06:01:50 EDT Fri 29 Mar 2024
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or Name
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CA



Redknee Solutions Inc
Symbol RKN
Shares Issued 108,519,936
Close 2017-08-09 C$ 0.90
Market Cap C$ 97,667,942
Recent Sedar Documents

Redknee Solutions loses $26.74-million (U.S.) in Q3

2017-08-09 23:30 ET - News Release

Ms. Danielle Royston reports

REDKNEE SOLUTIONS REPORTS THIRD QUARTER FISCAL 2017 RESULTS

Redknee Solutions Inc. has released its results for the fiscal third quarter ended June 30, 2017. (All figures are in U.S. dollars unless otherwise stated.)

Fiscal Q3 2017 financial highlights (comparisons made between Q3 FY 2017 (the third quarter of fiscal year 2017) and Q3 FY 2016 (the third quarter of fiscal year 2016), unless otherwise noted):

  • Revenue was $32.6-million, compared with $40.5-million;
  • Gross profit was $18.6-million (57 per cent of total revenue), compared with $18.3-million (45 per cent of total revenue);
  • Recurring revenue was 67 per cent of revenue, compared with 63 per cent;
  • Incurred restructuring costs of $14.3-million;
  • Net loss was $26.7-million, or 25 cents per share, compared with a net loss of $12.3-million, or 11 cents per share;
  • Total cash of $49.0-million and cash from operations was $1.0-million;
  • Order backlog of $151.2-million at June 30, 2017.

Chief executive officer commentary

"During the quarter, we continued to make progress with our strategic plan, which is aimed at creating a more efficient, more profitable company with market leading products," said Danielle Royston, CEO of Redknee Solutions. "In Q3, we improved gross profit, strengthened our recurring revenue stream, generated positive cash flow from operations and worked to deliver customer success to a number of customers around the world. We anticipate seeing further momentum with the completion of our rights offering, which is expected to generate gross proceeds of $54-million (U.S.). Proceeds from the rights offering will be used to fund our restructuring plan."

Fiscal Q3 2017 operational highlights:

  • Smart Communications awarded Redknee a services and support contract for Redknee Unified. With Redknee Unified, Smart can benefit from improved time to market by adding tool-based testing for production configuration and real-time configuration changes.
  • A global Tier 1 telecommunications operator in EMEA (Europe, the Middle East and Africa) awarded Redknee a multicountry contract to upgrade and expand Redknee Unified.
  • A large Tier 1 telecommunications operator in Europe will make a multimillion-dollar investment in Redknee Unified. This investment allows Redknee to further enhance its existing service creation platform to provide NextGen capability.
  • Redknee announced it had entered into a standby purchase agreement with Wave Systems Corp., an affiliate of ESW Capital LLC, in connection with the company's $54-million rights offering that is fully backstopped by Wave. Redknee will use proceeds of the rights offering to finance a restructuring of the business.
  • Subject to the closing of the rights offering, Redknee announced it will enter into a service agreement with Crossover Markets, Inc. and a technology services agreement with DevFactory FZ-LLC; as such, the company has extended the previously announced interim service agreements with both.

Fiscal Q3 2017 financial results:

  • Revenue was $32.6-million, compared with $40.5-million in the same year-ago quarter. Recurring revenue was 67 per cent of total revenue, compared with 63 per cent in the same year-ago quarter.
  • Order backlog decreased by 16 per cent to $151.2-million, compared with $180.7-million in fiscal 2016.
  • Gross margin was $18.6-million, or 57 per cent of total revenue, compared with $18.3-million, or 45 per cent of total revenue, in the same year-ago quarter.
  • Net loss was $26.7-million (includes $14.3-million of restructuring costs) or 25 cents per basic and diluted share, compared with a net loss of $12.3-million or 11 cents per basic and diluted share in the same year-ago quarter.
  • Total cash at June 30, 2017, was $49.0-million. Cash from operations was $1.0-million (included $6.0-million of restructuring payments).
  • The company continues to evaluate the forward $120-million revenue base, and there is potential risk with its customer relationships through this long turnaround process. The company believes the restructuring plan is sufficient in a worst-case scenario of up to a 25-per-cent loss from that revenue base. It also believe that the financing from the rights offering remains sufficient to complete the restructuring and commence the strategic plan.

