SOURCE: Redknee Solutions Inc.

Redknee Solutions Inc.

August 13, 2013 19:10 ET

Redknee Solutions Reports Fiscal Third Quarter 2013 Results

TORONTO--(Marketwired - Aug 13, 2013) - Redknee Solutions Inc. (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers (CSPs), reported results for its fiscal third quarter ended June 30, 2013. All figures are in U.S. dollars.

Fiscal Q3 2013 Financial Highlights as Compared to the Same Year-ago Quarter

  • Revenue totaled $58.6 million, up 295% from $14.8 million
  • Recurring revenue was 54% of total revenue compared to 48%
  • Gross profit was $32.0 million (55% of total revenue) compared to $10.6 million (71% of total revenue)
  • Adjusted EBITDA totaled $7.3 million versus $2.5 million
  • Net income totaled $80,000 or $0.00 per share versus $1.7 million or $0.03 per share
  • Cash at $77.7 million
  • Order backlog at a record $163.1 million

Fiscal Q3 2013 Operational Highlights

  • The integration of the acquisition is proceeding in-line with the target to complete major activities by April 2014
  • Grupo Éxito launched Colombia's first retail-based MVNO leveraging Redknee's cloud offering
  • Demonstrated combined integrated product portfolio, as well as roadmap investment, to support our customers' evolving needs
  • Multi-million dollar customer contracts announced throughout the quarter across all regions
  • 100+ patents granted and 80+ patents pending

Fiscal Q3 2013 Financial Results
Revenue was $58.6 million compared to $14.8 million in same year-ago quarter. The improvement was primarily due to increased revenue related to the most recent acquisition, as well as license expansions, license upgrades, and third-party hardware and software sales.

Recurring revenue was 54% of total revenue compared to 48% for the same year-ago quarter. The increase was due to a higher level of sales and renewals of customer support services, software subscriptions, and term licenses. Recurring revenue consists of support and maintenance, long-term service contracts, and revenue from term-based licenses.

Gross margin was 55% compared to 71% in the same year-ago. The decrease relates to the change in revenue mix of the acquired business.

Adjusted EBITDA was $7.3 million compared to $2.5 million in the same year-ago quarter (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net income totaled $80,000 or $0.00 per diluted share compared to $1.7 million or $0.03 per diluted share in the same year-ago quarter. Q3 2013 net income included $3.0 million of costs related to the BSS acquisition.

Contracted order backlog totaled $163.1 million at quarter-end, which included the impact of the acquisition of the BSS business unit.

At June 30, 2013, cash and investments totaled $77.7 million, with net cash of $56.8 million.

The company has drawn $20.9 million of its $50.0 million credit facility with Wells Fargo.

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 third quarter, which includes the full contribution from the most recent acquisition, we continued to demonstrate our ability to execute by expanding business with our customers, growing our backlog and focusing on the inherent operating leverage in our software product business," said Lucas Skoczkowski, CEO of Redknee.

"I believe that we have made excellent progress and we are on track with the integration process. Our customers and partners have been very supportive of Redknee's new position in the marketplace, and this has translated into both order and pipeline momentum.

"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 portfolio presents new cross-selling and upselling opportunities, and we are committed to providing the highest level of service to our customers. 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 (Wednesday, August 14, 2013) to discuss these results. 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: Wednesday, August 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#: 4633261

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 September 14, 2013.

Toll-Free Replay Number: 1-877-870-5176
International Replay Number: 1-858-384-5517
Replay PIN: 4633261

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. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Persons reading this news release are cautioned that such information may not be appropriate for other purposes.

Such forward-looking statements include the statements regarding financial and other projections as well as statements regarding Redknee's future plans, objectives or performance for the current period and subsequent periods and regarding the markets for our products. 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 inability of Redknee's products to perform as expected, a material adverse change in the affairs of Redknee, and the factors discussed under the "Risk Factors" section of Redknee's most recently filed AIF which is available on SEDAR at www.sedar.com and on Redknee's web-site at www.redknee.com. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements.

