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Redknee Solutions Reports Fiscal Second Quarter 2013 Results

May 13, 2013 - Toronto

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 and on SEDAR at

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

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

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 and on the Company's website at

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.

Condensed Consolidated Interim Statements of
Financial Position
(Expressed in U.S. dollars)

March 31, September 30,
2013 2012
-------------- --------------

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
=============== ==============

Condensed Consolidated Interim Statements of Comprehensive Income
(Expressed in U.S. dollars)

Three months ended Six months ended
March 31, March 31,
2013 2012 2013 2012

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
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
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 ============ ============ =========== ============

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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


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