TORONTO, Feb. 10, 2016 /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, 2015. All figures are in U.S. dollars.
Fiscal Q1 2016 Financial Highlights
(Comparisons made between fiscal Q1FY2016 and fiscal Q1FY2015
results, unless otherwise noted)
- Revenue totalled $50.1 million
($54.8 million, on a constant
currency basis), compared to $62.6
million;
- Gross profit was $29.7 million
(59% of total revenue) compared to $36.6
million (58% of total revenue);
- Adjusted EBITDA of $4.8 million
(10% of total revenue) versus Adjusted EBITDA of $11.0 million (18% of total revenue);
- Recurring was 52% of revenue, compared to 44%;
- Net loss was $4.3 million or
$0.04 loss per share versus a net
income of $2.0 million or
$0.02 income per share,
- Available liquidity as at December 31,
2015 was $89.0 million,
including $49.0 million of cash,
and,
- Order backlog of $166.8 million
($173.0 million on a constant
currency basis).
Fiscal Q1 2016 Operational Highlights
- Supported a Tier 1 Operator in North
America with its Mobile Virtual Network Enabler (MVNE)
strategy, including an extension of its contract with Redknee worth
more than $5 million;
- Delivered the latest version of Redknee Railway, an
Intelligent Network (IN) solution for GSM-Railway, to Prorail, a
leading Dutch railway operator;
- Launched the Redknee Connected Suite, a software platform
designed to help enterprises monetize applications for the Internet
of Things (IoT);
- Recognized as a leader in the Canadian technology industry in
the Deloitte's 2015 Technology Fast 50 and Fast 500; and,
- Continued to expand patent portfolio with a total of 152
patents granted and 31 patents filed at quarter end, with
additional patents still undergoing transfer following the Orga
Systems acquisition.
Highlights Subsequent End of Q1 2016
- As anticipated at the time of the Orga Systems acquisition and
consistent with its acquisition and integration strategy, Redknee
initiated its planned cost structure optimization as it finalizes
the integration of Orga. As a result of these efforts, the
Company expects to close certain offices and refocus some of its
activities in certain regions, resulting in headcount reductions of
between 200 and 300 full-time equivalents globally. The
restructuring is expected to cost between $25 and $30 million and result in annualized
savings of between $20 and $25
million. The implementation will be executed on a
timely basis and will be subject to the necessary consultation
processes where required by local laws.
- As of close of trading February 10,
2016, Redknee had purchased 1,246,590 shares for a total
cost of approximately CAD$3.5 million
under the Company's Normal Course Issuer Bid (NCIB) since the
program's commencement on December 7,
2015.
Management Commentary
"The first quarter saw continued progress on our near-term
priorities, highlighted by gross margin expansion, improving cash
flows and a growing order book, notwithstanding a period in which
the typical lumpiness in our software license revenue was
exacerbated by several purchase decision delays, as well as the
full cost structure of the Orga acquisition," said Lucas
Skoczkowski, CEO of Redknee. "We are encouraged by both our strong
first quarter bookings and our continuing engagement with these
operators and we believe that we remain well positioned to secure
these orders over the coming several quarters."
Mr. Skoczkowski continued, "With the integration of Orga Systems
substantially complete, as per the plan we outlined at the time of
acquisition, we have moved quickly and decisively on our cost
structure optimization program. The expected cost savings of
$20 to $25 million annually will
further contribute to long-term cash flow and profitability.
We continue to expect the acquisition of Orga to be accretive in
fiscal 2016. Importantly, we are confident the proposed
changes will in no way impact our high standard of customer service
or our product development, delivery or support."
"As we look out to the year ahead, amidst the expected ongoing
softness in service provider spending, we will remain laser-focused
on maximizing our profitability and cash flow generation, while
growing our proportion of recurring revenue. We remain
steadfast in our commitment to continuing to advance our strong
competitive position as the provider of choice for monetization and
subscriber management solutions for service providers worldwide in
our core communications market, while leveraging our reputation and
experience in pursuit of the significant opportunities related to
the Internet of Things."
Fiscal Q1 2016 Financial Results
Revenue was $50.1 million
($54.8 million on a constant currency
basis) compared to $62.6 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 and lower license revenue compared to the same
year-ago quarter.
Order backlog increased 5% to $166.8
million ($173.0 million on a
constant currency basis) from $158.5
million in the fourth quarter of fiscal 2015.
Recurring revenue was 52% of total revenue, compared to 44% in
the same year-ago quarter.
Gross margin was 29.7 million or 59% compared to $36.6 million or 58% in the same year-ago
quarter.
Adjusted EBITDA was $4.8 million,
or 10% of revenue, compared to Adjusted EBITDA of $11.0 million, or 18% of revenue, in the same
year-ago quarter (see discussion about the presentation of Adjusted
EBITDA, a non-IFRS measure, below).
Net loss totalled $4.3 million, or
$0.04 loss per basic and diluted
share compared to a net income of $2.0
million, or $0.02 income per
basic and diluted share, in the same year-ago quarter.
