Redknee Reports Profitable Growth in Q3-2009

TORONTO, Canada - Redknee (TSX:RKN), a leading provider of business-critical software and services for communications service providers, including end-to-end converged billing, real-time charging, rating and personalization, today announced its results for the third quarter of fiscal 2009, ended June 30, 2009.

Q3 Highlights: ————– - Third quarter 2009 revenue up 21% to $14.5M (Q3 2008: $11.9M) - Gross margin increased to 79% (Q3 2008: 64%) - EBITDA profit of $2.5M (Q3 2008: loss of $2.5M) - Operating profit of $0.8M (Q3 2008: operating loss of $3.6M) - Signed a multi-million dollar contract for the Turnkey Converged Billing (”TCB”) solution in EMEA - Signed multi-million dollar license expansion with a Tier-1 EMEA operator - Secured a service bureau contract with a leading Asia Pacific operator - Recognized by Stratecast as a “Top 10″ To Watch In OSS/BSS Elite - Cash and investments at $22.4M (September 30, 2008: $15.3M) - Received another patent (17 granted patents, 50 pending applications)

“Redknee continues to execute on our stated corporate growth strategy. We remain focused on annual growth with emphasis on increasing our recurring revenues, while continuing to take market share in the real-time monetization space” noted Lucas Skoczkowski, CEO for Redknee. He added “Our disciplined execution has resulted in increased revenue, a strong cash position, and another profitable quarter. While our focus remains on driving annual profitable growth, quarter to quarter revenue volatility and foreign exchange headwind will continue to present challenges.

Please see section regarding Forward-Looking Statements which form an integral part of this release. These results, along with the unaudited consolidated financial statements and the Company’s MD&A are available on the Company’s website at www.redknee.com and on SEDAR at www.sedar.com

OVERVIEW

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Redknee remains focused on the three core elements of its corporate strategy:

1. Continued expansion and evolution of our business-critical solutions to our global customer base; 2. Market share growth and leadership in our served addressable market; and 3. An increasing proportion of sustainable recurring revenues. ————————————– (1) Earnings Before Interest Expense, Income Taxes, Depreciation, and Amortization (EBITDA) is a non-GAAP measure. While useful in understanding Company operational results, EBITDA is not standardized and may not be comparable to similar results reported by other companies. EBITDA described above is calculated as Income (loss) from operations, net of foreign exchange gain/loss, amortization and stock-based compensation.

Sales of Redknee’s business-critical solutions have continued to grow in the third quarter of fiscal 2009, with our Turnkey Converged Billing and Next Generation Rating & Charging solutions contributing more than 95% of revenue.

Stratecast/Frost and Sullivan, an industry analyst, presented Redknee the Stratecast Global OSS/BSS Top Ten to Watch Award. This recognition is awarded to responsive and well-managed companies that have emerged as real competitors to the established OSS/BSS elite. Stratecast specifically recognized Redknee for delivering a well-defined and clearly differentiated product offering, along with a level of agility and a culture of innovation that stands out amongst the competition around the globe.

Redknee’s market leading solutions continue to be recognized globally by telecom providers. In the third quarter Redknee:

- Signed a multi-million dollar contract for Redknee’s Turnkey Converged Billing (”TCB”) solution. This solution enables the EMEA operator to manage its wireless, fixed, and broadband services with a complete converged billing solution, providing a seamless triple-play experience to its subscribers. - Signed a multi-million dollar license expansion agreement for its Next Generation Rating and Charging (NGRC) solution, which provides advanced rating and charging capabilities and facilitates the increased adoption and consumption of the EMEA operator’s growing data services. - Expanded its customer base in the high growth markets by adding a leading Tier-1 operator in the Asia Pacific (APAC) region.

Financial Review

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For the third quarter of fiscal 2009, Redknee’s revenue grew by 21 % to $14.5 million compared to revenue of $11.9 million in the third quarter of fiscal 2008. The majority of the Company’s revenue is denominated in U.S . dollars and thus revenues may be impacted by exchange rate fluctuations.

Recurring revenue was enhanced by sales and renewals of customer support services, software subscriptions and term licenses. On a four- quarter trailing basis, recurring revenues were at 38 % of overall revenues.

Gross margin in the period increased to $11.5 million or 79% of revenue from $7.7 million or 64% of revenue in the third quarter of fiscal 2008.

Redknee recorded an EBITDA profit of $2.5 million for the third quarter of fiscal 2009 as compared to an EBITDA loss of $2.5 million for the third quarter of fiscal 2008.

For the nine month period ended June 30, 2009, the Company experienced a foreign exchange gain of $ 0.9 million. For the quarter ended June 30, 2009, the Company recognized a foreign currency exchange loss of $1.3 million, as compared to a foreign currency exchange loss of $0.7 million in the same period of fiscal 2008.

