redknee solutions inc. - optiva · redknee to be materially different from any conclusion,...

TSX: RKN

Q2 FY16 - Investor Conference Call May 10, 2016

© Copyright Redknee Inc. 2015

DISCLAIMER

This presentation does not constitute or form part of any offer for sale or subscription or any solicitation for any offer to buy or subscribe for anysecurities or to form the basis of or be relied on in connection with any contract or commitment. This is not, and under no circumstances is to beconstrued as, a prospectus, an offering memorandum, an advertisement, an offer, an invitation or a solicitation to enter into a transaction or otherinvestment business.

No representation or warranty is made to the fairness, accuracy, completeness or correctness of these materials. Each recipient or reader must maketheir own investigation and assessment of the matters contained here. In particular, no representation or warranty is given, and no responsibility orliability is accepted, as to the achievement or reasonableness of any future projections or the assumptions underlying them, or any forecasts, estimates,or statements as to prospects contained or referred to in these presentation materials.

Certain statements may constitute “forward-looking” statements and are prospective. Forward-looking statements are neither promises norguarantees. They involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements ofRedknee to be materially different from any conclusion, projection or future results, performance or achievement expressed or implied by such forward-looking statements. Actual events may differ materially from expectations embodied in forward-looking statements and depend on a number of factorsand risks, some of which may be beyond the company's control. New risk factors may arise from time to time. It is not possible to predict all of those riskfactors or the extent to which any factor or combination of factors may cause actual results, performance and achievements of Redknee to be materiallydifferent from those contained in forward-looking statements. These risks and uncertainties include rapid technology change, changes in customerarchitecture and equipment deployment requirements, the risks and uncertainties of new product introductions, economic and commercial conditions,exchange rate fluctuations, competitive forces, dependence on key supplies and like factors that may cause actual results, performance or achievementto differ materially from those implied by such forward-looking statements. Given these risks and uncertainties, investors and readers should not placeundue reliance on forward-looking statements as a prediction of actual results.

No responsibility or liability is accepted by any person for any loss howsoever arising from any use of, or in connection with, these presentation materialsor their contents or otherwise. In issuing these materials, Redknee does not undertake any obligation to update information or to correct anyinaccuracies which may become apparent in these materials. These materials are supplied to you for your own information and may not be distributed,published, reproduced or otherwise made available to any other person, in whole or in part, for any purpose. In particular, they should not be distributedto or otherwise made available to persons where such distribution or availability may lead to a breach of any law or regulatory requirements.


© Copyright Redknee Inc. 2015© Copyright Redknee Inc. 2016

Q2 FY16 HIGHLIGHTS

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Mill

ion

USD

Revenue: $39.8M (Q2 FY15: $53.7M)

Order Backlog: $175.5M

Gross Margin: 54%

Recurring Revenue:

63% of total

Adjusted EBITDA:

$(2.4M) (Q2 FY15: $10.5M, 20% of Revenue)

Cash: $44.3M

$158M$169M

$176M

0

50

100

150

200

Q4 15 Q1 16 Q2 16

ORDER BACKLOG

Highlights:• Initiated planned restructuring post-acquisition – achieved agreement with Workers’

Council in Berlin (subsequent to Q2)• Positive cash flow from operations (after cash used for restructuring) of $2.7M• Launched the latest version of Redknee Unified• Signed multiple large contracts during and subsequent to Q2• Record order backlog


CONTINUE TO BE IN ACTIVE DISCUSSIONS AND EXPECT ADDITIONAL NEW CONTRACTS THROUGHOUT REMAINDER OF FISCAL 2016

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RECENT SALES MOMENTUM: MAJOR CONTRACT WINS

Customer Region Value Closed

Tier 1 CSP APAC >$20M Q3

Tier 1 CSP Americas $8M Q3

TIM Brazil Brazil Not disclosed Q2

Tier 1 CSP APAC $15M Q2

Turk Telecom Turkey Not disclosed Q2


REVENUE BREAKDOWN BY QUARTER

1 Recurring revenue includes support and maintenance agreements, term based product licenses, subscription, cloud service and long term service agreements.

*The above noted information is based on management estimates and is unaudited

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(US$ MILLIONS)

Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 $ Change % Change

Software 13.9 20.0 18.7 10.8 16.7 9.7 4.7 (14.0) (75%)

% of revenue 23% 32% 35% 23% 28% 19% 12%

Services 12.4 13.8 10.1 10.7 15.3 13.0 11.6 1.5 15%

% of revenue 20% 22% 19% 23% 25% 26% 29%

Third Party 7.3 4.2 2.4 3.4 4.0 2.5 0.8 (1.6) (67%)

% of revenue 12% 7% 4% 7% 7% 5% 2%

Support 27.4 24.6 22.5 21.7 23.7 25.0 22.7 0.2 1%

% of revenue 45% 39% 42% 47% 40% 50% 57%

Total Revenue 60.9 62.6 53.7 46.7 59.8 50.1 39.8 (14.0) (26%)

Recurring Revenue1 28.5 27.4 24.8 24.6 26.0 25.9 25.1 0.3 1%

% of revenue 47% 44% 46% 53% 44% 52% 63%


GROSS MARGIN SUMMARY

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50%

55%

60%

0

20

40

60

80

100

120

140

160

TTM Q2 2015 TTM Q3 2015 FY 2015 TTM Q1 2016 TTM Q2 2016

Gross Profit Gross Margin

Mill

ion

USD

Q2 FY 2016

GROSS MARGIN

54%

55%

59% 59% 59%

57%


Q2 FY16 OPERATING COSTS

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1 Adjusted Total OPEX : Total OPEX less acquisition costs and restructuring costs.

