RNS Number : 3359J
Redknee Solutions Inc.
02 December 2008
For Immediate Release 2 December 2008
Redknee Solutions Inc.
("Redknee" or the "Company")
Results for the year ended September 30, 2008
Redknee (TSX/AIM: RKN), a leading provider of mission-critical software and services for communications service providers, including
end-to-end convergent billing, real-time charging and rating and personalization, today announces its results for the financial year ended
September 30, 2008.
Financial Highlights:
* Second half 2008 revenue up 48% to $26.6 million (2H07 - $17.9 million)
* 2008 revenue up 31% to $50.7million (2007 - $38.6 million)
* Second half gross margin increases to 71% (2H07 - 59%)
* 2008 gross margin increases to 70% (2007 - 67%)
* Basic loss per share of ($0.08) (2007 - loss per share of ($0.20))
* Cash and investments at $15.3 million (March, 30, 2008 - $16.0 million)
Canadian-based Redknee reports in Canadian dollars but generates a majority of its revenue from US dollar, Euro and UK pound priced and
denominated contracts.
Operating Highlights:
* Over 20 new operators in 2008 across APAC, EMEA and Americas (2007 - nine new operators);
* Further enhanced recurring revenue in Redknee's business model:
* Secured first multi-year revenue share agreement,
* Integrated interconnect service bureau operation acquired from Argent Networks,
* Secured first multi-year term-license agreement generating recurring revenues,
* Three new mission-critical solutions introduced during the year;
* Six new patents awarded and eight new patent applications filed;
* US$10 million credit line obtained from Export Development Canada.
Lucas Skoczkowski, CEO for Redknee commented:
"After 12 months of record growth, Redknee enters fiscal 2009 in a stronger position. Our strategy has positioned us well to benefit
from the continued increase in wireless subscriber penetration throughout the high growth markets of Africa, the Middle East and Asia
Pacific, while addressing niche growth segments of Tier-1 operators in Europe and North America. In the current uncertain economic
environment, we remain focused on accelerating our return to profitability, while executing our strategy in a disciplined fashion."
Please see section regarding Forward-Looking Statements which forms an integral part of this release. These results along with the
audited consolidated financial statements and the Company's MD&A and AIF are available on the Company's website at www.redknee.com and on
SEDAR at www.sedar.com. The Company's annual audited financial statements together with the Annual Report for fiscal year 2008 will be
posted to shareholders in due course.
CHIEF EXECUTIVE REVIEW
Introduction
Fiscal 2008 has proven to be another record year for Redknee in terms of both revenue and new business momentum. We have continued to
execute our corporate strategy, and as a result we have achieved record levels of revenue ($50.7 million) and a record number of new
operator additions (over 20). Redknee gained market share in the high growth regions, while continuing to focus on our niche growth segments
of Tier-1 operators in Europe and North America.
Growth Strategy
As stated in our March 31, 2008 interim results, Redknee continues to be dedicated to delivering on the following three long-term
measures of success:
* Provide mission-critical solutions to our global customer base;
* Achieve market leadership in our served addressable market, including the high growth market regions consisting of Africa, the Middle
East and Asia Pacific; and
* Continue to increase the proportion of recurring revenues in our business model.
Progress continued to be made on each of these three objectives throughout fiscal 2008.
All Redknee's mission critical solutions have experienced sales growth in 2008, with Turnkey Converged Billing generating over 40% of
revenue, an increase of 42% over fiscal 2007. Furthermore, Redknee introduced three new mission-critical solutions into the marketplace
during fiscal 2008:
* InBill, an interconnect billing and content management solution that is designed to manage carrier-to-carrier and third party
invoices;
* Mobile Money, a suite of capabilities that is designed to address subscriber needs in the high growth markets from ways to top-up
mobile handsets while roaming from country to country, to using the handset as a mobile wallet to store and transfer funds; and
* One Call Resolution, designed to enable call centres to rapidly resolve subscribers' issues and service complaints, while enabling
the reduction of call centre costs and increasing subscriber satisfaction.
