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Press release from Marketwire

Redknee Solutions Reports Fiscal Fourth Quarter and Record Full Year 2011 Results

Wednesday, November 30, 2011

Redknee Solutions Reports Fiscal Fourth Quarter and Record Full Year 2011 Results18:10 EST Wednesday, November 30, 2011TORONTO--(Marketwire - November 30, 2011) - Redknee Solutions, Inc. (TSX: RKN), a leading provider of business-critical billing, charging and customer management software and solutions, reported results for the fiscal fourth quarter and full year ended September 30, 2011.Fiscal Q4 2011 Highlights</b>- Revenue increased 12% to $14.6 million- Telefonica expanded relationship by adopting Redknee's pricing analysis and optimization solutions- Awarded multi-million dollar strategic services agreement with Western European Tier 1 operator- Entered Latin America with new multi-million dollar MVNO deployment- Awarded a multi-million dollar converged billing contract with a U.S. wireless service provider</ul>Fiscal Year </b>2011 </b>Highlights</b>- Revenue increased 23% to a record $60.1 million- Recurring revenue increased by 20% to a record $24.3 million- Order backlog up 32% to a record $48.2 million- Increased footprint with Microsoft Dynamics CRM by securing multiple converged billing contracts- Secured six new customers across Americas, EMEA and APAC regions- Signed global partnership with Tech Mahindra to delivery real-time converged billing to communication services providers- Awarded Top 50 Best Managed Companies Award for ninth consecutive year</ul>Fiscal Q4 2011 Results</b>Revenue increased 12% to $14.6 million from $13.0 million in the same year-ago quarter. The improvement is primarily due to the increase in both software and services revenue, and support revenue.The majority of the company's revenue is denominated in U.S. dollars and thus impacted by exchange rate fluctuations. On a constant currency basis, revenue in fiscal Q4 2011 would have been $14.6 million. The company plans to begin reporting in U.S. dollars in the first quarter of fiscal 2012.Recurring revenue grew to 45% of revenue, as compared to 42% in the same quarter year ago. Recurring revenue was enhanced by sales and renewals of customer support services, software subscriptions and term licenses.Gross profit decreased to 65% from 73% in the same year-ago quarter. The decrease was primarily due to the change in revenue mix, with a higher percentage of sales of services and third-party components.Net income totaled $307,000 or $0.00 per basic and diluted share, as compared to a net income of $359,000 or $0.01 per basic and diluted share in the same year-ago period.EBITDA was $1.0 million, as compared to an EBITDA of $2.9 million in the same year-ago quarter.The company recognized a foreign currency exchange gain of $579,000, as compared to a foreign currency exchange loss of $444,000 in the same period a year ago.At September 30, 2011, cash and investments totaled $16.3 million, as compared to $19.6 million in the same period a year ago.Fiscal Year 2011 Results</b>Revenue increased 23% to a record $60.1 million from $48.9 million in the fiscal year 2010. On a constant currency basis, revenue in fiscal year 2011 would have been $62.0 million.Recurring revenue was 41%, as compared to 41% in the same period a year ago.Gross profit decreased to 65% of revenue from 73% in the fiscal year 2010.EBITDA was $1.4 million, as compared to an EBITDA of $6.1 million in fiscal year 2010.The company recognized a foreign currency exchange loss of $67,000, as compared to a foreign currency exchange loss of $1.7 million in fiscal year 2010.Net loss totaled $2.5 million or $(0.04) per basic and diluted share, as compared to a net income of $1.1 million or $0.02 per basic and diluted share in fiscal year 2010.The contracted order backlog was $48.2 million, as compared to a contracted order backlog of $36.5 million in fiscal year 2010.