Redknee Solutions Reports Fiscal Fourth Quarter and Full Year 2013 Results

TORONTO, Dec. 11, 2013 /CNW/ - Redknee Solutions Inc. (TSX: RKN), a leading provider of business-critical billing and charging software for communications service providers, today reported results for its fiscal fourth quarter and full year ended September 30, 2013. All figures are in U.S. dollars.

Fiscal Q4 2013 Financial Highlights (compared to Q4 2012)

• Revenue of $57.4 million, up 295% from $14.5 million
• Recurring revenue was 57% of total revenue compared to 47%
• Gross margin was 54% compared to 69%
• Adjusted EBITDA of $4.5 million versus $1.9 million
• Net loss was $1.0 million or $0.01 per share versus net income of $1.9 million or $0.03 per share
• Cash increased to $80.1 million at year end
• Order backlog at $160.4 million

Fiscal Year 2013 Highlights (Compared to FY 2012)

• Revenue increased 150% to a record $142.0 million
• Recurring revenue increased to 55% of total revenue compared to 50%
• Adjusted EBITDA of $11.3 million versus $7.3 million
• Net loss was $0.3 million or $0.00 per share versus net income of $5.3 million or $0.08 per share

Fiscal Q4 2013 Operational Highlights

• Tokyu Group's iTSCOM, a leading Japanese Cable TV service provider and existing Redknee customer, signed an additional multi-year contract for Redknee's converged billing and customer care solution
• BH Telecom, the largest operator in Bosnia and Herzegovina and an acquired customer, signed a multi-million dollar deal to upgrade to the latest version of Redknee's converged billing, charging, policy and customer care solution
• Multi-million dollar customer contracts announced throughout the quarter across all regions
• Awarded the Stratecast Frost & Sullivan Award for Global Growth Leadership in Communications Service Provider (CSP) billing
• Highlighted by Infonetics Research for the innovation leadership of Redknee's integrated charging and policy solution

"In 2013, we completed a transformative acquisition that made us the largest independent real-time monetization and subscriber management software company globally, with more than 200 customers and a strong base of recurring revenue" said Lucas Skoczkowski, CEO of Redknee. "Customers are responding positively to Redknee and we continue to make excellent progress with our integration strategy.  This is reflected in our financial results for the quarter, as well as a growing pipeline, driven by renewals with existing customers, a healthy demand for upgrades, and a general sales momentum.  In 2014, we will continue to emphasize high quality customer service, while we focus on cross-selling and increasing revenue opportunities with our existing customer base and acquiring new customers."

Q4 2013 Financial Results

Revenue in Q4 2013 was $57.4 million, compared to $14.5 million in Q4 2012. The increase was primarily due to the Nokia Siemens Networks BSS acquisition, as well as license expansions, license upgrades, and third-party hardware and software sales.

Recurring revenue was 57% of total revenue compared to 47% for Q4 2012. 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 54% compared to 69% in Q4 2012. This expected decrease in gross margin relates to the change in mix of the revenue recorded and lower support margin from the acquired BSS business.

Adjusted EBITDA was $4.5 million, compared to $1.9 million in the same quarter in the prior year (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net loss totalled $1.0 million or $0.01 per diluted share compared to net income $1.9 million or $0.03 per diluted share in Q4 2012. Q4 2013 net income included $1.7 million of acquisition-related costs.

Contracted order backlog reached $160 million at quarter-end, which included the impact of the acquisition of the BSS business unit.

Full-Year 2013 Financial Results

Revenue in fiscal 2013 increased to $142.0 million, from $56.9 million in fiscal 2012. Recurring revenue for the fiscal year increased to 55% of total revenue, compared to 50% in fiscal 2012, primarily driven by sales to new customers acquired through to the BSS acquisition.

Gross margin for the fiscal year was 56% from 69% in fiscal year 2012.

Net loss totalled $0.3 million, or $0.00 per basic and diluted share, compared to net income of $5.3 million, or $0.08 per basic and diluted share, in fiscal 2012. The year over year decrease relates to acquisition-related costs incurred as a result of the BSS acquisition.

