8-13-13 7:10 PM EDT | Email Article
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TORONTO -- (Marketwired) -- 08/13/13 -- Redknee Solutions Inc. (TSX: RKN), a leading provider of business-critical software and solutions for communications service providers (CSPs), reported results for its fiscal third quarter ended June 30, 2013. All figures are in U.S. dollars.

Fiscal Q3 2013 Financial Highlights as Compared to the Same Year-ago Quarter

  • Revenue totaled $58.6 million, up 295% from $14.8 million
  • Recurring revenue was 54% of total revenue compared to 48%
  • Gross profit was $32.0 million (55% of total revenue) compared to $10.6 million (71% of total revenue)
  • Adjusted EBITDA totaled $7.3 million versus $2.5 million
  • Net income totaled $80,000 or $0.00 per share versus $1.7 million or $0.03 per share
  • Cash at $77.7 million
  • Order backlog at a record $163.1 million

Fiscal Q3 2013 Operational Highlights

  • The integration of the acquisition is proceeding in-line with the target to complete major activities by April 2014
  • Grupo Éxito launched Colombia's first retail-based MVNO leveraging Redknee's cloud offering
  • Demonstrated combined integrated product portfolio, as well as roadmap investment, to support our customers' evolving needs
  • Multi-million dollar customer contracts announced throughout the quarter across all regions
  • 100+ patents granted and 80+ patents pending

Fiscal Q3 2013 Financial Results
Revenue was $58.6 million compared to $14.8 million in same year-ago quarter. The improvement was primarily due to increased revenue related to the most recent acquisition, as well as license expansions, license upgrades, and third-party hardware and software sales.

Recurring revenue was 54% of total revenue compared to 48% for the same year-ago quarter. The increase was due to a higher level of sales and renewals of customer support services, software subscriptions, and term licenses. Recurring revenue consists of support and maintenance, long-term service contracts, and revenue from term-based licenses.

Gross margin was 55% compared to 71% in the same year-ago. The decrease relates to the change in revenue mix of the acquired business.

Adjusted EBITDA was $7.3 million compared to $2.5 million in the same year-ago quarter (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net income totaled $80,000 or $0.00 per diluted share compared to $1.7 million or $0.03 per diluted share in the same year-ago quarter. Q3 2013 net income included $3.0 million of costs related to the BSS acquisition.

Contracted order backlog totaled $163.1 million at quarter-end, which included the impact of the acquisition of the BSS business unit.

At June 30, 2013, cash and investments totaled $77.7 million, with net cash of $56.8 million.

The company has drawn $20.9 million of its $50.0 million credit facility with Wells Fargo.

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 www.redknee.com and on SEDAR at www.sedar.com.

Management Commentary
"During the third quarter, which includes the full contribution from the most recent acquisition, we continued to demonstrate our ability to execute by expanding business with our customers, growing our backlog and focusing on the inherent operating leverage in our software product business," said Lucas Skoczkowski, CEO of Redknee.

"I believe that we have made excellent progress and we are on track with the integration process. Our customers and partners have been very supportive of Redknee's new position in the marketplace, and this has translated into both order and pipeline momentum.

"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 portfolio presents new cross-selling and upselling opportunities, and we are committed to providing the highest level of service to our customers. 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 (Wednesday, August 14, 2013) 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: Wednesday, August 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#: 4633261

The presentation will be webcast live and available for replay via the Investors section of Redknee's website at www.redknee.com.

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 September 14, 2013.

Toll-Free Replay Number: 1-877-870-5176
International Replay Number: 1-858-384-5517
Replay PIN: 4633261

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 www.redknee.com.

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. 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 the statements regarding financial and other projections 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 inability of Redknee's products to perform as expected, 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.

Although the forward-looking statements contained in this document are based upon what Redknee believes are reasonable assumptions, Redknee cannot assure investors that our actual results will be consistent with these forward-looking statements. Redknee assumes no obligation to update or revise these forward-looking statements to reflect new events or circumstances, except as required by securities law.


