RDM Corporation Reports First Quarter Financial Results

Toronto Stock Exchange Symbol: RC

WATERLOO, ON, Feb. 5 /CNW/ - RDM Corporation (TSX: RC), a leading developer of specialized software and hardware products for electronic payment processing, today reported its financial results for the three month period ended December 31, 2009 .

    
    Q1 2010 Highlights

    -   Total revenues were $5.7 million in the first quarter of fiscal 2010,
        compared to $7.1 million in the first quarter of 2009.
    -   Payment Processing Services segment revenues, which are recurring in
        nature, were $2.4 million in Q1 2010, compared to $2.2 million a year
        earlier.
    -   Transaction volumes for RDM's Image & Transaction Management System
        (ITMS(R)) averaged 3.5 million items per week during the first
        quarter, compared to 3.3 million items per week a year earlier, and
        3.7 million items per week during Q4 2009. The decline in the weekly
        transaction volume from the fourth quarter of 2009 to the first
        quarter of 2010 is due to fewer business operating days.
    -   ITMS(R) end user locations grew from 17,800 to 18,100 during the
        first quarter. RDM had 55 independent sales organization (ISO)
        partners and 41 bank distribution partners at quarter-end, and signed
        two new banks subsequent to quarter-end.
    -   The Company shipped 5,800 proprietary scanners in Q1 2010, compared
        to 7,700 a year earlier.
    -   Gross profit was $2.3 million or 40% of revenues, compared to $2.9
        million or 42% of revenues in the first quarter of 2009.
    -   Net loss was $489,000 or $0.02 per share in Q1 2010, compared to a
        net loss of $1.6 million or $0.08 per share in Q1 2009.
    -   Cash and equivalents were $16.2 million at December 31, 2009,
        compared to $15.7 million at September 30, 2009.
    

"First quarter results were in line with our expectations in a challenging economic environment. We were pleased to see year-over-year growth in our transaction processing volumes and end users," said Douglas Newman , President and CEO of RDM Corporation. "Our strategy of maintaining product leadership and operational excellence has paid off in the form of sales wins in a number of competitive situations, and I expect these key differentiators to become increasingly important for us in the coming quarters."

    
    Financial Review

    Operating Results by Segment
    For the Three Months Ended December 31, 2009

      (In thousands     Payment     Digital   Electronic
       of Canadian   Processing     Imaging      Payment      Quality
       dollars)        Services    Products    Solutions    Assurance   Total
                  -----------------------------------------------------------
      Revenue            $2,354      $3,009          $88         $251  $5,702
      Gross profit         $940      $1,130          $18         $168  $2,256
      Gross profit
       percentage           40%         38%          20%          67%     40%

    Operating Results by Segment
    For the Three Months Ended December 31, 2008

      (In thousands     Payment     Digital   Electronic
       of Canadian   Processing     Imaging      Payment      Quality
       dollars)        Services    Products    Solutions    Assurance   Total
                  -----------------------------------------------------------
      Revenue            $2,244      $3,852         $480         $511  $7,087
      Gross profit         $911      $1,485         $161         $391  $2,948
      Gross profit
       percentage           41%         39%          34%          77%     42%
    

RDM generated total revenues of $5.7 million in the three months ended December 31, 2009 , a decrease of $1.4 million from first quarter of the previous year. The majority of the decrease was attributable to the effects of a shift in currency exchange rates over the past year.

Payment Processing Services segment revenues increased by $110,000 or 5% from a year earlier to $2.4 million , driven by growth in ITMS transaction volumes and end users, partially offset by the impact of exchange rates. Revenues in the Digital Imaging Products segment decreased by $0.8 million to $3.0 million due to a reduction in scanner shipments attributable to general economic conditions as well as the exchange impact. The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 6% of total revenues for the quarter, generated revenues of $88,000 and $251,000 , respectively, compared to $161,000 and $391,000 , respectively, in Q1 2009.

