Redknee Reports First Quarter Fiscal 2010 Financial Results
Q1 Highlights:
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- First quarter 2010 revenue down 17% to $11.8M (Q1 2009: 14.2M)
- Gross margin increased to 77% (Q1 2009: 76%)
- EBITDA profit of $1.7M (Q1 2009: $0.9M)
- Operating profit of $0.8M (Q1 2009: $3.2M)
- Two new customers, one in North America and one in EMEA, as well as
notable TCB license expansions across EMEA and APAC
- Launched Interconnect Billing (InBill) 6.0 version
- Patents: 17 issued, 53 pending applications
- Recipient of the 2009 INTERNET TELEPHONY BSS/OSS Excellence Award.
"Redknee delivered another consecutive profitable quarter on an EBITDA basis, while adding customers across our key markets. Our strategy has positioned us well to benefit from the opportunities in both the high growth markets of
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
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(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.
OVERVIEW
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Redknee remains focused on the three core elements of its long-term corporate growth 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.
Sales of Redknee's business-critical solutions have been robust in the context of economic and market uncertainties our customers operate in. Redknee's Turnkey Converged Billing and Next Generation Rating & Charging solutions contributed over 90% of first quarter revenue - in line with our plan. More specifically, the sales of Redknee's Turnkey Converged Billing and InBill solutions have grown the fastest in the quarter, largely thanks to winning new operator system replacements and expanding licenses in existing operators. This further underscores the advantages of the broad software system offering that Redknee is bringing to its target markets.
Redknee's market leading solutions continue to be recognized globally by telecom providers. Redknee has continued to take market share in its served addressable market by gaining two new customers across Americas and EMEA regions through a combination of deliveries to new operators, modular software delivery that integrate with existing systems, as well as replacement of competitors' end-to-end platforms. Technology Marketing Corporation (TMC) has named Redknee's One Call Resolution a recipient of the 2009 INTERNET TELEPHONY BSS/OSS Excellence Award presented by INTERNET TELEPHONY magazine.
Growth of recurring revenue was enhanced by managed service contracts and renewals of support services, software subscriptions and term licenses. On a four-quarter trailing basis, recurring revenues were at 43% of our overall revenues.
Redknee continues to have a strong employee base, a growing number of customers, and the right products with patents to meet our customers' demands. Market trends further support our approach; mobile data services continue to grow in Tier 1 markets, and wireless subscriber numbers continue to expand in the high growth markets of
Financial Review
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For the three-months ended
The decrease in revenue for the quarter noted above relates primarily to the decline in revenue from initial deployments and upgrades. This can be attributed to general economic uncertainties, during which operators deferred project commitments and implementations and lowered license expansions in response to declining average revenue per subscriber, slower subscriber additions and foreign exchange fluctuations in their respective operating regions.
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 43% of overall revenues.
Gross profit in the period decreased to
Redknee recorded an EBITDA profit of
For the quarter ended
Net income in Q1 fiscal 2010 was
Cash and investments as at
Organizational Evolution
In an event subsequent to the end of the fiscal quarter, Redknee announced today changes to its senior management team. Effective
CONFERENCE CALL
The Company will discuss the results on a conference call and webcast at
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 647-427-7450
Toll-free North America 1-888-231-8191
A webcast will also be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2941620
A copy of the presentation for the call will be available at: http://www.redknee.com/investors/company_reports
Conference Replay
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The conference call will be archived for replay by telephone at: 416- 849-0833 or Toll-Free at 1-800-642-1687 (Passcode: 51955401) from
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. 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 factors discussed under the "Risk Factors" section of the Company's the most recently filed AIF which is available on SEDAR at www.sedar.com and on the Company's web-site at www.redknee.com.
Although the forward-looking statements contained in this document are based upon what we believe are reasonable assumptions, we cannot assure investors that our actual results will be consistent with these forward-looking statements. We assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances, except as required by securities law.