Although the forward-looking statements contained in this document are based upon what Redknee believes are reasonable assumptions, Redknee cannot assure investors that our actual results will be consistent with these forward-looking statements. Redknee assumes 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 Statement of Financial Position  
(Expressed in U.S. dollars)  
(Unaudited)  
             
    June 30,     September 30,  
    2013     2012  
                 
Assets                
                 
Current assets:                
  Cash and cash equivalents   $ 76,905,436     $ 16,878,523  
  Trade accounts and other receivables     33,140,780       10,394,639  
  Unbilled revenue     24,885,994       12,125,089  
  Prepaid expenses     1,972,880       799,901  
  Other assets     689,476       649,272  
  Inventories     7,981,588       580,171  
  Total current assets     145,576,154       41,427,595  
                 
Restricted cash     805,599       913,270  
Property and equipment     12,197,182       726,818  
Deferred income taxes     497,756       659,260  
Investment tax credits     514,671       550,000  
Other assets     3,643,798       3,170,308  
Intangible assets     40,157,991       3,671,306  
Goodwill     7,638,590       7,638,590  
Total assets   $ 211,031,741     $ 58,757,147  
                 
Liabilities and Shareholders' Equity                
                 
Current liabilities:                
  Trade payables   $ 11,239,462     $ 1,756,532  
  Accrued liabilities     35,866,627       7,156,844  
  Provisions     1,201,050       -  
  Income taxes payable     2,371,994       2,036,864  
  Deferred revenue     18,696,958       7,258,759  
  Total current liabilities     69,376,091       18,208,999  
                 
Deferred revenue     1,686,984       78,002  
Other liabilities     885,547       439,398  
Contingent consideration     23,562,232       -  
Loans and borrowings     19,121,496       5,461,970  
Deferred income taxes     268,947       408,156  
Total liabilities     114,901,297       24,596,525  
                 
Shareholders' equity:                
  Share capital, net of employee share purchase loans     107,415,192       46,543,100  
  Treasury stock     (166,016 )     (264,584 )
  Contributed surplus     5,080,494       4,787,549  
  Deficit     (16,212,695 )     (16,918,912 )
  Accumulated other comprehensive income     13,469       13,469  
  Total shareholders' equity     96,130,444       34,160,622  
Total liabilities and shareholders' equity   $ 211,031,741     $ 58,757,147  
                 
                 
                 
REDKNEE SOLUTIONS INC.  
Condensed Consolidated Interim Statement of Comprehensive Income  
(Expressed in U.S. dollars)  
(Unaudited)  
                         
    Three months ended     Nine months ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
                                 
Revenue:                                
  Software, services and other   $ 28,057,789     $ 8,975,327     $ 42,085,340     $ 25,024,032  
  Support     30,562,514       5,871,850       42,524,703       17,303,693  
      58,620,303       14,847,177       84,610,043       42,327,725  
                                 
Cost of revenue     26,668,407       4,245,441       36,520,665       13,424,996  
                                 
Gross profit     31,951,896       10,601,736       48,089,378       28,902,729  
                                 
Operating expenses:                                
  Sales and marketing     8,963,710       4,068,675       15,610,082       11,168,586  
  General and administrative     6,024,125       2,469,876       10,842,726       6,491,404  
  Research and development     12,400,828       1,997,506       19,007,158       7,143,938  
  Acquisition and related costs     3,012,481       -       11,194,456       -  
      30,401,144       8,536,057       56,654,422       24,803,928  
                                 
Income (loss) from operations     1,550,752       2,065,679       (8,565,044 )     4,098,801  
                                 
Foreign exchange gain (loss)     (587,236 )     (209,836 )     (1,239,683 )     (216,682 )
Other income (expense)     -       -       11,796,825       (13,938 )
Finance income     3,312       31,444       22,659       71,657  
Finance costs     (209,468 )     (79,226 )     (442,495 )     (297,173 )
                                 
Income (loss) before income taxes     757,360       1,808,061       1,572,262       3,642,665  
                                 
Income taxes (recovery):                                
  Current     707,580       289,153       954,711       513,210  
  Deferred     (30,305 )     (219,686 )     (88,666 )     (299,134 )
      677,275       69,467       866,045       214,076  
                                 
Total Comprehensive income   $ 80,085     $ 1,738,594     $ 706,217     $ 3,428,589  
                                 
Net income per common share:                                
  Basic     0.00       0.03       0.01       0.05  
  Diluted     0.00       0.03       0.01       0.05  
                                 
