Posted February 5, 2009
Quarterly Report

RDM Corporation Reports First Quarter Results

WATERLOO, ON - 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 December 31, 2008.

Q1 2009 Highlights

- Total revenues were $7.1 million in the first quarter of fiscal
2009, unchanged from $7.1 million in the first quarter of last
- Revenues in the Payment Processing Services segment doubled to
$2.2 million in Q1 2009, compared to $1.1 million a year earlier.
- Transaction volumes for RDM's Image & Transaction Management
System (ITMS(R)) averaged 3.3 million items per week during the
first quarter, compared to 2.1 million items per week a year
earlier, and 3.1 million items per week during Q4 2008.
- ITMS(R) end user locations increased from 14,900 to 15,900 during
the first quarter of 2009.
- RDM added five additional bank distributors and seven new
independent sales organizations (ISOs) during the quarter.
- RDM shipped 7,700 proprietary scanners during the quarter,
compared to 10,700 units in Q1 2008.
- Gross profit was $2.9 million or 42% of revenues, compared to $2.7
million or 38% of revenues in the first quarter of 2008.
- Net loss was $1.6 million or $0.08 per share (fully diluted) in Q1
2009, compared to net earnings of $1,000 or $0.00 per share in Q1
2008, and is due primarily to a foreign exchange loss on the
forward contracts.
- Cash and equivalents of $17.3 million at December 31, 2008, is
virtually unchanged from $17.4 million three months earlier.

"We made progress on some of our top strategic priorities in the first quarter during a time of significant macroeconomic instability," said Douglas Newman, President and CEO of RDM Corporation. "Our recurring revenue ITMS business grew sequentially on every measure: end user locations, transaction volume, and the number of bank and ISO distribution partners. We continued to invest in future growth, and still remained cash flow neutral even as scanner sales softened. We remain cautious about the near-term outlook in our market and are positioning the company to withstand the current economic uncertainty, and to benefit when rapid growth in the remote deposit capture space resumes."

Financial Review

RDM recorded revenues of $7.1 million in the three months ended December 31, 2008, unchanged from the $7.1 million of revenues generated in the first quarter of the prior fiscal year. The strengthening of the U.S. dollar over the past year resulted in a $1.4 million favourable impact on reported revenues. A $1.1 million revenue increase in the Payment Processing Services segment, driven by growth in ITMS transaction volumes and end users as well as the currency exchange rate shift, offset revenue decreases in the Company's other three operating segments. Revenues in the Digital Imaging Products segment decreased by $0.8 million to $3.9 million due to a decrease in scanner shipments and the absence of $610,000 of non-recurring licensing revenue recorded in the first quarter of 2008. The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 14% of total revenues in the first quarter, each generated revenues of approximately $0.5 million, compared to $0.7 million and $0.6 million, respectively, in the first quarter of 2008.

Gross profit increased to $2.9 million in the first quarter of 2009 from $2.7 million a year earlier. Expressed as a percentage of revenues, gross margin was 42%, compared to 38% in the Q1 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 $911,000 in the first quarter from $223,000 a year earlier. The segment generated an operating loss of $651,000, compared to a loss of $840,000 in Q1 2008. This improvement in operating earnings was realized even as the Company invested an additional $420,000 in sales and marketing efforts focused on signing new ITMS banks and ISO resellers.

Sales and marketing expense increased $280,000 to $1.4 million, with efforts focused primarily on the rapidly growing Payment Processing Services segment. Research and development expenses increased $57,000 to $1.1 million as the Company continued to invest in new product development. General and administration expenses increased $89,000 to $478,000, due in part to the launch of Simply Deposit including legal and credit management costs.

RDM recognized a $1.5 million foreign exchange loss in the first quarter of 2009 due to the impact of a dramatic shift in exchange rates during the quarter on forward contracts held by the Company for hedging purposes. Primarily as a result of this exchange loss, net earnings declined by $1.6 million compared to one year earlier. Net loss was $1.6 million or $0.08 per share (fully diluted) in Q1 2009, compared to net earnings of $1,000 or $0.00 per share in Q1 2008.

RDM repurchased 190,400 shares in the first quarter under its Normal Course Issued Bid. At December 31, 2008, the Company had 21.2 million common shares outstanding.

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