Rights offering update

Subsequent to quarter-end, the previously announced rights offering was approved by 92.58 per cent of the 55,727,138 votes cast by holders of the company's subordinate voting shares present in person or represented by proxy at the special meeting of shareholders held on July 25, 2017. With the completion of the shareholder approval requirement, Redknee has commenced the launch of the rights offering. Net proceeds from the rights offering will be utilized to further the company's initiative to restructure Redknee to position it for growth and profitability.

Further details on the rights offering, including eligibility requirements for shareholders to participate and the procedures to be followed by shareholders in order to subscribe for rights, are included in a rights offering circular and rights offering notice, which were filed with securities regulatory authorities in each province and territory of Canada on July 26, 2017. A copy of the rights offering circular and rights offering notice is available on SEDAR.

Conference call

The company will host a conference call tomorrow (Aug. 10, 2017) to discuss these results. Ms. Royston and chief financial officer 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, Aug. 10, 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 No.:  45780008

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.

A replay of the call will be available until 12 a.m. Eastern Time on Thursday, Aug. 17, 2017.

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

International replay number:  1-416-849-0833

Replay PIN:  45780008

About Redknee Solutions Inc.

Redknee monetizes today's digital world for communications service providers. Its 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.

            CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE (LOSS)
                              (expressed in U.S. dollars)
                                                                                             
                                                Three months ended           Nine months ended
                                                           June 30                     June 30
                                                2017          2016          2017          2016
                                                                                             
Revenue
Software, services and other            $ 12,387,266  $ 17,165,876  $ 39,855,491  $ 59,389,563  
Support and subscription                  20,189,307    23,354,180    64,295,923    71,038,796   
                                          32,576,573    40,520,056   104,151,414   130,428,359  
Cost of revenue                           13,964,206    22,181,399    44,295,030    60,932,909   
Gross profit                              18,612,367    18,338,657    59,856,384    69,495,450   
Operating expenses
Sales and marketing                        6,789,205     6,685,766    17,245,645    22,903,762   
General and administrative                 8,337,484     7,362,852    23,786,139    23,280,531   
Research and development                  10,622,543     9,904,602    29,110,061    35,213,390   
Restructuring costs                       14,278,115     4,115,721    18,358,589    28,936,176   
Acquisition and related costs                      -       172,893             -     1,123,371    
                                          40,027,347    28,241,834    88,500,434   111,457,230  
(Loss) from operations                   (21,414,980)   (9,903,177)  (28,644,050)  (41,961,780) 
Foreign exchange (loss)                   (2,449,022)     (155,023)   (3,114,891)     (619,799)    
Other expense                                      -             -    (1,450,928)            -            
Finance income                                     -        41,050       230,205        64,154       
Finance costs                             (1,530,806)   (1,889,017)  (10,912,651)   (4,696,951)  
(Loss) before income taxes               (25,394,808)  (11,906,167)  (43,892,315)  (47,214,376) 
Income tax expense (recovery)
Current                                    1,463,390       367,839     4,862,036     4,367,190    
Deferred                                    (109,199)      (19,073)     (387,604)      602,500      
                                           1,354,191       348,766     4,474,432     4,969,690    
Net (loss)                               (26,748,999)  (12,254,933)  (48,366,747)  (52,184,066) 
Other comprehensive (loss)
Pension actuarial adjustment                       -             -             -       (77,702)     
Comprehensive (loss)                    $(26,748,999) $(12,254,933) $(48,366,747) $(52,261,768)
Net (loss) per common share
Basic                                   $      (0.25) $      (0.11) $      (0.45) $      (0.48)      
Diluted                                 $      (0.25) $      (0.11) $      (0.45) $      (0.48)       

We seek Safe Harbor.

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