TORONTO, May 6, 2015 /CNW/ - Redknee Solutions
Inc. (TSX: RKN) a leading provider of
real-time monetization and subscriber management software, reported
results for its fiscal second quarter ended March 31, 2015.
All figures are in U.S. dollars.
Fiscal Q2 2015 Financial Highlights
(Comparisons
made between fiscal Q2FY2015 and fiscal Q2FY2014 results, unless
otherwise noted)
- Revenue totalled $53.7 million
($61.1 million, on a constant
currency basis), compared to $72.4
million
- Gross profit was $32.7 million
(61% of total revenue) compared to $34.7
million (48% of total revenue)
- Adjusted EBITDA of $10.5 million
(20% of total revenue) versus Adjusted EBITDA of $5.7 million (8% of total revenue)
- Recurring revenue was 46% of total revenue, compared to
36%
- Net loss totalled $2.0 million or
$0.02 per share (net income of
$6.8 million or $0.06 per share on a constant currency basis)
versus a net income of $4.8 million
or $0.05 income per share
- Total cash at March 31, 2015 was
$105.8 million
- Cash flow from operations was $13
million
- Order backlog of $157.2 million
at March 31, 2015
Fiscal Q2 2015 Operational Highlights
- Won a $6 million dollar order
with a leading enterprise in APAC to support its growth in the
energy retail sector
- Delivered the latest release of Redknee Unified to Vodafone
India to boost data adoption by subscribers and increase customer
satisfaction
- Supported Vodacom's data/LTE growth and monetization strategy
with the latest release of Redknee Unified
- Enabled Digicel to offer prepaid energy in APAC
- 149 patents granted and 40 patents filed
Management Commentary
"During the second quarter of fiscal 2015, we have continued to
execute on our growth strategy by improving our revenue mix
resulting in gross margin improvement and strong adjusted EBITDA,"
said Lucas Skoczkowski, CEO of Redknee. "Our focus remains on
supporting customers with our advanced software solutions and
increasing our position as the largest independent real-time
converged monetization software provider for communications. Our
leading software solutions are increasingly being leveraged to
support the rise of M2M and the Internet of Things (IoT) across our
traditional customer base and non-telecom verticals including
utilities, smart homes, and smart energy. As our market continues
to consolidate, Redknee has a great opportunity to leverage its
software platform, and its high customer reference ability to
further expand our customer base and grow our sales pipeline. We
remain disciplined in execution, focusing on margin improvement and
cash flow generation, while we continue to seek accretive
acquisitions to achieve our long-term business goals."
Fiscal Q2 2015 Financial Results
Revenue
was $53.7 million ($61.1 million
on a constant currency basis) compared to $72.4
million in the same year-ago quarter. The change in revenue
compared to the prior year period resulted mainly from the impact
of foreign exchange variation, lower third-party hardware sales, as
well as lower support revenue due to expected non-renewal of
certain support contracts.
Order backlog declined 7% to $157.2
million ($175.8 million on a
constant currency basis) compared to $164.7
million in the same year-ago quarter.
Recurring revenue was 46% of total revenue, compared to 36% in
the same year-ago quarter.
Gross margin was 61% compared to 48% in the same year-ago
quarter. The increase in gross margin was primarily attributable to
the increase in revenue from high-margin software license deals,
and increased margins for services and support.
Adjusted EBITDA was $10.5 million, or 20% of
revenue, compared to Adjusted EBITDA of $5.7 million, or 8% of revenue, in the same
year-ago quarter (see discussion about the presentation of
Adjusted EBITDA, a non-IFRS measure, below).
Net loss totalled $2.0 million, or $0.02 loss per
basic and diluted share (net income of $6.8
million or $0.06 per share on
a constant currency basis), compared to a net income of
$4.8 million, or $0.05
income per basic and diluted share, in the same year-ago
quarter.
At March 31, 2015, total cash
ended at $105.8 million. This
reflects the impact of $3.4 million
in restructuring charges as well as a $3.4
million decrease due to foreign exchange rate variation in
the quarter. Cash flow from operations totalled $13 million, excluding restructuring payments of
$3.4 million incurred in the
quarter.
Please refer to the section regarding forward-looking statements
which form an integral part of this release. These results, along
with the annual audited 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.
Conference Call
The company will host a conference call tomorrow (May 7, 2015) 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 7, 2015
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#: 27369765
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/1CUvUhw.
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 until 12:00 midnight
(EST) Thursday, May 14, 2015.
Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 27369765
About Redknee Solutions Inc.
