RDM Corporation , a leading provider of specialized software and
hardware products for electronic payment processing, has
reported its financial results for the three month period ended
March 31, 2007.
Q2 2007 Highlights
– Total revenues were $7.9 million in the second quarter of fiscal
2007, an increase of 34% from $5.9 million in Q2 2006.
– The Digital Imaging segment, which represented over 80% of
revenues,
grew by $2.7 million in the second quarter to $6.5 million of
revenues.
– Transaction volumes for RDM’s Image & Transaction Management System
(ITMS) averaged 1,271,000 items per week during the second quarter,
compared to 618,000 items per week a year earlier, and
995,000 items per week in Q1 2007.
– ITMS end user locations increased from 4,100 to 5,100 during the
second quarter of 2007.
– Gross profit was $3.4 million or 43% of revenues in the second
quarter, compared to $2.6 million or 44% of revenues a year
earlier.
– Net earnings were $587,000 or $0.03 per share, compared to $208,000
or $0.01 per share in the previous year’s second quarter.
Subsequent Events
– Subsequent to quarter-end, RDM announced Capture One, which was
jointly developed with Epson Corporation. Capture One is a batch
scanner and is designed for the emerging eCheck market which
includes
Remote Deposit Capture (ARC, BOC, Check 21, and Image Exchange) and
Branch Automation. Capture One is powered by RDM’s MICR Imaging and
processing technologies.
– The Company also announced that its RDM SYNERGY all-in-one POS
payment solution will be distributed as part of the Back Office
Capture solution by ProfitStars, a division of Jack Henry &
Associates Inc., and that it had received Class B certification
from
Chase Paymentech which opens new distribution channels for RDM
SYNERGY.
– Also subsequent to the quarter, RDM announced that the shareholders
and Board of Directors of Xign Corporation have signed an agreement
to sell Xign. Upon completion of the transaction RDM expects cash
proceeds of at least $9.0 million. The sale of RDM’s minority
interest in Xign is expected to result in a one-time gain of
$0.12 to
$0.18 per share, and will enable the Company to redeploy capital to
growth opportunities.
“We recorded solid growth in the second quarter, particularly in our
core Digital Imaging segment,” said Douglas Newman, President and CEO of
RDM Corporation. “Scanner shipments remained strong during the quarter,
however, as expected, did not equal our first quarter’s exceptionally high
shipment volumes which contained an unusually large backlog from the
previous quarter. ITMS processing volumes continue to grow significantly
and we are in the midst of executing contracts to enable two additional
banks to use ITMS as their remote deposit solution. We are also excited
about the potential for the recent hardware product announcements to
favourably impact our sales in future periods.”
Financial Review
RDM’s revenues of $7.9 million in the three months ending March 31,
2007 represented growth of $2.0 million or 34% over the same period of
2006. The increase was attributable to growth in the Digital Imaging
segment, which encompasses both scanner sales and the ITMS transaction
revenue. Digital Imaging revenues grew by $2.7 million or 71% from a year
earlier, driven by increasing adoption of remote deposit capture services.
On a year-to-date basis, total revenues were $19.6 million in the first six
months of fiscal 2007, compared to $10.9 million in the comparable period
of 2006.
As disclosed in the Company’s first quarter 2007 materials, scanner
production levels were elevated in the first quarter as the Company worked
through an order backlog that had built up as a result of strong demand.
The Company shipped 20,000 scanners in the first quarter, of which 5,000
were attributable to orders not filled in the prior quarter. Second quarter
2007 scanner volume of 12,000 units are more representative of the current
period’s demand, and compares to 8,000 units a year earlier.
Revenues in the Electronic Payments Solutions segment, comprised of
custom development projects for government agencies and financial
institution customers, were $775,000 in the quarter compared to $1.6
million a year earlier. The Quality Assurance segment, comprised of quality
control products sold to commercial check printers and processors,
generated revenues of $594,000, compared to $502,000 in Q2 2006. Results in
the two smaller segments were in line with management expectations, and
both segments made a positive contribution to operating income in the
quarter.
Gross profit grew by $0.7 million or 28% to $3.4 million. Expressed as
a percentage of revenue, gross margin declined from 44% to 43% due to
changes in the business mix.
Sales and marketing expense grew 42% to $901,000 in Q2 2007 as a result
of increased sales efforts and activities associated with the Company’s
rapidly growing Digital Imaging segment. While revenues have grown
significantly, costs have been well managed and the Company recorded modest
year-over-year decreases in general and administration, research and
development, and depreciation and amortization expenses. Interest and other
income improved by $85,000 primarily due to higher cash balances and better
interest rates. Total operating expenses increased only marginally to $2.5
million from $2.4 million a year earlier.
RDM’s earnings from operations grew to $887,000 in the second quarter
of 2007, from $208,000 in Q2 2006. The Company recognized a $300,000 income
tax expense in the quarter, compared to no tax expense in the same period
of 2006. Net earnings of $587,000, or $0.03 per share, represented 182%
growth compared to $208,000 or $0.01 per share in the second quarter of
2006.
Operating activities generated $1.3 million of cash flow in the
quarter, compared to $1.8 million in Q2 2006. Cash and equivalents
increased $1.1 million during the quarter to $10.1 million. This balance
does not include the impact of the sale of the Company’s minority interest
in Xign Corporation, which was announced April 18, 2007 and is expected to
contribute approximately $9.0 million of cash proceeds by the end of RDM’s
current fiscal year.
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 cheque conversion systems and
web-based image and transaction management services for banks, retailers,
payment processors and government agencies. RDM’s Image & Transaction
Management System (ITMS(R)) is an industry leading e-check processing
solution whereby transaction information can be remotely captured and
processed electronically from distributed locations, freeing up significant
customer float time and significantly reducing costs associated with
returned checks.