Redknee Solutions Inc. (dba Optiva Inc.) Reports First Quarter 2018 Financial Results

– Restructuring Well Underway and Customer Success Program Showing Improvement –

TORONTO, Feb. 7, 2018 /CNW/ - Redknee Solutions Inc. (dba Optiva 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 first quarter ended December 31^st, 2017. (All figures are in U.S. dollars unless otherwise stated.)

"This past quarter we kicked off our restructuring activities with proceeds from our Rights Offering," said Danielle Royston, CEO of Optiva. "The restructuring activities will continue through the balance of 2018 as we lay the foundation for our unified operating platform to deliver 100% customer success to our customers. We re-positioned the company by launching our new name and new brand, Optiva, as we prepare to begin execution on our second phase: investing to bring our products up to a market leadership position.  Finally, our first full operational period for our customer success program, Optiva Advantage™, is complete, and we are delighted to report that it has improved from our previous position of 20% up to 27%.  While we still have long way to go, I remain excited about our future and look forward to continued steady progress."

Fiscal Q1 2018 Financial Highlights
(Comparisons made between fiscal Q1FY2018 and fiscal Q1FY2017 results, unless otherwise noted)

• Revenue totaled $34.4 million compared to $37.2 million;
• Gross profit was $14.3 million (42% gross margin) compared to $21.1 million (57% gross margin);
• Loss provisions on certain contracts totalling $5.4 million is impacting gross margins in Q1 by 15%;
• Recurring revenue was 66% of revenue, compared to 62%;
• Operating expenses for the period were $76.9 million compared to $22.1 million;
• Operating expenses include $47.0 million in restructuring costs and increased R&D spend of $7.6 million;
• Net loss was $64.5 million, or $0.25 loss per share compared to a net loss of $6.4 million, or $0.06 loss per share;
• Cash used in operating activities was $16.8 million; and
• Board has approved payment of accumulated dividend on the Series A preferred shares of $7.6 million.

Operational Highlights - Q1, 2018 and Subsequent:

• Terminated approximately 520 employees globally;
• Vacated premises in 11 locations;
• Introduced new Optiva branding;
• Customer Success (rebranded Optiva Advantage^TM) metric showing improvement to 27%, up from 20% in May, 2017; and
• Began offering customers Google Cloud Spanner database services.

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.optiva.com and on SEDAR at www.sedar.com.

Conference Call

The Company will host a conference call tomorrow (February 8, 2018) to discuss their Q1 2018 results. CEO Danielle Royston and Interim CFO Anin Basu will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's discussion.

Date: Thursday, February 8, 2018
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 5989628

The webcast will be available for replay via Optiva's investor relations website (www.optiva.com) or http://bit.ly/2rvKZNu.

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, February 15, 2018.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 5989628

Media Inquiries: [email protected]

About Redknee Solutions Inc. (dba Optiva Inc.)

Optiva Inc. monetizes today's digital world for communications service providers. Our portfolio of subscriber management software enables real-time billing, charging, policy management and user experience functionality that is mission-critical for our customers' growth and innovation. Available on-premise or in the cloud, Optiva™ solutions are designed to deliver the most impact for the best value. Our deep market knowledge and powerful analytical insights coupled with the Optiva Advantage™ program ensure our customers have what they need to achieve their strategic business goals. Established in 1999, Redknee Solutions Inc. (dba Optiva Inc.) can be found on the Toronto Stock Exchange (TSX: RKN). For more information, please go to www.optiva.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.
Condensed Consolidated Interim Statements of Financial Position
(Expressed in U.S. dollars)
(Unaudited)

