RDM Corporation Reports Fourth Quarter and Year End Financial Results

Toronto Stock Exchange Symbol: RC

WATERLOO, ON, Dec. 3 /CNW/ - RDM Corporation (TSX: RC), a leading developer of specialized software and hardware products for electronic payment processing, today reported its financial results for the three and twelve-month periods ended September 30, 2009 .

    
    Fiscal 2009 Financial Highlights

    -   Total revenues were $24.5 million in fiscal 2009, a decrease of 8%
        from $26.6 million in 2008.
    -   Payment Processing Services revenues generated by RDM's Image &
        Transaction Management System (ITMS(R)) grew 64% to $9.9 million
        compared to $6.0 million reported in 2008.
    -   The increase in Payment Processing Service revenues resulted in an
        improvement in gross profit from $1.8 million to $4.4 million for the
        segment.
    -   Overall gross profit was $10.4 million or 43% of revenues, compared
        to $9.7 million or 36% of revenues in 2008.
    -   The loss before income taxes and the gain on the sale of the
        Company's investment in Xign was $2.0 million in fiscal 2009,
        compared to a loss of $1.6 million in fiscal 2008.
    -   Net loss was $2.0 million or $0.10 per share (fully diluted) in 2009,
        compared to a loss of $1.0 million or $0.05 per share in the previous
        year.
    -   Cash and equivalents were $15.7 million at September 30, 2009, a
        decrease of $1.7 million from one year earlier.

    Fiscal 2009 Operational Highlights

    -   ITMS transaction volumes averaged 3.7 million items per week during
        the fourth quarter of 2009, compared to 3.12 million items per week
        in Q4 2008, and 3.8 million items per week during Q3 2009.
    -   Nine new bank distributors were signed during the year, bringing the
        total to 41 banks.
    -   ITMS end user locations increased from 14,900 to 17,800 during the
        year.
    -   RDM shipped 22,081 proprietary scanners in 2009, compared to 39,623 a
        year earlier.
    -   The Company released Simply Deposit Mobile(TM), a downloadable
        application specifically designed for mobile customers and initially
        available for the iPhone and latest BlackBerry.
    -   RDM entered into distribution agreements with 29 independent sales
        organizations (ISOs) who are marketing RDC directly to end user
        merchants, bringing the total to 53 ISOs.
    

"In a year where growth opportunities were limited by the economic environment, we achieved a meaningful increase in payment processing revenues and volumes. Our market research validates our view that a significant percentage of small businesses in the U.S. are still very interested in a remote deposit capture solution, but the vast majority have never been offered the service," said Douglas Newman , President and CEO of RDM Corporation. "We continue to believe the market opportunity is substantial, and are cautiously optimistic that momentum will return to the sector in 2010. We expect to be able to capitalize on the basis of our product leadership, distribution channels and financial strength."

    
    Financial Review

    Operating Results by Segment
    For the Year Ended September 30, 2009

                             Payment   Digital  Electronic
    (In thousands of       Processing  Imaging   Payment    Quality
     Canadian dollars)      Services  Products  Solutions  Assurance  Total
                           --------------------------------------------------
    Revenue                   $9,899   $11,780    $1,323    $1,518   $24,520
    Gross profit              $4,396    $4,336      $554    $1,131   $10,417
    Gross profit percentage      44%       37%       42%       75%       42%


    Operating Results by Segment
    For the Year Ended September 30, 2008

                             Payment   Digital  Electronic
    (In thousands of       Processing  Imaging   Payment    Quality
     Canadian dollars)      Services  Products  Solutions  Assurance   Total
                           --------------------------------------------------
    Revenue                   $6,042   $16,129    $2,781    $1,670   $26,622
    Gross profit              $1,843    $5,074    $1,553    $1,179    $9,649
    Gross profit percentage      31%       31%       56%       71%       36%
    

RDM generated total revenues of $24.5 million in the year ended September 30, 2009 , a decrease of $2.1 million from the previous year. The decrease was due to lower scanner revenue, partially mitigated by increased payment processing revenue and by the effects of a stronger U.S. dollar.

