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Press release from Marketwire

Redknee Solutions Reports Fiscal Second Quarter 2012 Results

Wednesday, May 09, 2012

Redknee Solutions Reports Fiscal Second Quarter 2012 Results18:18 EDT Wednesday, May 09, 2012TORONTO--(Marketwire - May 09, 2012) - Redknee Solutions, Inc. (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers, reported results for the fiscal second quarter ended March 31, 2012.Fiscal Q2 2012 Highlights</b>- Revenue was $14.1 million (Q2 2011: $16.0 million)- Gross margin was 67% (Q2 2011: 68%)- EBITDA was $1.5 million (Q2 2011: $1.7 million)- Recurring revenue increased to 51% of revenue (Q2 2011: 34%)- Order backlog increased to $60.5 million (Q2 2011: $48.6 million)- Cash increased to $19.9 million (Q4 2011: $15.7 million)- Secured multi-million dollar orders with existing customers in Americas and EMEA- Announced breakthrough converged billing benchmark results for 250M subscribers- Joined Microsoft Dynamics CRM Global ISV program- Initiated Normal Course Issuer Bid program</ul>Fiscal Q2 2012 Results</b>Revenue for the fiscal second quarter 2012 was $14.1 million, flat compared to last quarter and down from $16.0 million in the same year-ago quarter. The decrease was primarily due to a large one-time license expansion recognized in the Asia-Pacific region in Q2 of fiscal 2011.Recurring revenue, on a trailing twelve month basis, was 48% of revenue, compared to 41% one year ago. The improvement was due to increased sales and renewals of customer support services, software subscriptions and term licenses.Gross margin for the fiscal second quarter 2012 decreased slightly to 67% from 68% in the same year-ago quarter. EBITDA (Earnings before Interest, Taxes, Depreciation, Amortization and non-cash stock-based compensation) for the fiscal second quarter 2012 was $1.5 million, or 11% of revenue, compared to $1.7 million and 11% of revenue in the same year-ago quarter.Net income for the fiscal second quarter 2012 totaled $1.3 million or $0.02 per basic and diluted share, compared to a net income of $430,000 or $0.01 per basic and diluted share in the same year-ago period. The increase was partially attributable to a foreign currency exchange gain of $550,000 in fiscal Q2 2012, compared to a foreign currency exchange loss of $350,000 in the same year-ago quarter.At March 31, 2012, cash and investments totaled $19.9 million compared to $15.7 million as at September 30, 2011. This increase was attributable to cash generated from operating activities of $5.9 million, compared to $0.5 million in the same period last year.Please see the 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 significant progress on our strategic initiatives during the quarter, which helped drive strong recurring revenue, profitability and order backlog for the second quarter," said Redknee's CEO Lucas Skoczkowski."Our next generation technology platform, coupled with our global partnerships with Microsoft and Tech Mahindra, has allowed us to target larger and longer-term contracts with Tier 1 network operators. Our industry leading solution's capacity is proven to serve at least 250 million subscribers, which sets a new standard for carrier-grade scalability and performance with significant cost savings. An example of this is our Telco-In-The-Box offering with Tech Mahindra, which offers a turnkey, flexible solution and fast time to market. We expect our technology and partnerships to further support our growth and increase our market share.""We continue to focus on real-time converged billing and customer care with on-premise and cloud delivery capability with an emphasis on multi-year, term-based licensing models. These types of contracts will drive long-term recurring revenue and profitability, and ultimately build shareholder value."Conference Call</b>The company will host a conference call tomorrow (Thursday, May 10, 2012) 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 the management's presentation.Dial-in number: 1-877-941-8416International: 