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Press release from CNW Group

REDKNEE REPORTS FOURTH QUARTER FISCAL 2010 FINANCIAL RESULTS

Wednesday, December 01, 2010

REDKNEE REPORTS FOURTH QUARTER FISCAL 2010 FINANCIAL RESULTS18:49 EST Wednesday, December 01, 2010TORONTO, Dec. 1 /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 fiscal year 2010, ended September 30, 2010. Q4 Highlights: Q4 2010 revenue of $13.0M (on constant dollar basis $14.2M, Q4 2009: $10.8M)Gross margin of 73% (Q4 2009: 75%)EBITDA of $2.9M (Q4 2009: $1.9M)Operating income of $2.0M (Q4 2009: loss of $0.3M)Won $5+ million transformation contract in APACFY2010 Highlights: 2010 revenue of $48.9M (on constant dollar basis $54.6M, 2009: $53.3M)Gross margin of 73% (2009: 78%)EBITDA of $6.1M (2009: $6.5M)Operating income of $3.2M (2009: $4.2M)Order backlog of $36.5M (2009: $25.2M)Key TCB deals: APAC billing replacement, MVNO US reference, two long term service contractsAcquisition of Nimbus Systems, a Tier 1 billing and customer care specialistPatents: 28 issued, over 70 pendingAwarded Billing and OSS World Excellence Award for Best Service Enablement ToolNamed one of the Top 50 Best Managed Companies in Canada Award for the eighth consecutive year"Redknee delivered good progress on its strategic growth plan, while achieving its key strategic objectives, securing record order backlog and positioning us for growth in fiscal 2011. We believe that our strategy of focusing on our core suite of monetization software products and services continues to drive customer and shareholder value in our company, 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 a commitment to increasing our recurring revenues," noted Lucas Skoczkowski, CEO for Redknee.  Please see the section regarding Forward-Looking Statements which forms 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______________________________________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.OVERVIEW Redknee remains focused on the three core elements of its long-term corporate growth strategy: Continued expansion and evolution of our business-critical solutions to our global customer base;Market share growth and leadership in our served addressable market; andAn 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 the revenue in fiscal 2010 - 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 served addressable market by gaining over 15 new customers across Americas, APAC and EMEA through a combination of deliveries to new operators, modular software delivery that integrates with existing systems, as well as replacement of competitors' end-to-end platforms. Furthermore, Redknee's Next Generation Rating and Charging solution was awarded the Billing and OSS World Excellence Award for its ability to improve its customers' business performance and profitability. Redknee's NGRC is an end-to-end real-time data rating, charging and policy engine that enables operators to launch new services and manage bandwidth, while creating new revenue streams based on diverse pricing options for both prepaid and post-paid subscribers.Redknee's acquisition of Nimbus Systems further strengthens its operating model and market share, particularly in global Tier-1 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-selling opportunities for joint product and service portfolios, while positioning the company to engage and win new customers.Financial ReviewFor Q4 of fiscal 2010, revenue was $13.0 million, up 20% from the $10.8 million recorded in Q4 2009. Operating profit for the quarter was $2.0 million, compared to a loss of $0.3 million in Q4 2009. On a constant currency basis, revenue would have been $14.2M or growth of 31% over Q4 2009.For fiscal 2010, Redknee's revenue decreased by 8% to $48.9 million compared to revenue of $53.3 million in 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, fiscal 2010 revenue would have been $54.6 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 margin for fiscal 2010 decreased to $35.8 million or 73% of revenue from $43.1 million or 78% of revenue in fiscal 2009.Redknee recorded an EBITDA of $6.1 million for fiscal 2010 compared to an EBITDA of $6.5 million for the fiscal 2009.The Company recognized a foreign currency exchange loss of $ 1.7 million in fiscal 2010, as compared to a foreign currency exchange loss of $0.9 million in fiscal 2009.Net profit in fiscal 2010 was $1.1 million or $0.02 per share, as compared to $3.3 million or $0.06 per share in fiscal 2009.Cash and investments (including restricted cash) as at September 30, 2010 was $19.6 million versus $19.9 million as at June 30, 2010.CONFERENCE CALLThe Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday December 2, 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     1-888-231-8191The webcast can be accessed at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3310560Conference ReplayThe conference call will be archived to replay by telephone at: 416-849-0833 or Toll-Free at 1-800-642-1687 (Passcode No. 24660302) 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®, 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.    