Payment Processing Services segment revenues increased by $3.9 million or 64% from a year earlier to $9.9 million , driven by growth in ITMS transaction volumes and end users as well as the change in currency exchange rates. Revenues in the Digital Imaging Products segment decreased by $4.4 million to $11.8 million due to a reduction in scanner shipments attributable to general economic conditions. The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 12% of total revenues for the year, generated revenues of $1.3 million and $1.5 million , respectively, compared to $2.8 million and $1.7 million , respectively, in fiscal 2008.

Gross profit increased by $0.8 million to $10.4 million in fiscal 2009 from $9.7 million in fiscal 2008. Expressed as a percentage of revenues, gross margin was 42.5%, compared to 36.2% a year earlier. Increased margins were due to the favourable impact of exchange rates and a change in product mix to include a higher proportion of payment processing recurring revenue. Gross profit in the Payment Processing Services segment grew to $4.4 million in fiscal 2009 from $1.8 million a year earlier. The segment generated an operating loss of $1.3 million , compared to a loss of $2.8 million in fiscal 2008. This improvement in operating earnings would have been greater if the Company had not invested an additional $0.8 million in sales, marketing and research and development efforts.

Sales and marketing expense increased $251,000 to $5.1 million in fiscal 2009, with efforts focused primarily on the rapidly growing Payment Processing Services segment, and in particular on signing new ITMS banks and ISO resellers and accelerating adoption for their customers. Research and development expenses increased $660,000 to $4.5 million as the Company continued to invest in new product development including Simply Deposit Mobile. General and administration expenses were relatively flat at $1.9 million .

Net loss was $2.0 million in fiscal 2009, or $0.10 per share, compared to a net loss of $1.0 million or $0.05 per share a year earlier. Fiscal 2008 results included a $559,000 gain on the sale of the Company's investment in Xign. The loss before income taxes and the gain on the sale of Xign was $2.0 million in fiscal 2009, compared to a loss of $1.6 million on the same basis in fiscal 2008.

RDM repurchased 478,700 shares during fiscal 2009 under its Normal Course Issuer Bids. At September 30, 2009 , the Company had 20.8 million common shares outstanding.

Fourth Quarter Review

RDM recorded revenues of $5.7 million in the three month period ended September 30, 2009 , down from $7.5 million in the fourth quarter of 2008. Gross margin was 42% in the quarter compared to 36% a year earlier. Operating expenses were $2.1 million , compared to $2.0 million in Q4 2008.

Net earnings were $286,000 or $0.01 per share in the fourth quarter of 2009, compared to a loss of $476,000 or $0.02 per share in the comparable period of last year. Fourth quarter 2009 earnings were positively impacted by the recognition of a $952,000 foreign exchange gain due to the impact of the strengthening of the Canadian dollar during the quarter, while Q4 2008 results included a $399,000 exchange loss.

Executive Change

RDM also announced that John Mamalakis, Vice President of Sales, will be leaving the Company after December 31, 2009 .

"We will miss John's enthusiasm and on behalf of the Company, I would like to wish him well in his future endeavours," said Douglas Newman .

Conference Call

RDM will be hosting a conference call to discuss the Company's fourth quarter and year end financial results on December 3, 2009 at 9:00 a.m. EST . Dial-in numbers are 416-644-3426 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 will be filed on 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 more 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)

    -------------------------------------------------------------------------
    At September 30                                           2009      2008
    -------------------------------------------------------------------------
    Assets:

    Current assets:
      Cash and cash equivalents                           $ 15,718  $ 17,421
      Accounts receivable                                    4,123     4,929
      Inventories                                            3,409     6,325
      Investment tax credit receivable                       1,770     1,703
      Other                                                  2,039     1,087
    -------------------------------------------------------------------------
    Total current assets                                    27,059    31,465

    Furniture and equipment                                  3,275     2,893
    Intangible assets                                          288       278
    -------------------------------------------------------------------------
    Total assets                                          $ 30,622  $ 34,636
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity:

    Current liabilities:
      Accounts payable & accrued liabilities              $  3,062  $  4,945
      Deferred revenue                                         498       631
    -------------------------------------------------------------------------
    Total current liabilities                                3,560     5,576
    -------------------------------------------------------------------------

