Yesterday, Redknee (TSX:RKN) reported it had signed a “multimillion-dollar, multiyear” contract to provide cloud-based converged billing services to to Step Up Mobile, a US-based mobile virtual network operator that will launch on the Sprint network midway through 2013.
Redknee CEO Lucas Skoczkowski said the contract is evidence his company is gaining momentum: “We are very pleased to be announcing this latest win with Step Up Mobile, which increases Redknee’s footprint in the American market and adds to the growing portfolio of customers that are selecting Redknee’s cloud-based converged billing solution, ” he said, adding: “This win also reinforces Redknee’s leadership in delivering innovative solutions that empower service providers with the greatest flexibility and agility to support their growth strategies, increase revenues and improve the customer experience.”
M Partners analyst Ron Shuttleworth believes the Step Up Mobile deal is worth between five and six million dollars over the life of the contract, and will likely be higher margin business than the equivalent in perpetual license revenue. In a research update to clients today, Shuttleworth made adjustments to expectations for EBITDA margins for fiscal 2013, to 17.2% from his previous expectation of 16.9%, and raised his target price on Redknee to $1.95, up ten cents from his previous target. The M Partners analyst maintained his BUY rating the stock.
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Founded in the solarium of Lucas Skoczkowski’s apartment in 1999, Mississauga-based Redknee now boasts clients such as Microsoft and Cisco. The company’s billing solutions run the gamut from the customer side to helping service providers better monitor, understand and monetize their subscriber base. Redknee’s real-time converged billing solution has been benchmarked to support a quarter of a billion subscribers.
Shuttleworth says Redknee is entering a interesting stage in its history in which it is beginning to deliver on term contracts with recurring revenue. He says this can strengthen future earnings leverage, and there could be significant upside to contracts such as the Step Up deal if there is a national roll-out in the outlying years.
Shares of Redknee closed today up .7% to $1.41.