Redknee is a leading global provider of innovative 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 connected customer experience -
through either SaaS or on-premise based solutions. Redknee's
real-time monetization and subscriber management platform provides
innovative converged charging, billing, policy management, and
customer care solutions for over 200 communications service
providers and is supporting service providers to monetize digital
services across utilities and smart meters, transportation,
connected homes and vehicles, and other enterprises that are
emerging from the growing ecosystem of the Internet of Things
(IoT). 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
The Company reports "Adjusted EBITDA", which is not a financial
measure calculated and presented in accordance with International
Financial Reporting Standards (IFRS), and should not be considered
in isolation or as a substitute to net income (loss), operating
income or any other financial measures of performance calculated
and presented in accordance with IFRS, or as an alternative to cash
flow from operating activities as a measure of liquidity. The
Company defines Adjusted EBITDA as net income (loss) excluding
amounts for depreciation and amortization, other expenses, finance
costs, finance income, income tax expense (recovery), foreign
exchange gain (loss), share-based compensation, restructuring costs
and acquisition and related costs. "Recurring revenue," is not a
financial measure calculated and presented in accordance with IFRS
and should not be considered in isolation or as a substitute 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 in isolation or as a substitute to
revenue.
The "constant currency" presentation, which is a non-GAAP
measure, excludes the impact of fluctuations in foreign currency
exchange rates. The Company calculates constant currency by
converting the current period local currency financial results
using the comparative period exchange rates.
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 these 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.
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 statements respecting
anticipated revenues in Q2 FY15 under a new license expansion
contract, reduction in annual expenses in fiscal 2015 and 2016 and
no direct impact on customer service or the Company's product
development, expansion of adjusted EBITDA, future opportunities in
the company's core communication and non-telecom monetization
businesses, improvement in margin with an increase in revenue from
higher-margin software license deals 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
failure of demand for Redknee's products to develop as anticipated,
the failure to obtain customer orders or meet customer
requirements, the inability of Redknee's products to perform as
expected, the inability of Redknee to achieve anticipated cost
savings in the time frames and to the extent anticipated,
unanticipated negative impacts on customer service or product
development as a result of costs savings implemented, 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. Redknee
does not undertake or accept any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements to reflect any change in its expectations or any change
in events, conditions or circumstances on which any such statement
is based, except as required by law.
Redknee Solutions
Inc.
|
|
|
Condensed
Consolidated Interim Statement of Financial Position
|
|
|
(Expressed in U.S.
dollars)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
March 31,
2015
|
September 30,
2014
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
104,351,704
|
$
|
108,636,797
|
|
Trade accounts and
other receivables
|
74,938,515
|
71,393,983
|
|
Unbilled
revenue
|
30,707,764
|
42,396,988
|
|
Prepaid
expenses
|
2,730,994
|
4,339,650
|
|
Other
assets
|
753,890
|
898,871
|
|
Inventories
|
2,859,859
|
5,199,362
|
|
Total current
assets
|
216,342,726
|
232,865,651
|
|
|
|
Restricted
cash
|
1,440,479
|
881,940
|
Property and
equipment
|
7,227,646
|
8,708,115
|
Deferred income
taxes
|
1,681,228
|
1,939,416
|
Investment tax
credits
|
368,267
|
416,222
|
Other
assets
|
1,792,711
|
2,089,688
|
Intangible
assets
|
29,921,643
|
32,819,313
|
Goodwill
|
7,638,590
|
7,638,590
|
|
|
|
Total
assets
|
$
|
266,413,290
|
$
|
287,358,935
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Trade
payables
|
$
|
10,965,116
|
$
|
9,538,161
|
|
Accrued
liabilities
|
30,388,396
|
38,566,558
|
|
Provisions
|
10,918,879
|
14,967,576
|
|
Income taxes
payable
|
1,235,724
|
1,595,569
|
|
Contingent
consideration
|
12,311,474
|
14,454,527
|
|
Deferred
revenue
|
17,712,921
|
20,743,769
|
|
Loans and
borrowings
|
3,375,000
|
750,000
|
|
Total current
liabilities
|
86,907,510
|
100,616,160
|
|
|
|
Deferred
revenue
|
2,800,059
|
3,601,859
|
Other
liabilities
|
3,069,539
|
2,281,341
|
Pension and
non-pension post-employment benefit obligation
|
10,023,753
|
10,258,900
|
Loans and
borrowings
|
42,773,405
|
45,809,713
|
Provisions
|
2,073,722
|
6,608,270
|
Deferred income
taxes
|
-
|
36,016
|
Total
liabilities
|
147,647,988
|
169,212,259
|
|
|
|
Shareholders'
equity:
|
|
|
|
Share
capital
|
173,890,989
|
173,757,863
|
|
Treasury
stock
|
(141,917)
|
(21,226)
|
|
Contributed
surplus
|
6,300,060
|
5,665,135
|
|
Deficit
|
(57,108,881)
|
(57,080,147)
|
|
Accumulated other
comprehensive income
|
(4,174,949)
|
(4,174,949)
|
|
Total shareholders'
equity
|
118,765,302
|
118,146,676
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
266,413,290
|
$
|
287,358,935
|
Redknee Solutions
Inc.