Adjusted EBITDA was $11.3 million, or 8% of revenue, in fiscal 2013, increasing 53% from $7.3 million, or 13% of revenue, in fiscal 2012.

At September 30, 2013, cash and investments were $80.1 million, compared to $17.8 million at September 30, 2012.

Please refer to the 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 www.redknee.com and on SEDAR at www.sedar.com.

Conference Call

The company will host a conference call tomorrow (Thursday, December 12, 2013) 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, December 12, 2013
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 97301217

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/1aUED5e .

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 December 19, 2013.

Toll-Free Replay Number: 1 [phone] International Replay Number: 1 [phone] Replay PIN: 9730121

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.

Adjusted EBITDA

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-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.

Other companies (including competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in Redknee's industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Redknee or is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA 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.
Consolidated Statements of Financial Position
(Expressed in U.S. dollars)
September 30, 2013 and 2012
			2013		2012
Assets
Current assets:
	Cash and cash equivalents	$	79,054,757	$	16,878,523
	Trade accounts and other receivables		66,393,041		10,394,639
	Unbilled revenue		39,421,584		12,125,089
	Prepaid expenses		1,943,986		799,901
	Other assets		832,516		649,272
	Inventories		6,644,580		580,171
	Total current assets		194,290,464		41,427,595
Restricted cash			1,011,361		913,270
Property and equipment			10,890,910		726,818
Deferred income taxes			1,923,409		659,260
Investment tax credits			378,923		550,000
Other assets			3,179,724		3,170,308
Intangible assets			38,732,447		3,671,306
Goodwill			7,638,590		7,638,590
Total assets		$	258,045,828	$	58,757,147
Liabilities and Shareholders' Equity
Current liabilities:
	Trade payables	$	15,707,464	$	1,756,532
	Accrued liabilities		59,532,922		7,156,844
	Provisions		1,201,050		-
	Income taxes payable		2,445,616		2,036,864
	Deferred revenue		14,935,451		7,258,759
	Loans and borrowings		375,000		-
	Total current liabilities		94,197,503		18,208,999
Deferred revenue			4,149,940		78,002
Other liabilities			1,892,576		439,398
Pension and non-pension post-employment benefit obligation			814,335		-
Contingent consideration			24,833,537		-
Loans and borrowings			32,956,036		5,461,970
Embedded derivative liability			900,570		-
Deferred income taxes			744,652		408,156
Total liabilities			160,489,149		24,596,525
Shareholders' equity:
	Share capital		109,017,145		46,543,100
	Treasury stock		(132,050)		(264,584)
	Contributed surplus		4,357,175		4,787,549
	Deficit		(17,182,622)		(16,918,912)
	Accumulated other comprehensive income		1,497,031		13,469
	Total shareholders' equity		97,556,679		34,160,622
Total liabilities and shareholders' equity		$	258,045,828	$	58,757,147

REDKNEE SOLUTIONS INC.
Consolidated Statements of Comprehensive Income
(Expressed in U.S. dollars)
Years ended September 30, 2013 and 2012
			2013		2012
Revenue:
	Software, services and other	$	68,066,282	$	33,859,929
	Support		73,981,190		23,004,219
			142,047,472		56,864,148
Cost of revenue			63,114,358		17,865,463
Gross profit			78,933,114		38,998,685
Operating expenditures:
	Sales and marketing		25,133,152		14,704,054
	General and administrative		20,653,701		9,247,155
	Research and development		34,421,619		9,382,866
	Acquisition and related costs		12,963,575		-
			93,172,047		33,334,075
Income (loss) from operations			(14,238,933)		5,664,610
Foreign exchange loss			(676,151)		(38,881)
Other income (expenses)			15,814,798		(13,938)
Finance income			31,292		99,718
Finance costs			(1,011,314)		(449,753)
Income (loss) before income taxes			(80,308)		5,261,756
Income taxes (recovery):
	Current		1,920,688		964,069
	Deferred		(1,737,286)		(1,004,370)
			183,402		(40,301)
Net income (loss)			(263,710)		5,302,057
Other comprehensive income:
	Actuarial gain on pension and non-pension post-employment   benefit plans, net of income tax of $ 753,101		1,483,562		-
Total comprehensive income		$	1,219,852	$	5,302,057
Net income per common share:
	Basic	$	0.00	$	0.08
	Diluted		0.00		0.08
Weighted average number of common shares:
	Basic		82,808,206		64,178,009
	Diluted		82,808,206		65,129,225

