Redknee Solutions Reports Fiscal Second Quarter 2014 Results - 47 ABC - Delmarva's Choice

Redknee Solutions Reports Fiscal Second Quarter 2014 Results

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SOURCE Redknee Solutions Inc.

TORONTO, May 7, 2014 /CNW/ - Redknee Solutions Inc.  (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers (CSPs), reported results for its fiscal second quarter ended March 31, 2014. All figures are in U.S. dollars.

Fiscal Q2 2014 Financial Highlights as Compared to the Same Year-ago Quarter

  • Revenue totaled $72.4 million, up 514% from $11.8 million
  • Gross profit was $34.7 million (48% of total revenue) compared to $7.2 million (61% of total revenue)
  • Adjusted EBITDA totaled $5.7 million versus EBITDA loss of $1.5 million
  • Net income totaled $4.8 million or $0.05 per share versus a net income of $2.4 million or $0.03 per share
  • Cash at $116.0 million
  • Order backlog at $164.7 million
  • Completed a bought deal offering of 12,820,520 common shares for gross proceeds of Cdn $75.0 million.

Fiscal Q2 2014 Operational Highlights

  • Won a new converged billing and customer care customer in EMEA.
  • Signed a multi-year global framework agreement with Telekom Austria Group to provide support to its European operations.
  • Signed significant upgrades to Redknee's software with Vipnet Croatia, a leading EMEA multi-play service provider, and TSTT, an operator in the Americas.
  • Additional multi-million dollar customer contracts announced throughout the quarter across all regions.
  • Advanced Redknee's presence in non-telecom vertical markets, including software upgrades deployed for customers of Redknee's solution for transportation and coverage by leading analysts of Redknee's solution for smart homes.
  • Expanded global presence by opening local offices in Indonesia, Malaysia, and South Africa.
  • Highlighted in the Stratecast Global OSS/BSS Top 10 to Watch in 2014; nominated for the TM Forum Solution Excellence Awards for Best Solution Provider and nominated for 2014 Frost & Sullivan Asia Pacific ICT Awards.
  • All major activities regarding the integration of the Nokia Networks BSS acquisition are complete.
  • 175+ patents granted and 55+ patents filed.

Management Commentary

"In the past twelve months our company has undergone significant growth, achieving revenues of $249 million, gross margin of 52% and adjusted EBITDA of 9% while successfully completing the integration of the BSS acquisition. More importantly, during the second quarter, we continued to demonstrate our ability to execute our growth strategy by increasing revenues, delivering strong order bookings and continuing to grow our sales pipeline," said Lucas Skoczkowski, CEO of Redknee. "With the completion of the integration, we are now focused on building upon our position as the largest independent real-time converged monetization software provider for communications. We also see increasing opportunities to leverage our leading software solutions to capitalize on the rise of the Internet of Things in non-telecom verticals such as transportation and smart homes. We are encouraged by the positive momentum the business is achieving with our on premise and virtualized solutions and look forward to continuing to execute on our strategic growth plan."

Fiscal Q2 2014 Financial Results
Revenue was $72.4 million compared to $11.8 million in the same year-ago quarter. The improvement was primarily due to increased revenue related to the BSS acquisition, as well as license expansions, license upgrades, and third-party hardware and software sales.

Recurring revenue was 36% of total revenue compared to 55% for the same year-ago quarter. The decline in the current quarter versus the prior period was due to an increase in total revenues as a result of a higher than average contribution from third party hardware and software license revenues in the period. Furthermore, recurring revenue in the quarter was also affected by delayed renewals of customer support services of approximately $3.5 million, which are expected to be closed in Q3 2014. Recurring revenue consists of support and maintenance, long-term service contracts, and revenue from term-based licenses.

Gross margin was 48% compared to 61% in the same year-ago quarter. The decrease relates to a change in revenue mix as a result of the acquisition of Nokia Networks BSS business unit.