REDKNEE SOLUTIONS INC.
Condensed Consolidated Interim Statement of Financial Position
(Expressed in U.S. dollars)
(Unaudited)

                                                    June 30,  September 30,
                                                        2013           2012
                                               -------------  -------------

Assets

Current assets:
  Cash and cash equivalents                    $  76,905,436  $  16,878,523
  Trade accounts and other receivables            33,140,780     10,394,639
  Unbilled revenue                                24,885,994     12,125,089
  Prepaid expenses                                 1,972,880        799,901
  Other assets                                       689,476        649,272
  Inventories                                      7,981,588        580,171
                                               -------------  -------------
  Total current assets                           145,576,154     41,427,595

Restricted cash                                      805,599        913,270
Property and equipment                            12,197,182        726,818
Deferred income taxes                                497,756        659,260
Investment tax credits                               514,671        550,000
Other assets                                       3,643,798      3,170,308
Intangible assets                                 40,157,991      3,671,306
Goodwill                                           7,638,590      7,638,590
                                               -------------  -------------
Total assets                                   $ 211,031,741  $  58,757,147
                                               =============  =============

Liabilities and Shareholders' Equity

Current liabilities:
  Trade payables                               $  11,239,462  $   1,756,532
  Accrued liabilities                             35,866,627      7,156,844
  Provisions                                       1,201,050              -
  Income taxes payable                             2,371,994      2,036,864
  Deferred revenue                                18,696,958      7,258,759
                                               -------------  -------------
  Total current liabilities                       69,376,091     18,208,999

Deferred revenue                                   1,686,984         78,002
Other liabilities                                    885,547        439,398
Contingent consideration                          23,562,232              -
Loans and borrowings                              19,121,496      5,461,970
Deferred income taxes                                268,947        408,156
                                               -------------  -------------
Total liabilities                                114,901,297     24,596,525

Shareholders' equity:
  Share capital, net of employee share
   purchase loans                                107,415,192     46,543,100
  Treasury stock                                    (166,016)      (264,584)
  Contributed surplus                              5,080,494      4,787,549
  Deficit                                        (16,212,695)   (16,918,912)
  Accumulated other comprehensive income              13,469         13,469
                                               -------------  -------------
  Total shareholders' equity                      96,130,444     34,160,622
                                               -------------  -------------
Total liabilities and shareholders' equity     $ 211,031,741  $  58,757,147
                                               =============  =============



REDKNEE SOLUTIONS INC.
Condensed Consolidated Interim Statement of Comprehensive Income
(Expressed in U.S. dollars)
(Unaudited)

                            Three months ended         Nine months ended
                                 June 30,                  June 30,
                                2013         2012         2013         2012
                         -----------  -----------  -----------  -----------

Revenue:
  Software, services and
   other                 $28,057,789  $ 8,975,327  $42,085,340  $25,024,032
  Support                 30,562,514    5,871,850   42,524,703   17,303,693
                         -----------  -----------  -----------  -----------
                          58,620,303   14,847,177   84,610,043   42,327,725

Cost of revenue           26,668,407    4,245,441   36,520,665   13,424,996
                         -----------  -----------  -----------  -----------

Gross profit              31,951,896   10,601,736   48,089,378   28,902,729

Operating expenses:
  Sales and marketing      8,963,710    4,068,675   15,610,082   11,168,586
  General and
   administrative          6,024,125    2,469,876   10,842,726    6,491,404
  Research and
   development            12,400,828    1,997,506   19,007,158    7,143,938
  Acquisition and
   related costs           3,012,481            -   11,194,456            -
                         -----------  -----------  -----------  -----------
                          30,401,144    8,536,057   56,654,422   24,803,928
                         -----------  -----------  -----------  -----------

Income (loss) from
 operations                1,550,752    2,065,679   (8,565,044)   4,098,801

Foreign exchange gain
 (loss)                     (587,236)    (209,836)  (1,239,683)    (216,682)
Other income (expense)             -            -   11,796,825      (13,938)
Finance income                 3,312       31,444       22,659       71,657
Finance costs               (209,468)     (79,226)    (442,495)    (297,173)
                         -----------  -----------  -----------  -----------

Income (loss) before
 income taxes                757,360    1,808,061    1,572,262    3,642,665

Income taxes (recovery):
  Current                    707,580      289,153      954,711      513,210
  Deferred                   (30,305)    (219,686)     (88,666)    (299,134)
                         -----------  -----------  -----------  -----------
                             677,275       69,467      866,045      214,076

                         -----------  -----------  -----------  -----------
Total Comprehensive
 income                  $    80,085  $ 1,738,594  $   706,217  $ 3,428,589
                         ===========  ===========  ===========  ===========

Net income per common
 share:
  Basic                         0.00         0.03         0.01         0.05
  Diluted                       0.00         0.03         0.01         0.05
                         ===========  ===========  ===========  ===========