Net income in Q3 fiscal 2009 was $0.5 million or $ 0.01 per share, as compared to a loss of $3.9 million or $0.07 per share in Q3 fiscal 2008.

Cash and investments as at June 30, 2009 was $22.4 million versus $15. 3 million as at September 30, 2008.

CONFERENCE CALL

The Company will discuss the results on a conference call and webcast at 7:30 a.m. ET time on Thursday, August 6, 2009.

To participate in the conference call please dial the following numbers five minutes before the start of the call to ensure your participation:

Local dial-in number 416-644-3431 Toll-free North America 800-814-4859 Toll-free United Kingdom 00-800-2288-3501

A webcast will also be available at: www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2742300

A copy of the presentation for the call will be available at: redknee.com/investors/company_reports

Conference Replay

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The conference call will be archived for replay by telephone at: 416-640-1917 or Toll-Free at 1-877-289- 8525 (Passcode 21311221 followed by the number sign) from 10:30 am on August 6, to 11:59 pm on August 20, 2009.

FORWARD-LOOKING STATEMENTS

Certain statements in this Release which are not historical facts may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws (”forward-looking statements”). Any statements related to Redknee’s projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as “believes”, “anticipated”, “expected”, “projected”, “targeting”, “estimate”, “intend” and similar terms are intended to assist in identification of these forward- looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions. Except as required by law, Redknee does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking information, whether as a result of new information, future events or otherwise, or the above list of factors affecting this information.

Many factors could cause the actual results of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, each of the following factors, which are further discussed in the section of the Company’s AIF entitled Risk Factors, and which is available on SEDAR at www.sedar.com and on the Company’s web-site at www.redknee.com.

About REDKNEE:

Redknee is a leading global provider of innovative communication software products, solutions and services. Redknee’s award-winning solutions enable operators to monetize the value of each subscriber transaction while personalizing the subscriber experience to meet mainstream, niche and individual market segment requirements. Redknee’s revenue generating solutions provide advanced converged billing, rating, charging and policy for voice, messaging and new generation data services to over 70 network operators in over 50 countries. References to Redknee refer to the combined operations of the parent Redknee Solutions Inc, and all wholly owned subsidiaries.

Redknee(R), Redknee Solutions, and the Redknee logo are trademarks or registered trademarks of Redknee Solutions Inc. All other company, product names and any registered and unregistered trademarks mentioned (if any) are used for identification purposes only and remain the exclusive property of their respective owners.

For more information, visit www.redknee.com.

