TORONTO, Feb. 8, 2017 /CNW/ - Redknee Solutions
Inc. (TSX: RKN) a leading provider of
real-time monetization and subscriber management software, reported
results for its fiscal first quarter ended December 31, 2016.
(All figures are in U.S. dollars unless otherwise stated.)
Fiscal Q1 2017 Financial Highlights
(Comparisons
made between fiscal Q1FY2017 and fiscal Q1FY2016 results, unless
otherwise noted)
- Revenue was $37.2 million
compared to $50.1 million;
- Gross profit was $21.1 million
(57% of total revenue) compared to $29.7
million (59% of total revenue);
- EBITDA was $2.0 million (5% of
total revenue) compared to EBITDA of $3.7
million (7% of total revenue);
- Recurring revenue was 67% of revenue, compared to 52%;
- Net loss was $6.4 million, or
$0.06 loss per share, compared to a
net loss of $4.3 million, or
$0.04 loss per share;
- Cash used in operations was $7.0
million; and,
- Order backlog of $162.1 million
at December 31, 2016.
Fiscal Q1 2017 Operational Highlights
- Successfully implemented Redknee Unified, a converged
multi-play billing, charging and customer care platform at Omantel,
a leading communication service provider (CSP) in the Middle East;
- Completed an expansion of Redknee's real-time monetization and
subscriber management platform at Telecommunications Services of
Trinidad and Tobago Limited (TSTT); and,
- Signed multi-million dollar customer orders in APAC and EMEA,
as Redknee continues to see demand for its products and
services.
Highlights Subsequent to Quarter End
- Was awarded a contract by Telekom Srpske to upgrade its
existing BSS solution to Redknee Unified 2016 and expand support to
both prepaid and postpaid subscribers; and,
- Following shareholder approval, the Company completed a private
placement with Wave Systems Corp. (the "Investor"), an affiliate of
ESW Capital, LLC ("ESW Capital"), of 800,000 Series A Preferred
Shares of the Company and a common share purchase warrant to the
Investor for gross proceeds of US$83.2
million
(the "Transaction"). The Company subsequently announced the
appointment to its board of directors of four nominees of the
Investor and accepted the resignations of three directors;
and,
- Following completion of the Transaction, the Company used a
portion of the net proceeds from the Transaction to fully repay all
loans and borrowings.
Financial Guidance and Corporate Update
The Company is withdrawing the financial guidance it had
previously provided for Fiscal 2017 for revenues of between
$170 million and $180 million and
adjusted EBITDA of between $15 million and
$20 million.
In addition, the Board of Directors concluded that there are
opportunities to further restructure the business to improve the
operational and financial performance of Redknee with the objective
of achieving best in class metrics, while ensuring long-term
sustainability of the business.
Accordingly, the Board of Directors has directed management to
develop and present various restructuring proposals with a specific
focus on realizing additional cost savings, as well as a plan to
finance any additional capital required to support any approved
restructuring plans.
Management Commentary
"Our recently completed $83.2
million private placement and the restructuring alternatives
being discussed will provide Redknee with a solid financial
footing, permanently taking off the table any question of financial
viability for our customers, employees and shareholders," said
Lucas Skoczkowski, Chief Executive Officer, Redknee Solutions Inc.
"The involvement of ESW Capital brings the additional benefit
of an experienced, long-term strategic partner, as we focus on
achieving our short-term goal of delivering best-in-class operating
margin performance through additional restructuring
opportunities."
"We are redoubling our efforts to support and expand our
customer relationships. We are continuing to invest in agile
solutions that deliver results for our clients, while broadening
our software and service offerings to better address their evolving
needs. During the first quarter, we launched a number of client
projects and we remain actively engaged throughout the
market. We see increasing interest from both clients and
potential customers for our industry leading, business critical
solutions, and we expect to see a number of exciting opportunities
in 2017."
Fiscal Q1 2017 Financial Results
Revenue was $37.2 million compared to $50.1
million in the same year-ago quarter. The decrease resulted
mainly from the impact of lower license revenue due to delays in
customer purchasing decisions and overall reduced capital and
operating spending in the global communication industry, compared
to the same year-ago quarter.
Recurring revenue was 67% of total revenue, compared to 52% in
the same year-ago quarter.