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.Management Commentary</b>"We made substantial progress on our strategic growth plan during the quarter, which helped drive a profitable quarter and record revenue and backlog for the fiscal year," said Redknee's CEO Lucas Skoczkowski. "Our global partnerships with Microsoft and Tech Mahindra have allowed us to leverage their scale, and target larger and longer-term contracts with network operators. We expect these and other important partnerships to further accelerate our growth and the expansion of our market share.""Our strategy to focus on real-time converged billing with on-premise and cloud delivery capability has also positioned us to capitalize on new markets. We entered Latin America and more recently Japan with major licencing agreements, demonstrating our ability to drive transformative strategies for communication services providers on a global scale. As we begin fiscal 2012, we remain focused on securing long-term revenue and earnings potential, expanding our recurring revenue stream, and ultimately building shareholder value."Conference Call</b>The company will host a conference call tomorrow (Thursday, December 1, 2011) to discuss these results. Redknee's CEO Lucas Skoczkowski and CFO David Charron will host the presentation starting at 8:30 a.m. Eastern Time. A question and answer session will follow management's presentation.Dial-in number: 1-877-941-1427International: 1-480-629-9664Conference ID#: 4489833The webcast can be accessed at: http://www.media-server.com/m/p/s2a6upj9Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.A replay of the call will be available after 11:30 a.m. Eastern time on the same day until January 1, 2012.Toll-free replay number: 1-877-870-5176International replay number: 1-858-384-5517Replay PIN#: 4489833Forward-Looking Statements</b>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</b> and on the Company's web-site at www.redknee.com</b>.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 Solutions, Inc.</b>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(R), 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 SheetsAs at September 30, 2011 and 2010(Unaudited)--------------------------------------------------------------------------- 2011 2010$ $AssetsCurrent assetsCash and cash equivalents 15,458,072 18,738,958Short-term investments - 22,186Trade accounts and other receivables 13,492,484 14,959,777Unbilled revenue 10,887,593 7,196,714Prepaid expenses 1,452,467 1,371,960Goods in transit 468,303 256,709 ----------- ----------- 41,758,919 42,546,304Restricted cash 815,313 811,979Property and equipment 392,700 635,526Future income taxes and investment tax credits 1,520,101 795,196Other assets 482,460 518,655Intangible assets 4,131,113 5,861,248Goodwill 7,935,373 7,668,157 ----------- ----------- 57,035,979 58,837,065 =========== ===========LiabilitiesCurrent liabilitiesAccounts payable 1,798,668 2,624,339Accrued liabilities 6,234,891 3,703,055Income taxes payable 3,323,598 2,730,670Deferred revenue 6,075,302 6,031,551Current portion of loans payable 3,339,064 3,071,885Current portion of obligations under capital leases 19,400 24,197 ----------- ----------- 20,790,923 18,185,697Other long-term liabilities 544,899 468,505Long-term portion of loans payable 4,978,587 7,094,087Obligations under capital leases 12,790 32,178Future income taxes 847,526 1,265,159 ----------- ----------- 27,174,725 27,045,626 ----------- -----------Shareholders' EquityShare capital, net of employee share purchase loans 48,112,321 47,662,953 ----------- -----------Contributed surplus 4,484,861 4,345,128 ----------- -----------Deficit (22,583,579) (20,050,301)Accumulated other comprehensive loss (152,349) (166,341) ----------- ----------- (22,735,928) (20,216,642) ----------- ----------- 29,861,254 31,791,439 ----------- ----------- 57,035,979 58,837,065 =========== ===========Redknee Solutions Inc.Consolidated Statement of OperationsFor the three months and years ended September 30, 2011 and 2010(Unaudited)--------------------------------------------------------------------------- Three months ended Twelve months ended September 30 September 30 ---------------------- ---------------------- 2011 2010 2011 2010 $ $ $ $RevenueSoftware, services and other 8,643,346 7,916,996 37,709,784 29,814,462Support 5,936,029 5,075,422 22,363,276 19,055,927 ---------- ---------- ---------- ---------- 14,579,375 12,992,418 60,073,060 48,870,389Cost of revenue 5,079,727 3,541,370 21,317,198 13,107,426 ---------- ---------- ---------- ----------Gross profit 9,499,648 9,451,048 38,755,862 35,762,963 ---------- ---------- ---------- ----------Operating expensesSales and marketing 4,373,446 3,065,387 15,959,445 12,548,407General and administrative 2,087,368 1,866,131 9,789,388 7,637,960Research and development 1,922,841 1,764,600 12,108,147 