Adjusted EBITDA was $5.7 million compared to adjusted EBITDA loss 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 $4.8 million or $0.05 per diluted share compared to a net income of $2.4 million or $0.03 per diluted share in the same year-ago quarter. As presented in the "Reconciliation of Net Income (Loss) to Adjusted EBITDA" below, the Q2 2014 net income includes $2.4 million of costs linked directly to the BSS acquisition and revaluation of contingent consideration related to the acquisition of $7.0 million.

At March 31, 2014, cash and cash equivalents totaled $116.0 million. As at March 31, 2014, the Company's Days Sales Outstanding in Accounts Receivable remained flat at 101 days. Subsequent to March 31, 2014, the Company has collected $35.2 million against the trade receivables.

At March 31, 2014, contracted order backlog totaled $164.7 million.

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, May 8, 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, May 8, 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#: 31256955

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/1gBwj1A.

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 May 22, 2014.

Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 31256955

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)    
     
  March 31, 2014 September 30, 2013
Assets    
     
Current assets:    
  Cash and cash equivalents  $114,803,920 $79,054,757
  Trade accounts and other receivables 97,073,068 66,393,041
  Unbilled revenue  46,785,669 39,421,584
  Prepaid expenses 4,382,408 1,943,986
  Other assets  856,345 832,516
  Inventories  8,092,183 6,644,580
  Total current assets   271,993,593 194,290,464
     
Restricted cash  1,178,490 1,011,361
Property and equipment  9,727,301 10,890,910
Deferred income taxes 1,938,871 1,923,409
Investment tax credits 422,445 378,923
Other assets  2,552,021 3,179,724
Intangible assets 36,198,243 38,732,447
Goodwill 7,638,590 7,638,590
     
Total assets  $331,649,554 $258,045,828
     
Liabilities and Shareholders' Equity    
     
Current liabilities:    
  Trade payables $21,059,145 $15,707,464
  Accrued liabilities  56,407,819 59,532,922
  Provisions  - 1,201,050
  Income taxes payable 2,891,108 2,445,616
  Contingent consideration 8,305,192  
  Deferred revenue  12,523,555 14,935,451
  Loans and borrowings 375,000 375,000
  Total current liabilities 101,561,819 94,197,503
     
Deferred revenue 2,928,270 4,149,940
Other liabilities 3,182,465 2,793,146
Pension and non-pension post-employment benefit obligation 1,648,902 814,335
Contingent consideration  10,727,110 24,833,537
Loans and borrowings  46,581,273 32,956,036
Deferred income taxes 690,418 744,652
Total liabilities 167,320,257 160,489,149
     
Shareholders' equity:    
  Share capital 173,709,305 109,017,145
  Treasury stock  (29,549) (132,050)
  Contributed surplus 4,626,180 4,357,175
  Deficit (15,473,670) (17,182,622)
  Accumulated other comprehensive income 1,497,031 1,497,031
  Total shareholders' equity 164,329,297 97,556,679
     
Total liabilities and shareholders' equity $331,649,554 $258,045,828

 


Redknee Solutions Inc.        
Condensed Consolidated Interim Statement of Comprehensive Income (Loss)    
(Expressed in U.S. dollars)        
(Unaudited)        
         
  Three months ended Three months ended
  March 31, March 31,
  2014 2013 2014 2013
         
Revenue:        
  Software, services and other $47,271,200 $5,752,813 $75,125,083 $14,027,551
  Support 25,162,120 5,999,964 57,711,477 11,962,189
  72,433,320 11,752,777 132,836,560 25,989,740
         
Cost of revenue 37,720,340 4,532,850 65,100,275 9,852,258
         
Gross profit 34,712,980 7,219,927 67,736,285 16,137,482
         
Operating expenses:        
  Sales and marketing  9,087,347 3,693,277 17,595,744 6,646,372
  General and administrative 7,667,655 2,421,998 15,842,404 4,818,601
  Research and development 15,953,669 3,406,669 30,838,008 6,606,330
  Acquisition and related costs 2,395,690 5,903,503 3,268,058 8,181,975
  35,104,361 15,425,447 67,544,214 26,253,278
         
Income (loss) from operations (391,381) (8,205,520) 192,071 (10,115,796)
         