|
Condensed
Consolidated Interim Statements of Comprehensive Income
(Loss)
|
(Expressed in U.S.
dollars)
|
(Unaudited)
|
|
|
Three months ended March 31,
|
Six months ended March 31,
|
|
2015
|
2014
|
2015
|
2014
|
|
Revenue:
|
|
Software, services
and other
|
$
|
31,220,323
|
$
|
46,696,242
|
$
|
69,175,923
|
$
|
74,071,458
|
|
Support and
subscription
|
22,522,584
|
25,737,078
|
47,143,913
|
58,765,102
|
|
53,742,907
|
72,433,320
|
116,319,836
|
132,836,560
|
|
|
|
|
|
Cost of
revenue
|
21,000,581
|
37,720,340
|
46,989,071
|
65,100,275
|
|
|
|
|
|
Gross
profit
|
32,742,326
|
34,712,980
|
69,330,765
|
67,736,285
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Sales and
marketing
|
7,700,464
|
9,087,347
|
17,162,703
|
17,595,744
|
|
General and
administrative
|
7,511,581
|
7,667,655
|
14,573,965
|
15,842,404
|
|
Research and
development
|
11,397,028
|
15,953,669
|
23,726,810
|
30,838,008
|
|
Restructuring
costs
|
251,635
|
-
|
588,349
|
-
|
|
Acquisition and
related costs
|
279,432
|
2,395,690
|
694,483
|
3,268,058
|
|
27,140,140
|
35,104,361
|
56,746,310
|
67,544,214
|
|
|
|
|
|
Income (loss) from
operations
|
5,602,186
|
(391,381)
|
12,584,455
|
192,071
|
|
|
|
|
|
Foreign exchange gain
(loss)
|
(5,178,499)
|
582,571
|
(7,847,412)
|
(555,333)
|
Other
income
|
-
|
6,951,904
|
-
|
5,801,235
|
Finance
income
|
7,192
|
9,427
|
11,674
|
24,186
|
Finance
costs
|
(1,116,244)
|
(811,636)
|
(2,014,461)
|
(1,396,156)
|
|
|
|
|
|
Income (loss) before
income taxes
|
(685,365)
|
6,340,885
|
2,734,256
|
4,066,003
|
|
|
|
|
|
Income tax
(recovery):
|
|
|
|
|
|
Current
|
1,370,784
|
1,595,017
|
2,770,579
|
2,439,822
|
|
Deferred
|
(16,454)
|
(23,653)
|
(7,589)
|
(82,771)
|
|
1,354,330
|
1,571,364
|
2,762,990
|
2,357,051
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) and
comprehensive income (loss)
|
$
|
(2,039,695)
|
$
|
4,769,521
|
$
|
(28,734)
|
$
|
1,708,952
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
Basic
|
(0.02)
|
0.05
|
(0.00)
|
0.02
|
|
Diluted
|
(0.02)
|
0.05
|
(0.00)
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares:
|
|
|
|
|
|
Basic
|
109,089,428
|
98,362,310
|
109,017,472
|
97,015,120
|
|
Diluted
|
109,089,428
|
101,796,856
|
109,017,472
|
100,465,490
|
|
|
|
|
|
|
Redknee Solutions
Inc.
|
Consolidated
Statement of Cash Flows
|
(Expressed in U.S.