At December 31, 2015, total cash
ended at $49.0 million.
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 (February 11, 2016) 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 11,
2016
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#: 26272800
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/1ZiGLO1.
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 18,
2016.
Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 26272800
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 "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 income, 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 Q4 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 Statements of Financial Position
|
|
|
|
|
(Expressed in U.S.
dollars)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
September
30,
|
|
|
2015
|
|
2015
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
43,225,618
|
$
|
55,047,577
|
|
Trade accounts and
other receivables
|
|
65,212,319
|
|
67,439,885
|
|
Unbilled
revenue
|
|
40,234,965
|
|
38,612,499
|
|
Prepaid
expenses
|
|
2,649,713
|
|
2,535,936
|
|
Income taxes
receivable
|
|
1,687,830
|
|
1,399,564
|
|
Other
assets
|
|
376,114
|
|
392,195
|
|
Inventories
|
|
797,887
|
|
812,987
|
|
Total current
assets
|
|
154,184,446
|
|
166,240,643
|
|
|
|
|
|
Restricted
cash
|
|
5,810,179
|
|
5,972,087
|
Property and
equipment
|
|
7,779,025
|
|
8,435,008
|
Deferred income
taxes
|
|
3,712,970
|
|
4,286,459
|
Investment tax
credits
|
|
336,978
|
|
351,385
|
Other
assets
|
|
1,802,212
|
|
1,816,640
|
Intangible
assets
|
|
42,179,057
|
|
44,821,478
|
Goodwill
|
|
31,281,092
|
|
31,281,092
|
|
|
|
|
|
Total
assets
|
$
|
247,085,959
|
$
|
263,204,792
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Trade
payables
|
$
|
11,624,856
|
$
|
9,128,710
|
|
Accrued
liabilities
|
|
29,965,445
|
|
32,305,136
|
|
Provisions
|
|
6,984,952
|
|
8,772,519
|
|
Income taxes
payable
|
|
2,529,168
|
|
2,364,983
|
|
Settlement accrual
and contingent consideration
|
|
3,604,425
|
|
10,244,224
|
|
Deferred
revenue
|
|
12,244,252
|
|
13,363,696
|
|
Loans and
borrowings
|
|
2,100,000
|
|
1,800,000
|
|
Total current
liabilities
|
|
69,053,098
|
|
77,979,268
|
|
|
|
|
|
Deferred
revenue
|
|
889,458
|
|
870,937
|
Other
liabilities
|
|
1,743,704
|
|
2,615,163
|
Pension and other
long-term employment benefit plans
|
|
11,691,735
|
|
11,417,481
|
Loans and
borrowings
|
|
54,267,647
|
|
54,961,066
|
Provisions
|
|
2,961,754
|
|
4,006,354
|
Total
liabilities
|
|
140,607,396
|
|
151,850,269
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
Share
capital
|
|
173,308,039
|
|
174,082,815
|
|
Treasury
stock
|
|
(141,917)
|
|
(141,917)
|
|
Contributed
surplus
|
|
8,180,871
|
|
7,899,360
|
|
Deficit
|
|
(71,391,715)
|
|
(67,086,722)
|
|
Accumulated other
comprehensive loss
|
|
(3,476,715)
|
|
(3,399,013)
|
|
Total shareholders'
equity
|
|
106,478,563
|
|
111,354,523
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
247,085,959
|
$
|
263,204,792
|
REDKNEE SOLUTIONS
INC.
|
Condensed
Consolidated Interim Statements of Comprehensive Income
(Loss)
|
(Expressed in U.S.
dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Software, services
and other
|
|
|
|
$
|
25,118,234
|
$
|
37,955,600
|
|
Support and
subscription
|
|
|
|
|
24,997,577
|
|
24,621,329
|
|
|
|
|
|
50,115,811
|
|
62,576,929
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
|
|
|
20,397,916
|
|
25,988,490
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
29,717,895
|
|
36,588,439
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
|
|
|
|
8,401,274
|
|
9,462,239
|
|
General and
administrative
|
|
|
|
|
7,288,271
|
|
7,062,384
|
|
Research and
development
|
|
|
|
|
12,755,071
|
|
12,329,782
|
|
Acquisition and
related costs
|
|
|
|
|
833,704
|
|
415,051
|
|
Restructuring
costs
|
|
|
|
|
278,546
|
|
336,714
|
|
|
|
|
|
29,556,866
|
|
29,606,170
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
|
|
161,029
|
|
6,982,269
|
|
|
|
|
|
|
|
|
Foreign exchange
loss
|
|
|
|
|
(493,008)
|
|
(2,668,913)
|
Finance
income
|
|
|
|
|
5,374
|
|
4,482
|
Finance
costs
|
|
|
|
|
(1,048,531)
|
|
(898,217)
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
|
|
|
(1,375,136)
|
|
3,419,621
|
|
|
|
|
|
|
|
|
Income tax
expense:
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
2,381,289
|
|
1,399,795
|
|
Deferred
|
|
|
|
|
548,568
|
|
8,865
|
|
|
|
|
|
2,929,857
|
|
1,408,660
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
|
|
|
(4,304,993)
|
|
2,010,961
|
|
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
Pension actuarial
adjustment
|
|
|
|
|
(77,702)
|
|
–
|
|
|
|
|
|
|
|
|
Comprehensive income
(loss)
|
|
|
|
$
|
(4,382,695)
|
$
|
2,010,961
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
(0.04)
|
|
0.02
|
|
Diluted
|
|
|
|
|
(0.04)
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
109,136,362
|
|
108,944,276
|
|
Diluted
|
|
|
|
|
109,136,362
|
|
111,410,637
|
|
|
|
|
|
|
|
|
|
REDKNEE SOLUTIONS
INC.