On the market leadership front, Redknee's sustained focus on high growth regions and specific business segments in 2008 resulted in a
record number of new operator wins and a 38% increase in served addressable market share in our converged billing segment. Targeting the
high-growth regions of Africa, the Middle East, and Asia Pacific, as well as high-growth business segments within North America and Europe,
has allowed Redknee to capitalize on markets that have continued to expand.
Finally, on Redknee's recurring revenue measure of success, second half of fiscal 2008 recurring revenues represented 33% of overall
revenue versus 29% in the first half of fiscal 2008. The recurring revenue model was enhanced by strong support agreement renewals, signing
of a multi year term license agreements and enhanced by our acquisition of InBill from Argent Networks.
Revenue
Redknee posted record levels of revenue for fiscal 2008 ($50.7 million), a 31% increase year on year growth as compared with a 4%
increase for fiscal 2007. Redknee has always been, and continues to be, a global company with the majority of its revenue coming from
international markets. In fiscal 2008, Redknee continued to expand its global presence, which resulted in sales growing in all of our
markets, with our fastest growing region being Asia Pacific, which grew by 97% to $12.5 million.
Operators
Redknee's customer base includes some of the largest mobile communications service providers worldwide, and consists of more than 70
operators in over 50 countries. Additionally, no single customer constitutes more than 16% of Redknee's revenue, and the global nature of
our customer base helps to ensure that the Company is not reliant on any one geography or customer.
Fiscal 2008 has been a record year for customer growth at Redknee, adding over 20 new operators/installations from our organic sales
efforts and the acquisition of the InBill operations of Argent.
Market Outlook
Redknee continues to focus on the high-growth markets of Africa, the Middle East and Asia Pacific. According to industry analysts, over
80% of new mobile subscribers will come from these high-growth markets.
The Tier-1 markets continue to offer significant opportunities for business growth in specific areas associated with data applications
and subscriber experience management. Industry analysts project that data services, the area Redknee specializes in, will continue to grow
at over 10% year over year within Tier-1 markets.
Trading on Toronto Stock Exchange
On October 21, 2008, Redknee announced its common shares had been approved for listing on the Toronto Stock Exchange ("TSX"). Redknee
believes the listing of its shares on the TSX will enable it to broaden its investor base, raise the Company's profile in Canada and North
America and provide a presence on its local Canadian exchange.
Financial Review
Second Half 2008
For the six month period ended September 30, 2008, Redknee's revenue grew by 48% to $26.6 million compared to revenue of $17.9 million
in the second half of fiscal 2007. Gross margin in the period increased to $19.0 million or 71% of revenue from 59% of revenue in the second
half of fiscal 2007. Net loss for the period declined to $3.0 million from $7.2 million in fiscal 2007, including several one-time costs in
fiscal 2008 such as expenses related to the implementation of Bill 198 in Ontario, the listing of the Company's shares on the TSX and the
procurement of a US $10 million line of credit from the Export Development Canada. Cash and investments as at September 30, 2008 was $15.3
million versus $16.0 million as at March 31, 2008.
Fiscal 2008
For the year ended September 30, 2008, revenue was $50.7 million, a 31% increase over fiscal 2007. Gross margin for the year increased
to 70% compared to 67% in fiscal 2007. Net loss for the period declined to $4.4 million from $10.4 million in fiscal 2007.Cash balances
declined by $8.4 million in the period from $23.7 million at September 30, 2007 to $15.3 million at September 30, 2008 due to the operating
loss of $4.4 million, the acquisition of InBill for $1.0 million and an increase in working capital to support the growth of the Company.
The following table outlines the Company's results of operations for the period indicated.
