Redknee Solutions Reports Fiscal First Quarter 2014 Results - WFLA News Channel 8

Redknee Solutions Reports Fiscal First Quarter 2014 Results

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SOURCE Redknee Solutions Inc.

TORONTO, Feb. 13, 2014 /PRNewswire/ - Redknee Solutions Inc.  (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers (CSPs), reported results for its fiscal first quarter ended December 31, 2013. All figures are in U.S. dollars.

Fiscal Q1 2014 Financial Highlights as Compared to the Same Year-ago Quarter

  • Revenue totaled $60.4 million, up 324% from $14.2 million
  • Recurring revenue was 55% of total revenue compared to 50%
  • Gross profit was $33.0 million (55% of total revenue) compared to $8.9 million (63% of total revenue)
  • Adjusted EBITDA totaled $5.4 million versus $1.0 million
  • Net loss totaled $3.1 million or $0.03 per share versus a net loss of $1.7 million or $0.02 per share
  • Cash at $72.2 million
  • Order backlog at a record $166.8 million

Fiscal Q1 2014 Operational Highlights

  • Announced record $50 million capacity expansion framework with APAC customer.
  • Announced two significant software upgrades with acquired customers worth more than $10 million each.
  • Additional multi-million dollar customer contracts announced throughout the quarter across all regions.
  • Advanced Redknee's presence in non-telecom vertical markets, including demonstrating Redknee's cloud-based utilities billing system at Tier 1 events and expanding our collaboration with existing partners.
  • Continued significant growth in the customer base for the Policy Control Server product, now providing our Policy and Charging Rules Function (PCRF) solution to over 55 communication service provider customers with over 1.2 billion subscribers.
  • Integration of the latest acquisition is ahead of target to complete all major activities by the end of March 2014.
  • Awarded the 2013 Stratecast | Frost & Sullivan Award for Global Growth Leadership in Communications Service Provider (CSP) billing.
  • Highlighted in the 2013 Gartner Magic Quadrant for Integrated Revenue and Customer Management for CSPs for demonstrating high capability and performance.
  • 175+ patents granted and 65 patents filed.

Management Commentary
"In the first quarter of fiscal 2014, we continued to execute on Redknee's growth plan. Today, we are the largest independent software company delivering real-time converged monetization and subscriber solutions, with more than 200 customers and a strong base of recurring revenue," said Lucas Skoczkowski, CEO of Redknee. "Our customers continue to respond very positively to Redknee, as shown through our ability to secure record license expansions, upgrades and numerous support renewals across all of our markets. As we bring the integration of our latest acquisition to its completion, we are increasingly focusing on growing our sales pipeline and order backlog, as we observe a healthy demand for upgrades and strong sales momentum.  In addition, we will continue to deliver a high quality customer service, while we drive cross-selling and increasing revenue opportunities with our existing customer base, as well as acquiring new customers."

Fiscal Q1 2014 Financial Results
Revenue was $60.4 million compared to $14.2 million in the 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 55% of total revenue compared to 50% 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 63% in the same year-ago quarter. The decrease relates to a change in revenue mix as a result of the acquisition of NSN's BSS business unit.

Adjusted EBITDA was $5.4 million compared to $1.0 million in the same year-ago quarter (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net loss totaled $3.1 million or $0.03 per diluted share compared to a net loss of $1.7 million or $0.02 per diluted share in the same year-ago quarter. As presented in the "Reconciliation of Net Income (Loss) to Adjusted EBITDA" below, the Q1 2014 net loss includes $3.7 million of costs linked directly to the BSS acquisition.

At December 31, 2013, cash and cash equivalents totaled $72.2 million.

At December 31, 2013, contracted order backlog totaled $166.8 million, which includes $11 million of $50 million APAC expansion framework referenced in the Fiscal Q1 2014 Operational Highlights.

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.

