Redknee’s (TSX:RKN) first full quarter incorporating its Nokia Siemens Networks acquisition shows the company knows what it is doing, says M Partners analyst Ron Shuttleworth.
Last Tuesday, Redknee reported its Q3, 2013 results. The company earned (U.S.) $80,085 on revenue of revenue of $58.6-million, up 295% from the $14.8-million revenue number the company posted in 2012’s Q3.
CEO Lucas Skoczkowski said the integration of the assets was more than on track.
“During the third quarter, which includes the full contribution from the most recent acquisition, we continued to demonstrate our ability to execute by expanding business with our customers, growing our backlog and focusing on the inherent operating leverage in our software product business,” he said. “I believe that we have made excellent progress and we are on track with the integration process. Our customers and partners have been very supportive of Redknee’s new position in the marketplace, and this has translated into both order and pipeline momentum.”
Shuttleworth says there are three major reasons why Redknee is having success after last December’s $54-million acquisition of certain assets from Nokia Siemens Networks.
First, says the M Partners analyst, sales discipline has eliminated low margin sales, leaving better quality revenue. Second, already existing Nokia Siemens Networks customers are showing interest in Redknee’s solutions. Finally, there is a general surge of interest in Redknee’s cloud-based solutions, and some existing client upgrades are of the high-margin variety.
In a research update to clients following Redknee’s Q3 numbers, Shuttleworth maintained his BUY recommendation but raised his 12-month share price target to $5.00, up from $3.75. He explains that this is because he now believes Redknee will generate EBITDA of $44.3-million, up from his previous estimate of $38.1-million.
At press time, shares of Redknee were down 1.2% to $4.04.