SOURCE: Redknee Solutions, Inc.

Redknee Solutions, Inc.

May 13, 2013 20:59 ET

Redknee Solutions Reports Fiscal Second Quarter 2013 Results

TORONTO--(Marketwired - May 13, 2013) - Redknee Solutions, Inc. (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers, reported results for its fiscal second quarter ended March 31, 2013. All figures below are in U.S. dollars.

Fiscal Q2 2013 Financial Highlights as Compared to the Same Year-ago Quarter - Results exclude Nokia Siemens Networks Business Support System (BSS) business unit acquisition unless otherwise noted.

  • Revenue totaled $11.8 million compared to $14.1 million
  • Recurring revenue was 59% of total revenue compared to 51%
  • Gross profit was $7.2 million (61% of revenue) compared to $9.5 million (67% of revenue)
  • Adjusted EBITDA loss totaled $1.5 million vs. an adjusted EBITDA gain of $1.5 million
  • Net income totaled $2.4 million or $0.03 per share vs. $1.3 million or $0.02 per share
  • Quarter-end cash totaled $21.8 million
  • Quarter-end contract backlog totaled $159.4 million, which includes the impact of acquiring the BSS business unit; expanded the order backlog 14% year-over-year on a comparative basis

Fiscal Q2 2013 Operational Highlights

  • On March 29, 2013, Redknee completed the acquisition of the BSS business unit from Nokia Siemens Networks. The acquisition increased Redknee's global customer base to more than 200 customers across 90 countries
  • Secured two new customers in EMEA -- including a leading utility company
  • Signed multi-million dollar orders in Americas and EMEA
  • Launched the Redknee Cloud, a fully hosted, end-to-end converged billing and customer care solution offered as a Software as a Service (SaaS)
  • Nominated for the TeleManagement World Forum Excellence Awards for its converged billing and customer care platform

Fiscal Q2 2013 Financial Results
Revenue totaled $11.8 million compared to $14.1 million in same year-ago quarter. The decrease was primarily due to the timing of orders received from existing customers, as well as existing customer project delays. The majority of the delayed revenue is expected to be recognized in the second half of fiscal 2013.

Recurring revenue totaled 59% of total revenue compared to 51% for the same year-ago quarter. Recurring revenues consist of support and maintenance, long-term service contracts and revenue from term-based licenses.

Gross margin was 61% compared to 67% in the same year-ago.

Adjusted EBITDA loss totaled $1.5 million compared to an adjusted EBITDA gain of $1.5 million in the same year-ago quarter (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net income totaled $2.4 million or $0.03 per diluted share compared to net income of $1.3 million or $0.02 per diluted share in the same year-ago quarter. Net income included an $11.8 million bargain purchase gain and $5.9 million of costs, both related to the acquisition of the BSS business unit.

Contracted order backlog totaled $159.4 million at quarter-end, which includes the impact of the acquisition of the BSS business unit. In the quarter, Redknee expanded the order backlog 14% year-over-year on a comparative basis.

At March 31, 2013, cash and investments totaled $21.8 million, with net cash of $15.9 million. Subsequent to quarter-end, the company extended its credit facility to $50 million and completed a C$45.0 million private placement financing in April 2013.

Please refer to the section regarding forward-looking statements which form an integral part of this release. These results, along with the unaudited condensed consolidated interim financial statements and the company's unaudited MD&A, are available on the company's website at www.redknee.com and on SEDAR at www.sedar.com.

Management Commentary
"During the second quarter, we continued to demonstrate our ability to add new customers, and grow our order backlog. By closing the acquisition of the Nokia Siemens Networks' BSS business unit, we are now one of the largest independent real-time monetization and subscriber management software companies in our industry -- our systems monetize over one billion out of the six billion mobile subscriptions globally," said Lucas Skoczkowski, CEO of Redknee.

"Today, we have a customer base that spans 200 communications service providers across 90 countries, including many long-standing relationships with key Tier-1 service providers. Our combined solution suite presents new cross-selling and upselling opportunities, while we remain committed to providing the highest level of service to our customers.

"The positive feedback we have received thus far from our customers, employees and partners is encouraging for Redknee. We remain focused on successfully integrating the acquisition and look to expand sales both with new customers, as well as increasing the share of wallet with our existing customers."

