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Press release from CNW Group

Redknee Reports Third Quarter Fiscal 2011 Financial Results

Wednesday, August 03, 2011

Redknee Reports Third Quarter Fiscal 2011 Financial Results17:07 EDT Wednesday, August 03, 2011("Redknee" or "the Company")TORONTO, Aug. 3, 2011 /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 third quarter of fiscal 2011, ended June 30, 2011.Q3 Highlights: Third quarter 2011 revenue increased  by 39% to $14.7M (on constant currency basis: $15.0M, Q3 2010: $10.6M)Gross margin at 61% (Q3 2010: 71%)EBITDA loss of $1.7M (Q3 2010: loss of $0.4M)Excluding one-time costs, adjusted EBITDA loss of $0.2MOrder backlog of $41.1M (Q3 2010: $27.5M)Expansions with Tier 1 operators in Americas, signed global partnership with Tech Mahindra, deployed release 9.0 of Redknee's real-time converged billing platform in APAC and EMEAPatents: 30+ granted and 70+ pending applications"Redknee continues to deliver good progress on its strategic growth plan.  We have grown our revenues, while taking steps to reduce our personnel costs by over 10% through synergies realized from our last acquisition to drive future improvement in our gross margin and EBITDA. We have advanced our global partnerships in service of growing opportunities to win more significant business with both existing and new customers in each of our core markets. We are encouraged by 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 real-time Turnkey Converged Billing ("TCB") platform contributed to over 90% of third quarter revenue - in line with its plan.Redknee's market leading solutions continue to be recognized globally by telecom providers, especially in Americas, where Redknee has expanded its TCB licenses with its customers in the region.  Redknee successfully deployed the latest release of TCB 9.0 of its real-time billing platform in APAC and EMEA. As per Redknee's strategic focus to enhance its go-to-market strategy through partners, Redknee has entered into a global partnership with Tech Mahindra (NSE: TECHM), a global systems integrator and business transformation consulting organization focused on the communications industry, to jointly deliver software and services to the communications service providers market.On a last 12 months ("LTM") basis, recurring revenues were at 40% of overall revenues, while growing to a record level of $23.3M. Redknee continues to focus on multi-year service agreements to support forward visibility and to enhance our recurring revenues.Financial ReviewFor the three-month period ended June 30, 2011, the Company's revenue increased by 39% to $14.7M from $10.6M in the third quarter of fiscal 2010.The gross margin for the third quarter of fiscal 2011 was 61% compared to 71% for the third quarter of fiscal 2010.  The decrease in gross margin relates to the decreased margins in third party sales and in services revenues recorded in the quarter.Operating expenses for Q3 2011, excluding amortization and foreign exchange loss (gain), decreased to 74% of revenue as compared to 75% of revenue in the same period last year.  Included this quarter are one-time operating expenses relating to an allowance for doubtful accounts and severance charges to achieve further synergies from the integration of our Nimbus acquisition.  Excluding the one-time costs of $1.4M, total operating expenses were 67% of revenues in Q3 of fiscal 2011.The Company currently has a portfolio of 30+ patents granted and 70+ pending applications.Net loss in Q3 fiscal 2011 was $2.3 million or $0.04 loss per share, compared to a net loss of $0.2 million or $0.00 per share in Q3 fiscal 2010.Cash and investments (including restricted cash) as at June 30, 2011 was $14.0 million versus $16.9 million as at March 31, 2011.CONFERENCE CALLThe Company will discuss the results on a conference call and webcast at 8:30 a.m. EDT time on Thursday August 4, 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: ReplayThe conference call will be archived to replay by telephone at: 416-849-0833 or Toll-Free at 1-800-642-1687 (Passcode No. 83347434) 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      Interim consolidated Balance Sheets (unaudited)   For the period endedJune 30, 2011 September 30, 2010  $$ Assets        Current assets   Cash and cash equivalents13,274,605 