Redknee Solutions Reports Fiscal First Quarter 2014 Results

TORONTO, Feb. 12, 2014 /CNW/ - Redknee Solutions Inc.  (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers (CSPs), reported results for its fiscal first quarter ended December 31, 2013. All figures are in U.S. dollars.

Fiscal Q1 2014 Financial Highlights as Compared to the Same Year-ago Quarter

• Revenue totaled $60.4 million, up 324% from $14.2 million
• Recurring revenue was 55% of total revenue compared to 50%
• Gross profit was $33.0 million (55% of total revenue) compared to $8.9 million (63% of total revenue)
• Adjusted EBITDA totaled $5.4 million versus $1.0 million
• Net loss totaled $3.1 million or $0.03 per share versus a net loss of $1.7 million or $0.02 per share
• Cash at $72.2 million
• Order backlog at a record $166.8 million

Fiscal Q1 2014 Operational Highlights

• Announced record $50 million capacity expansion framework with APAC customer.
• Announced two significant software upgrades with acquired customers worth more than $10 million each.
• Additional multi-million dollar customer contracts announced throughout the quarter across all regions.
• Advanced Redknee's presence in non-telecom vertical markets, including demonstrating Redknee's cloud-based utilities billing system at Tier 1 events and expanding our collaboration with existing partners.
• Continued significant growth in the customer base for the Policy Control Server product, now providing our Policy and Charging Rules Function (PCRF) solution to over 55 communication service provider customers with over 1.2 billion subscribers.
• Integration of the latest acquisition is ahead of target to complete all major activities by the end of March 2014.
• Awarded the 2013 Stratecast | Frost & Sullivan Award for Global Growth Leadership in Communications Service Provider (CSP) billing.
• Highlighted in the 2013 Gartner Magic Quadrant for Integrated Revenue and Customer Management for CSPs for demonstrating high capability and performance.
• 175+ patents granted and 65 patents filed.

Management Commentary
"In the first quarter of fiscal 2014, we continued to execute on Redknee's growth plan. Today, we are the largest independent software company delivering real-time converged monetization and subscriber solutions, with more than 200 customers and a strong base of recurring revenue," said Lucas Skoczkowski, CEO of Redknee. "Our customers continue to respond very positively to Redknee, as shown through our ability to secure record license expansions, upgrades and numerous support renewals across all of our markets. As we bring the integration of our latest acquisition to its completion, we are increasingly focusing on growing our sales pipeline and order backlog, as we observe a healthy demand for upgrades and strong sales momentum.  In addition, we will continue to deliver a high quality customer service, while we drive cross-selling and increasing revenue opportunities with our existing customer base, as well as acquiring new customers."

Fiscal Q1 2014 Financial Results
Revenue was $60.4 million compared to $14.2 million in the same year-ago quarter. The improvement was primarily due to increased revenue related to the most recent acquisition, as well as license expansions, license upgrades, and third-party hardware and software sales.

Recurring revenue was 55% of total revenue compared to 50% for the same year-ago quarter. The increase was due to a higher level of sales and renewals of customer support services, software subscriptions, and term licenses. Recurring revenue consists of support and maintenance, long-term service contracts, and revenue from term-based licenses.

Gross margin was 55% compared to 63% in the same year-ago quarter. The decrease relates to a change in revenue mix as a result of the acquisition of NSN's BSS business unit.

Adjusted EBITDA was $5.4 million compared to $1.0 million in the same year-ago quarter (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net loss totaled $3.1 million or $0.03 per diluted share compared to a net loss of $1.7 million or $0.02 per diluted share in the same year-ago quarter. As presented in the "Reconciliation of Net Income (Loss) to Adjusted EBITDA" below, the Q1 2014 net loss includes $3.7 million of costs linked directly to the BSS acquisition.

At December 31, 2013, cash and cash equivalents totaled $72.2 million.

At December 31, 2013, contracted order backlog totaled $166.8 million, which includes $11 million of $50 million APAC expansion framework referenced in the Fiscal Q1 2014 Operational Highlights.

Please refer to the section regarding forward-looking statements which form an integral part of this release. These results, along with the unaudited condensed consolidated interim financial statements and the company's unaudited MD&A, are available on the company's website at www.redknee.com and on SEDAR at www.sedar.com.

Conference Call

The company will host a conference call tomorrow (Thursday, February 13, 2014) to discuss these results. CEO Lucas Skoczkowski and CFO David Charron will host the presentation starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date: Thursday, February 13, 2014
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 35886292

The presentation will be webcast live and available for replay via either the Investors section of Redknee's website (www.redknee.com) or http://bit.ly/1hYFbjk.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

If you have any difficulty connecting with the conference call, please contact TMX Equicom at 1 [phone], ext. 253.

