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Redknee Solutions Inc. - Redknee Reports Revenue Growth and Profitability in Second Quarter 2009

^{Published on 2009-05-12 18:00:38, Last Modified on 2009-05-12 18:04:56 - Market Wire}
 

 TORONTO, May 12 /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 2009, ended March 31, 2009. Q2 Highlights: -------------- - Second quarter 2009 revenue up 9% to $13.8 million (Q2 2008: $12.6 million) - Gross margin increases to 79% (Q2 2008: 71%) - EBITDA of $1.1 million (Q2 2008: loss of $0.6 million) - Operating profit of $0.5 million (Q2 2008: operating profit of $0.9 million) - Signed multi-million dollar contract with Bintel Ltd. - Platinum award for 50 Best Managed Companies in Canada for consecutive six years - Cash and investments at $20.2 million (September 30, 2008: $15.3 million) - 16 issued patents, 51 pending applications, and 1further patent application at various stages of the grant/issuance process "Redknee continues to deliver on its stated corporate strategy. We have continued to invest in the high growth markets of Africa, the Middle East, and Asia Pacific, while building support among Tier 1 operators in Europe and North America." stated Lucas Skoczkowski, CEO for Redknee. He added "Our strategy execution and disciplined cost-management have resulted in increased revenue, a strong cash position, and another profitable quarter. We remain focused on profitable growth in fiscal 2009." Please see section regarding Forward-Looking Statements which forms 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 ] -------------------------------- (1) Earnings Before Interest Expense, Income Taxes, Depreciation, and Amortization (EBITDA) is a non-GAAP measure. While useful in understanding Company operational results, EBITDA is not standardized and may not be comparable to similar results reported by other companies. EBITDA described above is calculated as Income (loss) from operations, net of foreign exchange gain/loss, amortization and stock-based compensation. OVERVIEW -------- Redknee remains focused on the three core elements of its corporate 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 continued to grow in the second quarter of fiscal 2009, with our Turnkey Converged Billing solutions contributing more than 55% of revenue. Sales of Redknee's Next Generation Rating & Charging solutions also grew contributing an additional 33% of our quarterly revenue. Industry analyst, Frost and Sullivan, named Redknee as an innovative leader and top performer in our space, one of the top ten companies to watch for in 2009. Redknee's focus on market-driven innovation led us to announce a BlackBerry(R) charging solution that enables subscribers to use BlackBerry(R) Smartphones on a prepaid basis; a high-value service when upwards of 90% of subscribers in high-growth markets use prepaid mobile phones. Global telecom carriers continue to recognize Redknee's market leading solutions. In the second quarter of fiscal 2009, the Company signed a multi-million dollar Turnkey Converged Billing contract with Bintel, a fast-growing telecommunications service provider based in Bahrain and rolling out services in Africa. Redknee continued to expand upon its existing customer base in the high growth markets through the expansion of existing licenses and the sale of additional solutions. Growth of recurring revenue was enhanced by sales and renewals of customer support services, software subscriptions and term licenses. On a four-quarter trailing basis, recurring revenues were at 36% of overall revenues. Redknee continues to have a strong employee base, a growing number of customers, and the right product offering to meet our customers' demands. Market trends further support our approach; data services continue to grow in Tier 1 markets, and wireless subscriber numbers continue to expand in the high growth markets of Africa, the Middle East and Asia Pacific. Financial Review ---------------- For the second quarter of fiscal 2009, Redknee's revenue grew by 9% to $13.8 million compared to revenue of $12.6 million in the second quarter of fiscal 2008. The majority of the Company's revenue is denominated in U.S. dollars and thus revenues may be impacted by exchange rate fluctuations. Gross margin in the period increased to $10.8 million or 79% of revenue from $9.0 million or 71% of revenue in the second quarter of fiscal 2008. Redknee recorded an EBITDA profit of $1.1 million for the second quarter of fiscal 2009 as compared to an EBITDA loss of $0.6 million for the second quarter