RDM Corporation Reports Third Quarter Results

Thursday, July 30, 2009 7:53 AM

(Source: Canada Newswire) tracking

Toronto Stock Exchange Symbol: RC

WATERLOO, ON, July 30 /CNW/ - RDM Corporation (TSX: RC), a leading provider of solutions for the electronic commerce and payment processing markets, today reported its financial results for the three month period ended June 30, 2009.

Q3 2009 Highlights

- Total revenues were $5.9 million in the third quarter of fiscal 2009,

compared to $5.2 million in the third quarter of 2008.

- Payment Processing Services segment revenues, which are recurring in

nature, were $2.5 million in Q3 2009, compared to $1.7 million a year

earlier.

- Transaction volumes for RDM's Image & Transaction Management System

(ITMS(R)) averaged 3.8 million items per week during the third

quarter, compared to 2.8 million items per week a year earlier, and

3.6 million items per week during Q2 2009.

- ITMS(R) end user locations grew from 17,000 to 17,800 during the

third quarter and 13,300 at the end of the third quarter in 2008.

- RDM added one additional bank distributor and two new independent

sales organizations (ISOs) during the quarter.

- Gross profit was $2.5 million or 42% of revenues, compared to $1.8

million or 34% of revenues in the third quarter of 2008.

- Net earnings were $175,000 or $0.01 per share (fully diluted) in Q3

2009, compared to a net loss of $298,000 or $0.01 per share in Q3

2008.

- Cash and equivalents of $16.9 million at June 30, 2009 were unchanged

from the end of the prior quarter.

"While recent economic conditions have restricted growth opportunities in our sector, we made continued progress in growing our recurring revenues from our Payment Processing Services", said Douglas Newman, President and CEO of RDM Corporation. "ITMS transaction volumes and end users have increased sequentially and year over year and we continue to expand both our distribution network and our product footprint. Our strong financial position has enabled us to build on our competitive advantage through ongoing investment in product leadership, which we believe maximizes our long-term growth potential."

Financial Review

Operating Results by Segment

For the Three Months Ended June 30, 2009

Payment Electronic

(In thousands of Processing Digital Payment Quality

Canadian dollars) Services Imaging Solutions Assurance Total

------------------------------------------------------

Revenue $2,491 $2,948 $180 $322 $5,941

Gross profit $1,173 $1,032 $66 $235 $2,506

Gross profit

percentage 47% 35% 37% 73% 42%

Operating Results by Segment

For the Three Months Ended June 30, 2008

Payment Electronic

(In thousands of Processing Digital Payment Quality

Canadian dollars) Services Imaging Solutions Assurance Total

------------------------------------------------------

Revenue $1,680 $2,672 $554 $331 $5,237

Gross profit $467 $822 $249 $220 $1,758

Gross profit

percentage 28% 31% 45% 67% 34%

RDM generated total revenues of $5.9 million in the three months ended June 30, 2009, an increase of $0.7 million from the third quarter of fiscal 2008. The strengthening of the U.S. dollar compared to last year's third quarter resulted in a $0.8 million favourable impact on reported revenues.

Payment Processing Services segment revenues increased by $0.8 million or 48% from a year earlier to $2.5 million, driven by growth in ITMS transaction volumes and end users as well as the change in currency exchange rates. Revenues in the Digital Imaging Products segment increased by $0.3 million to $2.9 million, as a reduction in proprietary scanner shipments was offset by the favourable impact of exchange rates and higher third party scanner shipments. The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 8% of total revenues in the third quarter, generated revenues of $180,000 and $322,000, respectively, compared to $554,000 and $331,000, respectively, in the third quarter of 2008.

