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Press release from CNW Group

Redknee Reports First Quarter Fiscal 2011 Financial Results

Wednesday, February 09, 2011

Redknee Reports First Quarter Fiscal 2011 Financial Results18:24 EST Wednesday, February 09, 2011("Redknee" or "the Company")TORONTO, Feb. 9 /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 the results for the first quarter of fiscal 2011 ended December 31, 2010. Q1 Highlights: Revenue increased  by 20% to $14.1M (on constant currency basis $15.0M , Q1 2010: $11.8M)Gross margin at 63% (Q1 2010: 77%)EBITDA(1) of $0.4M (Q1 2010: $1.7M)Operating loss of $0.7M (Q1 2010: operating income of $0.8M)Order backlog of $37.3MOne MVNO billing contract in EMEA; data policy win in APAC;  large wholesale billing win in APAC,  and Tier 1 contracts in AmericasPatents: 30 issued, 73 pending and 3 in the grant/issuance process"Redknee continues to deliver good progress on our strategic growth plan.  We have increased the proportion of initial deployments thereby compressing our gross margin in the short term, while providing opportunity for future license growth. We see opportunities to continue to win business with both existing and new customers in each of our core markets.  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.comOVERVIEW Redknee remains focused on the three core elements of our 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 continues to compete successfully in the markets that we service.  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 first quarter revenue - in line with our plan. Redknee's market leading solutions continue to be recognized globally by telecom providers. Redknee has continued to take market share by winning contracts with: additional EMEA MVNO contract, a large APAC wholesale billing and content settlement win, APAC data policy win, as well as real-time subscriber system wins with multiple Tier 1 operators in the Americas region. As strategic transactions, Redknee believes these new contracts will enable us to continue to build significant market share in both Tier 1 and 2 operators over the coming years.Redknee's recurring revenue streams continue to strengthen, despite the appreciation in the Canadian dollar. In the first quarter, the recurring revenues grew by 15% to 42% of revenues. On a four-quarter trailing basis, recurring revenues were at 41% of 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 three-month period ended December 31, 2010, the Company's revenue increased by 20% to $14.1M from $11.8M in the first quarter of fiscal 2010.The gross margin for the first quarter of fiscal 2011 was 63% as compared to 77% for the first quarter of fiscal 2010.  The decrease in gross margin can be attributed to the mix of products sold in Q1 2011, as 13% of the revenue this quarter results from the sale of third party hardware and software components.  These components were sold as part of Redknee's initial deployments which will provide opportunities for future license growth.For the three-month period ended December 31, 2010, operating expenses, excluding amortization and foreign exchange loss, declined to 61% of revenue as compared to 64% of revenue in the same period last year. The net loss in Q1 fiscal 2011 was $0.9M or $(0.01) per share as compared to a net profit of $0.6M or $0.01 per share in Q1 fiscal 2010.CONFERENCE CALLThe Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday February 10, 2011.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          647-427-7450Toll-free North America    1-888-231-8191The webcast can be accessed at:http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3387780Conference ReplayThe conference call will be archived to replay by telephone at: 416-849-0833 or Toll-Free at 1-800-642-1687 (Passcode No. 40420096) 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 90 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.______________________________________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.Interim consolidated Balance Sheets (unaudited)  For the period endedDecember 31, 2010September 30, 2010 $$Assets      Current assets  Cash and cash equivalents16,626,22818,738,958Short-term investments022,186Trade accounts and other receivables14,752,04114,959,777Unbilled revenue6,408,8677,196,714Prepaid expenses1,533,8091,371,960Goods in transit190,920256,709                        39,511,865                    42,546,304   Restricted cash                      1,885,865                         811,979   Property and equipment                          573,219                         635,526   Intangible assets                      5,447,495                      5,861,248Goodwill                      7,854,531                      7,668,157Future income taxes and investment tax credits                      1,019,139                         795,196Other assets                          498,560                         518,655    56,790,67458,837,065   Liabilities     Current liabilities  Accounts payable3,141,7822,624,339Accrued liabilities3,819,6003,703,055Income taxes payable2,736,5022,730,670Deferred revenue4,565,9106,031,551Current portion of long term debt2,957,4363,071,885Current portion of obligations under capital leases 18,81124,197    17,240,04118,185,697   Long term deferred revenue                                    -  Other long term liabilities479,677468,505Obligations under capital leases25,88732,178Long term portion of loans payable6,613,8277,094,087Future income taxes1,185,3971,265,159Total liabilities25,544,82927,045,626   Shareholders' Equity     Share capital, net of employee share purchase loans47,788,79447,662,953   Contributed surplus4,484,7874,345,128   Deficit(20,954,906)(20,050,301)   Accumulated and other comprehensive loss(72,830)(166,341)    (21,027,736)(20,216,642)    31,245,84531,791,439    56,790,67458,837,065      Interim consolidated Statements of Operations  (unaudited)   For the three months ended December 31,20102009 $$   Revenue   Software, services and other8,558,6717,003,612 Support5,569,2734,776,465 14,127,94411,780,077   Cost of revenue5,198,6022,719,296Gross profit8,929,3429,060,78   Operating expenses   Selling and marketing3,519,2573,156,571 General and administrative2,075,9991,660,581 Research and development 3,044,2952,743,323 Amortization478,173         158,721 Foreign currency exchange loss         545,566         493,131 9,663,2908,212,327   (Loss) Income from operations      (733,949)       848,454  Interest income           38,328             1,674 Interest expense        (143,988)         (12,796)(Loss) Income before income taxes      (839,609)       837,332  Income taxes            64,996         273,027(Loss) Income for the period      (904,605)       564,305    Shares    63,941,381    58,800,461EPS             (0.01)              0.01 For further information: Redknee Solutions Inc.Lucas Skoczkowski, Chief Executive Officer David Charron, Chief Financial OfficerTel: +1 905 625 2622 Fax: +1 905 625 2773