RDM Corporation Reports Second Quarter Results

ITMS(R) Transaction Volume Reaches 2.5 Million per Week Toronto Stock Exchange Symbol: RC

WATERLOO - RDM Corporation reported its financial results for the three month period ended March 31, 2007.

Q2 2008 Highlights

- Transaction volumes for RDM's Image & Transaction Management System (ITMS(R)) averaged 2.5 million items per week during the second quarter of fiscal 2008, compared to 1.3 million items per week a year earlier, and 2.1 million items per week during Q1 2008.

- ITMS(R) end user locations increased from 10,000 to 11,500 during the second quarter.

- Total revenues were $6.8 million in Q2 2008, compared to $7.9 million in Q2 2007.

- Digital Imaging segment revenues were $5.6 million, compared to $6.5 million a year earlier.

- Gross profit was $2.7 million or 39% of revenues, compared to $3.4 million or 43% of revenues in Q2 2007.

- Net loss was $269,000 or $(0.01) per share in the second quarter of 2008, compared to net earnings of $587,000 or $0.03 per share a year earlier.

- Cash and equivalents at March 31, 2008 were $17.9 million.

- The Company shipped 10,300 proprietary scanner units in the second quarter of 2008, compared to 11,990 in the second quarter of 2007, and 10,700 in the first quarter of 2008.

- RDM added one additional bank distributor and two resellers during the quarter.

Subsequent Events

- Subsequent to quarter-end, the Company announced the release of three new products: RDM SYNERGY II, the second generation of its all-in-one payment terminal; the fourth generation of ITMS WebClient software product; and Simply Deposit(TM), a remote deposit capture solution designed specifically for the needs of small businesses. >>

"Our ITMS business continues to grow rapidly. We added 1,500 end user locations during the second quarter and processed an additional 350,000 items per week," said Douglas Newman, President and CEO of RDM Corporation. "The recent launch of our Simply Deposit(TM) solution will broaden our reach and help us better serve the small business market which has been estimated to include more than 14 million businesses. I feel very confident in RDM's long-term prospects for growth in the remote deposit capture space."

Mr. Newman continued: "Scanner sales during the quarter were disappointing, however, as the timing of certain anticipated orders was delayed. Furthermore, the exchange rate continues to impact our year-over-year reported revenues. While we expect to see growth in the second half of the year, we do not expect our full-year revenues to exceed the total reported in fiscal 2007, which included an unusually strong first quarter.

Financial Review

RDM recorded revenues of $6.8 million in the three months ended March 31, 2008, a decrease of $1.1 million from the comparable period of fiscal 2007. The decrease in reported revenue was primarily caused by the rapid appreciation over the past year of the Canadian dollar compared to the U.S. dollar, the currency in which virtually all of the Company's revenues are generated. The Digital Imaging segment generated $5.6 million of revenues, a decrease of 14% from Q2 2007, as lower scanner sales were only partially offset by the continued growth in ITMS revenues.

Revenues in the Electronic Payments Solutions segment, comprised of custom development projects for government agencies and financial institution customers, were $805,000 in Q2 2008, in line with management expectations and 4% higher than the $774,000 recorded a year earlier. Revenues in the Quality Assurance segment, comprised of quality control products sold to commercial check printers and processors, were below expectations at $389,000, compared to $594,000 in Q2 2007. Both segments made a positive contribution to operating income.

Gross profit was $2.7 million in Q2 2008 compared to $3.3 million in the second quarter of 2007. Expressed as a percentage of revenue, gross margin was 39% in Q2 2008 compared to 43% a year earlier, due to the negative impact of exchange rates and a change in product mix.

Sales and marketing expense increased to $1.2 million from $0.9 million in Q2 2007, as efforts were focused on signing new ITMS banks, preparing for the introduction of a batch scanner, and the launch of Simply Deposit(TM). Research and development expenses were flat at $0.9 million as the Company continued to invest in new product development. General and administration expenses were also unchanged at $0.5 million for the quarter.

RDM recorded a net loss of $269,000 in the second quarter of 2008, or $(0.01) per share, compared to net earnings of $587,000 or $0.03 per share a year earlier. The decrease was primarily attributable to the dramatic change in exchange rates and the increase in sales and marketing efforts. The Company had 21,487,826 common shares outstanding at March 31, 2008.