Gross profit increased by $0.7 million to $2.5 million in the third quarter of 2009 from $1.8 million in the comparable period of fiscal 2008. Expressed as a percentage of revenues, gross margin was 42%, compared to 34% in Q3 2008. Increased margins were due to the favourable impact of exchange rates and a change in product mix to include a higher proportion of payment processing recurring revenue. Gross profit in the Payment Processing Services segment grew to $1.2 million in the third quarter from $467,000 a year earlier. The segment generated an operating loss of $233,000, compared to a loss of $776,000 in Q3 2008. This improvement in operating earnings was realized even as the Company invested an additional $162,000 in sales, marketing and research and development efforts.

Sales and marketing expense decreased $36,000 to $1.2 million in Q3 2009, with efforts focused primarily on the rapidly growing Payment Processing Services segment, and in particular on signing new ITMS banks and ISO resellers and promoting Simply Deposit(TM). Research and development expenses increased $242,000 to $1.1 million as the Company continued to invest in new product development including Simply Deposit Mobile(TM). Simply Deposit Mobile is a downloadable remote deposit product application that will initially be available for the iPhone and latest Blackberry handsets. General and administration expenses decreased $51,000 to $533,000.

Net earnings were $175,000 in the third quarter of 2009, or $0.01 per share, compared to a net loss of $298,000 or $0.01 per share a year earlier. In addition to the factors noted above, earnings were affected by a foreign exchange gain of $692,000 recognized in the quarter, compared to a gain of $131,000 in Q3 2008. The foreign exchange gain was due to the impact of a shift in exchange rates during the quarter on forward contracts held by the Company as economic hedges, partially offset by a gain in U.S. denominated monetary assets.

RDM repurchased 30,100 shares in the third quarter, including 12,600 shares repurchased since the renewal of its Normal Course Issuer Bid on May 21, 2009. At June 30, 2009, the Company had 20.8 million common shares outstanding.

Conference Call

RDM will be hosting a conference call to discuss the Company's third quarter financial results on July 30, 2009 at 9:00 a.m. EDT. Dial-in numbers are 416-644-3422 or 1-800-587-1893. 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 further 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)

----------------------------------------------------------------- --------

June 30, September 30,

2009 2008

Unaudited Audited

----------------------------------------------------------------- --------

Assets:

Current assets:

Cash and cash equivalents $ 16,939 $ 17,421

Accounts receivable 3,714 4,929

Inventories 4,167 6,325

Investment tax credit receivable 1,714 1,703

Other 951 1,087

----------------------------------------------------------------- --------

Total current assets 27,485 31,465

Furniture and equipment 3,095 2,893

Intangible assets 318 278

----------------------------------------------------------------- --------

Total assets $ 30,898 $ 34,636

----------------------------------------------------------------- --------

Liabilities and shareholders' equity:

Current liabilities:

Accounts payable and accrued liabilities $ 3,627 $ 4,945

Deferred revenue 609 631

----------------------------------------------------------------- --------

Total current liabilities 4,236 5,576

Future income tax liability 138 201

Shareholders' equity:

Share capital 27,980 28,338

Contributed surplus 1,494 1,162

Retained earnings (deficit) (2,950) (641)

----------------------------------------------------------------- --------

Total shareholders' equity 26,524 28,859

----------------------------------------------------------------- --------

Total liabilities and shareholders' equity $ 30,898 $ 34,636

----------------------------------------------------------------- --------

RDM CORPORATION

Consolidated Statements of Operations and Deficit

(Amounts in Canadian Dollars, In Thousands, Except Per Share Amounts)

----------------------------------------------------------------- --------

Three months ended Nine months ended

June June

2009 2008 2009 2008

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

----------------------------------------------------------------- --------

Revenue $ 5,941 $ 5,237 $ 18,810 $ 19,131

Cost of revenue 3,435 3,479 10,776 12,180

----------------------------------------------------------------- --------

Gross Profit 2,506 1,758 8,034 6,951

Operating expenses:

Sales and marketing 1,233 1,269 3,879 3,564

Research and development 1,130 888 3,295 2,846

General and

administration 533 584 1,449 1,471

Depreciation and

amortization 64 60 186 176

Stock-based compensation 75 126 332 383

Foreign exchange

loss (gain) (692) (131) 1,319 153

Interest Income (12) (181) (117) (512)

Gain on sale of long

term investment - (559) - (559)

----------------------------------------------------------------- --------

2,331 2,056 10,343 7,522

----------------------------------------------------------------- --------

Earnings (loss) before

income taxes 175 (298) (2,309) (571)

Future Income Tax expense

(recovery) - - - (5)

----------------------------------------------------------------- --------

Net earnings (loss) and

comprehensive

earnings (loss) 175 (298) (2,309) (566)

----------------------------------------------------------------- --------

Earnings (loss) per share

- basic and diluted $ .01 $ (.01) $ (.11) $ (.03)

----------------------------------------------------------------- --------

RDM CORPORATION

Statement of Shareholder's Equity

(Amounts in Canadian Dollars, In Thousands)

----------------------------------------------------------------- --------

Share Contributed Retained Share Total

Capital Surplus earnings Purchase

(deficit) Loans

----------------------------------------------------------------- --------

Balance as at

October 1,

2007 $ 27,978 $ 927 $ 401 $ (16) $ 29,290

Net earnings

(loss) and

comprehensive

earnings (loss) - - (566) - (566)

Stock-based

compensation - 383 - - 383

Repayment of

share purchase

loans - - - 16 16

Issuance of

Capital 321 - - - 321

Repurchase of

Share Capital (20) - - - (20)

----------------------------------------------------------------- --------

Balance as at

June 30, 2008 $ 28,279 $ 1,310 $ (165) $ (16) $ 29,424

----------------------------------------------------------------- --------

Balance as at

September 30,

2008 28,338 $ 1,162 $ (641) $ - $ 28,859

Net earnings

(loss) and

comprehensive

earnings (loss) - - (2,309) - (2,309)

Repurchase of

share capital (358) - - - (358)

Stock-based

compensation - 332 - - 332

----------------------------------------------------------------- --------

Balance as at

June 30, 2009 $ 27,980 $ 1,494 $ (2,950) $ - $ 26,524

----------------------------------------------------------------- --------

RDM CORPORATION

Consolidated Statements of Cash Flows

(Amounts in Canadian Dollars, In Thousands)

Three months ended Nine months ended

June June

2009 2008 2009 2008

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

----------------------------------------------------------------- --------

Cash provided by (used

in):

Operations:

Net earnings (loss)

Items not

involving cash: $ 175 $ (298) $ (2,309) $ (566)

Amortization of

furniture and

equipment 262 235 711 580

Amortization of

intangible assets 13 11 36 30

Stock-based

compensation 75 126 332 383

Future income

taxes 10 - (64) (5)

Gain on sale of

long-term

investment - (559) - (559)

Change in non-cash

operating working

capital (238) (1,052) 2,159 121

----------------------------------------------------------------- --------

Cash provided by (used

in) operations 297 (1,537) 865 (16)

Financing:

Issuance of share

capital; net of

issue costs - - - 321

Repayment of share

purchase loans - - - 16

----------------------------------------------------------------- --------

Cash provided by

financing activities - - - 337

Investing:

Repurchase of

share capital (25) (20) (358) (20)

Cash proceeds on sale

of long-term

investment - 1,062 - 1,062

Purchase of furniture

and equipment (181) (232) (913) (1,600)

Additions to

intangible assets (16) (16) (76) (74)

----------------------------------------------------------------- --------

Cash used in

investing

activities (222) 794 (1,347) (632)

Increase (decrease)

in cash and

cash equivalents 75 (743) (482) (311)

Cash and cash

equivalents,

beginning of period 16,864 17,850 17,421 17,418

----------------------------------------------------------------- --------

Cash and cash

equivalents, end

of period $ 16,939 $ 17,107 $ 16,939 $ 17,107

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