18,738,958Short-term investments- 22,186Trade accounts and other receivables15,975,897 14,959,777Unbilled revenue10,202,301 7,196,714Prepaid expenses1,685,749 1,371,960Goods in transit563,649 256,709     41,702,201 42,546,304    Restricted cash774,771 811,979Property and equipment455,695 635,526Future income taxes and investment tax credits1,166,684 795,196Other assets495,326 518,655Intangible assets 4,719,765 5,861,248Goodwill7,935,373 7,668,157     57,249,815 58,837,065    Liabilities       Current liabilities   Accounts payable3,067,433 2,624,339Accrued liabilities3,792,436 3,703,055Income taxes payable3,203,564 2,730,670Deferred revenue6,363,025 6,031,551Current portion of loans payable3,985,456 3,071,885Current portion of obligations under capital leases10,016 24,197     20,421,930 18,185,697    Other long-term liabilities 576,365 468,505Long-term portion of loans payable5,432,514 7,094,087Obligations under capital leases27,220 32,178Future income taxes 1,002,473 1,265,159     27,460,502 27,045,626    Shareholders' Equity   Share capital, net of employee share purchase loans47,891,324 47,662,953Contributed surplus4,795,852 4,345,128Deficit(22,890,204) (20,050,301)Accumulated other comprehensive loss(7,659) (166,341)     (22,897,863) (20,216,642)     29,789,313 31,791,439     57,249,815 58,837,065    Interim consolidated Statements of Operations (unaudited)                         Three months ended Nine months ended    June 30,   June 30,  2011 2010 2011 2010 $$$$         Revenue        Software, services and other 9,041,093 5,738,695 29,066,438 21,897,466Support 5,689,588 4,892,963 16,427,247 13,980,505           14,730,681 10,631,658 45,493,685 35,877,971         Cost of revenue 5,705,269 3,112,879 16,237,471 9,566,056         Gross profit 9,025,412 7,518,779 29,256,214 26,311,915         Operating expenses        Sales and marketing 4,166,440 2,804,084 11,585,999 9,483,020General and administrative 3,216,466 2,400,288 7,702,020 5,771,829Research and development 3,586,414 2,810,904 10,185,306 8,185,452Amortization of property and equipment and        intangible assets 458,194 164,872 1,392,665 486,178Foreign exchange (gain) loss (260,849) (504,352) 645,108 1,236,071           11,166,665 7,675,796 31,511,098 25,162,550         (Loss) income from operations (2,141,253) (157,017) (2,254,884) 1,149,365         Interest income 37,829 22,710 121,162 29,600         Interest expense (174,036) (3,827) (451,404) (21,335)         (Loss) income before income taxes (2,277,460) (138,134) (2,585,126) 1,157,630         Income taxes  66,065 91,650 254,777 422,162         Net (loss) income for the period (2,343,525) (229,784) (2,839,903) 735,468         Net (loss) income per common share         Basic (0.04) 0.00 (0.04) 0.01Diluted (0.04) 0.00 (0.04) 0.01         Weighted average number of common shares        Basic 64,194,871 60,078,132 64,154,532 60,078,132Diluted 64,194,871 60,078,132 64,154,532 61,785,769         Reconciliation of Net loss (income) to EBITDA                   Three months ended Nine months ended  June30, June 30,  2011 2010 2011 2010 $$$$         AS REPORTED         Net (loss) income for the period (2,343,525) (229,784) (2,839,903) 735,468 Addback / (subtract):          Amortization of property and equipment and intangible assets 458,194 164,872 1,392,665 486,178  Interest Income (37,829) (22,710) (121,162) (29,600)  Interest Expense 174,036 3,827 451,404 21,335  Income Taxes 66,065 91,650 254,777 422,162  Stock based compensation 205,833 137,442 606,804 275,689  Foreign exchange (gain) loss (260,849) (504,352) 645,108 1,236,071         EBITDA (1) (1,738,075) (359,055) 389,693 3,147,303                  (1) EBITDA represents net (loss) income from continuing operations excluding amounts for amortization, interest, income taxes, foreign exchange (gain) loss and stock based compensation and is a common measure of operating performance in the industry. EBITDA is not a measure of financial performance under Canadian generally accepted accounting principles (GAAP), and should not be considered in isolation or as a substitute for consolidated net (loss) income as a measure of performance For further information: Redknee Solutions Inc. Lucas Skoczkowski, Chief Executive Officer David Charron, Chief Financial Officer Tel: +1 905 625 2622 Fax: +1 905 625 2773