and cash equivalents                        18,274,398   15,242,607
    Short-term investments                            4,135,288       56,363
    Trade accounts and other receivables             13,122,935   11,192,182
    Unbilled revenue                                  2,280,758    6,060,452
    Investment tax credits and income taxes
     receivable                                         675,000      600,000
    Prepaid expenses                                  1,088,326    1,066,584
    Goods in transit                                    526,069      325,716
                                                    -------------------------

                                                     40,102,774   34,543,904

    Restricted cash (note 7)                            605,774      409,919

    Property and equipment                              669,972      580,053

    Intangible assets                                 1,217,849    1,388,761

    Other assets                                        557,411      528,294
                                                    -------------------------

                                                     43,153,780   37,450,931
                                                    -------------------------
                                                    -------------------------
    Liabilities

    Current liabilities
    Accounts payable                                  1,232,850    2,172,268
    Accrued liabilities                               8,349,682    8,678,539
    Income taxes payable                              2,844,527    2,100,785
    Deferred revenue                                  6,982,290    5,084,287
    Current portion of obligations under capital
     leases                                                   -          619
                                                    -------------------------

                                                     19,409,349   18,036,498
                                                    -------------------------
    Shareholders' Equity

    Share capital, net of employee share purchase
     loans                                           40,388,274   39,686,701
                                                    -------------------------

    Contributed surplus                               4,406,035    4,410,677
                                                    -------------------------

    Deficit                                         (20,896,913) (24,471,986)

    Accumulated other comprehensive loss, net of
     income taxes                                      (152,965)    (210,959)
                                                    -------------------------

    Total deficit and accumulated other
     comprehensive loss                             (21,049,878) (24,682,945)
                                                    -------------------------

                                                     23,744,431   19,414,433
                                                    -------------------------

                                                     43,153,780   37,450,931
                                                    -------------------------
                                                    -------------------------
    Guarantees and contingencies (note 7)


    Redknee Solutions Inc.
    Interim Consolidated Statement of Operations
    (Unaudited)
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)

                                Three months ended         Nine months ended
                                           June 30,                  June 30,
                          ------------------------- -------------------------
                                 2009         2008         2009         2008
                                    $            $            $            $
    Revenue
    Software, services and
     other                  8,861,397    8,078,812   26,195,166   25,425,719
    Support and
     subscription           5,618,489    3,860,394   16,251,870   10,601,626
                          ---------------------------------------------------

                           14,479,886   11,939,206   42,447,036   36,027,345

    Cost of revenue         3,008,663    4,284,895    9,300,867   11,670,985
                          ---------------------------------------------------

    Gross profit           11,471,223    7,654,311   33,146,169   24,356,360
                          ---------------------------------------------------

    Operating expenses
    Selling and marketing   3,765,183    4,005,832   12,040,384   12,116,903
    General and
     administrative         2,470,037    2,726,886    7,451,500    7,566,437
    Research and
     development (note 4)   2,931,780    3,731,752    9,591,644   10,252,886
    Amortization of property
     and equipment and
     intangible assets        169,897       91,848      482,026      218,943
    Foreign currency
     exchange (gain) loss   1,311,451      665,267     (909,409)  (1,043,737)
                          ---------------------------------------------------

                           10,648,348   11,221,585   28,656,145   29,111,432
                          ---------------------------------------------------

    Income (loss) from
     operations               822,875   (3,567,274)   4,490,024   (4,755,072)

    Interest income             4,968       57,292       45,751      391,500
    Interest expense          (10,681)    (102,890)     (14,880)    (112,482)
                          ---------------------------------------------------

    Income (loss) before
     income taxes             817,162   (3,612,872)   4,520,895   (4,476,054)

    Income taxes
    Current                   309,147      241,406      945,822      833,781
                          ---------------------------------------------------

    Net income (loss) for
     the period               508,015   (3,854,278)   3,575,073   (5,309,835)
                          ---------------------------------------------------
                          ---------------------------------------------------

    Net income (loss) per
     common share (note 2)
    Basic                        0.01        (0.07)        0.06        (0.09)
    Diluted                      0.01        (0.07)        0.06        (0.09)

    Weighted average number
     of common shares
     (note 2)
    Basic                  57,107,659   56,347,051   57,107,659   56,347,051
    Diluted                59,122,135   57,232,051   58,226,223   57,232,051



    Redknee Solutions Inc.
    Interim Consolidated Statement of Cash Flows
    (Unaudited)
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)

                                Three months ended         Nine months ended
                                           June 30,                  June 30,
                          ------------------------- -------------------------
                                 2009         2008         2009         2008
                                    $            $            $            $
    Cash provided by (used in)

    Operating activities
    Net income (loss) for
     the period               508,015   (3,854,278)   3,575,073   (5,309,835)
    Items not involving cash
      Amortization of property
       and equipment          112,115       91,848      311,114      218,943
      Amortization of
       intangible assets       57,782                   170,912
      Unrealized foreign
       currency exchange
       gain                 2,114,121      275,041   (1,333,887)  (1,176,950)
      Stock-based
       compensation
       (note 3)               189,935      288,620      513,058      766,214
    Change in non-cash
     operating working
     capital (note 5)        (417,866)     282,355    3,537,092   (3,660,586)
                          ---------------------------------------------------

                            2,564,102   (2,916,414)   6,773,362   (9,162,214)
                          ---------------------------------------------------

    Financing activities
    Collection of employee
     loans                    109,621                   168,650
    Proceeds from exercise
     of options                15,224                    15,224
    Repayment of obligations
     under capital leases                  (18,585)        (619)     (43,672)
                          ---------------------------------------------------

                              124,845      (18,585)     183,255      (43,672)
                          ---------------------------------------------------

    Investing activities
    (Purchase of) proceeds
     from short-term
     investments            4,958,910    1,300,497   (4,078,925)   8,701,591
    Purchase of property and
     equipment                (88,088)    (163,939)    (401,033)    (340,144)
    (Increase) decrease in
     other assets               8,118       96,407      (29,116)    (261,744)
    Loan to Argent Networks
     PTY Ltd.                                                       (529,463)
    Collection of loan from
     Argent Networks PTY Ltd.                                        526,754
    Increase in restricted
     cash                      50,911          464     (195,854)    (378,722)
    Acquisition of Argent
     Networks PTY Ltd., net of
     cash acquired                                                (1,084,255)
                          ---------------------------------------------------

                            4,929,851    1,233,429   (4,704,928)   6,634,017
                          ---------------------------------------------------

    Effect of foreign
     currency exchange rate
     changes on cash and
     cash equivalents        (419,179)    (239,000)     780,102      382,000
                          ---------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents during the
     period                 7,199,619   (1,940,570)   3,031,791   (2,189,869)

    Cash and cash
     equivalents -
     Beginning of period   11,074,779    8,678,471   15,242,607    8,927,770
                          ---------------------------------------------------

    Cash and cash
     equivalents - End of
     period                18,274,398    6,737,901   18,274,398    6,737,901
                          ---------------------------------------------------
                          ---------------------------------------------------

    Supplemental cash flow
     information
    Interest paid              10,681          235       14,880        1,795
    Interest received           4,968       56,888       45,751      390,645
    Cash taxes/investment
     tax credits received,
     net of income taxes
     paid                     130,895      174,909      328,531      364,499

    




For further information:

For further information: Redknee Solutions Inc., Lucas Skoczkowski,
Chief Executive Officer, David Charron, Chief Financial Officer, Isabel
Fernandes-Cunha, Investor Relations, Tel: (905) 625-2622, Fax: (905) 625-2773


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