Redknee Solutions Inc. Interim Consolidated Balance Sheet (Unaudited) ———————————————————————— (expressed in Canadian dollars) June September 30, 30, 2009 2008 $ $ Assets Current assets Cash and cash equivalents 18,274,398 15,242,607 Short-term investments 4,135,288 56,363 Trade accounts and other receivables 13,122,935 11,192,182 Unbilled revenue 2,280,758 6,060,452 Investment tax credits and income taxes receivable 675,000 600,000 Prepaid expenses 1,088,326 1,066,584 Goods in transit 526,069 325,716 ————————- 40,102,774 34,543,904 Restricted cash (note 7) 605,774 409,919 Property and equipment 669,972 580,053 Intangible assets 1,217,849 1,388,761 Other assets 557,411 528,294 ————————- 43,153,780 37,450,931 ————————- ————————- Liabilities Current liabilities Accounts payable 1,232,850 2,172,268 Accrued liabilities 8,349,682 8,678,539 Income taxes payable 2,844,527 2,100,785 Deferred revenue 6,982,290 5,084,287 Current portion of obligations under capital leases - 619 ————————- 19,409,349 18,036,498 ————————- Shareholders’ Equity Share capital, net of employee share purchase loans 40,388,274 39,686,701 ————————- Contributed surplus 4,406,035 4,410,677 ————————- Deficit (20,896,913) (24,471,986) Accumulated other comprehensive loss, net of income taxes (152,965) (210,959) ————————- Total deficit and accumulated other comprehensive loss (21,049,878) (24,682,945) ————————- 23,744,431 19,414,433 ————————- 43,153,780 37,450,931 ————————- ————————- Guarantees and contingencies (note 7) Redknee Solutions Inc. Interim Consolidated Statement of Operations (Unaudited) ———————————————————————— (expressed in Canadian dollars) Three months ended Nine months ended June 30, June 30, ————————- ———————— 2009 2008 2009 2008 $ $ $ $ Revenue Software, services and other 8,861,397 8,078,812 26,195,166 25,425,719 Support and subscription 5,618,489 3,860,394 16,251,870 10,601,626 ————————————————– 14,479,886 11,939,206 42,447,036 36,027,345 Cost of revenue 3,008,663 4,284,895 9,300,867 11,670,985 ————————————————– Gross profit 11,471,223 7,654,311 33,146,169 24,356,360 ————————————————– Operating expenses Selling and marketing 3,765,183 4,005,832 12,040,384 12,116,903 General and administrative 2,470,037 2,726,886 7,451,500 7,566,437 Research and development (note 4) 2,931,780 3,731,752 9,591,644 10,252,886 Amortization of property and equipment and intangible assets 169,897 91,848 482,026 218,943 Foreign currency exchange (gain) loss 1,311,451 665,267 (909,409) (1,043,737) ————————————————– 10,648,348 11,221,585 28,656,145 29,111,432 ————————————————– Income (loss) from operations 822,875 (3,567,274) 4,490,024 (4,755,072) Interest income 4,968 57,292 45,751 391,500 Interest expense (10,681) (102,890) (14,880) (112,482) ————————————————– Income (loss) before income taxes 817,162 (3,612,872) 4,520,895 (4,476,054) Income taxes Current 309,147 241,406 945,822 833,781 ————————————————– Net income (loss) for the period 508,015 (3,854,278) 3,575,073 (5,309,835) ————————————————– ————————————————– Net income (loss) per common share (note 2) Basic 0.01 (0.07) 0.06 (0.09) Diluted 0.01 (0.07) 0.06 (0.09) Weighted average number of common shares (note 2) Basic 57,107,659 56,347,051 57,107,659 56,347,051 Diluted 59,122,135 57,232,051 58,226,223 57,232,051 Redknee Solutions Inc. Interim Consolidated Statement of Cash Flows (Unaudited) ———————————————————————— (expressed in Canadian dollars) Three months ended Nine months ended June 30, June 30, ————————- ———————— 2009 2008 2009 2008 $ $ $ $ Cash provided by (used in) Operating activities Net income (loss) for the period 508,015 (3,854,278) 3,575,073 (5,309,835) Items not involving cash Amortization of property and equipment 112,115 91,848 311,114 218,943 Amortization of intangible assets 57,782 170,912 Unrealized foreign currency exchange gain 2,114,121 275,041 (1,333,887) (1,176,950) Stock-based compensation (note 3) 189,935 288,620 513,058 766,214 Change in non-cash operating working capital (note 5) (417,866) 282,355 3,537,092 (3,660,586) ————————————————– 2,564,102 (2,916,414) 6,773,362 (9,162,214) ————————————————– Financing activities Collection of employee loans 109,621 168,650 Proceeds from exercise of options 15,224 15,224 Repayment of obligations under capital leases (18,585) (619) (43,672) ————————————————– 124,845 (18,585) 183,255 (43,672) ————————————————– Investing activities (Purchase of) proceeds from short-term investments 4,958,910 1,300,497 (4,078,925) 8,701,591 Purchase of property and equipment (88,088) (163,939) (401,033) (340,144) (Increase) decrease in other assets 8,118 96,407 (29,116) (261,744) Loan to Argent Networks PTY Ltd. (529,463) Collection of loan from Argent Networks PTY Ltd. 526,754 Increase in restricted cash 50,911 464 (195,854) (378,722) Acquisition of Argent Networks PTY Ltd., net of cash acquired (1,084,255) ————————————————– 4,929,851 1,233,429 (4,704,928) 6,634,017 ————————————————– Effect of foreign currency exchange rate changes on cash and cash equivalents (419,179) (239,000) 780,102 382,000 ————————————————– Increase (decrease) in cash and cash equivalents during the period 7,199,619 (1,940,570) 3,031,791 (2,189,869) Cash and cash equivalents - Beginning of period 11,074,779 8,678,471 15,242,607 8,927,770 ————————————————– Cash and cash equivalents - End of period 18,274,398 6,737,901 18,274,398 6,737,901 ————————————————– ————————————————– Supplemental cash flow information Interest paid 10,681 235 14,880 1,795 Interest received 4,968 56,888 45,751 390,645 Cash taxes/investment tax credits received, net of income taxes paid 130,895 174,909 328,531 364,499

For further information: Redknee Solutions Inc., Lucas Skoczkowski, Chief Executive Officer, David Charron, Chief Financial Officer, Isabel Fernandes-Cunha, Investor Relations, Tel: +1-(905)-625-2622, Fax: +1-(905)-625-2773

Source: Redknee Solutions Inc.

For further information: Redknee Solutions Inc., Lucas Skoczkowski, Chief Executive Officer, David Charron, Chief Financial Officer, Isabel Fernandes-Cunha, Investor Relations, Tel: +1-(905)-625-2622, Fax: +1-(905)-625-2773