Redknee Reports Third Quarter Fiscal 2010 Financial Results
TORONTO, Aug. 11 /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 2010, ended June 30, 2010.
Q3 Highlights:
--------------
- Third quarter 2010 revenue at $10.6M (on constant dollar basis
$12.1M, Q3 2009: $14.5M)
- Gross margin at 71% (Q3 2009: 79%)
- EBITDA(1) loss of $0.4M (Q3 2009: profit of $2.3M)
- Operating loss of $0.2M (Q3 2009: profit of $0.8M)
- Order backlog of $27.5M
- Announced intent to acquire Nimbus Systems, a Tier 1 billing and
customer care specialist
- Following quarter end, Redknee has finalized two multi-year, multi-
million dollar service contracts
- Patents: 19 issued, over 58 pending
- Redknee's real-time data rating, charging and policy solution was
awarded the Best Service Enablement Tool at the Billing & OSS World
Excellence Awards
"Redknee delivered good progress on its strategic growth plan, while I am disappointed in this quarter's revenue and profitability. We believe that our strategy to focus on our core suite of monetization software products and services has positioned us well long-term, which has been further enhanced through the acquisition of Nimbus Systems. We expect the quarter-to-quarter revenue volatility and foreign exchange headwinds to continue. We remain focused on our long-term growth in revenues and earnings, with commitment to increasing our recurring revenues," 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 www.redknee.com and on SEDAR at www.sedar.com
OVERVIEW
--------
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.
Redknee's monetization suite of products and services (real-time Turnkey Converged Billing and Next Generation Rating Charging & Policy solutions) contributed to over 90% of third quarter revenue - in line with its plan.
Redknee's market leading solutions continue to be recognized globally by telecom providers. Redknee's announcement to acquire Nimbus Systems will further strengthen its operating model and market share, particularly in global group operators, including Telefonica, Orange and Vodafone, while providing future opportunities to expand into the Latin American markets. The market, product and cultural synergies between the two companies will elevate Redknee's capabilities and market presence to better serve its customers, create cross-sell opportunities for joint product and service portfolio, while positioning the company to engage and win new customers.
On a four-quarter trailing basis, recurring revenues were at 43% of our overall revenues. Ahead of our plan year to date, Redknee has secured two multi-year multi-million service agreements adding forward visibility, while enhancing our recurring revenues.
Financial Review
----------------
For the third quarter of fiscal 2010, Redknee's revenue decreased by 27% to $10.6 million compared to revenue of $14.5 million in the third quarter of fiscal 2009. The majority of the Company's revenue is denominated in U.S. dollars and thus revenues are impacted by exchange rate fluctuations. On a constant currency basis, revenues for the quarter would have been $12.1 million.
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 $7.5 million or 71% of revenue from $11.5 million or 79% of revenue in the third quarter of fiscal 2009.
Redknee recorded an EBITDA loss of $0.4 million for the third quarter of fiscal 2010 as compared to an EBITDA gain of $2.3 million for the third quarter of fiscal 2009. A one-time bad debt expense of $0.5 million was recorded for a customer in the Americas.
For the quarter ended June 30, 2010, the Company recognized a foreign currency exchange gain of $0.5 million, as compared to a foreign currency exchange loss of $1.3 million in the third quarter of fiscal 2009.
Net loss in Q3 fiscal 2010 was $0.2 million or $0.00 per share, as compared to a net profit of $0.5 million or $0.01 per share in Q3 fiscal 2009.
Cash and investments as at June 30, 2010 was $19.8 million versus $19.8 million as at March 31, 2010.
CONFERENCE CALL
The Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday August 12, 2010.
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: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3166240
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. 90397420) from 11:30 a.m.
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 80 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.
(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.
Redknee Solutions Inc.
Interim Consolidated Balance Sheet
(Unaudited)
-------------------------------------------------------------------------
(expressed in Canadian dollars)
June September
30, 30,
2010 2009
$ $
Assets
Current assets
Cash and cash equivalents 19,812,246 25,663,047
Short-term investments - 107,049
Trade accounts and other receivables 10,672,901 8,160,277
Unbilled revenue 4,706,969 2,670,431
Investment tax credits and income taxes
receivable 200,000 600,000
Prepaid expenses 1,001,083 1,027,056
Goods in transit 85,116 242,099
-------------------------
36,478,315 38,469,959
Restricted cash (note 7) 127,272 322,722
Property and equipment 432,309 623,567
Intangible assets 905,016 1,139,444
Future income taxes 337,529 334,513
Other assets 466,630 464,303
-------------------------
38,747,071 41,354,508
-------------------------
-------------------------
Liabilities
Current liabilities
Accounts payable 1,034,435 907,694
Accrued liabilities 3,249,623 5,899,843
Income taxes payable 2,260,920 2,529,923
Deferred revenue 5,471,520 6,988,512
-------------------------
12,016,498 16,325,972
-------------------------
Long-term deferred revenue - 1,005,164
-------------------------
12,016,498 17,331,136
-------------------------
Shareholders' equity
Share capital, net of employee share purchase
loans 43,094,235 40,744,480
-------------------------
Contributed surplus 4,175,711 4,572,737
-------------------------
Deficit (20,409,087) (21,144,555)
Accumulated other comprehensive loss, net of
income taxes (130,286) (149,290)
-------------------------
Total deficit and accumulated other
comprehensive loss (20,539,373) (21,293,845)
-------------------------
26,730,573 24,023,372
-------------------------
38,747,071 41,354,508
-------------------------
-------------------------
Guarantees and contingencies (note 7)
Approved by the Board of Directors
(signed) "Alan Michels" Director (signed) "Lucas Skoczkowski" Director
------------------------ -----------------------------
Redknee Solutions Inc.