of fiscal 2008. For the six month period ended March 31, 2009, the Company experienced a foreign exchange gain of $2.2 million. For the quarter ended March 31, 2009, the Company recognized a foreign currency exchange loss of $0.4 million, as compared to a foreign currency exchange gain of $1.8 million in the same period of fiscal 2008. Net income in Q2 fiscal 2009 was $0.2 million or $0.00 per share, as compared to $0.7 million or $0.01 per share in Q2 fiscal 2008 Cash and investments as at March 31, 2009 was $20.2 million versus $15.3 million as at September 30, 2008. CONFERENCE CALL The Company will discuss the results on a conference call and webcast at 8:30 a.m. EST time on Wednesday, May 13, 2009. 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 416-644-3431 Toll-free North America 800-587-1893 Toll-free United Kingdom 00 800 2288 3501 A webcast will also be available at: [ http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2659140 ] Conference Replay ----------------- The conference will be archived for replay by telephone at: 416-640-1917 or Toll-Free at 1-877-289- 8525 (passcode 21305612 followed by the number sign) from 10:30 am on May 13, to 11:59 pm on May 27, 2009. FORWARD-LOOKING STATEMENTS Certain statements in this Release which are not historical facts may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to Redknee's projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "believes", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions. Except as required by law, Redknee does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking information, whether as a result of new information, future events or otherwise, or the above list of factors affecting this information. Many factors could cause the actual results of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, each of the following factors, which are further discussed in the section of the Company's AIF entitled Risk Factors, and which is available on SEDAR at [ www.sedar.com ] and on the Company's web-site at [ www.redknee.com ]. 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. Established in 1999, Redknee Solutions Inc. (TSX: RKN) is the parent of the wholly-owned operating subsidiary Redknee Inc. and its various subsidiaries. References to Redknee refer to the combined operations of those entities. For more information, visit [ www.redknee.com ]. Redknee Solutions Inc. Interim Consolidated Balance Sheet (Unaudited) ------------------------------------------------------------------------- (expressed in Canadian dollars) March 31, September 30, 2009 2008 $ $ Assets Current assets Cash and cash equivalents 11,074,779 15,242,607 Short-term investments 9,094,198 56,363 Trade accounts and other receivables 11,964,465 11,192,182 Unbilled revenue 3,150,512 6,060,452 Investment tax credits and income taxes receivable 650,000 600,000 Prepaid expenses 749,798 1,066,584 Goods in transit 528,628 325,716 ---------------------------- 37,212,380 34,543,904 Restricted cash (note 7) 656,685 409,919 Property and equipment 693,998 580,053 Intangible assets 1,275,631 1,388,761 Other assets 565,529 528,294 ---------------------------- 40,404,223 37,450,931 ---------------------------- ---------------------------- Liabilities Current liabilities Accounts payable 1,385,073 2,172,268 Accrued liabilities 7,617,854 8,678,539 Income taxes payable 2,685,858 2,100,785 Deferred revenue 5,851,795 5,084,287 Current portion of obligations under capital leases - 619 ---------------------------- 17,540,580 18,036,498 ---------------------------- Shareholders' Equity Share capital, net of employee share purchase loans 40,263,430 39,686,701 ---------------------------- Contributed surplus 4,216,100 4,410,677 ---------------------------- Deficit (21,404,928) (24,471,986) Accumulated other comprehensive loss, net of income taxes (210,959) (210,959) ---------------------------- Total deficit and accumulated other comprehensive loss (21,615,887) (24,682,945) ---------------------------- 22,863,643 19,414,433 ---------------------------- 40,404,223 37,450,931 ---------------------------- ---------------------------- Guarantees and contingencies (note 7) Redknee Solutions Inc. Interim Consolidated Statement of Operations (Unaudited) ------------------------------------------------------------------------- (expressed in Canadian dollars) Three months ended Six months ended March 31, March 31, ------------------------ ----------------------- 2009 2008 2009 2008 $ $ $ $ Revenue Software, services and other 7,935,239 9,127,667 17,333,769 17,346,907 Support 