Order backlog slightly decreased by 3% to $162.1 million compared to $166.8 million in fiscal 2016.
Gross margin was $21.1 million, or
57% of total revenue, compared to $29.7
million, or 59% of total revenue, in the same year-ago
quarter. The decrease resulted mainly from lower revenue from
high-margin software license deals.
EBITDA was $2.0 million or 5% of
revenue compared to EBITDA of $3.7
million, or 7% of revenue, in the same year-ago quarter (see
discussion about the presentation of EBITDA, a non-IFRS measure,
below).
Net loss was $6.4 million, or $0.06 loss per
basic and diluted share, compared to a net loss of
$4.3 million, or $0.04
loss per basic and diluted share, in the same year-ago
quarter. Net loss in the quarter included the $3.2 million breakage fee payable to an affiliate
of Constellation Software Inc., for which the obligation was
satisfied by ESW Capital as a prepayment to their subscription.
Total cash at December 31, 2016
was $31.8 million. Cash used in
operations was $7.0 million.
Please refer to the section regarding Forward-Looking Statements
below 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 (February 9, 2017) 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 9, 2017
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#: 59766721
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/2jWDdXI
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 NATIONAL | Equicom at 1 (416) 586-1955.
A replay of the call will be available until 12:00 midnight
(EST) Thursday, February 16,
2017.
Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 59766721
About Redknee Solutions Inc.
Redknee monetizes today's digital world. We provide a complete
portfolio of mission-critical monetization and subscriber
management solutions and services that allow communications service
providers, utility companies, auto makers and enterprise businesses
of all types to charge for things in new and innovative ways.
Redknee's real-time billing, charging, policy and customer care
offerings provide the agility and scalability to drive a unique
user experience, increase profitability and support any new product
or business model. Available on premise, cloud-based, or as a
Software-as-a-Service, Redknee's low-risk, flexible solutions power
more than 250 businesses across the globe. 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 "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 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) and share-based compensation.
"Recurring revenue," which 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.
Other companies (including competitors) may define EBITDA,
recurring revenue, and order backlog differently. The Company
presents 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
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 order backlog contributing to increased revenue
visibility for the Fiscal 2017; the impact of the challenging macro
environment on the Company's revenue; our restructuring initiatives
and ongoing cost management efforts are expected to result in
significantly improved profitability next year; and financial
guidance for Fiscal 2017; 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. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
and assumptions that may cause the actual results, performance or
achievements to differ materially. Such factors include, but are
not limited to, assumptions respecting : (i) the conversion of
sales pipeline into orders and orders into revenue based on the
extent and timing of historical conversion; (ii) the
anticipated mix of the sale of products and services of the Company
and associated margin being consistent with that realized in the
past; (iii) the ability of Redknee to bring new products and
services to market and to increase sales; (iv) the strength of the
Company's product development pipeline; (v) the estimated size and
growth prospects of the markets Redknee seeks to address; (vi) the
Company's competitive position in those markets and its ability to
take advantage of future opportunities in those markets; (vii) the
benefits of the Company's products and services to be realized by
its customers; (viii) the demand for the Company's products and
services and the extent of deployment of the Company's products and
services; (ix) the Company's financial condition and capital
requirements; * the stability of general economic and market
conditions; (xi) currency exchange rates and interest rates; (xii)
capital markets continuing to provide the Company with access to
capital. The risks and uncertainties that may affect
forward-looking statements include, but are 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 Statements of Financial Position
|
|
|
(Expressed in U.S.