Interim Consolidated Statement of Operations
(Unaudited)
-------------------------------------------------------------------------
(expressed in Canadian dollars)
Three months ended Nine months ended
June 30, June 30,
------------------------- -------------------------
2010 2009 2010 2009
$ $ $ $
Revenue
Software, services and
other 5,738,695 8,861,397 21,897,466 26,195,166
Support and
Subscription 4,892,963 5,618,489 13,980,505 16,251,870
---------------------------------------------------
10,631,658 14,479,886 35,877,971 42,447,036
Cost of revenue 3,112,879 3,008,663 9,566,056 9,300,867
---------------------------------------------------
Gross profit 7,518,779 11,471,223 26,311,915 33,146,169
---------------------------------------------------
Operating expenses
Selling and marketing 2,804,084 3,765,183 9,483,020 12,040,384
General and
administrative 2,400,288 2,470,037 5,771,829 7,451,500
Research and
development (note 4) 2,810,904 2,931,780 8,185,452 9,591,644
Amortization of
property and
equipment and
intangible assets 164,872 169,897 486,178 482,026
Foreign currency
exchange (gain) loss (504,352) 1,311,451 1,236,071 (909,409)
---------------------------------------------------
7,675,796 10,648,348 25,162,550 28,656,145
---------------------------------------------------
Income (loss) from
operations (157,017) 822,875 1,149,365 4,490,024
Interest income 22,710 4,968 29,600 45,751
Interest expense (3,827) (10,681) (21,335) (14,880)
---------------------------------------------------
Income (loss) before
income taxes (138,134) 817,162 1,157,630 4,520,895
Income taxes
Current 91,650 309,147 422,162 945,822
---------------------------------------------------
Net income (loss) for
the period (229,784) 508,015 735,468 3,575,073
---------------------------------------------------
---------------------------------------------------
Net income (loss) per
common share (note 2)
Basic 0.00 0.01 0.01 0.06
Diluted 0.00 0.01 0.01 0.06
Weighted average
number of common
shares (note 2)
Basic 60,078,132 57,107,659 60,078,132 57,107,659
Diluted 60,078,132 59,122,135 61,785,769 58,226,223
Redknee Solutions Inc.
Interim Consolidated Statement of Comprehensive Income (Loss)
(Unaudited)
-------------------------------------------------------------------------
(expressed in Canadian dollars)
Three months ended Nine months ended
June 30, June 30,
------------------------- -------------------------
2010 2009 2010 2009
$ $ $ $
Net income (loss) for
the period (229,784) 508,015 735,468 3,575,073
Other comprehensive
income, net of income
taxes
Foreign currency
translation
adjustment 44,550 57,994 19,004 57,994
---------------------------------------------------
Comprehensive income
(loss) for the period (185,234) 566,009 754,472 3,633,067
---------------------------------------------------
---------------------------------------------------
Redknee Solutions Inc.
Notes to Interim Consolidated Financial Statements
(Unaudited)
June 30, 2010
-------------------------------------------------------------------------
Three months ended Nine months ended
June 30, June 30,
---------------------------------------------------
2010 2009 2010 2009
$ $ $ $
Cash provided by
(used in)
Operating activities
Net income (loss) for
the period (229,784) 508,015 735,468 3,575,073
Items not involving
cash
Amortization of
property and
equipment 105,462 112,115 307,948 311,114
Amortization of
intangible assets 59,410 57,782 178,230 170,912
Unrealized foreign
currency exchange
loss (gain) (377,156) 2,114,121 1,265,700 (1,333,887)
Stock-based
compensation
(note 3) 137,442 189,935 275,689 513,058
Change in non-cash
operating working
capital (note 5) (19,236) (417,866) (9,237,670) 3,537,092
---------------------------------------------------
(323,862) 2,564,102 (6,474,635) 6,773,362
---------------------------------------------------
Financing activities
Collection of employee
loans 12,797 109,621 479,405 168,650
Proceeds from exercise
of stock options 464,018 15,224 1,197,635 15,224
Repayment of
obligations under
capital leases - - (619)
---------------------------------------------------
476,815 124,845 1,677,040 183,255
---------------------------------------------------
Investing activities
(Purchase of) proceeds
from short-term
investments - 4,958,910 107,049 (4,078,925)
Purchase of property
and equipment (39,427) (88,088) (116,690) (401,033)
(Increase) decrease
in other assets (28,625) 8,118 (2,327) (29,116)
(Increase) decrease
in restricted cash (5,400) 50,911 195,450 (195,854)
---------------------------------------------------
(73,450) 4,929,851 183,482 (4,704,928)
---------------------------------------------------
Effect of foreign
currency exchange
rate changes on
cash and cash
equivalents (43,662) (419,179) (1,236,688) 780,102
---------------------------------------------------
Increase (decrease)
in cash and cash
equivalents during
the period 35,840 7,199,619 (5,850,801) 3,031,791
Cash and cash
equivalents -
Beginning of period 19,776,406 11,074,779 25,663,047 15,242,607
---------------------------------------------------
Cash and cash
equivalents -
End of period 19,812,246 18,274,398 19,812,246 18,274,398
---------------------------------------------------
---------------------------------------------------
Supplemental cash flow
information
Interest paid 3,827 10,681 21,335 14,880
Interest received 22,711 4,968 29,600 45,751
Net income taxes
paid 99,298 130,895 269,944 328,531
For further information: Redknee Solutions Inc. Lucas Skoczkowski, Chief Executive Officer; David Charron, Chief Financial Officer, Tel: +1 905 625 2622, Fax: +1 905 625 2773
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