A replay of the call will be available after 11:30 a.m. Eastern time on the same day through February 20, 2014.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 35886292

About Redknee Solutions Inc.

Redknee is a leading global provider of innovative communication software products, solutions and services. Redknee's award-winning solutions enable service providers to monetize new services, business models and content and to deliver a comprehensive customer experience. Redknee's revenue and subscriber management platform provides innovative converged billing, charging, customer care, and payments solutions for voice, messaging and data services to over 200 service providers in over 90 countries. Established in 1999, Redknee Solutions Inc. (TSX: RKN) is the parent of the wholly-owned operating subsidiary Redknee Inc. and its various subsidiaries. References to Redknee refer to the combined operations of those entities. For more information about Redknee and its solutions, please go to www.redknee.com.

Non-IFRS Measures

Beginning in the first fiscal quarter of 2013, the company has begun to report "Adjusted EBITDA", which is not a financial measure calculated and presented in accordance with International Financial Reporting Standards (IFRS), and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, or as an alternative to cash flow from operating activities as a measure of liquidity. The company defines adjusted EBITDA as net income (loss) from continuing operations excluding amounts for depreciation and amortization, other (income) / expenses, finance costs, finance income, income taxes, foreign exchange (gain) loss, share-based compensation, and acquisition and related costs. EBITDA is not a measure of financial performance under IFRS, and should not be considered in isolation or as a substitute for consolidated net income (loss) as a measure of performance.

"Recurring Revenue," is not a financial measure calculated and presented in accordance with IFRS and should not be considered as an alternative to revenue. Recurring Revenue includes revenue from support and maintenance agreements, long term service agreements, and term-based product licenses and software subscription.

"Order Backlog" relates to contractual commitments as at period end, pending to be delivered and will be recognized as revenue in future periods. Order Backlog is not a financial measure calculated and presented in accordance with IFRS and should not be considered as an alternative to revenue.

Other companies (including competitors) may define adjusted EBITDA, recurring revenue, and order backlog differently. The company presents adjusted EBITDA, recurring revenue, and order backlog because management believes it to be important supplemental measures of performance that are commonly used by securities analysts, investors and other interested parties in the evaluation of companies in Redknee's industry. Management uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Redknee nor is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA, recurring revenue, and order backlog in isolation or as a substitute for analysis of the company's results as reported under IFRS. See "Reconciliation of Net Income (Loss) to adjusted EBITDA" below for further information on this non-IFRS measure.

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. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Persons reading this news release are cautioned that such information may not be appropriate for other purposes.

Such forward-looking statements include the statements regarding financial and other projections as well as statements regarding Redknee's future plans, objectives or performance for the current period and subsequent periods and regarding the markets for our products. 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 inability of Redknee's products to perform as expected, a material adverse change in the affairs of Redknee, and the factors discussed under the "Risk Factors" section of Redknee's most recently filed AIF which is available on SEDAR at www.sedar.com and on Redknee's web-site at www.redknee.com. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements.

Although the forward-looking statements contained in this document are based upon what Redknee believes are reasonable assumptions, Redknee cannot assure investors that our actual results will be consistent with these forward-looking statements. Redknee assumes no obligation to update or revise these forward-looking statements to reflect new events or circumstances, except as required by securities law.

Redknee Solutions Inc.
Condensed Consolidated Interim Statement of Financial Position
(Expressed in U.S. dollars)
(Unaudited)
		December 31, 2013	September 30, 2013
Assets
Current assets:
	Cash and cash equivalents	$71,149,391	$79,054,757
	Trade accounts and other receivables	78,867,201	66,393,041
	Unbilled revenue	40,954,048	39,421,584
	Prepaid expenses	3,032,269	1,943,986
	Other assets	830,829	832,516
	Inventories	6,672,500	6,644,580
Total current assets		201,506,238	194,290,464
Restricted cash		1,026,588	1,011,361
Property and equipment		10,359,813	10,890,910
Deferred income taxes		1,869,235	1,923,409
Investment tax credits		366,541	378,923
Other assets		2,929,392	3,179,724
Intangible assets		37,198,741	38,732,447
Goodwill		7,638,590	7,638,590
Total assets		$262,895,138	$258,045,828
Liabilities and Shareholders' Equity
Current liabilities:
	Trade payables	$15,833,062	$15,707,464
	Accrued liabilities	60,030,468	59,532,922
	Provisions	1,201,050	1,201,050
	Income taxes payable	2,830,917	2,445,616
	Deferred revenue	10,347,608	14,935,451
	Loans and borrowings	375,000	375,000
Total current liabilities		90,618,105	94,197,503
Deferred revenue		3,403,978	4,149,940
Other liabilities		3,193,063	2,793,146
Pension and non-pension post-employment benefit obligation		1,218,841	814,335
Contingent consideration		25,984,206	24,833,537
Loans and borrowings		42,931,530	32,956,036
Deferred income taxes		720,586	744,652
Total liabilities		168,070,309	160,489,149
Shareholders' equity:
	Share capital, net of employee share purchase loans	109,084,608	109,017,145
	Treasury stock	(46,110)	(132,050)
	Contributed surplus	4,532,491	4,357,175
	Deficit	(20,243,191)	(17,182,622)
	Accumulated other comprehensive income	1,497,031	1,497,031
Total shareholders' equity		94,824,829	97,556,679
Total liabilities and shareholders' equity		$262,895,138	$258,045,828

