Redknee Solutions’ Q4 confirms our positive view of company, says Clarus

Clarus Securities analyst Eyal Ofir says Redknee Solutions (Redknee Solutions Stock Quote, Chart, Nes: TSX:RKN) delivered a strong fourth quarter in all the key metrics he was looking for.

Yesterday, Redknee reported its fourth quarter and fiscal 2014 results. The company posted adjusted EBITDA of $5.8 million on revenue of $60.9-million, up 6% from the $57.4-million topline the company posted in the same period last year.

“In 2014, we executed on our growth strategy and advanced our position as the largest independent real-time converged monetization software provider for the communications market,” said CEO Lucas Skoczkowski. “As we realize our growth goals and expand into new vertical markets, including utilities, smart cities and transportation, we are supporting customers with our software product platform in both our core communication business and in non-telecom verticals, driving monetization through M2M and the evolving IoT market. With the integration of our latest acquisition complete, we have taken the opportunity to strategically optimize our cost base to drive future increased sustainable operating leverage from our business.”

Ofir notes that Redknee’s adjusted EBITDA number of $5.8-million came in well ahead of his expectation of $2.7-million and the slightly rosier consensus view of $3.0-million. He notes that the company reported improvements in high-margin license and third-party revenue, while its topline was pressured by a decrease in lower-margin support revenue.

“In our opinion,” says Ofir, “Redknee executed in the quarter and was able to beat the main metrics that we were looking for in a big way. The company experienced a significant rebound in gross and EBITDA margins while being able to generate almost $20 million in cash flow from operations.”

In a research update to clients today, Ofir maintained his BUY recommendation and $6.00 one-year target price on Redknee, implying a return of 53.8% at the time of publication.

More Cantech Analysts