|
Condensed
Consolidated Interim Statements of Cash Flows
|
(Expressed in U.S.
dollars)
|
(Unaudited)
|
|
|
|
|
|
Three months
ended
|
|
|
December
31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
Cash provided by
(used in):
|
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
Net income
(loss)
|
$
|
(4,304,993)
|
$
|
2,010,961
|
|
Adjustments
for:
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
1,003,027
|
|
942,236
|
|
|
Amortization of
intangible assets
|
|
2,287,866
|
|
1,812,382
|
|
|
Finance
income
|
|
(5,374)
|
|
(4,482)
|
|
|
Finance
costs
|
|
1,048,531
|
|
898,217
|
|
|
Pension
expense
|
|
196,552
|
|
169,791
|
|
|
Income tax
expense
|
|
2,929,857
|
|
1,408,660
|
|
|
Unrealized foreign
exchange loss
|
|
1,103,147
|
|
1,865,646
|
|
|
Share-based
compensation
|
|
249,609
|
|
465,166
|
|
|
Revaluation of
contingent consideration
|
|
–
|
|
(576,243)
|
|
|
Change in
provisions
|
|
(2,832,167)
|
|
(3,438,084)
|
|
|
Change in non-cash
operating working capital
|
|
(719,629)
|
|
(9,096,004)
|
|
|
956,426
|
|
(3,541,754)
|
|
Interest
paid
|
|
(320,768)
|
|
(49,754)
|
|
Interest
received
|
|
11,685
|
|
49,504
|
|
Income taxes
paid
|
|
(2,456,657)
|
|
(871,201)
|
|
|
(1,809,314)
|
|
(4,413,205)
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Proceeds from
exercise of stock options
|
|
37,500
|
|
64,130
|
|
Purchase of shares
under normal course issuer bid
|
|
(1,106,482)
|
|
–
|
|
Interest paid on
loans and borrowings
|
|
(829,640)
|
|
(931,655)
|
|
Repayment of loans
and borrowings
|
|
(450,000)
|
|
(375,000)
|
|
Transaction costs on
loans and borrowings
|
|
(90,496)
|
|
–
|
|
|
(2,439,118)
|
|
(1,242,525)
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Purchase of property
and equipment
|
|
(507,420)
|
|
(331,868)
|
|
Purchase of
intangible assets
|
|
(11,259)
|
|
(136,296)
|
|
Decrease (increase)
in restricted cash
|
|
161,908
|
|
(146,218)
|
|
Settlement accrual
paid
|
|
(6,639,799)
|
|
–
|
|
|
(6,996,570)
|
|
(614,382)
|
|
|
|
|
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
|
(576,957)
|
|
(1,865,646)
|
|
|
|
|
|
Decrease in cash and
cash equivalents
|
|
(11,821,959)
|
|
(8,135,758)
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
55,047,577
|
|
108,636,797
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
$
|
43,225,618
|
$
|
100,501,039
|
REDKNEE SOLUTIONS
INC.
|
|
|
|
|
|
|
|
|
Reconciliation of Net
Income (Loss) to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
(Expressed in U.S.
dollars)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net income (loss) for
the period
|
|
|
|
|
|
(4,304,993)
|
|
2,010,961
|
|
|
|
|
|
|
|
|
|
Add back /
(subtract):
|
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
|
|
|
1,003,027
|
|
942,236
|
|
Amortization of
intangible assets
|
|
|
|
|
|
2,287,866
|
|
1,812,382
|
|
Finance
income
|
|
|
|
|
|
(5,374)
|
|
(4,482)
|
|
Finance
costs
|
|
|
|
|
|
1,048,531
|
|
898,217
|
|
Income tax
expense
|
|
|
|
|
|
2,929,857
|
|
1,408,660
|
|
Share-based
compensation
|
|
|
|
|
|
249,609
|
|
465,166
|
|
Foreign exchange
loss
|
|
|
|
|
|
493,008
|
|
2,668,913
|
|
Restructuring
costs
|
|
|
|
|
|
278,546
|
|
336,714
|
|
Acquisition and
related costs
|
|
|
|
|
|
833,704
|
|
415,051
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
$
|
4,813,781
|
$
|
10,953,818
|
SOURCE Redknee Solutions Inc.