Conference Call
The company will host a conference call tomorrow (Tuesday, May 14, 2013) 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.

Date: Tuesday, May 14, 2013
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1-877-941-2068
International: 1-480-629-9712
Conference ID#: 4615419

The presentation will be webcast live and available for replay via the Investors section of Redknee'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 through June 14, 2013.

Toll-Free Replay Number: 1-877-870-5176
International Replay Number: 1-858-384-5517
Replay PIN: 4615419

About Redknee Solutions, Inc.
Redknee is a leading global provider of innovative communication software products, solutions and services. Redknee's award-winning solutions enable service providers to monetize new services, business models and content and to deliver a comprehensive customer experience. Redknee's revenue and subscriber management platform provides innovative converged billing, charging, customer care, and payments solutions for voice, messaging and data services to over 200 service providers in over 90 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 about Redknee and its solutions, please go to www.redknee.com.

About the Presentation of Adjusted EBITDA
Beginning in this first fiscal quarter of 2013, the company has begun to report adjusted EBITDA, which is not a financial measure calculated and presented in accordance with International Financial Reporting Standards (IFRS), and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, or as an alternative to cash flow from operating activities as a measure of liquidity. The company defines adjusted EBITDA as net income (loss) from continuing operations excluding amounts for depreciation and amortization, finance costs, finance income, income taxes, foreign exchange (gain) loss, share-based compensation, and expenses related to the acquisition of Business Support System (BSS) assets from Nokia Siemens Networks. EBITDA is not a measure of financial performance under IFRS, and should not be considered in isolation or as a substitute for consolidated net income (loss) as a measure of performance.

Other companies (including competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in Redknee's industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Redknee or is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA in isolation or as a substitute for analysis of the company's results as reported under IFRS. See "Reconciliation of Net Income (Loss) to adjusted EBITDA" below for further information on this non-IFRS measure.

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 website 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.

REDKNEE SOLUTIONS INC.            
Condensed Consolidated Interim Statements of Financial Position            
(Expressed in U.S. dollars)            
(Unaudited)            
             
    March 31,     September 30,  
    2013     2012  
                 
Assets                
Current assets:                
  Cash and cash equivalents   $ 20,981,723     $ 16,878,523  
  Trade accounts and other receivables     11,801,337       10,394,639  
  Unbilled revenue     21,552,280       12,125,089  
  Prepaid expenses     1,453,307       799,901  
  Other assets     730,605       649,272  
  Inventory     4,887,827       580,171  
  Total current assets     61,407,079       41,427,595  
                 
Restricted cash     859,932       913,270  
Property and equipment     12,486,167       726,818  
Deferred income taxes     599,440       659,260  
Investment tax credits     532,687       550,000  
Other assets     4,514,491       3,170,308  
Intangible assets     41,491,389       3,671,306  
Goodwill     7,638,590       7,638,590  
                 
Total assets   $ 129,529,775     $ 58,757,147  
                 
Liabilities and Shareholders' Equity                
                 
Current liabilities:                
  Trade payables   $ 1,994,154     $ 1,756,532  
  Accrued liabilities     22,384,629       7,156,844  
  Provisions     1,201,050       -  
  Income taxes payable     2,096,229       2,036,864  
  Deferred revenue     15,631,600       7,258,759  
  Total current liabilities     43,307,662       18,208,999  
                 
Deferred revenue     1,260,583       78,002  
Other liabilities     899,921       439,398  
Contingent consideration     23,562,232       -  
Loans and borrowings     5,519,679       5,461,970  
Deferred income taxes     309,139       408,156  
                 
Total liabilities     74,859,216       24,596,525  
                 
  Shareholders' equity:                
  Share capital, net of employee share purchase loans     66,248,480       46,543,100  
  Treasury stock     (174,339 )     (264,584 )
  Contributed surplus     4,875,729       4,787,549  
  Deficit     (16,292,780 )     (16,918,912 )
  Accumulated other comprehensive income     13,469       13,469  
  Total shareholders' equity     54,670,559       34,160,622  
                 