dollars)
|
(Unaudited)
|
|
|
Three months
ended
|
Six months
ended
|
|
March 31,
|
March 31,
|
|
|
2015
|
2014
|
2015
|
2014
|
|
Cash provided by
(used in):
|
|
Operating
activities:
|
|
Net income
|
$
|
(2,039,695)
|
$
|
4,769,521
|
$
|
(28,734)
|
$
|
1,708,952
|
|
Adjustments
for:
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
1,135,416
|
1,451,105
|
2,077,652
|
3,054,168
|
|
|
Amortization of
intangible assets
|
1,527,207
|
1,736,206
|
3,339,589
|
3,426,340
|
|
|
Finance
income
|
(7,192)
|
(9,427)
|
(11,674)
|
(24,186)
|
|
|
Finance
costs
|
1,116,244
|
811,636
|
2,014,461
|
1,396,156
|
|
|
Pensions
|
(404,938)
|
430,061
|
(235,147)
|
834,567
|
|
|
Income tax
expense
|
1,354,330
|
1,571,364
|
2,762,990
|
2,357,051
|
|
|
Unrealized foreign
exchange loss (gain)
|
3,895,407
|
158,133
|
5,761,053
|
203,834
|
|
|
Share-based
compensation
|
1,733,015
|
546,600
|
2,198,181
|
1,216,806
|
|
|
Revaluation of
contingent consideration
|
(1,566,810)
|
(6,951,904)
|
(2,143,053)
|
(5,801,235)
|
|
|
Change in
provisions
|
(5,145,161)
|
(1,201,050)
|
(8,583,245)
|
(1,201,050)
|
|
|
Change in non-cash
operating working capital
|
10,143,262
|
(22,963,360)
|
1,047,258
|
(43,390,850)
|
|
11,741,085
|
(19,651,115)
|
8,199,331
|
(36,219,447)
|
|
|
Interest
paid
|
(39,082)
|
953
|
(88,836)
|
-
|
|
|
Interest
received
|
(37,830)
|
8,108
|
11,674
|
22,867
|
|
|
Income taxes
paid
|
(2,038,430)
|
(2,053,879)
|
(2,909,631)
|
(2,146,138)
|
|
9,625,743
|
(21,695,933)
|
5,212,538
|
(38,342,718)
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
Issuance of share
capital
|
-
|
63,833,834
|
-
|
63,833,834
|
|
|
Proceeds from
exercise of stock options
|
15,095
|
507,404
|
79,225
|
548,177
|
|
|
Purchase of treasury
stock
|
(536,507)
|
-
|
(536,507)
|
-
|
|
|
Interest paid on
loans and borrowings
|
-
|
(636,472)
|
(931,655)
|
(636,472)
|
|
|
Proceeds from loans
and borrowings
|
-
|
3,500,000
|
-
|
13,500,000
|
|
|
Repayment of loans
and borrowings
|
(375,000)
|
-
|
(750,000)
|
-
|
|
|
Transaction costs of
loans and borrowings
|
-
|
10,032
|
-
|
-
|
|
(896,412)
|
67,214,798
|
(2,138,937)
|
77,245,539
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
Purchase of property
and equipment
|
(465,104)
|
(818,593)
|
(796,972)
|
(1,890,559)
|
|
|
Purchase of
intangible assets
|
(626,761)
|
(735,708)
|
(763,057)
|
(892,136)
|
|
|
Decrease in
restricted cash
|
(412,321)
|
(151,902)
|
(558,539)
|
(167,129)
|
|
(1,504,186)
|
(1,706,203)
|
(2,118,568)
|
(2,949,824)
|
|
|
|
|
|
Effect of foreign
exchange rate changes on
cash and cash
equivalents
|
(3,374,480)
|
(158,133)
|
(5,240,126)
|
(203,834)
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
3,850,665
|
43,654,529
|
(4,285,093)
|
35,749,163
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
100,501,039
|
71,149,391
|
108,636,797
|
79,054,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
$
|
104,351,704
|
$
|
114,803,920
|
$
|
104,351,704
|
$
|
114,803,920
|
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,
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Net income (loss) for
the period
|
(2,039,695)
|
4,769,521
|
(28,734)
|
1,708,952
|
|
|
|
|
|
Add back /
(subtract):
|
|
|
|
|
|
Depreciation of
property and equipment
|
1,135,416
|
1,451,105
|
2,077,652
|
3,054,168
|
|
Amortization of
intangible assets
|
1,527,207
|
1,736,206
|
3,339,589
|
3,426,340
|
|
Other
income
|
-
|
(6,951,904)
|
-
|
(5,801,235)
|
|
Finance
income
|
(7,192)
|
(9,427)
|
(11,674)
|
(24,186)
|
|
Finance
costs
|
1,116,244
|
811,636
|
2,014,461
|
1,396,156
|
|
Income tax
expense
|
1,354,330
|
1,571,364
|
2,762,990
|
2,357,051
|
|
Share-based
compensation
|
1,733,015
|
546,600
|
2,198,181
|
1,216,806
|
|
Foreign exchange loss
(gain)
|
5,178,499
|
(582,571)
|
7,847,412
|
555,333
|
|
|
|
|
|
EBITDA
|
9,997,824
|
3,342,530
|
20,199,877
|
7,889,385
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
Restructuring
costs
|
251,635
|
-
|
588,349
|
-
|
|
Acquisition and
related costs
|
279,432
|
2,395,690
|
694,483
|
3,268,058
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
10,528,891
|
$
|
5,738,220
|
$
|
21,482,709
|
$
|
11,157,443
|
SOURCE Redknee Solutions Inc.