Conference Call

The company will host a conference call tomorrow (Thursday, February 13, 2014) 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: Thursday, February 13, 2014
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1 (888) 231-8191
International: 1 (647) 427-7450
Conference ID#: 35886292

The presentation will be webcast live and available for replay via either the Investors section of Redknee's website (www.redknee.com) or http://bit.ly/1hYFbjk.

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 TMX Equicom at 1 (416) 815-0700, ext. 253.

A replay of the call will be available after 11:30 a.m. Eastern time on the same day through February 20, 2014.

Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 35886292

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.

Non-IFRS Measures

Beginning in the 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, other (income) / expenses, finance costs, finance income, income taxes, foreign exchange (gain) loss, share-based compensation, and acquisition and related costs. 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.

"Recurring Revenue," is not a financial measure calculated and presented in accordance with IFRS and should not be considered as an alternative to revenue. Recurring Revenue includes revenue from support and maintenance agreements, long term service agreements, and term-based product licenses and software subscription.

"Order Backlog" relates to contractual commitments as at period end, pending to be delivered and will be recognized as revenue in future periods. Order Backlog is not a financial measure calculated and presented in accordance with IFRS and should not be considered as an alternative to revenue.

Other companies (including competitors) may define adjusted EBITDA, recurring revenue, and order backlog differently. The company presents adjusted EBITDA, recurring revenue, and order backlog because management believes it to be important supplemental measures of performance that are commonly used by securities analysts, investors and other interested parties in the evaluation of companies in Redknee's industry. Management uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Redknee nor is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA, recurring revenue, and order backlog 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)    
  December 31, 2013 September 30, 2013
Assets    
     
Current assets:    
  Cash and cash equivalents  $71,149,391 $79,054,757
  Trade accounts and other receivables 78,867,201 66,393,041
  Unbilled revenue  40,954,048 39,421,584
  Prepaid expenses 3,032,269 1,943,986
  Other assets  830,829 832,516
  Inventories  6,672,500 6,644,580
Total current assets   201,506,238 194,290,464
     
Restricted cash  1,026,588 1,011,361
Property and equipment  10,359,813 10,890,910
Deferred income taxes 1,869,235 1,923,409
Investment tax credits 366,541 378,923
Other assets  2,929,392 3,179,724
Intangible assets 37,198,741 38,732,447
Goodwill 7,638,590 7,638,590
     
Total assets  $262,895,138 $258,045,828
     
Liabilities and Shareholders' Equity    
     
Current liabilities:    
  Trade payables $15,833,062 $15,707,464
  Accrued liabilities  60,030,468 59,532,922
  Provisions  1,201,050 1,201,050
  Income taxes payable 2,830,917 2,445,616
  Deferred revenue  10,347,608 14,935,451
  Loans and borrowings 375,000 375,000
Total current liabilities 90,618,105 94,197,503
     
Deferred revenue 3,403,978 4,149,940
Other liabilities 3,193,063 2,793,146
Pension and non-pension post-employment benefit obligation 1,218,841 814,335
Contingent consideration  25,984,206 24,833,537
Loans and borrowings  42,931,530 32,956,036
Deferred income taxes 720,586 744,652
Total liabilities 168,070,309 160,489,149
     
Shareholders' equity:    
  Share capital, net of employee share purchase loans 109,084,608 109,017,145
  Treasury stock  (46,110) (132,050)
  Contributed surplus 4,532,491 4,357,175
  Deficit (20,243,191) (17,182,622)
  Accumulated other comprehensive income 1,497,031 1,497,031
Total shareholders' equity 94,824,829 97,556,679
     
Total liabilities and shareholders' equity $262,895,138 $258,045,828

 

Redknee Solutions Inc.    
Condensed Consolidated Interim Statement of Comprehensive Income (Loss)
(Expressed in U.S. dollars)    
(Unaudited)    
  Three months ended
  December 31,
  2013 2012
     
Revenue:    
  Software, services and other $27,853,883 $8,274,738
  Support 32,549,357 5,962,225
  60,403,240 14,236,963
     
