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Redknee Solutions Reports Fiscal First Quarter 2016 Results

TORONTO, Feb. 10, 2016 /CNW/ - Redknee Solutions Inc. (TSX: RKN) a leading provider of real-time monetization and subscriber management software, reported results for its fiscal first quarter ended December 31, 2015. All figures are in U.S. dollars.

Fiscal Q1 2016 Financial Highlights 
(Comparisons made between fiscal Q1FY2016 and fiscal Q1FY2015 results, unless otherwise noted)
  • Revenue totalled $50.1 million ($54.8 million, on a constant currency basis), compared to $62.6 million;
  • Gross profit was $29.7 million (59% of total revenue) compared to $36.6 million (58% of total revenue);
  • Adjusted EBITDA of $4.8 million (10% of total revenue) versus Adjusted EBITDA of $11.0 million (18% of total revenue);
  • Recurring was 52% of revenue, compared to 44%;
  • Net loss was $4.3 million or $0.04 loss per share versus a net income of $2.0 million or $0.02 income per share,
  • Available liquidity as at December 31, 2015 was $89.0 million, including $49.0 million of cash, and,
  • Order backlog of $166.8 million ($173.0 million on a constant currency basis).

Fiscal Q1 2016 Operational Highlights

  • Supported a Tier 1 Operator in North America with its Mobile Virtual Network Enabler (MVNE) strategy, including an extension of its contract with Redknee worth more than $5 million;
  • Delivered the latest version of Redknee Railway,  an Intelligent Network (IN) solution for GSM-Railway, to Prorail, a leading Dutch railway operator;
  • Launched the Redknee Connected Suite, a software platform designed to help enterprises monetize applications for the Internet of Things (IoT);
  • Recognized as a leader in the Canadian technology industry in the Deloitte's 2015 Technology Fast 50 and Fast 500; and,
  • Continued to expand patent portfolio with a total of 152 patents granted and 31 patents filed at quarter end, with additional patents still undergoing transfer following the Orga Systems acquisition.

Highlights Subsequent End of Q1 2016

  • As anticipated at the time of the Orga Systems acquisition and consistent with its acquisition and integration strategy, Redknee initiated its planned cost structure optimization as it finalizes the integration of Orga. As a result of these efforts, the Company expects to close certain offices and refocus some of its activities in certain regions, resulting in headcount reductions of between 200 and 300 full-time equivalents globally. The restructuring is expected to cost between $25 and $30 million and result in annualized savings of between $20 and $25 million. The implementation will be executed on a timely basis and will be subject to the necessary consultation processes where required by local laws.
  • As of close of trading February 10, 2016, Redknee had purchased 1,246,590 shares for a total cost of approximately CAD$3.5 million under the Company's Normal Course Issuer Bid (NCIB) since the program's commencement on December 7, 2015.

Management Commentary

"The first quarter saw continued progress on our near-term priorities, highlighted by gross margin expansion, improving cash flows and a growing order book, notwithstanding a period in which the typical lumpiness in our software license revenue was exacerbated by several purchase decision delays, as well as the full cost structure of the Orga acquisition," said Lucas Skoczkowski, CEO of Redknee. "We are encouraged by both our strong first quarter bookings and our continuing engagement with these operators and we believe that we remain well positioned to secure these orders over the coming several quarters."

Mr. Skoczkowski continued, "With the integration of Orga Systems substantially complete, as per the plan we outlined at the time of acquisition, we have moved quickly and decisively on our cost structure optimization program.  The expected cost savings of $20 to $25 million annually will further contribute to long-term cash flow and profitability.  We continue to expect the acquisition of Orga to be accretive in fiscal 2016.  Importantly, we are confident the proposed changes will in no way impact our high standard of customer service or our product development, delivery or support."

"As we look out to the year ahead, amidst the expected ongoing softness in service provider spending, we will remain laser-focused on maximizing our profitability and cash flow generation, while growing our proportion of recurring revenue.  We remain steadfast in our commitment to continuing to advance our strong competitive position as the provider of choice for monetization and subscriber management solutions for service providers worldwide in our core communications market, while leveraging our reputation and experience in pursuit of the significant opportunities related to the Internet of Things."

Fiscal Q1 2016 Financial Results

Revenue was $50.1 million ($54.8 million on a constant currency basis) compared to $62.6 million in the same year-ago quarter. The change in revenue compared to the prior year period resulted mainly from the impact of foreign exchange variation and lower license revenue compared to the same year-ago quarter.

Order backlog increased 5% to $166.8 million ($173.0 million on a constant currency basis) from $158.5 million in the fourth quarter of fiscal 2015.

Recurring revenue was 52% of total revenue, compared to 44% in the same year-ago quarter.

Gross margin was 29.7 million or 59% compared to $36.6 million or 58% in the same year-ago quarter.

Adjusted EBITDA was $4.8 million, or 10% of revenue, compared to Adjusted EBITDA of $11.0 million, or 18% of revenue, in the same year-ago quarter (see discussion about the presentation of Adjusted EBITDA, a non-IFRS measure, below).

Net loss totalled $4.3 million, or $0.04 loss per basic and diluted share compared to a net income of $2.0 million, or $0.02 income per basic and diluted share, in the same year-ago quarter.

At December 31, 2015, total cash ended at $49.0 million.

Please refer to the section regarding forward-looking statements 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 and on SEDAR at

Conference Call

The company will host a conference call tomorrow (February 11, 2016) 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: Thursday February 11, 2016
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#: 26272800

The presentation will be webcast live and available for replay via either the Investors section of Redknee's website ( or

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 NATIONAL | Equicom at 1 (416) 586-1955.

A replay of the call will be available until 12:00 midnight (EST) Thursday, February 18, 2016.

Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 26272800 

Media Enquiries:

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

For additional information please contact:

Redknee Solutions:

Kristin Donelson
+1 905 625 2190

Investor Relations:
Katelynn Thissen
NATIONAL | Equicom
T: (416) 848-1427