Consolidated Balance Sheets    As at September 30, 2010 and 2009     (expressed in Canadian dollars)           2010$ 2009$Assets          Current assets    Cash and cash equivalents 18,738,958 25,663,047Short-term investments 22,186 107,049Trade accounts and other receivables 14,959,777 8,160,277Unbilled revenue 7,196,714 2,670,431Investment tax credits receivable - 600,000Prepaid expenses 1,371,960 1,027,056Goods in transit 256,709 242,099       42,546,304 38,469,959     Restricted cash 811,979 322,722     Property and equipment 635,526 275,331     Future income taxes  795,196 334,513     Other assets 518,655 464,303     Intangible assets 5,861,248 1,487,680     Goodwill  7,668,157 -       58,837,065 41,354,508     Liabilities         Current liabilities    Accounts payable 2,624,339 907,694Accrued liabilities 3,703,055 5,899,843Income taxes payable 2,730,670 2,529,923Deferred revenue 6,031,551 6,988,512Current portion of loans payable 3,071,885 -Current portion of obligations under capital leases 24,197 -       18,185,697 16,325,972     Long-term deferred revenue - 1,005,164     Other long-term liabilities  468,505 -     Long-term portion of loans payable 7,094,087 -     Obligations under capital leases  32,178 -     Future income taxes 1,265,159 -       27,045,626 17,331,136     Shareholders' Equity         Share capital, net of employee share purchase loans 47,662,953 40,744,480     Contributed surplus 4,345,128 4,572,737     Deficit (20,050,301) (21,144,555)     Accumulated other comprehensive loss (166,341) (149,290)     Total deficit and accumulated other comprehensive loss (20,216,642) (21,293,845)       31,791,439 24,023,372     Commitments, guarantees and contingencies 58,837,065 41,354,508     Redknee Solutions Inc.Consolidated Statements of OperationsFor the three months and years ended September 30, 2010 and 2009(expressed in Canadian dollars)   Three months endedSeptember 30 Twelve months endedSeptember 30           2010$ 2009$ 2010$ 2009$         Revenue        Software, services and other 7,916,996 5,901,443 29,814,462 32,096,609Support 5,075,422 4,901,653 19,055,927 21,153,523           12,992,418 10,803,096 48,870,389 53,250,132         Cost of revenue 3,541,370 2,667,159 13,107,426 11,968,026         Gross profit 9,451,048 8,135,937 35,762,963 41,282,106         Operating expenses        Sales and marketing 3,065,387 2,568,475 12,548,407 14,608,859General and administrative 1,866,131 1,531,793 7,637,960 8,983,293Research and development 1,764,600 2,338,281 9,950,052 11,929,925Amortization 291,071 195,203 777,249 677,229Foreign exchange loss 443,928 1,780,923 1,679,999 871,514           7,431,117 8,414,675 32,593,667 37,070,820         Income from operations      2,019,931        (278,738) 3,169,296 4,211,286         Interest income 42,974 51,996 72,574 97,747         Interest expense          (64,375)            (4,807) (85,710) (19,687)         Income before income taxes      1,998,530        (231,549) 3,156,160 4,289,346         Income taxes         Current 1,689,074 16,093 2,111,236 961,915Future (49,330) 0 (49,330) -         Net income for the year          358,786        (247,642) 1,094,254 3,327,431         Net income per common share        Basic 0.01 0.00       0.02 0.06Diluted 0.01 0.00       0.02 0.06         Weighted average number of common shares         Basic 62,308,901 57,761,293 60,137,683 57,761,293Diluted 64,608,163 57,761,293 62,017,977 59,832,102                 Redknee Solutions Inc.Consolidated Statements of Cash FlowsFor the years ended September 30, 2010 and 2009    (expressed in Canadian dollars)           2010$ 2009$     Cash provided by (used in)         Operating activities    Net income for the year 1,094,254 3,327,431Items not involving cash     Amortization of property and equipment 171,929 150,810 Amortization of intangible assets 605,320 526,419 Investment tax credits 600,000 (200,000) Unrealized foreign exchange loss 1,467,351 796,424 Stock-based compensation 554,391 708,727 Future income taxes (432,475) -Change in non-cash operating working capital (10,548,691) 5,389,401       (6,487,921) 10,699,212     Financing activities    Collection of employee share purchase loans 487,845 484,526Proceeds from exercise of stock options 1,299,242 26,586Repayment of obligations under capital leases - (619)Net proceeds from loans payable 7,789,507 -       9,576,574 510,493     Investing activities    Proceeds from (purchase of) short-term investments 148,813 (50,686)Purchase of property and equipment (114,746) (471,426)Purchase of intangible assets (99,557) -(Increase) decrease in other assets (54,354) 63,991(Increase) decrease in restricted cash (489,257) 87,197Acquisition of Nimbus Systems, net of cash acquired (8,422,352) -       (9,031,453) (370,924)     Effect of foreign exchange rate changes on cash and cash equivalents (980,822) (418,341)     (Decrease) increase in cash and cash equivalents during the year (6,923,622) 10,420,440     Cash and cash equivalents - Beginning of year 25,663,047 15,242,607     Cash and cash equivalents - End of year 18,738,958 25,663,047     For further information: Redknee Solutions Inc.       Lucas Skoczkowski, Chief Executive Officer  Tel: +1 905 625 2622David Charron, Chief Financial Officer  Fax: +1 905 625 2773