REDKNEE SOLUTIONS INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
Years ended September 30, 2013 and 2012
					2013		2012
Cash provided by (used in):
Operating activities:
	Net income (loss)			$	(263,710)	$	5,302,057
	Adjustments for:
		Depreciation of property and equipment			2,779,362		226,606
		Amortization of intangible assets			3,699,363		727,572
		Finance income			(31,292)		(99,718)
		Finance costs			1,011,314		449,753
		Income tax expense (recovery)			183,402		(40,301)
		Unrealized foreign exchange loss (gain)			221,878		(93,760)
		Bargain purchase gain from acquisition			(15,814,798)		-
		Share-based compensation			6,065,374		729,160
		Revaluation of contingent consideration			1,271,305		6,588
	Change in non-cash operating working capital				(8,474,238)		1,075,803
					(9,352,040)		8,283,760
	Interest paid				(604,653)		(114,081)
	Interest received				40,258		99,590
	Income taxes paid				(1,088,213)		(1,293,995)
					(11,004,648)		6,975,274
Financing activities:
	Proceeds from public offering				18,731,390		-
	Proceeds from private placement				41,060,376		-
	Proceeds from exercise of stock options				1,749,994		168,039
	Purchase of treasury stock				-		(714,608)
	Proceeds from loans and borrowings				30,000,000		5,911,319
	Repayment of loans and borrowings				-		(8,362,083)
	Transaction costs on loans and borrowings				(1,530,954)		(449,523)
					90,010,806		(3,446,856)
Investing activities:
	Purchase of property and equipment				(2,403,507)		(575,411)
	Purchase of intangible assets				(493,868)		(42,357)
	Decrease in restricted cash				(98,091)		(128,450)
	Settlement of Nimbus Systems contingent consideration				-		(877,377)
	Acquisition of business				(13,612,580)		-
					(16,608,046)		(1,623,595)
Effect of foreign exchange rate changes   on cash and cash equivalents					(221,878)		93,760
Increase in cash and cash equivalents					62,176,234		1,998,583
Cash and cash equivalents, beginning of year					16,878,523		14,879,940
Cash and cash equivalents, end of year				$	79,054,757	$	16,878,523

REDKNEE SOLUTIONS INC.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Expressed in U.S. dollars)
(Unaudited)
		Three months ended		Twelve months ended
		September 30,		September 30,
		2013	2012	2013	2012
Net income (loss) for the period		(969,927)	1,873,468	(263,710)	5,302,057
Add back / (subtract):
	Depreciation of property and equipment	1,758,046	79,356	2,779,362	226,606
	Amortization of intangible assets	1,749,281	174,451	3,699,363	727,572
	Other (income) expenses	(4,017,973)	-	(15,814,798)	13,938
	Finance income	(8,633)	(28,061)	(31,292)	(99,718)
	Finance costs	568,819	152,580	1,011,314	449,753
	Income tax expense	(682,643)	(254,377)	183,402	(40,301)
	Share-based compensation	4,880,298	74,594	6,065,374	729,160
	Foreign exchange loss (gain)	(563,532)	(177,801)	676,151	38,881
EBITDA		2,713,736	1,894,210	(1,694,834)	7,347,948
Adjustments:
	Acquisition and related costs	1,769,119	-	12,963,575	-
Adjusted EBITDA		$ 4,482,855	$ 1,894,210	$ 11,268,741	$ 7,347,948

 

SOURCE: Redknee Solutions Inc.

Investor Relations:
Robert Kelly
TMX Equicom
T: [phone] ext. 253
[email protected]  

Craig Armitage
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T: [phone] ext. 278
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