2H 08 2H 07 * % FY08 FY07 * %
vs. 2H07 vs. FY07
Revenue
Software, services and other $ 18,775 $ 12,071 56% $ 36,666 $ 27,189 35%
Support 7,838 5,861 34% 14,035 11,427 23%
26,613 17,932 48% 50,701 38,616 31%
Cost of revenue 7,587 7,300 4% 14,973 12,796 17%
Gross profit 19,027 10,632 79% 35,729 25,820 38%
71% 59% 70% 67%
Operating expenses
Selling and marketing 8,456 6,752 25% 16,567 13,707 21%
General and administrative 5,929 3,989 49% 10,769 8,066 34%
Research and development 6,943 4,809 44% 13,464 10,421 29%
Amortization of property and 282 113 150% 409 287 43%
equipment
Foreign currency exchange loss 125 2,231 -94% (1,584) 1,858 -185%
(gain)
21,735 17,894 21% 39,625 34,338 15%
Loss from operations (2,709) (7,262) 63% (3,897) (8,518) 54%
Interest income 117 492 -76% 451 658 -31%
Interest expense (18) (15) 20% (28) (1,665) -98%
Loss before income taxes (2,610) (6,785) 62% (3,473) (9,526) 64%
Income taxes 346 458 -24% 938 882 6%
Loss for the period (2,956) (7,243) 59% (4,411) (10,407) 58%
FORWARD-LOOKING STATEMENTS
In this release certain statements which are not historical facts may constitute forward-looking statements or forward-looking
information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to Redknee's projected
revenues, earnings, growth rates, revenue mix and product plans are forward looking statements as are any statements relating to future
events, conditions or circumstances. The use of terms such as "believes", "anticipated", "expected", "projected", "targeting", "estimate",
"intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place
undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future
performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or
developments of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.
Forward-looking statements are effective as of September 30, 2008 and are based on management's current plans, estimates, projections,
beliefs and opinions, and Redknee does not undertake any obligation to update forward-looking statements should assumptions related to these
plans, estimates, projections, beliefs and opinions change.
Many factors could cause the actual results of Redknee to differ materially from the results, performance, achievements or developments
expressed or implied by such forward-looking statements, including, without limitation, each of the following factors, which are further
discussed under the heading "Risk Factors" in Redknee's most recent Annual Information Form ("AIF"), a copy of which is available on SEDAR
at www.sedar.com:
* The Company's revenues may fluctuate from quarter to quarter and year to year depending upon sales cycles, customer demand and the
timing of customer order purchase decisions;
* The Company's gross margins may fluctuate from period to period depending upon a variety of factors including product mix in the
quarter, competitive pricing pressures and the level of sales generated through indirect channels;
* The Company faces intense competition in markets where there are typically several different competing technologies and rapid
technological changes;
* The Company's growth is dependent on the development of the market for communications billing software and the decisions of the
Company's target customers to deploy and further invest in those technologies which decisions may be impacted upon by changing economic and
industry conditions;
* The majority of the Company's expenses are denominated in Canadian dollars while its sales are generally denominated in U.S.
dollars or Euros. The Company's earnings are impacted by fluctuations in the exchange rates between these and other currencies in which the
Company trades;
* The introduction and sale of new products by the Company may impact the timing of revenue recognition which could raise greater
revenue fluctuations from quarter to quarter than has been experienced historically; and
* The Company is exposed to credit risk related to accounts receivable from customers and amounts owing from channel partners and
other third parties that the Company engages in business with. Third parties may default on their obligations to the Company due to
bankruptcy, lack of liquidity, operational failure or other reasons.
The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking statements, whether
as a result of new information, future events or otherwise, or the above list of factors affecting this information.
About Redknee
Redknee is a leading global provider of innovative communication software products, solutions and services. Redknee's award-winning
solutions enable operators to monetize the lifetime value of each subscriber transaction, while personalizing the subscriber experience to
meet mainstream, niche and individual market segment requirements. Redknee's revenue generating solutions provide advanced converged
billing, rating, charging and policy for voice, messaging and new generation data services to over 70 network operators in over 50
countries. Established in 1999, Redknee Solutions Inc. (TSX:RKN, AIM: 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, please
visit www.redknee.com.
CONFERENCE CALL
The Company will discuss the results on a conference call at 13:00 GMT (08:00 a.m. EST) today.
