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Press release from CNW Group

Redknee Reports Second Quarter Fiscal 2011 Financial Results

Wednesday, May 04, 2011

Redknee Reports Second Quarter Fiscal 2011 Financial Results18:54 EDT Wednesday, May 04, 2011("Redknee" or "the Company")TORONTO, May 4 /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 2011, ended March 31, 2011.Q2 Highlights: Second quarter 2011 revenue increased  by 24% to $16.6M (on constant currency basis: $17.5M, Q2 2010: $13.5M)Gross margin at 68% (Q2 2010: 72%)EBITDA of $1.7M (Q2 2010: $1.8M)Order backlog of $47.1M (Q4 2010: $36.5M)Signed multiple new customers in Europe , Middle East and Africa region; signed a multi-million dollar, multi-year Turnkey Converged Billing (TCB) upgrade and capacity expansion in APAC regionRedknee's TCB product nominated at the TM Forum Excellence AwardsPatents: 33 issued, over 77 pending and one in the grant/issuance process"Redknee continues to deliver good progress on its strategic growth plan.  We have grown both our revenues and contracted order backlog, while improving our gross margin quarter over quarter. We see opportunities to continue to win business with both existing and new customers in each of our core markets.  We are encouraged with our long-term growth in revenues and earnings, and remain committed 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 and on SEDAR at www.sedar.comOVERVIEW 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.Sales of Redknee's business-critical solutions have been robust in the context of the 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 85% of second quarter revenue - in line with its plan.Redknee's market leading solutions continue to be recognized globally by telecom providers. Redknee has expanded its TCB licenses with customers across Americas, APAC and EMEA regions.  Redknee signed multiple billing contracts with new customers, expanding our presence across EMEA. As strategic transactions, Redknee believes these new contracts will enable us to expand our footprint into these regions over coming years. Redknee announced a multi-million dollar, multi-year upgrade and capacity expansion of its TCB solution with a leading APAC group operator.On a trailing four-quarter basis, recurring revenues were at 41% of overall revenues. Redknee continues to focus on multi-year service agreements to support forward visibility and to enhance our recurring revenues.Redknee wishes to announce that John Phillips has chosen to step down from the Board of Directors after nearly 9 years of service. "During his tenure, John served both as non-executive director and chairman of the board, and supported Redknee's evolution from a private company to a publicly-listed international company,"  commented Lucas Skoczkowski, "He has contributed in countless ways to Redknee and we will be forever grateful for his contribution in making our organization that much stronger". Following John's departure and with the recent additions of Terry Nickerson and Greg Jacobson, Redknee's Board of Directors will consist of five independent non-executive directors and the CEO of the company.Financial Review For the three-month period ended March 31, 2011, the Company's revenue increased by 24% to $16.6M from $13.5M in the second quarter of fiscal 2010.The gross margin for the second quarter of fiscal 2011 was 68%  compared to 72% for the second quarter of fiscal 2010.  The decrease in gross margin relates to the product mix in sales for the period to products with lower gross margin.For the three-month period ended March 31, 2011, operating expenses, excluding amortization and foreign exchange loss (gain), increased to 60% of revenue as compared to 58% of revenue in the same period last year due mainly to the addition of operating costs from Nimbus.The Company currently has a portfolio of 33 issued patents, 77 outstanding patent applications, and one patent in the grant/issuance process. Net income in Q2 fiscal 2011 was $0.4 million or $0.01 per share, compared to a net profit of $0.4 million or $0.01 per share in Q2 fiscal 2010.Cash and investments (including restricted cash) as at March 31, 2011 was $16.9 million versus $18.5 million as at December 31, 2010.CONFERENCE CALLThe Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday May 5, 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          647-427-7450   Toll-free North America    1-888-231-8191The webcast can be accessed at: ReplayThe conference call will be archived to replay by telephone at: 416-849-0833 or Toll-Free at 1-800-642-1687 (Passcode No. 59634757) 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 and on the Company's web-site at   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®, 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 Balance Sheets (unaudited)       For the period ended March 31,2011September 30, 2010  $$Assets       Current assets   Cash and cash equivalents 15,245,87818,738,958Short-term investments -22,186Trade accounts and other receivables14,744,86114,959,777Unbilled revenue 10,340,9547,196,714Prepaid expenses 1,481,0511,371,960Goods in transit 416,060256,709      42,228,80442,546,304    Restricted cash 1,606,716811,979    Property and equipment 525,201635,526Intangible assets 5,076,8545,861,248Goodwill 7,935,3737,668,157Future income taxes and investment tax credits 1,090,739795,196Other assets 491,954518,655      58,955,64158,837,065    Liabilities       Current liabilities   Accounts payable 3,312,8462,624,339Accrued liabilities 3,746,4623,703,055Income taxes payable 2,834,3332,730,670Deferred revenue 7,166,9776,031,551Current portion of long term debt 2,520,7973,071,885Current portion of obligations under capital leases 14,69024,197      19,596,10518,185,697    Long term deferred revenue  - Other long term liabilities 557,856468,505Obligations under capital leases 26,78732,178Long termportion of loans payable 5,764,2087,094,087Future income taxes 1,093,9351,265,159Total liabilities 27,038,89127,045,626    Shareholders' Equity       Share capital, net of employee share purchase loans 47,884,93247,662,953    Contributed surplus 4,608,5274,345,128    Deficit (20,546,679)(20,050,301)    Accumulated and other comprehensiveloss (30,030)(166,341)      (20,576,709)(20,216,642)      31,916,75031,791,439      58,955,64158,837,065Interim consolidated Statements of Operations (unaudited)     Three months endedSix months ended March 31,March 31, 2011201020112010 $$$$          Revenue    Software, services and other11,466,6749,155,15920,025,34516,158,771Support5,168,3864,311,07710,737,6599,087,542      16,635,06013,466,23630,763,00425,246,313     Cost of revenue5,333,6003,733,88110,532,2026,453,176     Gross profit11,301,4609,732,35520,230,80218,793,137     Operating expenses    Sales and marketing3,900,3023,522,3657,419,5596,678,936General and administrative2,409,5551,710,9594,485,5543,371,542Research and development3,554,5972,631,2246,598,8925,374,547Amortization of property and equipment and intangible assets456,298162,585934,471321,306Foreign exchange loss360,3911,247,292905,9571,740,423      10,681,1439,274,42520,344,43317,486,754     Income (loss) from operations620,317457,930(113,631)1,306,383     Interest income45,0055,21583,3336,889     Interest expense(133,380)(4,713)(277,368)(17,508)     Income (loss) before income taxes531,942458,432(307,666)1,295,764     Income taxes123,71657,485188,712330,512     Net income (loss) for the period408,226400,947(496,378)965,252     Net income per common share    Basic0.010.01(0.01)0.02Diluted0.010.01(0.01)0.02     Weighted average number of common shares    Basic64,158,36359,603,52664,132,81359,603,526Diluted65,799,58061,738,91064,132,81361,259,237 ______________________________________Earnings Before Interest Expense, Income Taxes, Depreciation, and Amortization (EBITDA) is a non-GAAP measure. EBITDA described above is calculated as Income (loss) from operations, net of foreign exchange gain/loss, amortization and stock-based compensation.   For further information: Redknee Solutions Inc.       Lucas Skoczkowski, Chief Executive Officer Tel: +1 905 625 2622 David Charron, Chief Financial Officer Fax: +1 905 625 2773