Cost of revenue 27,379,935 5,319,408
     
Gross profit 33,023,305 8,917,555
     
Operating expenditures:    
  Sales and marketing  8,508,397 2,953,095
  General and administrative 8,174,749 2,396,603
  Research and development 14,884,339 3,199,661
  Acquisition and related costs 872,368 2,278,472
  32,439,853 10,827,831
     
Income (loss) from operations 583,452 (1,910,276)
     
Foreign exchange (loss) gain (1,137,904) 360,363
Other income (expenses) (1,150,669) -
Finance income 14,759 12,181
Finance costs (584,520) (114,162)
     
Loss before income taxes (2,274,882) (1,651,894)
     
Income tax expense (recovery):    
  Current 844,805 125,429
  Deferred (59,118) (38,491)
  785,687 86,938
     
Total comprehensive loss ($3,060,569) ($1,738,832)
     
Net loss per common share:    
  Basic ($0.03) ($0.02)
  Diluted (0.03) (0.02)
     
     
Weighted average number of common shares:    
  Basic 95,529,355 75,446,243
  Diluted 95,529,355 75,446,243
     

  

Redknee Solutions Inc.    
Condensed Consolidated Interim Statement of Cash Flows    
(Expressed in U.S. dollars)    
(Unaudited)    
  Three months ended
  December 31,
  2013 2012
     
Cash provided by (used in):    
Operating activities:    
  Net income ($3,060,569) ($1,738,832)
  Adjustments for:    
    Depreciation of property and equipment 1,603,063 71,158
    Amortization of intangible assets 1,690,134 164,792
    Finance income (14,759) (12,181)
    Finance costs 584,520 114,162
    Income tax expense 785,687 86,938
    Unrealized foreign exchange loss (gain) 45,701 66,462
    Share-based compensation 670,206 392,654
    Revaluation of contingent consideration 1,150,669 -
  Changes in non-cash operating working capital (20,022,984) (2,841,741)
  (16,568,332) (3,696,588)
  Interest paid (953) (87,236)
  Interest received 14,759 12,195
  Income taxes (paid) received (92,259) (118,398)
  (16,646,785) (3,890,027)
Financing activities:    
  Proceeds from public offering - 18,731,390
  Proceeds from exercise of stock options  40,773 182,050
  Proceeds of loans and borrowings 10,000,000 -
  Transaction costs on loans and borrowings (10,032) -
  10,030,741 18,913,440
     
Investing activities:    
  Purchase of property and equipment (1,071,966) (403,972)
  Purchase of intangible assets (156,428) -
  Increase (decrease) in restricted cash (15,227) (7,603)
  (1,243,621) (411,575)
     
Effect of foreign exchange rate changes on    
cash and cash equivalents (45,701) (66,462)
     
Decrease in cash and cash equivalents (7,905,366) 14,545,376
     
Cash and cash equivalents, beginning of period 79,054,757 16,878,523
     
Cash and cash equivalents, end of period $71,149,391 $31,423,899



Redknee Solutions Inc.    
Reconciliation of Net Income (Loss) to Adjusted EBITDA    
(Expressed in U.S. dollars)    
(Unaudited)    
  Three months ended
  December 31,
  2013 2012
     
     
Net income (loss) for the period (3,060,569) (1,738,832)
     
Add back / (subtract):    
  Depreciation of property and equipment 1,603,063 71,158
  Amortization of intangible assets 1,690,134 164,792
  Revaluation of contingent consideration 1,150,669 -
  Finance income (14,759) (12,181)
  Finance costs 584,520 114,162
  Income tax expense 785,687 86,938
  Share-based compensation 670,206 392,654
  Foreign exchange loss (gain) 1,137,904 (360,363)
     
EBITDA 4,546,855 (1,281,672)
     
Adjustments    
  Acquisition and related costs 872,368 2,278,472
     
Adjusted EBITDA $5,419,223 $996,800

 

©2012 PR Newswire. All Rights Reserved.

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