To participate in the conference call please dial the following numbers five minutes before the start of the call to ensure your
participation:
Local dial-in number 416 644 3418
Toll-free North America 800 732 6179
Toll-free United Kingdom 00 800 2288 3501
The conference call will be archived for replay by telephone at: 416-640-1917 or Toll -Free at 1-877-289- 8525
(passcode �21290759) from approximately 10:00 a.m. December 2, 2008 EDT time through to December 16, 2008.
For further details please contact:
Redknee Solutions Inc.
Lucas Skoczkowski, Chief Executive Officer Tel: +1 905 625 2622
Colley Clarke, Chief Financial Officer Fax: +1 905 625 2773
Buchanan Communications Tel: +44 (0) 20 7466 5000
Jeremy Garcia / Simon Gold
Canaccord Adams Tel: +44 (0) 20 7050 6500
Neil Johnson / Ryan Gaffney
Redknee Solutions Inc.
Consolidated Balance Sheets
As at September 30, 2008 and 2007
(expressed in Canadian dollars) (unaudited)
2008$ 2007$
Assets
Current assets
Cash and cash equivalents 15,242,607 8,927,770
Short-term investments 56,363 14,763,046
Accounts receivable 11,192,182 5,992,035
Unbilled revenue 6,060,452 3,925,232
Investment tax credits and income taxes 600,000 400,000
receivable
Prepaid expenses 1,066,584 1,064,183
Goods in transit 325,716 146,308
34,543,904 35,218,574
Restricted cash 409,919 -
Property and equipment 580,053 250,020
Intangible assets 1,388,761 -
Other assets 528,294 90,004
37,450,931 35,558,598
Liabilities
Current liabilities
Accounts payable 2,172,268 1,598,436
Accrued liabilities 8,678,539 5,045,954
Income taxes payable 2,100,785 2,444,196
Deferred revenue 5,084,287 3,403,246
Current portion of obligations under capital 619 49,371
leases
18,036,498 12,541,203
Shareholders' Equity
Share capital, net of employee share purchase 39,686,701 39,768,298
loans
Contributed surplus 4,410,677 3,520,838
Deficit (24,471,986) (20,060,782)
Accumulated other comprehensive loss, net of (210,959) (210,959)
income taxes
Total deficit and accumulated other (24,682,945) (20,271,741)
comprehensive loss
19,414,433 23,017,395
37,450,931 35,558,598
Commitments, guarantees and contingencies
Redknee Solutions Inc.
Consolidated Statements of Operations
For the years ended September 30, 2008 and 2007
(expressed in Canadian dollars) (unaudited)
2008$ 2007$
Revenue
Software, services and other 36,665,989 27,189,249
Support 14,035,355 11,427,116
50,701,344 38,616,365
Cost of revenue 14,972,692 12,796,290
Gross profit 35,728,652 25,820,075
Operating expenses
Sales and marketing 16,566,834 13,706,980
General and administrative 10,768,930 8,066,164
Research and development 13,464,000 10,420,666
Amortization of property and equipment and 409,489 286,720
intangible assets
Foreign exchange (gain) loss (1,584,049) 1,857,573
39,625,204 34,338,103
Loss from operations (3,896,552) (8,518,028)
Interest income 451,341 657,554
Interest expense (27,584) (1,665,072)
Loss before income taxes (3,472,795) (9,525,546)
Income taxes
Current 938,409 881,885
Loss for the year (4,411,204) (10,407,431)
Loss per common share
Basic (0.08) (0.20)
Diluted (0.08) (0.20)
Weighted average number of common shares
Basic 56,328,674 51,898,144
Diluted 56,328,674 51,898,144
Redknee Solutions Inc.
Consolidated Statements of Comprehensive Loss
For the years ended September 30, 2008 and 2007
(expressed in Canadian dollars)
2008$ 2007$
Loss for the year (4,411,204) (10,407,431)
Other comprehensive income, net of income
taxes
Foreign currency translation adjustment - 174,527
Comprehensive loss for the year (4,411,204) (10,232,904)
Redknee Solutions Inc.