    Future income tax liability                                201       201

    Commitments

    Shareholders' equity:
      Share capital                                         27,639    28,338
      Contributed surplus                                    1,886     1,162
      Deficit                                               (2,664)     (641)
    -------------------------------------------------------------------------
    Total shareholders' equity                              26,861    28,859
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity            $ 30,622  $ 34,636
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
    Years ended September 30                                  2009      2008
    -------------------------------------------------------------------------

    Revenue                                               $ 24,520  $ 26,622
    Cost of revenue                                         14,103    16,973
    -------------------------------------------------------------------------
    Gross profit                                            10,417     9,649

    Operating expenses (income):
      Sales and marketing                                    5,137     4,886
      Research and development                               4,462     3,802
      General and administration                             1,944     1,914
      Depreciation and amortization                            250       189
      Stock-based compensation                                 407       494
      Foreign exchange loss                                    367       552
      Gain on sale of long term investment                       -      (559)
      Interest                                                (127)     (587)
    -------------------------------------------------------------------------
                                                            12,440    10,691
    -------------------------------------------------------------------------

    Loss before income taxes                                (2,023)   (1,042)

    Income tax expense (recovery):
      Current                                                    -        41
      Future                                                     -       (41)
    -------------------------------------------------------------------------
                                                                 -         -
    -------------------------------------------------------------------------

    Net loss and comprehensive loss                       $ (2,023) $ (1,042)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net loss per share - basic and diluted                $  (0.10) $  (0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                               RDM CORPORATION
                 Statement of Changes in Shareholder's Equity
                 (Amounts in Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
                               Share   Contri-  Retained     Share     Total
                             capital     buted  earnings  purchase
                                       surplus  (deficit)    loans
    -------------------------------------------------------------------------
    Balance as at
     September 30, 2007     $ 27,978  $    927  $    401  $    (16) $ 29,290

    Net loss and
     comprehensive loss            -         -    (1,042)        -    (1,042)
    Issuance of share capital    580      (259)        -         -       321
    Repurchase of share
     capital                    (220)        -         -         -      (220)
    Stock-based compensation       -       494         -         -       494
    Repayment of share
     purchase loans                -         -         -        16        16
    -------------------------------------------------------------------------
    Balance as at
     September 30, 2008     $ 28,338  $  1,162  $   (641) $      -  $ 28,859

    Net loss and
     comprehensive loss            -         -    (2,023)        -    (2,023)
    Repurchase of share
     capital                    (699)      317         -         -      (382)
    Stock-based compensation       -       407         -         -       407
    -------------------------------------------------------------------------
    Balance as at
     September 30, 2009     $ 27,639  $  1,886  $ (2,664) $      -  $ 26,861
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
    Years ended September 30                                  2009      2008
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operations:
      Net loss                                            $ (2,023) $ (1,042)
      Items not involving cash:
        Amortization of furniture and equipment                989       819
        Amortization of intangible assets                       47        40
        Stock-based compensation                               407       494
        Future income tax expense (recovery)                     -       (41)
        Gain of sale of long term investment                     -      (559)
      Change in non-cash operating working capital             687       897
    -------------------------------------------------------------------------
    Cash provided by operations                                107       608

    Financing:
      Issuance of share capital                                  -       321
      Repayment of share purchase loans                          -        16
    -------------------------------------------------------------------------
    Cash provided by financing activities                        -       337

    Investing:
      Repurchase of share capital                             (382)     (220)
      Proceeds from sale of long term investment                 -     1,062
      Purchase of furniture and equipment                   (1,371)   (1,701)
      Additions to intangible assets                           (57)      (83)
    -------------------------------------------------------------------------
    Cash provided by (used in) investing activities         (1,810)     (942)

    -------------------------------------------------------------------------
    Increase (decrease) in cash and cash equivalents        (1,703)        3
    Cash and cash equivalents, beginning of year            17,421    17,418
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year                $ 15,718  $ 17,421
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents comprises:
      Cash                                                     360     4,040
      Guaranteed investment certificates                    15,358    13,381
    -------------------------------------------------------------------------
                                                          $ 15,718  $ 17,421
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

For further information: Douglas Newman, President and CEO, RDM Corporation, [phone], 340 Office, [phone] Fax, [email protected]; James Merwin, CFO & Vice President, Corporate Development, RDM Corporation, [phone], 284 Office, [phone] Fax, [email protected]