9,950,052Amortization of property and equipment and intangible assets 391,900 291,071 1,784,565 777,249Foreign exchange (gain) loss (578,574) 443,928 66,534 1,679,999 ---------- ---------- ---------- ---------- 8,196,981 7,431,117 39,708,079 32,593,667 ---------- ---------- ---------- ----------Income (loss) from operations 1,302,667 2,019,931 (952,217) 3,169,296Interest income 43,555 42,974 164,717 72,574Interest expense (84,631) (64,375) (536,035) (85,710) ---------- ---------- ---------- ----------Income (loss) before income taxes 1,261,591 1,998,530 (1,323,535) 3,156,160Income taxesCurrent 782,701 1,689,074 1,330,164 2,111,236Future 172,265 (49,330) (120,421) (49,330) ---------- ---------- ---------- ----------Net income (loss) for the period 306,625 358,786 (2,533,278) 1,094,254 ========== ========== ========== ==========Net income (loss) per common shareBasic 0.00 0.01 (0.04) 0.02Diluted 0.00 0.01 (0.04) 0.02Weighted average number of common sharesBasic 64,197,904 62,308,901 64,154,532 60,137,683Diluted 64,419,693 64,608,163 64,154,532 62,017,977Redknee Solutions Inc.Consolidated Statements of Cash FlowsFor the years ended September 30, 2011 and 2010(Unaudited)--------------------------------------------------------------------------- 2011 2010 $ $Cash provided by (used in)Operating activitiesNet (loss) income for the year (2,533,278) 1,094,254Items not involving cash Amortization of property and equipment 280,978 171,929 Amortization of intangible assets 1,503,587 605,320 Unrealized foreign exchange (gain) loss (413,499) 1,467,351 Stock-based compensation 485,344 554,391 Future income taxes and investment tax credits (1,142,538) 167,525Changes in non-cash operating working capital 178,843 (10,548,691) ----------- ----------- (1,640,563) (6,487,921) ----------- -----------Financing activitiesCollection of employee share purchase loans 5,244 487,358Proceeds from exercise of stock options 163,734 1,299,242Repayment of obligations under capital leases (24,185) -Proceeds of loans 297,158 7,789,507Repayment of loans (2,160,153) - ----------- ----------- (1,718,202) 9,576,107 ----------- -----------Investing activitiesProceeds from short-term investments 22,186 148,813Purchase of property and equipment (38,152) (114,746)Purchase of software (31,078) (99,557)Decrease (increase) in other assets 71,803 (54,354)Increase in restricted cash (3,334) (489,257)Acquisition of Nimbus Systems, net of cash acquired (267,216) (8,422,352) ----------- ----------- (245,791) (9,031,453) ----------- -----------Effect of foreign exchange rate changes on cash and cash equivalents 323,670 (980,822) ----------- -----------Decrease in cash and cash equivalents during the year (3,280,886) (6,924,089)Cash and cash equivalents - Beginning of year 18,738,958 25,663,047 ----------- -----------Cash and cash equivalents - End of year 15,458,072 18,738,958 =========== ===========Supplemental cash flow informationInterest paid 490,287 85,710Interest received 151,888 72,574Income taxes paid 542,142 344,882Shares issued in conjunction with acquisition of Nimbus Systems - 4,473,378Redknee Solutions Inc.Reconciliation of Net loss (income) to EBITDAFor the three months and years ended September 30, 2011 and 2010(Unaudited)--------------------------------------------------------------------------- Three months ended Twelve months ended September 30 September 30 ---------------------- ---------------------- 2011 2010 2011 2010 $ $ $ $AS REPORTED Net (loss) income for the period 306,625 358,786 (2,533,278) 1,094,254 Addback / (subtract): Amortization of property and equipment and intangible assets 391,900 291,071 1,784,565 777,249 Interest Income (43,555) (42,974) (164,717) (72,574) Interest Expense 84,631 64,375 536,035 85,710 Income Taxes 954,966 1,639,744 1,209,743 2,061,906 Stock based compensation (121,460) 155,114 485,344 430,803 Foreign exchange (gain) loss (578,574) 443,928 66,534 1,679,999 ---------- ---------- ---------- ----------EBITDA (1) 994,533 2,910,044 1,384,226 6,057,347 ========== ========== ========== ==========(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 performanceFOR FURTHER INFORMATION PLEASE CONTACT: For further details please contact:ORLucas Skoczkowski, Chief Executive OfficerRedknee Solutions, Inc.David Charron, Chief Financial OfficerTel: +1 905 625 2622ORLiolios Group, Inc.Investor RelationsMatt Glover or Michael KoehlerTel: +1 949 574 3860