RDM Corporation reports third quarter results

Toronto Stock Exchange Symbol: RC

WATERLOO, ON, July 30 /PRNewswire-FirstCall/ – 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 month period ended June 30, 2009.

    Q3 2009 Highlights

    -   Total revenues were $5.9 million in the third quarter of fiscal 2009,
        compared to $5.2 million in the third quarter of 2008.

    -   Payment Processing Services segment revenues, which are recurring in
        nature, were $2.5 million in Q3 2009, compared to $1.7 million a year
        earlier.

    -   Transaction volumes for RDM's Image & Transaction Management System
        (ITMS(R)) averaged 3.8 million items per week during the third
        quarter, compared to 2.8 million items per week a year earlier, and
        3.6 million items per week during Q2 2009.

    -   ITMS(R) end user locations grew from 17,000 to 17,800 during the
        third quarter and 13,300 at the end of the third quarter in 2008.

    -   RDM added one additional bank distributor and two new independent
        sales organizations (ISOs) during the quarter.

    -   Gross profit was $2.5 million or 42% of revenues, compared to $1.8
        million or 34% of revenues in the third quarter of 2008.

    -   Net earnings were $175,000 or $0.01 per share (fully diluted) in Q3
        2009, compared to a net loss of $298,000 or $0.01 per share in Q3
        2008.

    -   Cash and equivalents of $16.9 million at June 30, 2009 were unchanged
        from the end of the prior quarter.

“While recent economic conditions have restricted growth opportunities in our sector, we made continued progress in growing our recurring revenues from our Payment Processing Services”, said Douglas Newman, President and CEO of RDM Corporation. “ITMS transaction volumes and end users have increased sequentially and year over year and we continue to expand both our distribution network and our product footprint. Our strong financial position has enabled us to build on our competitive advantage through ongoing investment in product leadership, which we believe maximizes our long-term growth potential.”

    Financial Review

    Operating Results by Segment
    For the Three Months Ended June 30, 2009

                           Payment             Electronic
    (In thousands of    Processing   Digital     Payment     Quality
     Canadian dollars)    Services   Imaging   Solutions   Assurance   Total
                       ------------------------------------------------------
    Revenue                 $2,491    $2,948        $180        $322  $5,941
    Gross profit            $1,173    $1,032         $66        $235  $2,506
    Gross profit
     percentage                47%       35%         37%         73%     42%

    Operating Results by Segment
    For the Three Months Ended June 30, 2008

                           Payment             Electronic
    (In thousands of    Processing   Digital     Payment     Quality
     Canadian dollars)    Services   Imaging   Solutions   Assurance   Total
                       ------------------------------------------------------
    Revenue                 $1,680    $2,672        $554        $331  $5,237
    Gross profit              $467      $822        $249        $220  $1,758
    Gross profit
     percentage                28%       31%         45%         67%     34%

RDM generated total revenues of $5.9 million in the three months ended June 30, 2009, an increase of $0.7 million from the third quarter of fiscal 2008. The strengthening of the U.S. dollar compared to last year’s third quarter resulted in a $0.8 million favourable impact on reported revenues.

Payment Processing Services segment revenues increased by $0.8 million or 48% from a year earlier to $2.5 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 increased by $0.3 million to $2.9 million, as a reduction in proprietary scanner shipments was offset by the favourable impact of exchange rates and higher third party scanner shipments. The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 8% of total revenues in the third quarter, generated revenues of $180,000 and $322,000, respectively, compared to $554,000 and $331,000, respectively, in the third quarter of 2008.

Gross profit increased by $0.7 million to $2.5 million in the third quarter of 2009 from $1.8 million in the comparable period of fiscal 2008. Expressed as a percentage of revenues, gross margin was 42%, compared to 34% in Q3 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 third quarter from $467,000 a year earlier. The segment generated an operating loss of $233,000, compared to a loss of $776,000 in Q3 2008. This improvement in operating earnings was realized even as the Company invested an additional $162,000 in sales, marketing and research and development efforts.

