Redknee Reports Second Quarter Fiscal 2011 Financial Results

("Redknee" or "the Company")

TORONTO, May 4 /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 second quarter of fiscal 2011, ended March 31, 2011.

Q2 Highlights:

  • Second quarter 2011 revenue increased  by 24% to $16.6M (on constant currency basis: $17.5M, Q2 2010: $13.5M)
  • Gross margin at 68% (Q2 2010: 72%)
  • EBITDA of $1.7M (Q2 2010: $1.8M)
  • Order backlog of $47.1M (Q4 2010: $36.5M)
  • Signed multiple new customers in Europe , Middle East and Africa region; signed a multi-million dollar, multi-year Turnkey Converged Billing (TCB) upgrade and capacity expansion in APAC region
  • Redknee's TCB product nominated at the TM Forum Excellence Awards
  • Patents: 33 issued, over 77 pending and one in the grant/issuance process

"Redknee continues to deliver good progress on its strategic growth plan.  We have grown both our revenues and contracted order backlog, while improving our gross margin quarter over quarter. We see opportunities to continue to win business with both existing and new customers in each of our core markets.  We are encouraged with our long-term growth in revenues and earnings, and remain committed to increasing our recurring revenues, while continuing to take share in the real-time monetization market" noted Lucas Skoczkowski, CEO for Redknee. 

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 and on SEDAR at


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 the market its customers operate in.  Redknee's monetization suite of products and services (real-time Turnkey Converged Billing and Next Generation Rating Charging & Policy solutions) contributed to over 85% of second quarter revenue - in line with its plan.

Redknee's market leading solutions continue to be recognized globally by telecom providers. Redknee has expanded its TCB licenses with customers across Americas, APAC and EMEA regions.  Redknee signed multiple billing contracts with new customers, expanding our presence across EMEA. As strategic transactions, Redknee believes these new contracts will enable us to expand our footprint into these regions over coming years. Redknee announced a multi-million dollar, multi-year upgrade and capacity expansion of its TCB solution with a leading APAC group operator.

On a trailing four-quarter basis, recurring revenues were at 41% of overall revenues. Redknee continues to focus on multi-year service agreements to support forward visibility and to enhance our recurring revenues.

Redknee wishes to announce that John Phillips has chosen to step down from the Board of Directors after nearly 9 years of service. "During his tenure, John served both as non-executive director and chairman of the board, and supported Redknee's evolution from a private company to a publicly-listed international company,"  commented Lucas Skoczkowski, "He has contributed in countless ways to Redknee and we will be forever grateful for his contribution in making our organization that much stronger". Following John's departure and with the recent additions of Terry Nickerson and Greg Jacobson, Redknee's Board of Directors will consist of five independent non-executive directors and the CEO of the company.

Financial Review

For the three-month period ended March 31, 2011, the Company's revenue increased by 24% to $16.6M from $13.5M in the second quarter of fiscal 2010.

The gross margin for the second quarter of fiscal 2011 was 68%  compared to 72% for the second quarter of fiscal 2010.  The decrease in gross margin relates to the product mix in sales for the period to products with lower gross margin.

For the three-month period ended March 31, 2011, operating expenses, excluding amortization and foreign exchange loss (gain), increased to 60% of revenue as compared to 58% of revenue in the same period last year due mainly to the addition of operating costs from Nimbus.

The Company currently has a portfolio of 33 issued patents, 77 outstanding patent applications, and one patent in the grant/issuance process. 

Net income in Q2 fiscal 2011 was $0.4 million or $0.01 per share, compared to a net profit of $0.4 million or $0.01 per share in Q2 fiscal 2010.

Cash and investments (including restricted cash) as at March 31, 2011 was $16.9 million versus $18.5 million as at December 31, 2010.


The Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday May 5, 2011.

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

The webcast can be accessed at:

Conference Replay

The conference call will be archived to replay by telephone at: 416-849-0833 or Toll-Free at 1-800-642-1687 (Passcode No. 59634757) from 11:30 a.m.

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 and on the Company's web-site at  

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.