		December 31, 2017		September 30, 2017
Assets
Current assets:
	Cash and cash equivalents	$	94,397,655	$	110,891,744
	Trade accounts and other receivables	23,508,907		26,329,505
	Unbilled revenue	18,369,187		17,928,405
	Prepaid expenses	1,639,171		2,205,887
	Income taxes receivable	5,300,954		4,329,580
	Other assets	1,588,014		–
	Inventories	959,924		1,101,929
	Total current assets	145,763,812		162,787,050
Restricted cash		4,566,038		4,553,623
Property and equipment		1,753,130		3,457,611
Deferred income taxes		2,341,158		2,328,129
Investment tax credits		372,912		374,387
Other assets		–		1,353,968
Intangible assets		23,100,345		25,505,620
Goodwill		32,271,078		32,271,078
Total assets		$	210,168,473	$	232,631,466
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
	Trade payables	$	14,588,196	$	11,229,091
	Accrued liabilities	17,542,373		16,853,190
	Provisions	59,788,423		18,653,817
	Income taxes payable	343,114		322,403
	Deferred revenue	11,122,967		15,572,620
	Total current liabilities	103,385,073		62,631,121
Deferred revenue		648,053		894,409
Other liabilities		1,054,320		807,390
Pension and other long-term employment benefit plans		17,958,572		17,886,630
Provisions		1,286,507		824,626
Preferred shares		62,163,751		59,670,913
Warrant		26,845,638		29,622,772
Deferred income taxes		120,000		120,000
Total liabilities		213,461,914		172,457,861
Shareholders' equity (deficit):
	Share capital	248,680,325		248,680,325
	Standby Warrant	997,500		997,500
	Treasury stock	(141,917)		(141,917)
	Contributed surplus	12,813,587		11,826,454
	Deficit	(257,181,513)		(192,727,334)
	Accumulated other comprehensive loss	(8,461,423)		(8,461,423)
	Total shareholders' equity (deficit)	(3,293,441)		60,173,605
Total liabilities and shareholders' equity		$	210,168,473	$	232,631,466

                                                                                  

REDKNEE SOLUTIONS INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Expressed in U.S. dollars, except per share and share amounts)
(Unaudited)

		Three months ended December 31,
		2017		2016
Revenue:
	Software, services and other	$	12,985,583	$	14,004,104
	Support and subscription	21,414,853		23,206,102
		34,400,436		37,210,206
Cost of revenue		20,096,708		16,131,529
Gross profit		14,303,728		21,078,677
Operating expenditures:
	Sales and marketing	3,506,831		4,625,783
	General and administrative	9,752,742		8,131,299
	Research and development	16,710,691		9,150,313
	Restructuring costs	46,967,338		205,301
		76,937,602		22,112,696
Loss from operations		(62,633,874)		(1,034,019)
Foreign exchange gain (loss)		(620,160)		412,716
Other expenses		–		(3,200,000)
Finance income		42,898		184,927
Finance costs		148,902		(688,447)
Loss before income taxes		(63,062,234)		(4,324,823)
Income tax expense:
	Current	1,374,638		2,018,650
	Deferred	17,307		10,970
		1,391,945		2,029,620
Net loss and comprehensive loss		$	(64,454,179)	$	(6,354,443)
Loss per common share:
	Basic	$	(0.25)	$	(0.06)
	Diluted	(0.25)		(0.06)
Weighted average number of common shares:
	Basic	261,652,353		108,252,436
	Diluted	261,652,353		108,252,436

REDKNEE SOLUTIONS INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)

			Three months ended December 31,
				2017		2016
Cash provided by (used in):
Operating activities:
	Net loss		$	(64,454,179)	$	(6,354,443)
	Adjustments for:
		Depreciation of property and equipment		1,517,697		779,464
		Amortization of intangible assets		2,293,816		2,261,176
		Finance income		(42,898)		(184,927)
		Finance costs		(148,902)		688,447
		Pension		71,942		(869,401)
		Income tax expense		1,391,945		2,029,620
		Unrealized foreign exchange gain/(loss)		(116,979)		1,187,015
		Share-based compensation		1,238,479		(55,976)
		Change in provisions		41,596,487		(8,873,421)
		Loss on disposal of property and equipment		110,632		–
		Change in non-cash operating working capital		2,015,297		4,861,152
				(14,526,663)		(4,531,294)
		Interest paid		(33,943)		(104,089)
		Interest received		46,002		185,806
		Income taxes paid		(2,271,660)		(2,574,428)
				(16,786,264)		(7,024,005)
Financing activities:
		Interest paid on loans and borrowings		–		(1,084,943)
		Repayment of loans and borrowings		–		(750,000)
				–		(1,834,943)
Investing activities:
		Purchase of property and equipment		(4,201)		(290,345)
		Purchase of intangible assets		(9,985)		–
		Decrease in restricted cash		(12,415)		860,117
				(26,601)		569,772
Effect of foreign exchange rate changes on
		cash and cash equivalents		318,776		(735,215)
Decrease in cash and cash equivalents				(16,494,089)		(9,024,391)
Cash and cash equivalents, beginning of period				110,891,744		37,080,510
Cash and cash equivalents, end of period			$	94,397,655	$	28,056,119

SOURCE Redknee Solutions Inc.

Media Inquiries: Kristin Donelson, T: 905-625-2190, [email protected]; Investor Relations: Justin Canivet, NATIONAL | Equicom, T: 416-586-1942, [email protected]