Redknee Solutions Inc. Reports Fourth Quarter and Full Year Fiscal 2017 Results

– Q4 and Fiscal Year Results Showing Progress Against Strategic Plan –

TORONTO, Dec. 6, 2017 /CNW/ – Redknee Solutions Inc. (TSX: RKN), an innovative software and solutions company offering mission-critical monetization and subscriber management to leading communication service providers around the globe, reported results for its fiscal fourth quarter and full year ended September 30th, 2017. (All figures are in U.S. dollars unless otherwise stated.)

“The results of the fourth quarter reflect our continuing efforts to strengthen and enhance our long-term value proposition for shareholders,” said Danielle Royston, CEO of Redknee. “Using the proceeds from our Rights Offering, we are full speed ahead with our Strategic Plan and have already executed on a number of our restructuring initiatives. Furthermore, from an operational perspective, we continue to make noticeable progress on both our product revitalization plan and our Customer Success efforts worldwide. We remain committed to rebuilding a great company founded on great people and great products.”

 

Fiscal Q4 2017 Financial Highlights
(Comparisons made between fiscal Q4FY2017 and fiscal Q4FY2016 results, unless otherwise noted)

 

Fiscal 2017 Financial Highlights
(Comparisons made between fiscal 2017 and fiscal 2016 results, unless otherwise noted)

 

Operational Highlights – Q4, 2017 and Subsequent:

 

“Our revenue has been tracking lower, and although our customers and other stakeholders are supportive of the actions we are taking to improve our business, we expect to see revenue shrinking further in 2018 and potentially into 2019 until our restructuring is fully completed,” added Royston.

“This is a long turnaround story, and while we have made a good start in executing on our Strategic Plan, there is still a lot of work to do. We have added strength to our Board of Directors, made numerous product improvements, and are seeing directional improvement in our Customer Success rates.  For the next several quarters, we will invest the proceeds from our Rights Offering in our continued restructuring.  In turn, the savings realized from our restructuring will be channeled into Customer Success efforts and ongoing product revitalization.”

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 (December 7, 2017) to discuss their Q4 and FY 2017 results. CEO Danielle Royston  and Interim CFO Anin Basu will host the presentation starting at 8:30 a.m. Eastern time. A question and answer session will follow management’s presentation.

Date: Thursday, December 7, 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#: 3579199

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/2h01z3v.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

A replay of the call will be available until 12:00 midnight (EST) Thursday, December 14, 2017.

Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 3579199

Media Inquiries:  media@redknee.com

 

About Redknee

Redknee monetizes today’s digital world for communications service providers. Our market-leading portfolio of monetization and subscriber management solutions includes real-time billing, charging, policy and customer care modules and is available on premise, cloud-based, or as Software-as-a-Service. With a central focus on driving customer success, Redknee’s products power growth and innovation for operators globally. Established in 1999, Redknee Solutions Inc.(TSX: RKN) can be found on the Toronto Stock Exchange. For more information about Redknee, please go to www.redknee.com.

 

Non-IFRS Measures

The Company reports “Recurring revenue,” which is not a financial measure calculated and presented in accordance with International Financial Reporting Standards (IFRS), 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.

Other companies (including competitors) may define recurring revenue differently. The Company presents recurring revenue because management believes this 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 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.

 

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 revenue visibility for the Fiscal 2018; the impact of the challenging macro environment on the Company’s revenue; the impact of our restructuring initiatives and ongoing cost management efforts on our results in  next year; 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.
Consolidated Statements of Financial Position
(Expressed in U.S. dollars)

 

September 30, 2017 and 2016

2017

2016

Assets

Current assets:

Cash and cash equivalents

$

110,891,744

$

37,080,510

Trade accounts and other receivables

26,329,505

43,209,046

Unbilled revenue

17,928,405

27,290,500

Prepaid expenses

2,205,887

2,999,539

Income taxes receivable

4,329,580

2,662,163

Other assets

268,929

Inventories

1,101,929

710,591

Total current assets

162,787,050

114,221,278

Restricted cash

4,553,623

4,582,293

Property and equipment

3,457,611

6,262,965

Deferred income taxes

2,328,129

1,984,479

Investment tax credits

374,387

355,914

Other assets

1,353,968

1,656,971

Intangible assets

25,505,620

35,721,065

Goodwill

32,271,078

32,271,078

Total assets

$

232,631,466

$

197,056,043

Liabilities and Shareholders’ Equity

Current liabilities:

Trade payables

$

11,229,091

$

14,212,869

Accrued liabilities

16,853,190

23,405,832

Provisions

18,653,817

21,981,367

Income taxes payable

322,403

724,412

Deferred revenue

15,572,620

18,915,596

Loans and borrowings

50,445,790

Total current liabilities

62,631,121

129,685,866

Deferred revenue

894,409

639,688

Other liabilities

807,390

2,264,482

Pension and other long-term employment benefit plans

17,886,630

20,387,584

Provisions

824,626

6,683,256

Preferred shares

59,670,913

Series A Warrant

29,622,772

Deferred income taxes

120,000

687,947

Total liabilities

172,457,861

160,348,823

Shareholders’ equity:

Share capital

248,680,325

172,436,385

Standby Warrant

997,500

Treasury stock

(141,917)

(141,917)

Contributed surplus

11,826,454

9,812,545

Deficit

(192,727,334)

(133,954,043)

Accumulated other comprehensive loss

(8,461,423)

(11,445,750)

Total shareholders’ equity

60,173,605

36,707,220

Total liabilities and shareholders’ equity

$

232,631,466

$

197,056,043

REDKNEE SOLUTIONS INC.
Consolidated Statements of Comprehensive Loss
(Expressed in U.S. dollars, except per share and share amounts)

Years ended September 30, 2017 and 2016

2017

2016

Revenue:

Software, services and other

$

49,584,141

$

76,116,137

Support and subscription

88,339,593

94,973,763

137,923,734

171,089,900

Cost of revenue

58,028,200

78,494,715

Gross profit

79,895,534

92,595,185

Operating expenditures:

Sales and marketing

19,221,936

28,668,973

General and administrative

36,027,413

31,705,969

Research and development

41,944,025

45,495,754

Acquisition and related costs

4,838,371

Restructuring costs

18,771,333

35,184,661

115,964,707

145,893,728

Loss from operations

(36,069,173)

(53,298,543)

Foreign exchange loss

(3,073,512)

(4,216,967)

Other (expense) income

(1,450,928)

6,362,935

Finance income

247,339

83,058

Finance costs

(13,139,496)

(6,260,366)

Loss before income taxes

(53,485,770)

(57,329,883)

Income tax expense (recovery):

Current

6,166,388

8,631,902

Deferred

(878,867)

905,536

5,287,521

9,537,438

Loss for the year

(58,773,291)

(66,867,321)

Other comprehensive income (loss):

Items that will not be reclassified to net income:

Actuarial gain (loss) on pension and non-pension
post-employment benefit plans, net of income
tax (recovery) expense of nil (2016 – nil)

2,984,327

(8,046,737)

Total comprehensive loss

$

(55,788,964)

$

(74,914,058)

Loss per common share:

Basic

$

(0.49)

$

(0.62)

Diluted

(0.49)

(0.62)

Weighted average number of common shares:

Basic

120,106,596

108,481,143

Diluted

120,106,596

108,481,143

REDKNEE SOLUTIONS INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)

Years ended September 30, 2017 and 2016

2017

2016

Cash provided by (used in):

Operating activities:

Loss for the year

$

(58,773,291)

$

(66,867,321)

Adjustments for:

Depreciation of property and equipment

2,945,947

4,175,854

Amortization of intangible assets

9,053,704

9,442,492

Finance income

(247,339)

(83,058)

Finance costs

13,139,496

6,260,366

Income tax expense

5,287,521

9,537,438

Unrealized foreign exchange loss

171,743

2,378,887

Share-based compensation

1,584,208

3,150,239

Pensions

483,373

923,366

Provisions

(9,186,180)

15,885,750

Change in non-cash operating working capital

14,640,785

34,795,821

(20,900,033)

19,599,834

Interest paid

(422,116)

(502,201)

Interest received

284,285

86,335

Income taxes paid

(7,931,044)

(11,805,732)

(28,968,908)

7,378,236

Financing activities:

Issue of preferred shares and warrant

79,861,542

Issue of shares under rights offering

76,916,763

Purchase of shares under NCIB

(2,556,966)

Proceeds from exercise of stock options

204,733

249,768

Interest paid on loans and borrowings

(2,330,904)

(4,109,186)

Repayment of loans and borrowings

(52,750,000)

(6,800,000)

Transaction costs on loans and borrowings

(90,496)

101,902,134

(13,306,880)

Investing activities:

Purchase of property and equipment

(514,519)

(2,552,199)

Purchase of intangible assets

(41,318)

Decrease in restricted cash

28,670

1,389,794

Payment of settlement accrual and contingent
consideration

(10,244,224)

(485,849)

(11,447,947)

Effect of foreign exchange rate changes on cash and cash equivalents

1,363,857

(590,476)

Increase (decrease) in cash and cash equivalents

73,811,234

(17,967,067)

Cash and cash equivalents, beginning of year

37,080,510

55,047,577

Cash and cash equivalents, end of year

$

110,891,744

$

37,080,510

 

SOURCE Redknee Solutions Inc.