Total liabilities and shareholders' equity   $ 129,529,775     $ 58,757,147  
                 
                 
                 
REDKNEE SOLUTIONS INC.            
Condensed Consolidated Interim Statements of Comprehensive Income            
(Expressed in U.S. dollars)            
(Unaudited)            
                         
    Three months ended     Six months ended  
    March 31,     March 31,  
    2013     2012     2013     2012  
                                 
Revenue:                                
  Software, services and other   $ 5,752,813     $ 8,424,913     $ 14,027,551     $ 16,048,705  
  Support     5,999,964       5,682,723       11,962,189       11,431,843  
                                 
      11,752,777       14,107,636       25,989,740       27,480,548  
                                 
Cost of revenue     4,532,850       4,594,319       9,852,258       9,179,555  
                                 
Gross profit     7,219,927       9,513,317       16,137,482       18,300,993  
                                 
  Operating expenses:                                
  Sales and marketing     3,693,277       3,706,253       6,646,372       7,099,911  
  General and administrative     2,421,998       2,137,613       4,818,601       4,021,528  
  Research and development     3,406,669       2,727,782       6,606,330       5,146,432  
  Acquisition and related costs     5,903,503       -       8,181,975       -  
                                 
      15,425,447       8,571,648       26,253,278       16,267,871  
                                 
Income (loss) from operations     (8,205,520 )     941,669       (10,115,796 )     2,033,122  
                                 
Foreign exchange gain (loss)     (1,012,810 )     554,569       (652,447 )     (6,846 )
Other income (expense)     11,796,825       (13,938 )     11,796,825       (13,938 )
Finance income     7,166       22,141       19,347       40,213  
Finance costs     (118,865 )     (100,808 )     (233,027 )     (217,947 )
                                 
Income before income taxes     2,466,796       1,403,633       814,902       1,834,604  
                                 
Income taxes (recovery):                                
  Current     121,702       104,770       247,131       224,057  
  Deferred     (19,870 )     (32,988 )     (58,361 )     (79,448 )
                                 
      101,832       71,782       188,770       144,609  
                                 
Net comprehensive income   $ 2,364,964     $ 1,331,851     $ 626,132     $ 1,689,995  
                                 
Net income per common share:                                
  Basic     0.03       0.02       0.01       0.03  
  Diluted     0.03       0.02       0.01       0.03  
                                 
Weighted average number of common shares:                                
  Basic     79,840,642       64,410,404       77,660,795       64,316,481  
  Diluted     83,505,220       65,304,232       80,686,279       65,201,571  

 

REDKNEE SOLUTIONS INC.             
Reconciliation of Net Income (Loss) to EBITDA             
(Expressed in U.S. dollars)             
(Unaudited)             
   
    Three months ended     Six months ended  
    March 31,       March 31,      
    2013     2011     2013     2012  
Net income for the period     2,364,964       1,331,851     626,132       1,689,995  
                               
Add back / (subtract):                              
  Depreciation of property and equipment     89,951       50,061     161,109       93,199  
  Amortization of intangible assets     181,515       183,850     346,307       375,183  
  Other (income) expenses     (11,796,825 )     13,938     (11,796,825 )     13,938  
  Finance income     (7,166 )     (22,141 )   (19,347 )     (40,213 )
  Finance costs     118,865       100,808     233,027       217,947  
  Income tax expense     101,832       71,782     188,770       144,609  
  Share-based compensation     522,335       371,166     914,989       500,491  
  Foreign exchange loss (gain)     1,012,810       (554,569 )   652,447       6,846  
                               
EBITDA     (7,411,719 )     1,546,746     (8,693,391 )     3,001,995  
                               
Adjustments:                              
  Acquisition and related costs     5,903,503       -     8,181,975       -  
                               
Adjusted EBITDA   $ (1,508,216 )   $ 1,546,746     (511,416 )   $ 3,001,995  

  

Contact Information

  • For Further Details Please Contact:

    Redknee Solutions Inc.
    Lucas Skoczkowski, Chief Executive Officer
    David Charron, Chief Financial Officer
    Tel: +1 905 625 2622

    Investor Relations
    Liolios Group, Inc.
    Matt Glover or Michael Koehler
    Tel: +1 949 574 3860