RDM Corporation (TSX: RC), a leading provider of solutions for the electronic commerce and payment processing markets, today reported its financial results for the three and twelve-month periods ended September 30, 2007.
Fiscal 2007 Financial Highlights
- Total revenues were $33.9 million in fiscal 2007, an increase of 39% from $24.3 million in 2006.
- The Digital Imaging segment, which represented 85% of revenues, grew by 69% to $28.7 million of revenues.
- Gross profit was $13.5 million or 40% of revenues, compared to $10.0 million or 41% of revenues in 2006.
- Net earnings were $5.8 million or $0.26 per share (fully diluted) in 2007, compared to $2.1 million or $0.10 per share in the previous year. Approximately $2.7 million of 2007 earnings or $0.13 per share were attributable to a gain on the sale of RDM's minority stake in Xign Corporation.
- Cash and equivalents grew to $17.4 million at September 30, 2007, from $6.2 million one year earlier.
Fiscal 2007 Operating Highlights
- Transaction volumes for RDM's Image & Transaction Management System (ITMS) averaged 1,755,000 items per week during the fourth quarter of 2007 and exited the year at 2,081,000 items, compared to 792,000 items per week in Q4 2006.
- Ten new bank distributors were signed during the year, bringing the total to 25 banks.
- ITMS end user locations increased to 8,400 from 3,300 at the start of the year.
- Shipments of proprietary scanner units grew to 55,000 in 2007, compared to 34,000 the prior year.
- Product announcements included the CaptureOne (tm) batch scanner which is co-branded with Epson Corporation, and a new version of ITMS Web Client.
"A 39% increase in revenues and the second year in a row of record earnings are a great testament to the employees of RDM who have worked with great dedication and creativity over the past 12 months," said Douglas Newman, President and CEO of RDM Corporation. "RDM continues to be one of the leaders in remote deposit capture and we have established a great foundation for long term growth. Industry estimates are that only 2% of U.S. businesses are using RDC with the potential for 5 million seat deployments over the next five years."
Mr. Newman continued: "RDM is well positioned with our positive cash flow and cash in the bank to take advantage of acquisition and consolidation opportunities as they arise in our industry. We expect our revenue growth rates to continue at the same pace as over the past two years. Over the next year, gross margins may be impacted by fluctuation in the exchange rate between the Canadian and U.S. dollar. At current exchange rates, gross margins achieved are likely to be similar to those of Q4 2007."
Financial Review
RDM's revenues grew year-over-year by $9.6 million or 39% to $33.9 million in fiscal 2007. As RDM generates virtually all of its revenues in U.S. dollars, the Company was negatively impacted by the continued strengthening of the Canadian dollar during 2007.
The revenue increase was attributable to strong growth in the Digital Imaging segment, which comprises both scanner sales and the ITMS transaction revenue. Digital Imaging revenues grew by 69% to $28.7 million from $17.0 million in 2006, driven by increasing adoption of remote deposit capture services. The vast majority of Digital Imaging revenues were derived from scanner sales, which increased to 54,000 units from 34,000 units in 2006. Management anticipates continued volatility of units shipped on a quarterly basis, but expects to see an upward trend in scanner sales over the longer term.
Revenues in the Electronic Payments Solutions segment, comprised of custom development projects for government agencies and financial institution customers, were $3.2 million in 2007 compared to $5.5 million the previous year. The Quality Assurance segment, comprised of quality control products sold to commercial check printers and processors, generated revenues of 2.0 million, compared to $1.8 million in 2006. Results in the two smaller segments were in line with management expectations, and both segments made a positive contribution to operating income.
Gross profit grew by $3.5 million or 35% to $13.5 million in fiscal 2007. Expressed as a percentage of revenue, gross margin was 40% in 2007 compared to 41% last year, with the change attributable to business mix.
Sales and marketing expense increased 44% to $4.2 million, due to higher investment in sales activities related to the rapidly growing Digital Imaging segment, a focus on signing new ITMS banks, and marketing activities to prepare for the introduction of a batch scanner. Research and development expenses, net of investment tax credits, were unchanged at $3.0 million, as the Company continued to invest in Digital Imaging new product development. General and administration expenses increased 33% to $2.1 million as a result of increased regulatory compliance requirements, staff recruiting, SAS 70 audit fees and insurance due to the growth of the Company.
In 2007 RDM recorded a $2.7 million gain on sale of long term investment related to the sale of its minority interest in Xign Corporation. The Company recorded a $657,000 foreign exchange gain in 2007 compared to a $168,000 loss the prior year. Income tax expense for the year was $1.2 million, compared to a tax recovery of $784,000 in 2006. Net earnings of $5.8 million, or $0.26 per share (fully diluted), represented significant growth compared to $2.1 million or $0.10 per share in 2006.
Operating activities provided $2.4 million of cash flow in 2007, compared to $0.9 million in 2006. Investing activities provided $7.6 million of cash, comprised primarily of proceeds from the sale of the Company's minority interest in Xign Corporation. Cash and equivalents were $17.4 million at September 30, 2007. -- www.cnxmarketlink.com
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