Gross profit of $2.3 million in Q1 2010 was down from $2.9 million in the first quarter of the previous year. Expressed as a percentage of revenues, the overall gross margin was 40%, compared to 42% a year earlier. Decreased margins were due to the impact of exchange rates. Gross profit in the Payment Processing Services segment grew 3% to $940,000 in the first quarter, while the gross margin percentage for the segment declined slightly from 41% to 40%. The segment generated an operating loss of $405,000 , an improvement from a loss of $651,000 a year earlier.

Sales and marketing expense was $1.1 million in the first quarter of 2010, a decrease of 25% from $1.4 million in Q1 2009 when the Company made a significant investment in signing new channel partners and launching Simply Deposittm. Research and development expense increased 10% to $1.2 million as the Company continued to invest in new product development. General and administration expenses increased $75,000 to $553,000 for the quarter.

Net loss was $0.5 million in Q1 2010, or $0.02 per share, compared to a net loss of $1.6 million or $0.08 per share a year earlier. Prior year results included a $1.4 million foreign exchange loss, compared to a $172,000 foreign exchange gain in the current quarter.

RDM repurchased 29,100 shares during the first quarter under its Normal Course Issuer Bid. At December 31, 2009 , the Company had 20.8 million common shares outstanding.

Executive Appointment

RDM also announced that Doug Fisher has been appointed as acting Vice President of Sales. Mr. Fisher has held various sales roles since joining RDM in 2001, including Channel Manager and, most recently, Sales Director of Digital Imaging Solutions. He previously held a number of sales and marketing positions at NCR Corporation and RR Donnelley. Mr. Fisher holds a BA in Economics and a Master of Business Administration from Wilfrid Laurier University.

"I congratulate Doug on his new position. He has been instrumental in developing key customer relationships for us, and I look forward to the fresh perspective and enthusiasm he brings to the position," said Douglas Newman .

Conference Call

RDM will be hosting a conference call to discuss the Company's first quarter results on February 5, 2010 at 8:30 a.m. EST . Dial-in numbers are 647-427-7450 or 1-888-231-8191. The call will be webcast live and archived at www.rdmcorp.com. Detailed financial results and Management's Discussion and Analysis will be filed on www.sedar.com.

About RDM Corporation

RDM Corporation is headquartered in Waterloo, Ontario and trades on the Toronto Stock Exchange under the symbol RC. RDM is a leading provider of specialized software and hardware products for electronic payment processing. RDM has pioneered electronic check conversion systems and web based image and transaction management services for banks, retailers, payment processors and government agencies as well as print quality control and image quality systems for a variety of global customers. For more information, visit RDM's website at www.RDMCorp.com

This news release contains forward-looking statements. Forward-looking statements are based on estimates and assumptions made by RDM in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that RDM believes are appropriate in the circumstances. Many factors could cause RDM's actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. Risk factors relating to RDM are discussed in the Risks and Uncertainties section of RDM's Annual Information Form and year-end Management's Discussion and Analysis. These factors should be considered carefully, and readers should not place undue reliance on RDM's forward-looking statements. RDM has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    
                               RDM CORPORATION
                         Consolidated Balance Sheets
                 (Amounts In Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
                                                 December 31,   September 30,
                                                        2009            2009
                                                   Unaudited         Audited
    -------------------------------------------------------------------------
    Assets:

    Current assets:
      Cash and cash equivalents                     $ 16,151        $ 15,718
      Accounts receivable                              3,976           4,123
      Inventories                                      2,914           3,409
      Investment tax credit receivable                 1,815           1,770
      Other                                            1,714           2,039
    -------------------------------------------------------------------------
    Total current assets                              26,570          27,059

    Furniture and equipment                            3,053           3,275
    Intangible assets                                    320             288
    -------------------------------------------------------------------------
    Total assets                                    $ 29,943        $ 30,622
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity:

    Current liabilities:
      Accounts payable and accrued liabilities      $  2,862        $  3,062
      Deferred revenue                                   461             498
    -------------------------------------------------------------------------
    Total current liabilities                          3,323           3,560
    -------------------------------------------------------------------------