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®, 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

Interimconsolidated Balance Sheets (unaudited)      
For the period ended   March 31,2011 September 30, 2010
    $ $
Current assets      
Cash and cash equivalents   15,245,878 18,738,958
Short-term investments   - 22,186
Trade accounts and other receivables
14,744,861 14,959,777
Unbilled revenue   10,340,954 7,196,714
Prepaid expenses   1,481,051 1,371,960
Goods in transit   416,060 256,709
    42,228,804 42,546,304
Restricted cash   1,606,716 811,979
Property and equipment   525,201 635,526
Intangible assets   5,076,854 5,861,248
Goodwill   7,935,373 7,668,157
Future income taxes and investment tax credits   1,090,739 795,196
Other assets   491,954 518,655
    58,955,641 58,837,065
Current liabilities      
Accounts payable   3,312,846 2,624,339
Accrued liabilities   3,746,462 3,703,055
Income taxes payable   2,834,333 2,730,670
Deferred revenue   7,166,977 6,031,551
Current portion of long term debt   2,520,797 3,071,885
Current portion of obligations under capital leases   14,690 24,197
    19,596,105 18,185,697
Long term deferred revenue    
Other long term liabilities   557,856 468,505
Obligations under capital leases   26,787 32,178
Long termportion of loans payable   5,764,208 7,094,087
Future income taxes   1,093,935 1,265,159
Total liabilities   27,038,891 27,045,626
Shareholders' Equity      
Share capital, net of employee share purchase loans   47,884,932 47,662,953
Contributed surplus   4,608,527 4,345,128
Deficit   (20,546,679) (20,050,301)
Accumulated and other comprehensive loss   (30,030) (166,341)
    (20,576,709) (20,216,642)
    31,916,750 31,791,439
    58,955,641 58,837,065

Interim consolidated Statements of Operations (unaudited)        
  Three months ended Six months ended
  March 31, March 31,
  2011 2010 2011 2010
  $ $ $ $
Software, services and other 11,466,674 9,155,159 20,025,345 16,158,771
Support 5,168,386 4,311,077 10,737,659 9,087,542
  16,635,060 13,466,236 30,763,004 25,246,313
Cost of revenue 5,333,600 3,733,881 10,532,202 6,453,176
Gross profit 11,301,460 9,732,355 20,230,802 18,793,137
Operating expenses        
Sales and marketing 3,900,302 3,522,365 7,419,559 6,678,936
General and administrative 2,409,555 1,710,959 4,485,554 3,371,542
Research and development 3,554,597 2,631,224 6,598,892 5,374,547
Amortization of property and equipment and intangible assets 456,298 162,585 934,471 321,306
Foreign exchange loss 360,391 1,247,292 905,957 1,740,423
  10,681,143 9,274,425 20,344,433 17,486,754
Income (loss) from operations 620,317 457,930 (113,631) 1,306,383
Interest income 45,005 5,215 83,333 6,889
Interest expense (133,380) (4,713) (277,368) (17,508)
Income (loss) before income taxes 531,942 458,432 (307,666) 1,295,764
Income taxes 123,716 57,485 188,712 330,512
Net income (loss) for the period 408,226 400,947 (496,378) 965,252
Net income per common share        
Basic 0.01 0.01 (0.01) 0.02
Diluted 0.01 0.01 (0.01) 0.02
Weighted average number of common shares        
Basic 64,158,363 59,603,526 64,132,813 59,603,526
Diluted 65,799,580 61,738,910 64,132,813 61,259,237



Earnings Before Interest Expense, Income Taxes, Depreciation, and Amortization (EBITDA) is a non-GAAP measure. EBITDA described above is calculated as Income (loss) from operations, net of foreign exchange gain/loss, amortization and stock-based compensation.




SOURCE Redknee Solutions Inc.

For further information:

Redknee Solutions Inc.  
Lucas Skoczkowski, Chief Executive Officer Tel: +1 905 625 2622
David Charron, Chief Financial Officer Fax: +1 905 625 2773

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