Consolidated Statements of Shareholders* Equity
For the years ended September 30, 2008 and 2007
(expressed in Canadian dollars) (unaudited)
Share capital Employee share Accumulated
Total
other
Number Amount purchase loans Contributed Deficit comprehensive
Shareholders'
surplus loss
equity
$ $ $ $ $
$
Balance - September 30, 2006 37,915,628 3,872,010 - 2,943,004 (9,002,010) (385,486)
(2,572,482)
Changes in accounting policy - - - - (651,341) -
(651,341)
Issued pursuant to share 215,653 267,410 - - - -
267,410
purchase plan
Issued on exercise of stock 3,226,445 1,458,461 - (358,293) - -
1,100,168
options pursuant to share
purchase plan
Issued on exercise of stock 38,438 21,443 - - - -
21,443
options
Issue of restricted share 966,250 100,750 - (100,750) - -
-
units
Restricted share units held in (885,000) - - - - -
-
treasury by trust
Redemption of shares (75,000) (7,659) - (85,341) - -
(93,000)
Exchange of shares - - - - - -
-
Issued on initial public 16,700,000 39,893,878 - - - -
39,893,878
offering
Organization costs related to - (5,147,747) - - - -
(5,147,747)
initial public offering
Issued on exercise of stock 248,212 205,283 - - - -
205,283
options
Stock-based compensation - - - 1,122,218 - -
1,122,218
Loss for the year - - - - (10,407,431) -
(10,407,431)
Employee share purchase loans - - (895,531) - - -
(895,531)
Other comprehensive income - - - - - 174,527
174,527
Balance - September 30, 2007 58,350,626 40,663,829 (895,531) 3,520,838 (20,060,782) (210,959)
23,017,395
Stock-based compensation - - - 889,839 - -
889,839
Loss for the year - - - (4,411,204) -
(4,411,204)
Employee share purchase loans - - (81,597) - - -
(81,597)
Balance - September 30, 2008 58,350,626 40,663,829 (977,128) 4,410,677 (24,471,986) (210,959)
19,414,433
Redknee Solutions Inc.
Consolidated Statements of Cash Flows
For the years ended September 30, 2008 and 2007
(expressed in Canadian dollars) (unaudited)
2008$ 2007$
Cash provided by (used in)
Operating activities
Loss for the year (4,411,204) (10,407,431)
Items not involving cash
Amortization of property and equipment 291,489 286,720
Amortization of intangible assets 118,000 -
Unrealized foreign exchange (gain) loss (1,371,401) 449,954
Stock-based compensation 889,839 1,210,050
Debt accretion - 818,750
Change in non-cash operating working capital (1,708,257) 2,029,307
(6,191,534) (5,612,650)
Financing activities
Repayment of notes payable - (581,896)
Repayment of notes payable to related parties - (774,239)
Proceeds from issuance of common shares - 577,458
Proceeds from initial public offering, net of - 34,794,519
costs
Share buyback - (93,000)
Repayment of long-term debt - (8,275,792)
Repayment of obligations under capital leases (48,752) (57,410)
(48,752) 25,589,640
Investing activities
Sale (purchase) of short-term investments 14,706,683 (14,227,590)
Purchase of property and equipment (586,966) (35,403)
(Increase) decrease in other assets (435,581) 156,206
Loan to Argent Networks PTY Ltd. (529,463) -
Repayment of loan to Argent Networks PTY Ltd. 526,754 -
(Increase) decrease in restricted cash (409,919) 51,465
Acquisition of Argent Networks PTY Ltd., net (997,985) -
of cash acquired
12,273,523 (14,055,322)
Effect of exchange rate changes on cash and 281,600 103,396
cash equivalents
Increase in cash and cash equivalents during 6,314,837 6,025,064
the year
Cash and cash equivalents - Beginning of year 8,927,770 2,902,706
Cash and cash equivalents - End of year 15,242,607 8,927,770
Supplemental cash flow information
Interest paid 27,584 1,653,068
Interest received 451,341 667,884
Cash income taxes/investment tax credits 1,016,832 1,393,246
received, net of income taxes paid
This information is provided by RNS
The company news service from the London Stock Exchange
END
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