dollars)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
December
31,
|
September
30,
|
|
2016
|
2016
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
28,056,119
|
$
|
37,080,510
|
|
Trade accounts and
other receivables
|
38,864,854
|
43,209,046
|
|
Unbilled
revenue
|
25,245,987
|
27,290,500
|
|
Prepaid
expenses
|
2,710,247
|
2,999,539
|
|
Income taxes
receivable
|
2,961,761
|
2,662,163
|
|
Other
assets
|
165,744
|
268,929
|
|
Inventories
|
839,415
|
710,591
|
|
Total current
assets
|
98,844,127
|
114,221,278
|
|
|
|
Restricted
cash
|
3,722,176
|
4,582,293
|
Property and
equipment
|
5,659,446
|
6,262,965
|
Deferred income
taxes
|
1,874,139
|
1,984,479
|
Investment tax
credits
|
347,786
|
355,914
|
Other
assets
|
1,358,096
|
1,656,971
|
Intangible
assets
|
33,122,489
|
35,721,065
|
Goodwill
|
32,271,078
|
32,271,078
|
Total
assets
|
$
|
177,199,337
|
$
|
197,056,043
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Trade
payables
|
$
|
12,602,985
|
$
|
14,212,869
|
|
Accrued
liabilities
|
26,045,131
|
23,405,832
|
|
Provisions
|
18,606,138
|
21,981,367
|
|
Income taxes
payable
|
495,243
|
724,412
|
|
Deferred
revenue
|
15,257,256
|
18,915,596
|
|
Loans and
borrowings
|
49,839,580
|
50,445,790
|
|
Total current
liabilities
|
122,846,333
|
129,685,866
|
|
|
|
Deferred
revenue
|
479,404
|
639,688
|
Other
liabilities
|
1,631,973
|
2,264,482
|
Pension and other
long-term employment benefit plans
|
19,518,183
|
20,387,584
|
Provisions
|
1,185,064
|
6,683,256
|
Deferred income
taxes
|
643,911
|
687,947
|
Total
liabilities
|
146,304,868
|
160,348,823
|
|
|
|
Shareholders'
equity:
|
|
|
|
Share
capital
|
172,436,385
|
172,436,385
|
|
Treasury
stock
|
(141,917)
|
(141,917)
|
|
Contributed
surplus
|
10,354,237
|
9,812,545
|
|
Deficit
|
(140,308,486)
|
(133,954,043)
|
|
Accumulated other
comprehensive loss
|
(11,445,750)
|
(11,445,750)
|
|
Total shareholders'
equity
|
30,894,469
|
36,707,220
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
177,199,337
|
$
|
197,056,043
|
|
|
|
|
|
|
|
|
|
|
|
|
Redknee Solutions
Inc.
|
|
|
Condensed
Consolidated Interim Statements of Comprehensive Loss
|
|
|
(Expressed in U.S.
dollars, except per share and share amounts)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
2016
|
2015
|
|
|
|
Revenue:
|
|
|
|
Software, services
and other
|
$
|
14,004,104
|
$
|
25,118,234
|
|
Support and
subscription
|
23,206,102
|
24,997,577
|
|
37,210,206
|
50,115,811
|
|
|
|
Cost of
revenue
|
16,131,529
|
20,397,916
|
|
|
|
Gross
profit
|
21,078,677
|
29,717,895
|
|
|
|
Operating
expenditures:
|
|
|
|
Sales and
marketing
|
5,035,137
|
8,401,274
|
|
General and
administrative
|
7,721,945
|
7,288,271
|
|
Research and
development
|
9,150,313
|
12,755,071
|
|
Acquisition and
related costs
|
–
|
833,704
|
|
Restructuring
costs
|
205,301
|
278,546
|
|
22,112,696
|
29,556,866
|
|
|
|
Income (loss) from
operations
|
(1,034,019)
|
161,029
|
|
|
|
Foreign exchange gain
(loss)
|
412,716
|
(493,008)
|
Other
expenses
|
(3,200,000)
|
–
|
Finance
income
|
184,927
|
5,374
|
Finance
costs
|
(688,447)
|
(1,048,531)
|
|
|
|
Loss before income
taxes
|
(4,324,823)
|
(1,375,136)
|
|
|
|
Income tax
expense:
|
|
|
|
Current
|
2,018,650
|
2,381,289
|
|
Deferred
|
10,970
|
548,568
|
|
2,029,620
|
2,929,857
|
|
|
|
Loss for the
period
|
(6,354,443)
|
(4,304,993)
|
|
|
|
Other comprehensive
loss:
|
|
|
|
Pension actuarial
adjustment
|
–
|
(77,702)
|
|
|
|
Total comprehensive
loss
|
$
|
(6,354,443)
|
$
|
(4,382,695)
|
|
|
|
Loss per common
share:
|
|
|
|
Basic
|
$
|
(0.06)
|
$
|
(0.04)
|
|
Diluted
|
(0.06)
|
(0.04)
|
|
|
|
|
|
|
Weighted average
number of common shares:
|
|
|
|
Basic
|
108,252,436
|
109,136,362
|
|
Diluted
|
108,252,436
|
109,136,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redknee Solutions
Inc.
