("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 $0.2M
• Order 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 EMEA
• Patents: 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 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 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 Review

For 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 CALL

The 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	647-427-7450
Toll-free North America	1-888-231-8191

The webcast can be accessed at:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3602940

Conference Replay

The 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 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^®, 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.

 

Interim consolidated Balance Sheets (unaudited)
For the period ended	June 30, 2011		September 30, 2010
	$		$
Assets
Current assets
Cash and cash equivalents	13,274,605		18,738,958
Short-term investments	-		22,186
Trade accounts and other receivables	15,975,897		14,959,777
Unbilled revenue	10,202,301		7,196,714
Prepaid expenses	1,685,749		1,371,960
Goods in transit	563,649		256,709
	41,702,201		42,546,304
Restricted cash	774,771		811,979
Property and equipment	455,695		635,526
Future income taxes and investment tax credits	1,166,684		795,196
Other assets	495,326		518,655
Intangible assets	4,719,765		5,861,248
Goodwill	7,935,373		7,668,157
	57,249,815		58,837,065
Liabilities
Current liabilities
Accounts payable	3,067,433		2,624,339
Accrued liabilities	3,792,436		3,703,055
Income taxes payable	3,203,564		2,730,670
Deferred revenue	6,363,025		6,031,551
Current portion of loans payable	3,985,456		3,071,885
Current portion of obligations under capital leases	10,016		24,197
	20,421,930		18,185,697
Other long-term liabilities	576,365		468,505
Long-term portion of loans payable	5,432,514		7,094,087
Obligations under capital leases	27,220		32,178
Future income taxes	1,002,473		1,265,159
	27,460,502		27,045,626
Shareholders' Equity
Share capital, net of employee share purchase loans	47,891,324		47,662,953
Contributed surplus	4,795,852		4,345,128
Deficit	(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		21,897,466
Support		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		9,483,020
General and administrative		3,216,466		2,400,288		7,702,020		5,771,829
Research and development		3,586,414		2,810,904		10,185,306		8,185,452
Amortization of property and equipment and
intangible assets		458,194		164,872		1,392,665		486,178
Foreign 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)		0.01
Diluted		(0.04)		0.00		(0.04)		0.01
Weighted average number of common shares
Basic		64,194,871		60,078,132		64,154,532		60,078,132
Diluted		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
				June 30,				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