The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Redknee Reports Second Quarter Fiscal 2010 Financial Results

Wednesday, May 05, 2010

Redknee Reports Second Quarter Fiscal 2010 Financial Results19:43 EDT Wednesday, May 05, 2010TORONTO, May 5 /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 2010, ended March 31, 2010. << Q2 Highlights: -------------- - Second quarter 2010 revenue at $13.5M (Q2 2009: 13.8M) - Gross margin at 72% (Q2 2009: 79%) - EBITDA profit of $1.8M (Q2 2009: $1.1M) - Order backlog of $30M - Three new TCB customers from across APAC, Americas and EMEA markets, as well as software license expansions and functionality upgrades - Signed agreement with Microsoft around our real-time turnkey converged billing - Patents: 19 issued, over 58 pending - Recipient of the 2010 Best Managed Companies in Canada and named in list of Top 10 Wireless Software Companies in Canada >> "Redknee delivered another consecutive profitable quarter on an EBITDA basis, while both adding new customers and growing with our existing customers, capturing record order backlog of $30 million. Our strategy to focus on our core suite of monetization software products and services has positioned us well to benefit from the opportunities in each of our core markets. We expect the quarter-to-quarter revenue volatility and foreign exchange headwinds to continue in the near term. We remain focused on our long-term growth in revenues and earnings, with commitment 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 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. >> Sales of Redknee's business-critical solutions have been robust in the context of 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 90% of second quarter revenue - in line with its plan.Redknee's market leading solutions continue to be recognized globally by telecom providers. Redknee has continued to take market share in its market by gaining three new real-time TCB customers across Americas, APAC and EMEA regions. Furthermore, Redknee announced an alliance with Microsoft that extends Redknee's reach into the global markets that Microsoft serves, while also enhancing the Microsoft portfolio of partner-led industry solutions.On a four-quarter trailing basis, recurring revenues were at 41% of our overall revenues.Redknee continues to have a strong employee base, a growing number of customers, and the right products with patents to meet our customers' demands. Market trends further support our approach; mobile data and content services continue to grow, and wireless subscriber numbers continue to expand globally. << Financial Review ---------------- >> For the second quarter of fiscal 2010, Redknee's revenue decreased by 2% to $13.5 million compared to revenue of $13.8 million in the second 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 comparative constant dollar basis, revenues in the second quarter would have been $15.8 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 41% of overall revenues.Gross profit in the period decreased to $9.7 million or 72% of revenue from $10.8 million or 79% of revenue in the second quarter of fiscal 2009.Redknee recorded an EBITDA profit of $1.8 million for the second quarter of fiscal 2010 as compared to an EBITDA gain of $1.1 million for the second quarter of fiscal 2009.For the quarter ended March 31, 2010, the Company recognized a foreign currency exchange loss of $1.2 million, as compared to a foreign currency exchange loss of $0.4 million in the second quarter of fiscal 2009.Net income in Q2 fiscal 2010 was $0.4 million or $0.01 per share, as compared to a net profit of $0.2 million or $0.00 per share in Q2 fiscal 2009.Cash and investments as at March 31, 2010 was $19.8 million versus $20.2 million as at March 31, 2009.CONFERENCE CALLThe Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday May 6, 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=3004100Conference ReplayThe conference call will be archived to replay by telephone at: 416-849-0833 or Toll-Free at 1-800-642-1687 (Passcode No. 64657530) from 9:00 am.FORWARD-LOOKING STATEMENTSCertain 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 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 www.redknee.com. << Redknee Solutions Inc. Interim Consolidated Balance Sheet (Unaudited) ------------------------------------------------------------------------- (expressed in Canadian dollars) March 31, September 30 2010 2009 $ $ Assets Current assets Cash and cash equivalents 19,776,406 25,663,047 Short-term investments - 107,049 Trade accounts and other receivables 11,180,906 8,160,277 Unbilled revenue 4,740,785 2,670,431 Investment tax credits and income taxes receivable 400,000 600,000 Prepaid expenses 748,976 1,027,056 Goods in transit 239,354 242,099 --------------------------- 37,086,427 38,469,959 Restricted cash (note 7) 121,872 322,722 Property and equipment 498,344 623,567 Intangible assets 979,894 1,139,444 Future income taxes 336,322 334,513 Other assets 438,006 464,303 --------------------------- 39,460,865 41,354,508 --------------------------- --------------------------- Liabilities Current liabilities Accounts payable 950,108 907,694 Accrued liabilities 3,893,537 5,899,843 Income taxes payable 2,142,443 2,529,923 Deferred revenue 5,793,988 6,988,512 --------------------------- 12,780,076 16,325,972 --------------------------- Long-term deferred revenue 379,239 1,005,164 --------------------------- 13,159,315 17,331,136 --------------------------- Shareholders' equity Share capital, net of employee share purchase loans 42,417,300 40,744,480 --------------------------- Contributed surplus 4,238,389 4,572,737 --------------------------- Deficit (20,179,303) (21,144,555) Accumulated other comprehensive loss, net