5,814,811 3,482,729 10,633,381 6,741,232 ------------------------------------------------ 13,750,050 12,610,396 27,967,150 24,088,139 Cost of revenue 2,922,273 3,644,074 6,292,204 7,386,090 ------------------------------------------------ Gross profit 10,827,777 8,966,322 21,674,946 16,702,049 ------------------------------------------------ Operating expenses Selling and marketing 3,895,255 4,334,486 8,275,201 8,111,071 General and administrative 2,611,329 2,225,235 4,981,463 4,839,551 Research and development (note 4) 3,316,527 3,239,860 6,659,864 6,521,134 Amortization of property and equipment and intangible assets 119,892 64,417 312,129 127,095 Foreign currency exchange (gain) loss 417,099 (1,818,404) (2,220,860) (1,709,004) ------------------------------------------------ 10,360,102 8,045,594 18,007,797 17,889,847 ------------------------------------------------ Income (loss) from operations 467,675 920,728 3,667,149 (1,187,798) Interest income 15,707 133,422 40,783 334,208 Interest expense (2,170) (10,595) (4,199) (9,592) ------------------------------------------------ Income (loss) before income taxes 481,212 1,043,555 3,703,733 (863,182) Income taxes Current 275,261 300,694 636,675 592,375 ------------------------------------------------ Net income (loss) for the period 205,951 742,861 3,067,058 (1,455,557) ------------------------------------------------ ------------------------------------------------ Net income (loss) per common share (note 2) Basic 0.00 0.01 0.05 (0.03) Diluted 0.00 0.01 0.05 (0.03) Weighted average number of common shares (note 2) Basic 56,880,822 56,318,907 56,809,155 56,318,907 Diluted 57,210,822 57,203,907 57,210,822 57,203,907 Redknee Solutions Inc. Interim Consolidated Statement of Cash Flows (Unaudited) ------------------------------------------------------------------------- (expressed in Canadian dollars) Three months ended Six months ended March 31, March 31, ------------------------ ----------------------- 2009 2008 2009 2008 $ $ $ $ Cash provided by (used in) Operating activities Net income (loss) for the period 205,951 742,861 3,067,058 (1,455,557) Items not involving cash Amortization of property and equipment 82,100 64,417 198,999 127,095 Amortization of intangible assets 37,792 - 113,130 - Unrealized foreign currency exchange gain (930,918) (1,404,957) (3,448,008) (1,451,991) Stock-based compensation (note 3) 134,885 274,099 323,123 477,594 Change in non-cash operating working capital (note 5) (2,876,365) (119,099) 3,954,958 (3,942,941) ------------------------------------------------ (3,346,555) (442,679) 4,209,260 (6,245,800) ------------------------------------------------ Financing activities Collection of employee loans 41,378 - 59,029 - Repayment of obligations under capital leases - (10,036) (619) (25,087) ------------------------------------------------ 41,378 (10,036) 58,410 (25,087) ------------------------------------------------ Investing activities (Purchase of) proceeds from short-term investments (4,527,233) 3,267,231 (9,037,835) 7,401,094 Purchase of property and equipment (174,047) (109,862) (312,945) (176,205) (Increase) decrease in other assets 10,671 201,516 (37,234) (358,151) Loan to Argent Networks PTY Ltd. - - - (529,463) Collection of loan from Argent Networks PTY Ltd. - 526,754 - 526,754 Increase in restricted cash (245,524) (379,186) (246,765) (379,186) Acquisition of Argent Networks PTY Ltd., net of cash acquired - (1,084,255) - (1,084,255) ------------------------------------------------ (4,936,133) 2,422,198 (9,634,779) 5,400,588 ------------------------------------------------ Effect of foreign currency exchange rate changes on cash and cash equivalents 17,334 571,150 1,199,281 621,000 ------------------------------------------------ Increase (decrease) in cash and cash equivalents during the period (8,223,976) 2,540,633 (4,167,828) (249,299) Cash and cash equivalents - Beginning of period 19,298,755 6,137,838 15,242,607 8,927,770 ------------------------------------------------ Cash and cash equivalents - End of period 11,074,779 8,678,471 11,074,779 8,678,471 ------------------------------------------------ ------------------------------------------------ Supplemental cash flow information Interest paid 2,169 8,589 4,199 9,592 Interest received 15,705 131,416 40,781 334,208 Cash taxes/investment tax credits received, net of income taxes paid 53,753 - 226,937 - 

For further information: Redknee Solutions Inc., Lucas Skoczkowski, Chief Executive Officer, David Charron, Chief Financial Officer, Tel: (905) 625-2622, Fax: (905) 625-2773