1-480-629-9808Conference ID#: 4532798The presentation will be webcast live and available for replay via the Investors section of the company's website at www.redknee.com.Please 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 June 10, 2012.Toll-free replay number: 1-877-870-5176International replay number: 1-858-384-5517Replay PIN#: 4532798Forward-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.Interim Condensed Consolidated Statement of Financial Position(Expressed in U.S. dollars)(Unaudited)--------------------------------------------------------------------------- March 31, September 30, October 1, 2012 2011 2010 ------------- ------------- -------------AssetsCurrent assets Cash and cash equivalents $ 19,179,885 $ 14,879,940 $ 18,038,121 Short-term investments - - 21,356 Trade accounts and other receivables 12,927,419 12,987,865 14,400,281 Unbilled revenue 8,947,929 9,253,901 6,927,557 Prepaid expenses 1,237,640 1,398,145 1,320,649 Inventory 409,167 450,788 247,108 ------------- ------------- ------------- 42,702,040 38,970,639 40,955,072Restricted cash 731,762 784,820 781,611Property and equipment 759,762 378,013 611,757Deferred income taxes 1,282,280 1,463,249 765,456Long-term unbilled revenue 1,226,670 1,226,496 -Other assets 1,119,100 464,416 499,257Intangible assets 3,643,783 3,976,609 5,642,037Goodwill 7,638,590 7,638,590 7,381,368 ------------- ------------- ------------- $ 59,103,987 $ 54,902,832 $ 56,636,558 ============= ============= =============Liabilities and Shareholders EquityCurrent liabilities Accounts payable $ 1,476,359 $ 1,731,396 $ 2,526,188 Accrued liabilities 5,469,831 6,001,706 3,564,561 Income taxes payable 3,540,446 3,199,295 2,628,543 Contingent consideration 8,667,985 5,848,086 - Deferred revenue 877,377 870,789 5,805,971 Loans and borrowings 2,141,738 3,232,857 2,980,289 ------------- ------------- ------------- 22,173,736 20,884,129 17,505,552Deferred revenue 882,549 - -Other liabilities 564,768 524,520 450,983Contingent Consideration - - 1,160,816Loans and borrowings 3,981,327 4,804,700 6,859,743Deferred income taxes 785,715 815,829 1,217,842 ------------- ------------- ------------- 28,388,095 27,029,178 27,194,936Shareholders' Equity Share capital, net of employee share purchase loans 46,469,720 46,312,920 45,880,359 Contributed surplus 5,143,588 4,739,437 4,428,818 Deficit (20,910,885) (23,192,172) (20,867,555) Accumulated other comprehensive income 13,469 13,469 - ------------- ------------- ------------- 30,715,892 27,873,654 29,441,622 ------------- ------------- ------------- $ 59,103,987 $ 54,902,832 $ 56,636,558 ============= ============= =============Redknee Solutions Inc.Interim Condensed Consolidated Statement of Comprehensive Income (Loss)(Expressed in U.S. dollars)(Unaudited)--------------------------------------------------------------------------- Three months ended Six months ended March 31 March 31 ------------------------ ------------------------ 2012 2011 2012 2011 ----------- ----------- ----------- -----------Revenue Software, services and other $ 8,424,913 $11,037,820 $16,614,624 $19,276,397 Support 5,682,723 4,975,088 11,457,216 10,336,070 ----------- ----------- ----------- ----------- 14,107,636 16,012,908 28,071,840 29,612,467Cost of revenue 4,594,319 5,203,818 9,179,555 10,281,361 ----------- ----------- ----------- -----------Gross profit 9,513,317 10,809,090 18,892,285 19,331,106Operating expenses Sales and marketing 3,706,253 3,774,120 7,099,911 7,191,429 General and administrative 2,137,613 2,700,698 4,021,528 5,078,051 Research and development 2,727,782 3,428,912 5,146,432 6,418,881 ----------- ----------- ----------- ----------- 8,571,648 9,903,730 16,267,871 18,688,361 ----------- ----------- ----------- -----------Income from operations 941,669 905,360 2,624,414 642,745Foreign exchange gain (loss) 554,569 (346,912) (6,846) (872,074)Other income (13,938) 76,966 (13,938) 246,087Finance Income 22,141 43,322 40,213 80,217Finance Cost (100,808) (128,392) (217,947) (266,995) ----------- ----------- ----------- -----------Income (loss) before income taxes 1,403,633 550,344 2,425,896 (170,020)Income taxes (recovery): Current 104,770 207,130 224,057 375,352 Deferred (32,988) (88,041) (79,448) (193,698) ----------- ----------- ----------- ----------- 71,782 119,089 144,609 181,654 ----------- ----------- ----------- -----------Net income (loss) 1,331,851 431,255 2,281,287 (351,674)Other Comprehensive income: Foreign currency translation adjustment - 41,199 - 131,213 ----------- ----------- ----------- -----------Comprehensive Income (loss) $ 1,331,851 $ 472,454 $ 2,281,287 $ (220,461) =========== =========== =========== ===========Net income (loss) per common share Basic 0.02 0.01 0.04 (0.01) Diluted 0.02 0.01 0.03 (0.01) =========== =========== =========== ===========Weighted average number of common shares Basic 64,410,404 64,158,363 64,316,481 64,132,813 Diluted 65,304,232 65,799,580 65,201,571 64,132,813 =========== =========== =========== ===========Redknee Solutions Inc.Interim Condensed Consolidated Statement of Cash Flows(Expressed in U.S. dollars)(Unaudited)--------------------------------------------------------------------------- Three months ended March 31 2012 2011 ------------- -------------Cash provided by (used in)Operating activities Net income (loss) $ 1,331,851 $ 431,255 Adjustments for: Depreciation of property and equipment 50,061 34,532 Amortization of intangible assets 183,850 404,700 Finance income (22,141) (43,322) Finance costs 100,808 128,392 Income tax expense 71,782 119,089 Unrealized foreign exchange loss (13,077) 652,745 Share-based compensation 371,166 290,208 Changes in non-cash operating working capital 3,691,292 (1,270,798) ------------- ------------- 5,765,592 746,801 Interest paid (39,497) (141,715) Interest received 42,750 43,322 Income taxes received (paid) 96,111 (168,189) ------------- ------------- 5,864,956 480,219Financing activities Proceeds from exercise of stock options - 35,370 Repayment of loans and borrowings (1,655,852) (1,956,920) ------------- ------------- (1,655,852) (1,921,550)Investing activities Purchase of property and equipment (374,494) (25,646) Purchase of intangible assets - (35,874) Decrease (increase) in other assets (447,382) 10,663 Decrease (increase) in restricted cash (20,786) 268,709 Acquisition of Nimbus Systems - (76,506) ------------- ------------- (842,662) 141,346Effect of foreign exchange rate changes on cash and cash equivalents 13,077 (28,740) ------------- -------------Increase (decrease) in cash and cash equivalents 3,379,519 (1,328,725)Cash and cash equivalents - beginning of period 15,800,366 16,004,407 ------------- -------------Cash and cash equivalents - end of period $ 19,179,885 $ 14,675,682 ============= =============Redknee Solutions Inc.Reconciliation of Net loss (income) to EBITDA(Expressed in U.S. dollars)(Unaudited)--------------------------------------------------------------------------- Three months ended Six months ended March 31 March 31 ---------------------- ---------------------- 2012 2011 2012 2011 $ $ $ $AS REPORTED Net income (loss) income for the period 1,331,851 431,255 2,281,287 (351,674) Addback / (subtract): Amortization of property and equipment and intangible assets 233,911 439,232 468,382 899,522 Interest Income (22,141) (43,322) (40,213) (80,217) Interest Expense 100,808 128,392 217,947 266,995 Income Taxes 71,782 119,089 144,609 181,654 Stock based compensation 371,166 290,208 500,491 505,922 Foreign exchange (gain) loss (554,569) 346,912 6,846 872,074 ---------- ---------- ---------- ----------EBITDA (1) 1,532,808 1,711,766 3,579,349 2,294,276 ========== ========== ========== ==========(1) EBITDA represents net (loss) income from continuing operations excludingamounts for amortization, interest, income taxes, foreign exchange (gain)loss and stock based compensation and is a common measure of operatingperformance in the industry. EBITDA is not a measure of financialperformance under IFRS, and should not be considered in isolation or as asubstitute 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