of income taxes (174,836) (149,290) --------------------------- Total deficit and accumulated other comprehensive loss (20,354,139) (21,293,845) --------------------------- 26,301,550 24,023,372 --------------------------- 39,460,865 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 Six months ended March 31, March 31, ------------------------- -------------------------- 2010 2009 2010 2009 $ $ $ $ Revenue Software, services and other 9,155,159 7,935,239 16,158,771 17,333,769 Support and Subscription 4,311,077 5,814,811 9,087,542 10,633,381 ------------------------------------------------------ 13,466,236 13,750,050 25,246,313 27,967,150 Cost of revenue 3,733,881 2,922,273 6,453,176 6,292,204 ------------------------------------------------------ Gross profit 9,732,355 10,827,777 18,793,137 21,674,946 ------------------------------------------------------ Operating expenses Selling and marketing 3,522,365 3,895,255 6,678,936 8,275,201 General and administrative 1,710,959 2,611,329 3,371,542 4,981,463 Research and development (note 4) 2,631,224 3,316,527 5,374,547 6,659,864 Amortization of property and equipment and intangible assets 162,585 119,892 321,306 312,129 Foreign currency exchange (gain) loss 1,247,292 417,099 1,740,423 (2,220,860) ------------------------------------------------------ 9,274,425 10,360,102 17,486,754 18,007,797 ------------------------------------------------------ Income from operations 457,929 467,675 1,306,383 3,667,149 Interest income 5,215 15,707 6,889 40,783 Interest expense (4,713) (2,170) (17,508) (4,199) ------------------------------------------------------ Income before income taxes 458,432 481,212 1,295,764 3,703,733 Income taxes Current 57,485 275,261 330,512 636,675 ------------------------------------------------------ Net income for the period 400,947 205,951 965,252 3,067,058 ------------------------------------------------------ ------------------------------------------------------ Net income per common share (note 2) Basic 0.01 0.00 0.02 0.05 Diluted 0.01 0.00 0.02 0.05 Weighted average number of common shares (note 2) Basic 59,603,526 56,880,822 59,603,526 56,809,155 Diluted 61,738,910 57,210,822 61,259,237 57,210,822 Redknee Solutions Inc. Interim Consolidated Statement of Comprehensive Income (Loss) (Unaudited) ------------------------------------------------------------------------- (expressed in Canadian dollars) Three months ended Six months ended March 31, March 31, ------------------------- -------------------------- 2010 2009 2010 2009 $ $ $ $ Net income for the period 400,947 205,951 965,252 3,067,058 Other comprehensive income, net of income taxes Foreign currency translation adjustment (16,314) - (25,546) - ------------------------------------------------------ Comprehensive income for the period 384,633 205,951 939,706 3,067,058 ------------------------------------------------------ ------------------------------------------------------ Redknee Solutions Inc. Interim Consolidated Statement of Comprehensive Income (Loss) (Unaudited) ------------------------------------------------------------------------- (expressed in Canadian dollars) Three months ended Six months ended March 31, March 31, ------------------------- -------------------------- 2010 2009 2010 2009 $ $ $ $ Cash provided by (used in) Operating activities Net income for the period 400,947 205,951 965,252 3,067,058 Items not involving cash Amortization of property and equipment 86,687 82,100 185,998 198,999 Amortization of intangible assets 59,410 37,792 118,820 113,130 Unrealized foreign currency exchange loss (gain) 1,141,350 (930,918) 1,642,856 (3,448,008) Stock-based compensation (note 3) (24,737) 134,885 138,247 323,123 Change in non-cash operating working capital (note 5) (5,332,574) (2,876,365) (9,218,434) 3,954,958 ------------------------------------------------------ (3,668,917) (3,346,555) (6,167,261) 4,209,260 ------------------------------------------------------ Financing activities Collection of employee loans 32,500 41,378 466,608 59,029 Proceeds from exercise of stock options 733,617 - 733,617 - Repayment of obligations under capital leases - - - (619) ------------------------------------------------------ 766,117 41,378 1,200,225 58,410 ------------------------------------------------------ Investing activities (Purchase of) proceeds from short-term investments 278,210 (4,527,233) 107,049 (9,037,835) Purchase of property and equipment (29,793) (174,047) (60,776) (312,945) (Increase) decrease in other assets 27,768 10,671 26,298 (37,234) Increase in restricted cash 29,799 (245,524) 200,850 (246,765) ------------------------------------------------------ 305,984 (4,936,133) 273,421 (9,634,779) ------------------------------------------------------ Effect of foreign currency exchange rate changes on cash and cash equivalents (860,343) 17,334 (1,193,026) 1,199,281 ------------------------------------------------------ Increase (decrease) in cash and cash equivalents during the period (3,457,159) (8,223,976) (5,886,641) (4,167,828) Cash and cash equivalents - Beginning of period 23,233,565 19,298,755 25,663,047 15,242,607 ------------------------------------------------------ Cash and cash equivalents - End of period 19,776,406 11,074,779 19,776,406 11,074,779 ------------------------------------------------------ ------------------------------------------------------ Supplemental cash flow information Interest paid 4,712 2,169 17,508 4,199 Interest received 5,215 15,705 6,889 40,781 Cash taxes/investment tax credits received, net of income taxes paid 86,071 53,753 170,646 226,937 >> For further information: Redknee Solutions Inc.: Lucas Skoczkowski, Chief Executive Officer, David Charron, Chief Financial Officer, Tel: (905) 625-2622, Fax: (905) 625-2773