    Future income tax liability                          201             201

    Shareholders' equity:
      Share capital                                   27,611          27,639
      Contributed surplus                              1,961           1,886
      Deficit                                         (3,153)         (2,664)
    -------------------------------------------------------------------------
    Total shareholders' equity                        26,419          26,861
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity      $ 29,943        $ 30,622
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                               RDM CORPORATION
                    Consolidated Statements of Operations
    (Amounts in Canadian Dollars, In Thousands, Except Per Share Amounts)

    -------------------------------------------------------------------------
    Three months ended December 31                      2009            2008
                                                  (unaudited)     (unaudited)
    -------------------------------------------------------------------------

    Revenue                                         $  5,702        $  7,087
    Cost of revenue                                    3,446           4,139
    -------------------------------------------------------------------------
    Gross profit                                       2,256           2,948

    Operating expenses (income):
      Sales and marketing                              1,069           1,425
      Research and development                         1,182           1,071
      General and administration                         553             478
      Depreciation and amortization                       47              60
      Stock-based compensation                            75             144
      Foreign exchange loss (gain)                      (172)          1,448
      Interest income                                     (9)            (59)
    -------------------------------------------------------------------------
                                                       2,745           4,567
    -------------------------------------------------------------------------
    Loss before income taxes                            (489)         (1,619)

    Income tax expense                                     -               -
    -------------------------------------------------------------------------

    Net loss and comprehensive loss                 $   (489)       $ (1,619)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net loss per share - basic and diluted          $  (0.02)       $  (0.08)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                               RDM CORPORATION
                 Statement of Changes in Shareholder's Equity
                 (Amounts in Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
                                                       Retained
                                Share  Contributed     earnings
                              capital      surplus     (deficit)       Total
    -------------------------------------------------------------------------
    Balance as at
     September 30, 2008      $ 28,338     $  1,162      $  (641)    $ 28,859

    Net loss and
     comprehensive loss             -            -       (1,619)      (1,619)
    Repurchase of share capital  (160)           -            -         (160)
    Stock-based compensation        -          144            -          144
    -------------------------------------------------------------------------
    Balance as at
     December 31, 2008       $ 28,178     $  1,306      $(2,260)    $ 27,224
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance as at
     September 30, 2009      $ 27,639     $  1,886      $(2,664)    $ 26,861

    Net loss and
     comprehensive loss             -            -         (489)        (489)
    Repurchase of
     share capital                (28)           -            -          (28)
    Stock-based
     compensation                   -           75            -           75
    -------------------------------------------------------------------------
    Balance as at
     December 31, 2009       $ 27,611     $  1,961      $(3,153)    $ 26,419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                               RDM CORPORATION
                    Consolidated Statements of Cash Flows
                 (Amounts in Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
    Three months ended December 31                      2009            2008
                                                  (unaudited)     (unaudited)
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operations:
      Net Loss                                      $   (489)       $ (1,619)
      Items not involving cash:
        Amortization of furniture
         and equipment                                   279             212
        Amortization of intangible assets                  8              12
        Stock based compensation                          75             144
        Future income taxes (recovery)                     -             (74)
      Change in non-cash operating working capital       685           1,641
    -------------------------------------------------------------------------
    Cash provided by operations                          558             316

    Investing:
      Repurchase of share capital                        (28)           (160)
      Purchase of furniture and equipment                (57)           (274)
      Additions to intangible assets                     (40)            (39)
    -------------------------------------------------------------------------
    Cash used in investing activities                   (125)           (473)

    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents                                433            (157)
    Cash and cash equivalents, beginning of year      15,718          17,421
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period        $ 16,151        $ 17,264
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

For further information: Douglas Newman, President and CEO, RDM Corporation, [phone], 340 Office, [phone] Fax, [email protected]; James Merwin, CFO & Vice President, Corporate Development, RDM Corporation, [phone], 284 Office, [phone] Fax, [email protected]