Ms. Danielle Royston reports

REDKNEE SOLUTIONS REPORTS SECOND QUARTER FISCAL 2017 RESULTS

Redknee Solutions Inc. has released its financial results for its fiscal second quarter ended March 31, 2017 (all figures are in U.S. dollars unless otherwise stated).

Fiscal Q2 2017 financial highlights (comparisons made between fiscal Q2 2017 and fiscal Q2 2016 results, unless otherwise noted)

• Revenue was $34.4-million compared with $39.8-million.
• Gross profit was $20.2-million (59 per cent of total revenue) compared with $21.4-million (54 per cent of total revenue).
• Recurring revenue was 66 per cent of revenue, compared with 63 per cent.
• Net loss was $15.3-million, or 14 cents per share, compared with a net loss of $35.6-million, or 33 cents per share.
• Total cash was $46.8-million and cash used in operations was $12.1-million.
• Order backlog was $161.4-million at March 31, 2017.

Fiscal Q2 2017 operational highlights

• Redknee announced in late January that the private placement received shareholder approval. Following shareholder approval, the company completed a private placement with Wave Systems Corp., an affiliate of ESW Capital LLC, of 800,000 Series A preferred shares of the company and a common share purchase warrant to the investor for gross proceeds of $83.2-million. Following completion of the transaction, the company used a portion of the net proceeds from the transaction to fully repay all loans and borrowings.
• Redknee announced changes to the board of directors and leadership team. The board of directors now comprises Demetrios Anaipakos, Scott Brighton, Keith Graham, Chris Helling, Christy Jones, Andrew Price and Farhan Thawar. Changes to the leadership team include the appointment of Danielle Royston as chief executive officer and Leela Kaza as managing director, global strategic accounts.
• Redknee announced changes to its long-term growth and strategic plan, by announcing that it would focus on the telecommunications market and create two major operating units.
• The strategic global account operating unit will focus on communication service providers (CSP) for which the company provides significant, mission-critical software and services solutions.
• The packaged and cloud solutions operating unit will focus on preintegrated telecom software solutions, delivered on premise and from the cloud.
• Redknee announced its immediate business priority is customer success with the company's long-term goal of 100-per-cent success. The company also announced its intention to raise $60-million to restructure the company and invest an additional $100-million in research and development over a three-year period from 2017 to 2019. The company also plans to invest in staffing strategic account teams expecting to hire 200 people.
• Telekom Sprske and Redknee signed a multimillion-dollar upgrade to the latest version of Redknee Unified and a contract expansion including the deployment of Redknee's geo-redundancy system to improve the quality and reliability of services.
• WOM Chile and Redknee signed a multimillion-dollar transformation deal to deliver the full Redknee Unified stack to enable WOM to launch new service offerings, improve operational efficiency and create greater business value.
• A Tier 1 CSP in Asia-Pacific signed a multimillion-dollar upgrade to the latest version of Redknee Unified. The upgrade will add additional capacity and new capabilities including VoLTE.

Restructuring commentary

As part of its continuing initiative to restore the company to growth and profitability, Redknee intends to complete a financing transaction of approximately $60-million. The proceeds will be used to finance a restructuring of the business. Redknee expects that this restructuring will generate annualized savings of $50-million to $60-million over the next 18 to 24 months. The company intends to reinvest the cost savings into customer success and to execute on its $100-million product revitalization plan. Redknee's independent directors have engaged independent advisers to assist in their consideration of financing options to finance this restructuring.

Redknee has begun its restructuring activities and announces the departure of chief technology officer Dr. Ralf Guckert. As the company continues implementing further restructuring activities, it anticipates additional executive departures.

Management commentary

"Achieving 100-per-cent customer success remains our No. 1 priority," said Ms. Royston. "Historically, we have not focused on our customers, and as a result, our revenue and products suffered. Our new strategy realigns our organization to focus solely on delivering customer success to communications service providers. We plan to invest $100-million in our R&D group to build market leading products with the goal of being regarded as having the best talent in the industry. I am excited to report that our new direction is resonating well with our customers, and while a majority are reporting that they are currently unsuccessful, they all believe we now have the focus to bring them to success.