Foreign exchange gain (loss) 582,571 (1,012,810) (555,333) (652,447)
Other income (expenses) 6,951,904 11,796,825 5,801,235 11,796,825
Finance income 9,427 7,166 24,186 19,347
Finance costs (811,636) (118,865) (1,396,156) (233,027)
         
Income before income taxes 6,340,885 2,466,796 4,066,003 814,902
         
Income taxes (recovery):        
  Current 1,595,017 121,702 2,439,822 247,131
  Deferred (23,653) (19,870) (82,771) (58,361)
  1,571,364 101,832 2,357,051 188,770
         
Net comprehensive income $4,769,521 $2,364,964 $1,708,952 $626,132
         
Net income per common share:        
  Basic $0.05 $0.03 $0.02 $0.01
  Diluted 0.05 0.03 0.02 0.01
         
         
Weighted average number of common shares:        
  Basic 98,362,310 79,840,642 97,015,120 77,660,795
  Diluted 101,796,856 83,505,220 100,465,490 80,686,279
         

 




Redknee Solutions Inc.    
Condensed Consolidated Interim Statement of Cash Flows    
(Expressed in U.S. dollars)    
(Unaudited)    
     
  Six months ended
  March 31,
  2014 2013
     
Cash provided by (used in):    
Operating activities:    
  Net income $1,708,952 $626,132
  Adjustments for:      
    Depreciation of property and equipment 3,054,168 161,109
    Amortization of intangible assets 3,426,340 346,307
    Finance income (24,186) (19,347)
    Finance costs 1,396,156 233,027
    Income tax expense 2,357,051 188,770
    Unrealized foreign exchange loss 203,834 555,298
    Share-based compensation 1,216,806 914,989
    Revaluation of contingent consideration (5,801,235) -
    Bargain purchase gain from acquisition - (11,796,825)
  Changes in non-cash operating working capital (43,757,333) (280,927)
  (36,219,447) (9,071,467)
  Interest paid (636,472) (180,514)
  Interest received 22,867 29,593
  Income taxes paid (2,146,138) (269,998)
  (38,979,190) (9,492,386)
Financing activities:    
  Issuance of share capital  63,833,834 18,731,390
  Proceeds from exercise of stock options  548,177 727,267
  Proceeds of loans and borrowings 13,500,000 -
  77,882,011 19,458,657
     
Investing activities:    
  Purchase of property and equipment (1,890,559) (633,084)
  Purchase of intangible assets (892,136) (156,576)
  Increase (decrease) in restricted cash (167,129) 53,338
  Acquisition of business  - (4,571,451)
  (2,949,824) (5,307,773)
     
Effect of foreign exchange rate changes on    
cash and cash equivalents (203,834) (555,298)
     
Increase in cash and cash equivalents 35,749,163 4,103,200
     
Cash and cash equivalents, beginning of period 79,054,757 16,878,523
     
Cash and cash equivalents, end of period $114,803,920 $20,981,723




 

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,
  2014 2013 2014 2013
         
         
Net income for the period 4,769,521 2,364,964 1,708,952 626,132
         
Add back / (subtract):        
  Depreciation of property and equipment 1,451,105 89,951 3,054,168 161,109
  Amortization of intangible assets 1,736,206 181,515 3,426,340 346,307
  Revaluation of contingent consideration (6,951,904) - (5,801,235) -
  Bargain purchase gain from acquisition - (11,796,825) - (11,796,825)
  Finance income (9,427) (7,166) (24,186) (19,347)
  Finance costs 811,636 118,865 1,396,156 233,027
  Income tax expense 1,571,364 101,832 2,357,051 188,770
  Share-based compensation 546,600 522,335 1,216,806 914,989
  Foreign exchange loss (gain) (582,571) 1,012,810 555,333 652,447
         
EBITDA 3,342,530 (7,411,719) 7,889,385 (8,693,391)
         
Adjustments        
  Acquisition and related costs 2,395,690 5,903,503 3,268,058 8,181,975
         
Adjusted EBITDA $5,738,220 ($1,508,216) $11,157,443 ($511,416)

 


 

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