Weighted average number of common shares):                                
  Basic     80,727,695       64,142,461       78,845,355       64,252,923  
  Diluted     84,548,170       65,103,596       82,173,277       65,120,420  
                                   
                                   
                                   
REDKNEE SOLUTIONS INC.  
Condensed Consolidated Interim Statement of Cash Flows  
(Expressed in U.S. dollars)  
(Unaudited)  
             
    Nine months ended  
    June 30,  
    2013     2012  
                 
Cash provided by (used in):                
Operating activities:                
  Net income   $ 706,217     $ 3,428,589  
  Adjustments for:                
    Depreciation of property and equipment     1,021,316       147,250  
    Amortization of intangible assets     1,950,082       553,121  
    Finance income     (22,659 )     (71,657 )
    Finance costs     442,495       297,173  
    Income tax expense     866,045       214,076  
    Unrealized foreign exchange loss (gain)     1,438,611       (84,376 )
    Share-based compensation     1,185,076       654,566  
    Bargain purchase gain from acquisition     (11,796,825 )     -  
    Other     -       6,588  
  Changes in non-cash operating working capital     (1,480,408 )     4,056,789  
        (5,690,050 )     9,202,119  
  Interest paid     (287,605 )     (35,974 )
  Interest received     32,202       62,001  
  Income taxes (paid) received     (582,493 )     (78,672 )
      (6,527,946 )     9,149,474  
Financing activities:                
  Proceeds from public offering     18,731,390       -  
  Proceeds from private placement     41,060,376       -  
  Proceeds from exercise of stock options     792,973       107,443  
  Purchase of treasury stock     -       (714,608 )
  Repayment of loans and borrowings     -       (2,465,544 )
  Proceeds of loans and borrowings     15,000,000       -  
  Transaction costs on loans and borrowings     (1,496,230 )     -  
      74,088,509       (3,072,709 )
                 
Investing activities:                
  Purchase of property and equipment     (1,204,306 )     (561,027 )
  Purchase of intangible assets     (426,953 )     (42,357 )
  Increase in restricted cash     107,671       66,560  
  Settlement of Nimbus Systems contingent consideration     -       (877,377 )
  Acquisition of business     (4,571,451 )     -  
      (6,095,039 )     (1,414,201 )
                 
Effect of foreign exchange rate changes on cash and cash equivalents     (1,438,611 )     84,376  
                 
Increase in cash and cash equivalents     60,026,913       4,746,940  
                 
Cash and cash equivalents, beginning of period     16,878,523       14,879,940  
Cash and cash equivalents, end of period   $ 76,905,436     $ 19,626,880  
                 
                 
                 
REDKNEE SOLUTIONS INC.  
Reconciliation of Net Income (Loss) to EBITDA  
(Expressed in U.S. dollars)  
(Unaudited)  
                         
    Three months ended     Nine months ended  
    June 30,     June 30,  
    2013     2011     2013     2012  
                               
Net income for the period     80,085       1,738,594     706,217       3,428,589  
                               
Add back / (subtract):                              
  Depreciation of property and equipment     860,207       54,051     1,021,316       147,250  
  Amortization of intangible assets     1,603,775       177,938     1,950,082       553,121  
  Other (income) expenses     -       -     (11,796,825 )     13,938  
  Finance income     (3,312 )     (31,444 )   (22,659 )     (71,657 )
  Finance costs     209,468       79,226     442,495       297,173  
  Income tax expense     677,275       69,467     866,045       214,076  
  Share-based compensation     270,087       154,075     1,185,076       654,566  
  Foreign exchange loss (gain)     587,236       209,836     1,239,683       216,682  
                               
EBITDA     4,284,821       2,451,743     (4,408,570 )     5,453,738  
                               
Adjustments:                              
  Acquisition and related costs     3,012,481       -     11,194,456       -  
Adjusted EBITDA   $ 7,297,302     $ 2,451,743     6,785,886     $ 5,453,738  
                               
                               
                               

Contact Information

  • For Further Details Please Contact:

    Investor Relations:
    Matt Glover or Michael Koehler
    Liolios Group, Inc.
    Email Contact
    US: +1 949 574 3860
    Canada: +1 905 625 2027