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)
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(expressed in Canadian dollars)
December September
31, 2009 30, 2009
$ $
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Assets
Current assets
Cash and cash equivalents 23,233,565 25,663,047
Short-term investments 278,211 107,049
Trade accounts and other receivables 9,709,663 8,160,277
Unbilled revenue 3,090,894 2,670,431
Investment tax credits and income taxes
receivable 600,000 600,000
Prepaid expenses 939,376 1,027,056
Goods in transit 140,118 242,099
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37,991,827 38,469,959
Restricted cash (note 7) 151,671 322,722
Property and equipment 555,239 623,567
Intangible assets 1,055,792 1,139,444
Future income taxes 336,322 334,513
Other assets 465,772 464,303
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40,556,623 41,354,508
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Liabilities
Current liabilities
Accounts payable 781,883 907,694
Accrued liabilities 4,724,322 5,899,843
Income taxes payable 2,498,541 2,529,923
Deferred revenue 6,693,351 6,988,512
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14,698,097 16,325,972
Long-term deferred revenue 682,990 1,005,164
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15,381,087 17,331,136
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Shareholders' Equity
Share capital, net of employee share
purchase loans 41,383,188 40,744,480
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Contributed surplus 4,531,121 4,572,737
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Deficit (20,580,250) (21,144,555)
Accumulated other comprehensive loss, net
of income taxes (158,523) (149,290)
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Total deficit and accumulated other
comprehensive loss (20,738,773) (21,293,845)
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25,175,536 24,023,372
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40,556,623 41,354,508
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Guarantees and contingencies (note 7)
Redknee Solutions Inc.
Interim Consolidated Statement of Operations
(Unaudited)
For the three months ended December 31
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(expressed in Canadian dollars)
2009 2008
$ $
Revenue
Software, services and other 7,003,612 9,398,531
Support and Subscription 4,776,465 4,818,570
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11,780,077 14,217,101
Cost of revenue 2,719,296 3,369,931
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Gross profit 9,060,781 10,847,170
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Operating expenses
Selling and marketing 3,156,571 4,379,946
General and administrative 1,660,581 2,370,134
Research and development (note 4) 2,743,323 3,343,337
Amortization of property and equipment and
intangible assets 158,721 192,237
Foreign currency exchange (gain) loss 493,131 (2,637,959)
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8,212,327 7,647,695
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Income from operations 848,454 3,199,475
Interest income 1,674 25,076
Interest expense (12,796) (2,030)
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Income before income taxes 837,332 3,222,521
Income taxes
Current 273,027 361,415
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Net income for the period 564,305 2,861,106
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Net income per common share (note 2)
Basic 0.01 0.05
Diluted 0.01 0.05
Weighted average number of common shares (note 2)
Basic 58,800,461 56,643,532
Diluted 60,923,165 57,111,032
Redknee Solutions Inc.
Interim Consolidated Statement of Cash Flows
(Unaudited)
For the three months ended December 31
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(expressed in Canadian dollars)
2009 2008
$ $
Cash provided by (used in)
Operating activities
Net income for the period 564,305 2,861,106
Items not involving cash
Amortization of property and equipment 99,311 116,899
Amortization of intangible assets 59,410 75,338
Unrealized foreign currency exchange loss (gain) 501,505 (2,517,090)
Stock-based compensation (note 3) 162,984 188,239
Change in non-cash operating working capital
(note 5) (3,885,860) 6,831,323
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(2,498,345) 7,555,815
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Financing activities
Collection of employee share purchase loans 434,108 17,651
Repayment of obligations under capital leases - (619)
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434,108 17,032
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Investing activities
Purchase of short-term investments (171,161) (4,510,602)
Purchase of property and equipment (30,983) (138,898)
Increase in other assets (1,469) (47,905)
Increase (decrease) in restricted cash 171,051 (1,241)
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(32,562) (4,698,646)
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Effect of foreign currency exchange rate
changes on cash and cash equivalents (332,683) 1,181,947
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Increase (decrease) in cash and cash
equivalents during the period (2,429,482) 4,056,148
Cash and cash equivalents - Beginning of period 25,663,047 15,242,607
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Cash and cash equivalents - End of period 23,233,565 19,298,755
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Supplemental cash flow information
Interest paid 1,674 2,030
Interest received 12,796 25,076
Cash taxes/investment tax credits received,
net of income taxes paid 84,575 173,184
For further information: Redknee Solutions Inc., Lucas Skoczkowski, Chief Executive Officer; David Charron, Chief Financial Officer, Tel: (905) 625-2622, Fax: (905) 625-2773
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