"Operationally, it will take a lot of work to turn Redknee around. Once our financing is secured for the restructuring, we will move swiftly to make the changes we need to position Redknee for financial and customer success. We will leverage that success to make the necessary investments in the business and I continue to be optimistic about Redknee's future."

Fiscal Q2 2017 financial results

Revenue was $34.4-million compared with $39.8-million in the same year ago quarter. Recurring revenue was 66 per cent of total revenue, compared with 63 per cent in the same year ago quarter.

Order backlog decreased by 8 per cent to $161.4-million compared with $175.5-million in fiscal 2016.

Gross margin was $20.2-million, or 59 per cent of total revenue, compared with $21.4-million, or 54 per cent of total revenue, in the same year-ago quarter.

Net loss was $15.3-million, or 14 cents per basic and diluted share, compared with a net loss of $35.6-million, or 33 cents per basic and diluted share, in the same year ago quarter. Net loss last year included $24.5-million of restructuring costs.

Total cash at March 31, 2017, was $46.8-million. Cash used in operations was $12.1-million (included $4.5-million of restructuring payments).

Conference call

The company will host a conference call tomorrow (May 11, 2017) to discuss these results. Ms. Royston and chief financial officer David Charron will host the presentation starting at 8:30 a.m. ET. A question-and-answer session will follow management's presentation.

Date:  Thursday, May 11, 2017

Time:  8:30 a.m. ET (5:30 a.m. PT)

Dial-in number:  1-888-231-8191

International:  1-647-427-7450

Conference ID:  10173989

The presentation will be webcast live and available for replay via either the investors section of Redknee's website.

Please call the conference telephone number five to 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 1-416-586-1951.

A replay of the call will be available until 12 a.m. ET on Thursday, May 18, 2017.

Toll-free replay number:  1-855-859-2056

International replay number:  1-416-849-0833

Replay PIN:  10173989

About Redknee Solutions Inc.

Redknee provides a complete portfolio of mission-critical monetization and subscriber management solutions and services that allow communications service providers 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 communication service providers across the globe.

                                                                                 
                 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

                                                Three months ended              Six months ended
                                                          March 31,                     March 31,
                                               2017           2016            2017          2016
Revenue
Software, services and other            $13,464,121    $17,105,453     $27,468,225   $42,223,687
Support and subscription                 20,900,514     22,687,039      44,106,616    47,684,616
                                         34,364,635     39,792,492      71,574,841    89,908,303
Cost of revenue                          14,199,295     18,353,594      30,330,824    38,751,510
Gross profit                             20,165,340     21,438,898      41,244,017    51,156,793
Operating expenses
Sales and marketing                       5,421,303      7,816,722      10,456,440    16,217,996
General and administrative                7,726,710      8,629,408      15,448,655    15,917,679
Research and development                  9,337,205     12,553,717      18,487,518    25,308,788
Restructuring costs                       3,875,173     24,541,909       4,080,474    24,820,455
Acquisition and related costs                     -        116,774               -       950,478
                                         26,360,391     53,658,530      48,473,087    83,215,396
(Loss) from operations                   (6,195,051)   (32,219,632)     (7,229,070)  (32,058,603)
Foreign exchange gain (loss)             (1,078,585)        28,232        (665,869)     (464,776)
Other (expense) income                    1,749,072              -      (1,450,928)            -
Finance income                               45,278         17,730         230,205        23,104
Finance costs                            (8,693,398)    (1,759,403)     (9,381,845)   (2,807,934)
(Loss) before income taxes              (14,172,684)   (33,933,073)    (18,497,507)  (35,308,209)
Income taxes (recovery)
Current                                   1,379,996      1,618,062       3,398,646     3,999,351
Deferred                                   (289,375)        73,005        (278,405)      621,573
                                          1,090,621      1,691,067       3,120,241     4,620,924
(Loss) for the period                   (15,263,305)   (35,624,140)    (21,617,748)  (39,929,133)
Other comprehensive (loss)
Pension actuarial adjustment                      -              -               -       (77,702)
Total comprehensive (loss)              (15,263,305)   (35,624,140)    (21,617,748)  (40,006,835)
(Loss) per subordinate voting share
Basic                                         (0.14)         (0.33)          (0.20)        (0.37)
Diluted                                       (0.14)         (0.33)          (0.20)        (0.37)

We seek Safe Harbor.