RDM Corporation reports second quarter results

WATERLOO - RDM Corporation, a leading provider of solutions for the electronic commerce and payment processing markets, today reported its financial results for the three month period ended March 31, 2009.

Q2 2009 Highlights

- Total revenues were $5.8 million in the second quarter of fiscal 2009, compared to $6.8 million in the second quarter of 2008.

- Payment Processing Services segment revenues, which are recurring in nature, were $2.6 million in Q2 2009, compared to $1.4 million a year earlier.

- Transaction volumes for RDM's Image & Transaction Management System (ITMS(R)) averaged 3.6 million items per week during the second quarter, compared to 2.5 million items per week a year earlier, and 3.3 million items per week during Q1 2009.

- ITMS(R) end user locations grew from 15,900 to 17,000 during the second quarter.

- RDM added three additional bank distributors and 12 new independent sales organizations (ISOs) during the quarter.

- Gross profit was $2.6 million or 45% of revenues, compared to $2.5 million or 37% of revenues in the second quarter of 2008.

- Net loss was $0.9 million or $0.04 per share (fully diluted) in Q2 2009 which was due largely to a $0.6 million foreign exchange loss. This compares to a net loss of $0.3 million or $0.01 per share in Q2 2008.

- Operating activities generated $252,000 of positive cash flow, while $652,000 of cash was used for capital expenditures and the repurchase of shares. Cash and equivalents at March 31, 2009 were $16.9 million, compared to $17.3 million at the end of the prior quarter.

"I am encouraged by the continued momentum of our recurring revenue ITMS business," said Douglas Newman, President and CEO of RDM Corporation. "Despite the difficult economic environment, our average transaction volumes and total end user locations are both up nearly 50% compared to the prior year. We recently reached an important milestone by processing one million transactions in a single day."

Mr. Newman continued: "Overall results for the quarter were suppressed by disappointing scanner sales caused by the economic downturn. We plan to be prudent in managing our costs during this time of uncertainty, but our priority is to position the Company to capitalize on the long-term remote deposit capture opportunity, which I believe remains compelling."

Financial Review

RDM generated total revenues of $5.8 million in the three months ended March 31, 2009, a decrease of $1.0 million from the second quarter of fiscal 2008. The strengthening of the U.S. dollar during the quarter resulted in a $1.1 million favourable impact on reported revenues. Payment Processing Services segment revenues increased by $1.2 million or 81% to $2.6 million, driven by growth in ITMS transaction volumes and end users as well as the change in currency exchange rates. Revenues in the Digital Imaging Products segment decreased by $1.8 million to $2.4 million due to a reduction in scanner shipments. The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 13% of total revenues in the second quarter, generated revenues of $0.5 million and $0.2 million, respectively, compared to $0.8 million and $0.4 million, respectively, in the second quarter of 2008.

Gross profit increased to $2.6 million in the second quarter of 2009 from $2.5 million in the comparable period of fiscal 2008. Expressed as a percentage of revenues, gross margin was 45%, compared to 37% in the Q2 2008. Increased margins were due to the favourable impact of exchange rates and a change in product mix to include a higher proportion of payment processing recurring revenue. Gross profit in the Payment Processing Services segment grew to $1.2 million in the second quarter from $465,000 a year earlier. The segment generated an operating loss of $162,000, compared to a loss of $655,000 in Q2 2008. This improvement in operating earnings was realized even as the Company invested an additional $248,000 in sales and marketing efforts focused on signing new ITMS banks and ISO resellers.

Total sales and marketing expense increased $70,000 to $1.2 million in Q2 2009, with efforts focused primarily on the rapidly growing Payment Processing Services segment. Research and development expenses increased $149,000 to $1.1 million as the Company continued to invest in new product development. General and administration expenses decreased $68,000 to $430,000.

RDM recognized a $563,000 foreign exchange loss in the second quarter of 2009, an increase of $350,000 compared to the amount recognized a year earlier. The foreign exchange loss was due to the impact of a shift in exchange rates during the quarter on forward contracts held by the Company as economic hedges, partially offset by a gain in U.S. denominated monetary assets.

Net loss was $865,000 in the second quarter of 2009, or $0.04 per share, compared to a net loss of $269,000 or $0.01 per share a year earlier. RDM repurchased 254,000 shares in the second quarter under its Normal Course Issuer Bid. At March 31, 2009, the Company had 20.9 million common shares outstanding.