Redknee Reports Strong Profitability In Fiscal 2009

TORONTO, Nov. 25 /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 fourth quarter and fiscal year ended September 30, 2009.


    -   Revenue grew to $53.3 million (2008: $50.7 million)
    -   Gross margin increases to 78% (2008: 70%)
    -   EBITDA profit of $6.5M (2008: loss of $4.2M)
    -   Operating income of $4.2M (2008: operating loss of $3.9M)
    -   Basic earnings per share of $0.06 (2008: loss per share of $0.08)
    -   Cash and investments at $25.8M (September 30, 2008: $15.3M)
    -   Recurring revenues increased to 41% of total revenue (2008: 31% of
        total revenue)
    -   Six new customers across the Americas, APAC, and EMEA
    -   Successful admission to trading on the Toronto Stock Exchange
    -   Multiple industry awards and recognition for Redknee's technology,
        solutions and organizational achievements

Please see section regarding Forward-Looking Statements which form an integral part of this release. These results, along with the audited consolidated financial statements and the Company's MD&A are available on the Company's website at and on SEDAR at

Lucas Skoczkowski, CEO for Redknee commented:

"Redknee delivered profitable growth and excellent results in 2009 despite the challenging economic and market conditions. We enter 2010 as a stronger global organization, with a growing customer base and a solid financial position. Our strategy has positioned us well to benefit from the opportunities in both the high growth and Tier-1 markets. The quarter-to-quarter revenue volatility and foreign exchange headwinds will continue to present challenges in the near term. We remain focused on our long-term growth in revenues and earnings, with emphasis on increasing our recurring revenues, while continuing to take market share in the real-time monetization space."


    As we continue to make progress toward our vision of becoming the leading
global communications solutions provider of choice, 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;
    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 fiscal year 2009, with our Turnkey Converged Billing and Next Generation Rating & Charging solutions contributing more than 90% of revenue.

Sales of Redknee's business-critical solutions continued to grow in fiscal 2009, with our Turnkey Converged Billing and Next Generation Rating & Charging solutions contributing to more than 90% of revenue. Through the disciplined product roadmap process, Redknee has continued its investment in advancing its competitive advantage and brought to market new releases of its key flagship offerings - Turnkey Converged Billing, InBill and Next Generation Rating Charging & Policy.

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 six new customers across Americas, APAC and EMEA through combination of deliveries to new operators, modular software delivery that integrate with existing systems, as well as replacement of competitors' end-to-end platforms. Furthermore, Redknee's customer care solution, One Call Resolution, was awarded the International Engineering Consortium (IEC) Info Vision Award for providing the best network and services management and operations solution available. 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. The One Call Resolution customer service representatives and tactical network support technicians to resolve complex network problems quickly and efficiently. The solution increases the 'first call resolution' of subscriber complaints and reduces call handling times by giving support representatives an aggregated view of subscriber services. Redknee has found that this solution is especially important to operators who are deploying increasing number of smartphone platforms and services in their markets.

Redknee continues to have a strong employee base, a growing number of customers, and the right product offering 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 Africa, the Middle East and Asia Pacific.

    Financial Review

For fiscal 2009, Redknee's revenue increased by 5 % to $53.3 million compared to revenue of $50.7 million in 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. In fiscal 2009, recurring revenues were at 41 % of total revenues compared to 2008.

Gross margin in the period increased to $41.3 million or 78% of revenue from $35.7 million or 70% of revenue in fiscal 2008.

Redknee recorded an EBITDA profit of $6.5 million for fiscal 2009 as compared to a loss of $4.2 million for fiscal 2008.

For the fiscal year ended September 30, 2009, the Company experienced a foreign exchange loss of $ 0.9 million as compared to a foreign currency exchange gain of $1.6 in fiscal 2008.

Net income in fiscal 2009 was $3.3 million or $ 0.06 per share, as compared to a loss of $4.4 million or $0.08 per share in fiscal 2008.

Cash and investments as at September 30, 2009 was $25.8 million versus $15.3 million as at September 30, 2008.


The Company will discuss the results on a conference call and webcast at 8:30 a.m. ET time on Thursday, November 26, 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             416-644-3426

    Toll-free North America          800-731-5319

A webcast will also be available at:

A copy of the presentation for the call will be available at:

    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 4181245 followed by the number sign) from 10:30 am on.


