– 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)
- Revenue totalled $33.8 million
compared to $40.7 million;
- Gross profit was $20.0 million
(59% gross margin) compared to $23.1
million (57% gross margin);
- Recurring revenue was 76% of revenue, compared to 63%;
- Operating expenses for the period were $27.5 million compared to $34.4 million;
- Net loss was $10.4 million, or
$0.07 loss per share compared to a
net loss of $14.7 million, or
$0.14 loss per share; and
- Cash used in operations was $10.8
million.
Fiscal 2017 Financial Highlights
(Comparisons made
between fiscal 2017 and fiscal 2016 results, unless otherwise
noted)
- Revenue totalled $137.9 million
compared to $171.1 million;
- Gross profit was $79.9 million
(58% gross margin) compared to $92.6
million (54% gross margin);
- Recurring revenue was 69% of revenue, compared to 60%;
- Operating expenses for the year were $116.0 million compared to $145.9 million;
- Net loss was $58.8 million
(including $18.8 million of
restructuring charge), or $0.49 loss
per share compared to a net loss of $66.9
million (including $35.2
million of restructuring charge), or $0.62 loss per share; and,
- Cash used in operations was $29.0
million.
Operational Highlights - Q4, 2017 and Subsequent:
- Received shareholder approval for and completed Rights Offering
raising CDN$96.5 million;
- Appointed Robert Stabile to
Board of Directors;
- Launched a restructuring plan to reduce employees, close down
and streamline facilities globally and make organizational changes
for an estimated total cost of $48-$50 million;
and,
- Announced collaboration between Redknee and Google Cloud
engineering teams to integrate Cloud Spanner innovation into
Redknee products and began offering high-performance Google Cloud
Spanner to customers.
"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.