 

Redknee Solutions Inc.
Condensed Consolidated Interim Statement of Comprehensive Income (Loss)
(Expressed in U.S. dollars)
(Unaudited)
		Three months ended
		December 31,
		2013	2012
Revenue:
	Software, services and other	$27,853,883	$8,274,738
	Support	32,549,357	5,962,225
		60,403,240	14,236,963
Cost of revenue		27,379,935	5,319,408
Gross profit		33,023,305	8,917,555
Operating expenditures:
	Sales and marketing	8,508,397	2,953,095
	General and administrative	8,174,749	2,396,603
	Research and development	14,884,339	3,199,661
	Acquisition and related costs	872,368	2,278,472
		32,439,853	10,827,831
Income (loss) from operations		583,452	(1,910,276)
Foreign exchange (loss) gain		(1,137,904)	360,363
Other income (expenses)		(1,150,669)	-
Finance income		14,759	12,181
Finance costs		(584,520)	(114,162)
Loss before income taxes		(2,274,882)	(1,651,894)
Income tax expense (recovery):
	Current	844,805	125,429
	Deferred	(59,118)	(38,491)
		785,687	86,938
Total comprehensive loss		($3,060,569)	($1,738,832)
Net loss per common share:
	Basic	($0.03)	($0.02)
	Diluted	(0.03)	(0.02)
Weighted average number of common shares:
	Basic	95,529,355	75,446,243
	Diluted	95,529,355	75,446,243

  

Redknee Solutions Inc.
Condensed Consolidated Interim Statement of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
			Three months ended
			December 31,
			2013	2012
Cash provided by (used in):
Operating activities:
	Net income		($3,060,569)	($1,738,832)
	Adjustments for:
		Depreciation of property and equipment	1,603,063	71,158
		Amortization of intangible assets	1,690,134	164,792
		Finance income	(14,759)	(12,181)
		Finance costs	584,520	114,162
		Income tax expense	785,687	86,938
		Unrealized foreign exchange loss (gain)	45,701	66,462
		Share-based compensation	670,206	392,654
		Revaluation of contingent consideration	1,150,669	-
	Changes in non-cash operating working capital		(20,022,984)	(2,841,741)
			(16,568,332)	(3,696,588)
	Interest paid		(953)	(87,236)
	Interest received		14,759	12,195
	Income taxes (paid) received		(92,259)	(118,398)
			(16,646,785)	(3,890,027)
Financing activities:
	Proceeds from public offering		-	18,731,390
	Proceeds from exercise of stock options		40,773	182,050
	Proceeds of loans and borrowings		10,000,000	-
	Transaction costs on loans and borrowings		(10,032)	-
			10,030,741	18,913,440
Investing activities:
	Purchase of property and equipment		(1,071,966)	(403,972)
	Purchase of intangible assets		(156,428)	-
	Increase (decrease) in restricted cash		(15,227)	(7,603)
			(1,243,621)	(411,575)
Effect of foreign exchange rate changes on
cash and cash equivalents			(45,701)	(66,462)
Decrease in cash and cash equivalents			(7,905,366)	14,545,376
Cash and cash equivalents, beginning of period			79,054,757	16,878,523
Cash and cash equivalents, end of period			$71,149,391	$31,423,899

Redknee Solutions Inc.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Expressed in U.S. dollars)
(Unaudited)
		Three months ended
		December 31,
		2013	2012
Net income (loss) for the period		(3,060,569)	(1,738,832)
Add back / (subtract):
	Depreciation of property and equipment	1,603,063	71,158
	Amortization of intangible assets	1,690,134	164,792
	Revaluation of contingent consideration	1,150,669	-
	Finance income	(14,759)	(12,181)
	Finance costs	584,520	114,162
	Income tax expense	785,687	86,938
	Share-based compensation	670,206	392,654
	Foreign exchange loss (gain)	1,137,904	(360,363)
EBITDA		4,546,855	(1,281,672)
Adjustments
	Acquisition and related costs	872,368	2,278,472
Adjusted EBITDA		$5,419,223	$996,800

SOURCE: Redknee Solutions Inc.

Investor Relations:

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