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(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

    Redknee Solutions Inc.
    Consolidated Balance Sheets
    As at September 30, 2009 and 2008
    (expressed in Canadian dollars)
                                                           2009         2008
                                                              $            $


    Current assets
    Cash and cash equivalents                        25,663,047   15,242,607
    Short-term investments                              107,049       56,363
    Trade accounts and other receivables              8,160,277   11,192,182
    Unbilled revenue                                  2,670,431    6,060,452
    Investment tax credits receivable                   600,000      600,000
    Prepaid expenses                                  1,027,056    1,066,584
    Goods in transit                                    242,099      325,716
                                                     38,469,959   34,543,904

    Restricted cash (notes 3 and 15(b))                 322,722      409,919

    Property and equipment (note 4)                     623,567      580,053

    Intangible assets (note 5)                        1,139,444    1,388,761

    Future income taxes (note 11)                       334,513            -

    Other assets (note 12)                              464,303      528,294

                                                     41,354,508   37,450,931

    Current liabilities
    Accounts payable                                    907,694    2,172,268
    Accrued liabilities                               5,899,843    8,678,539
    Income taxes payable                              2,529,923    2,100,785
    Deferred revenue                                  6,988,512    5,084,287
    Obligations under capital leases (note 7)                 -          619

                                                     16,325,972   18,036,498

    Long-term deferred revenue                        1,005,164            -

                                                     17,331,136   18,036,498
    Shareholders' Equity

    Share capital, net of employee share
     purchase loans (note 8(a))                      40,744,480   39,686,701

    Contributed surplus                               4,572,737    4,410,677

    Deficit                                         (21,144,555) (24,471,986)
    Accumulated other comprehensive loss,
     net of income taxes                               (149,290)    (210,959)
    Total deficit and accumulated other
     comprehensive loss                             (21,293,845) (24,682,945)

                                                     24,023,372   19,414,433

                                                     41,354,508   37,450,931

    Commitments, guarantees and contingencies (note 15)

    Redknee Solutions Inc.
    Consolidated Statements of Operations
    As at September 30, 2009 and 2008
    (expressed in Canadian dollars)
                                                           2009         2008
                                                              $            $
    Software, services and other                     32,096,609   35,481,999
    Support                                          21,153,523   15,219,345

                                                     53,250,132   50,701,344

    Cost of revenue                                  11,968,026   14,972,692

    Gross profit                                     41,282,106   35,728,652

    Operating expenses
    Sales and marketing                              14,608,859   16,566,834
    General and administrative                        8,983,293   10,768,930
    Research and development (note 10)               11,929,925   13,464,000
    Amortization of property and equipment
     and intangible assets                              677,229      409,489
    Foreign exchange (gain) loss (note 2)               871,514   (1,584,049)

                                                     37,070,820   39,625,204

    Income (loss) from operations                     4,211,286   (3,896,552)

    Interest income                                      97,747      451,341

    Interest expense                                    (19,687)     (27,584)

    Income (loss) before income taxes                 4,289,346   (3,472,795)

    Income taxes (note 11)
    Current                                             961,915      938,409

    Net income (loss) for the year                    3,327,431   (4,411,204)

    Net income (loss) per common share (note 8(b))
    Basic                                                  0.06        (0.08)
    Diluted                                                0.06        (0.08)

    Weighted average number of common shares
     (note 8(b))
    Basic                                            57,761,293   56,328,674
    Diluted                                          59,832,102   56,328,674

    Redknee Solutions Inc.
    Consolidated Statements of Cash Flows
    For the years ended September 30, 2009 and 2008
    (expressed in Canadian dollars)
                                                           2009         2008
                                                              $            $
    Cash provided by (used in)

    Operating activities
    Net income (loss) for the year                    3,327,431   (4,411,204)
    Items not involving cash
      Amortization of property and equipment            427,912      291,489
      Amortization of intangible assets                 249,317      118,000
      Investment tax credits                           (200,000)           -
      Unrealized foreign exchange (gain) loss           796,424   (1,371,401)
      Stock-based compensation                          708,727      889,839
    Change in non-cash operating working capital
     (note 13)                                        5,389,401   (1,708,257)

                                                     10,699,212   (6,191,534)

    Financing activities
    Collection of employee share purchase loans         484,526            -
    Proceeds from exercise of stock options              26,586            -
    Repayment of obligations under capital leases          (619)     (48,752)

                                                        510,493      (48,752)

    Investing activities

    Sale (purchase) of short-term investments          (50,686)   14,706,683
    Purchase of property and equipment                (471,426)     (586,966)
    (Increase) decrease in other assets                 63,991      (435,581)
    Loan to Argent Networks PTY Ltd.                         -      (529,463)
    Repayment of loan to Argent Networks PTY Ltd.            -       526,754
    (Increase) decrease in restricted cash              87,197      (409,919)
    Acquisition of Argent Networks PTY Ltd.,
     net of cash acquired (note 16(b))                       -      (997,985)

                                                      (370,924)   12,273,523
    Effect of exchange rate changes on cash
     and cash equivalents                             (418,341)      281,600

    Increase in cash and cash equivalents
     during the year                                10,420,440     6,314,837

    Cash and cash equivalents - Beginning of year   15,242,607     8,927,770

    Cash and cash equivalents - End of year         25,663,047    15,242,607
    Supplemental cash flow information
    Interest paid                                       19,687        27,584
    Interest received                                   97,747       451,341
    Income taxes paid                                  634,612     1,016,832

SOURCE Redknee Solutions Inc.

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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