(US$ MILLIONS) Q2 FY16 Q2 FY15 $ CHANGE % CHANGE

S & M 7.8 7.7 0.1 2%

% of Revenue 20% 14%

G & A 8.6 7.5 1.1 15%


R & D 12.6 11.4 1.2 10%


Restructuring Costs 24.5 0.3 24.3 9653%

% of Revenue 62% 1%

Acquisition Costs 0.1 0.3 (0.2) (58%)

% of Revenue 0% 1%

Adjusted Total OPEX 1 29.0 26.6 2.4 9%



STRONG BALANCE SHEET & BACKLOG

(US$ MILLIONS) Q2 FY16 Q1 FY16 % CHANGE

Cash and Investments $44.3 $49.0 (10%)

A/R $61.3 $65.2 (6%)

DSO 106 days 99 days 7 days

Unbilled Revenue $34.9 $40.2 (13%)

Deferred Revenue $19.0 $13.1 45%

Working Capital $58.8 $85.1 (31%)

Backlog $175.5 $166.8 5%

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COST STRUCTURE OPTIMIZATION

UNLOCKINGEFFICIENCIES AND SYNERGIES

1 DRIVING ACCRETION THROUGH CASHFLOW AND PROFITABILITY

32 CONCENTRATING ACTIVITIES IN CERTAIN KEY REGIONS

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$26-28MONE TIME COST ANNUAL COST SAVINGS

EFFECTIVE FY 2017

FINANCIAL IMPACT

Up to $25M~


COMPANY UPDATE

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Redknee Unified 2016Powering the Digital Service Provider

• Simple and fast subscriber acquisition• Real-time self-care through on-device apps, web, and social• Enhanced offers and promotions based on real-time analytics• Smart pricing• Full support for the evolution to 5G


SOFTWARE & SERVICE BUSINESS MODELDriving gross margin

improvement, while growing

our recurring revenues to

increase our revenue

predictability

MANAGEMENT FOCUS

CASH FLOWGENERATION

Continue to improve by

focusing on working capital

optimization, and disciplined

collections

1 2 3DISCIPLINED COST MANAGEMENT

Continuing the cost structure

realignment programs with our core

and the acquired businesses, while

ensuring high customer satisfaction

& retention

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. . .


STRATEGIC PRIORITIES

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BUSINESS-CRITICAL MONETIZATION PLATFORM

Continue to secure

contracts for our core

Telecom Platform and

Redknee Connected Suite

Leverage our technologies

to diversify our customer

base beyond

communication vertical

SUSTAINABLE RECURRING REVENUE GROWTH

Focus on growing recurring

revenues to drive EBITDA

margins

Term licenses, cloud services

and support are the key

recurring revenue sources

1 2 3MARKET SHARE GROWTH

Customer-for-life and

expanding share of wallet

with existing customers

.

.

. .

.


TTM EBITDA Margin: 8%

Q2 FY16 SUMMARY

$196MTTM Revenue

TTM Recurring Revenue: 52%

Available Liquidity: $64.3M(USD)

Focused on Executing on our Strategy

(USD)


Q&A SESSION INSTRUCTIONS

NORTH AMERICA, DIAL TOLL-FREE:

1 (888) 231-8191

OUTSIDE NORTH AMERICA DIAL:

1 (647) 427-7450

Please provide the operator the conference name “Redknee Solutions” or:

Conference ID: 86923806

To ask a question following the presentation,please dial now:

© Copyright Redknee Inc. 2015© Copyright Redknee Inc. 2013© Copyright Redknee Inc. 2016

THANK YOU FOR JOINING US

A replay of today’s call will be available in the IR section of Redknee’s website at www.redknee.com or by dialing:

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NORTH AMERICA, DIAL TOLL-FREE:

1 (855) 859-2056

OUTSIDE NORTH AMERICA DIAL:

1 (416) 849-0833

Conference ID: 86923806

REDKNEE SOLUTIONS INC.

2560 Matheson Blvd East, Suite 500Mississauga, ONCanada L4W 4Y9

David CharronChief Financial Officer [email protected] www.redknee.com

INVESTOR RELATIONS:

NATIONAL | Equicom

Lawrence [email protected]

http://www.redknee.com/

redknee solutions inc. - optiva · redknee to be materially different from any conclusion,...

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