Weighted average number
 of common shares):
  Basic                   80,727,695   64,142,461   78,845,355   64,252,923
  Diluted                 84,548,170   65,103,596   82,173,277   65,120,420
                         ===========  ===========  ===========  ===========



REDKNEE SOLUTIONS INC.
Condensed Consolidated Interim Statement of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)

                                                     Nine months ended
                                                         June 30,
                                                        2013           2012
                                               -------------  -------------

Cash provided by (used in):
Operating activities:
  Net income                                   $     706,217  $   3,428,589
  Adjustments for:
    Depreciation of property and equipment         1,021,316        147,250
    Amortization of intangible assets              1,950,082        553,121
    Finance income                                   (22,659)       (71,657)
    Finance costs                                    442,495        297,173
    Income tax expense                               866,045        214,076
    Unrealized foreign exchange loss (gain)        1,438,611        (84,376)
    Share-based compensation                       1,185,076        654,566
    Bargain purchase gain from acquisition       (11,796,825)             -
    Other                                                  -          6,588
  Changes in non-cash operating working
   capital                                        (1,480,408)     4,056,789
                                               -------------  -------------
                                                  (5,690,050)     9,202,119
  Interest paid                                     (287,605)       (35,974)
  Interest received                                   32,202         62,001
  Income taxes (paid) received                      (582,493)       (78,672)
                                               -------------  -------------
                                                  (6,527,946)     9,149,474
Financing activities:
  Proceeds from public offering                   18,731,390              -
  Proceeds from private placement                 41,060,376              -
  Proceeds from exercise of stock options            792,973        107,443
  Purchase of treasury stock                               -       (714,608)
  Repayment of loans and borrowings                        -     (2,465,544)
  Proceeds of loans and borrowings                15,000,000              -
  Transaction costs on loans and borrowings       (1,496,230)             -
                                               -------------  -------------
                                                  74,088,509     (3,072,709)

Investing activities:
  Purchase of property and equipment              (1,204,306)      (561,027)
  Purchase of intangible assets                     (426,953)       (42,357)
  Increase in restricted cash                        107,671         66,560
  Settlement of Nimbus Systems contingent
   consideration                                           -       (877,377)
  Acquisition of business                         (4,571,451)             -
                                               -------------  -------------
                                                  (6,095,039)    (1,414,201)

Effect of foreign exchange rate changes on
 cash and cash equivalents                        (1,438,611)        84,376
                                               -------------  -------------

Increase in cash and cash equivalents             60,026,913      4,746,940

Cash and cash equivalents, beginning of period    16,878,523     14,879,940
                                               -------------  -------------
Cash and cash equivalents, end of period       $  76,905,436  $  19,626,880
                                               =============  =============



REDKNEE SOLUTIONS INC.
Reconciliation of Net Income (Loss) to EBITDA
(Expressed in U.S. dollars)
(Unaudited)

                          Three months ended          Nine months ended
                               June 30,                    June 30,
                              2013          2011         2013          2012
                      ------------  ------------  -----------  ------------

Net income for the
 period                     80,085     1,738,594      706,217     3,428,589

Add back /
 (subtract):
  Depreciation of
   property and
   equipment               860,207        54,051    1,021,316       147,250
  Amortization of
   intangible assets     1,603,775       177,938    1,950,082       553,121
  Other (income)
   expenses                      -             -  (11,796,825)       13,938
  Finance income            (3,312)      (31,444)     (22,659)      (71,657)
  Finance costs            209,468        79,226      442,495       297,173
  Income tax expense       677,275        69,467      866,045       214,076
  Share-based
   compensation            270,087       154,075    1,185,076       654,566
  Foreign exchange
   loss (gain)             587,236       209,836    1,239,683       216,682
                      ------------  ------------  -----------  ------------

EBITDA                   4,284,821     2,451,743   (4,408,570)    5,453,738

Adjustments:
  Acquisition and
   related costs         3,012,481             -   11,194,456             -
                      ------------  ------------  -----------  ------------
Adjusted EBITDA       $  7,297,302  $  2,451,743    6,785,886  $  5,453,738
                      ============  ============  ===========  ============



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For Further Details Please Contact:

Investor Relations:
Matt Glover or Michael Koehler
Liolios Group, Inc.
Email Contact
US: +1 949 574 3860
Canada: +1 905 625 2027

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Morningstar - 2013/8/13 - Redknee Solutions Reports Fiscal Third Quarter 2013 Results
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