|
|
|
Condensed
Consolidated Interim Statements of Cash Flows
|
|
|
(Expressed in U.S.
dollars)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
2016
|
2015
|
|
|
|
Cash provided by
(used in):
|
|
|
|
|
|
Operating
activities:
|
|
|
|
Net loss
|
$
|
(6,354,443)
|
$
|
(4,304,993)
|
|
Adjustments
for:
|
|
|
|
|
Depreciation of
property and equipment
|
779,464
|
1,003,027
|
|
|
Amortization of
intangible assets
|
2,261,176
|
2,287,866
|
|
|
Finance
income
|
(184,927)
|
(5,374)
|
|
|
Finance
costs
|
688,447
|
1,048,531
|
|
|
Pension
expense
|
(869,401)
|
196,552
|
|
|
Income tax
expense
|
2,029,620
|
2,929,857
|
|
|
Unrealized foreign
exchange loss
|
1,187,015
|
1,103,147
|
|
|
Share-based
compensation
|
(55,976)
|
249,609
|
|
|
Change in
provisions
|
(8,873,421)
|
(2,832,167)
|
|
|
Change in non-cash
operating working capital
|
4,861,152
|
(719,629)
|
|
(4,531,294)
|
956,426
|
|
Interest
paid
|
(104,089)
|
(320,768)
|
|
Interest
received
|
185,806
|
11,685
|
|
Income taxes
paid
|
(2,574,428)
|
(2,456,657)
|
|
(7,024,005)
|
(1,809,314)
|
|
|
|
Financing
activities:
|
|
|
|
Proceeds from
exercise of stock options
|
–
|
37,500
|
|
Purchase of shares
under normal course issuer bid
|
–
|
(1,106,482)
|
|
Interest paid on
loans and borrowings
|
(1,084,943)
|
(829,640)
|
|
Repayment of loans
and borrowings
|
(750,000)
|
(450,000)
|
|
Transaction costs on
loans and borrowings
|
–
|
(90,496)
|
|
(1,834,943)
|
(2,439,118)
|
|
|
|
Investing
activities:
|
|
|
|
Purchase of property
and equipment
|
(290,345)
|
(507,420)
|
|
Purchase of
intangible assets
|
–
|
(11,259)
|
|
Decrease in
restricted cash
|
860,117
|
161,908
|
|
Settlement accrual
paid
|
–
|
(6,639,799)
|
|
569,772
|
(6,996,570)
|
|
|
|
Effect of foreign
exchange rate changes on
|
|
|
|
cash and cash
equivalents
|
(735,215)
|
(576,957)
|
|
|
|
Decrease in cash and
cash equivalents
|
(9,024,391)
|
(11,821,959)
|
|
|
|
Cash and cash
equivalents, beginning of period
|
37,080,510
|
55,047,577
|
|
|
|
Cash and cash
equivalents, end of period
|
$
|
28,056,119
|
$
|
43,225,618
|
|
|
|
|
|
|
|
|
|
|
|
|
Redknee Solutions
Inc.
|
|
|
Reconciliation of Net
Loss to EBITDA
|
|
|
(Expressed in U.S.
dollars)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
2016
|
2015
|
|
|
|
Net loss for the
period
|
$
|
(6,354,443)
|
$
|
(4,304,993)
|
|
|
|
Add back /
(subtract):
|
|
|
|
Depreciation of
property and equipment
|
779,464
|
1,003,027
|
|
Amortization of
intangible assets
|
2,261,176
|
2,287,866
|
|
Other
expenses
|
3,200,000
|
–
|
|
Finance
income
|
(184,927)
|
(5,374)
|
|
Finance
costs
|
688,447
|
1,048,531
|
|
Income tax
expense
|
2,029,620
|
2,929,857
|
|
Share-based
compensation
|
(55,976)
|
249,609
|
|
Foreign exchange
(gain) loss
|
(412,716)
|
493,008
|
|
|
|
EBITDA
|
$
|
1,950,645
|
$
|
3,701,531
|
SOURCE Redknee Solutions Inc.