Sales and marketing expense decreased $36,000 to $1.2 million in Q3 2009, with efforts focused primarily on the rapidly growing Payment Processing Services segment, and in particular on signing new ITMS banks and ISO resellers and promoting Simply Deposit(TM). Research and development expenses increased $242,000 to $1.1 million as the Company continued to invest in new product development including Simply Deposit Mobile(TM). Simply Deposit Mobile is a downloadable remote deposit product application that will initially be available for the iPhone and latest Blackberry handsets. General and administration expenses decreased $51,000 to $533,000.

Net earnings were $175,000 in the third quarter of 2009, or $0.01 per share, compared to a net loss of $298,000 or $0.01 per share a year earlier. In addition to the factors noted above, earnings were affected by a foreign exchange gain of $692,000 recognized in the quarter, compared to a gain of $131,000 in Q3 2008. The foreign exchange gain 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.

RDM repurchased 30,100 shares in the third quarter, including 12,600 shares repurchased since the renewal of its Normal Course Issuer Bid on May 21, 2009. At June 30, 2009, the Company had 20.8 million common shares outstanding.

Conference Call

RDM will be hosting a conference call to discuss the Company’s third quarter financial results on July 30, 2009 at 9:00 a.m. EDT. Dial-in numbers are 416-644-3422 or 1-800-587-1893. The call will be webcast live and archived at www.rdmcorp.com. Detailed financial results and Management’s Discussion and Analysis will be filed on www.sedar.com.

About RDM Corporation

RDM Corporation is headquartered in Waterloo, Ontario and trades on the Toronto Stock Exchange under the symbol RC. RDM is a leading provider of specialized software and hardware products for electronic payment processing. RDM has pioneered electronic check conversion systems and web based image and transaction management services for banks, retailers, payment processors and government agencies as well as print quality control and image quality systems for a variety of global customers. For further information, visit RDM’s website at www.rdmcorp.com

This news release contains forward-looking statements. Forward-looking statements are based on estimates and assumptions made by RDM in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that RDM believes are appropriate in the circumstances. Many factors could cause RDM’s actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. Risk factors relating to RDM are discussed in the Risks and Uncertainties section of RDM’s Annual Information Form and year-end Management’s Discussion and Analysis. These factors should be considered carefully, and readers should not place undue reliance on RDM’s forward-looking statements. RDM has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                               RDM CORPORATION
                         Consolidated Balance Sheets
                 (Amounts In Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
                                                       June 30, September 30,
                                                          2009          2008
                                                     Unaudited       Audited
    -------------------------------------------------------------------------
    Assets:

    Current assets:
      Cash and cash equivalents                       $ 16,939      $ 17,421
      Accounts receivable                                3,714         4,929
      Inventories                                        4,167         6,325
      Investment tax credit receivable                   1,714         1,703
      Other                                                951         1,087
    -------------------------------------------------------------------------
    Total current assets                                27,485        31,465

    Furniture and equipment                              3,095         2,893
    Intangible assets                                      318           278
    -------------------------------------------------------------------------
    Total assets                                      $ 30,898      $ 34,636
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity:

    Current liabilities:
      Accounts payable and accrued liabilities        $  3,627      $  4,945
      Deferred revenue                                     609           631
    -------------------------------------------------------------------------
    Total current liabilities                            4,236         5,576

    Future income tax liability                            138           201

    Shareholders' equity:
      Share capital                                     27,980        28,338
      Contributed surplus                                1,494         1,162
      Retained earnings (deficit)                       (2,950)         (641)
    -------------------------------------------------------------------------
    Total shareholders' equity                          26,524        28,859
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity        $ 30,898      $ 34,636
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                               RDM CORPORATION
              Consolidated Statements of Operations and Deficit
    (Amounts in Canadian Dollars, In Thousands, Except Per Share Amounts)

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      June                      June
                               2009         2008         2009         2008
                           (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    -------------------------------------------------------------------------
    Revenue                   $ 5,941      $ 5,237     $ 18,810     $ 19,131
    Cost of revenue             3,435        3,479       10,776       12,180
    -------------------------------------------------------------------------
    Gross Profit                2,506        1,758        8,034        6,951
    Operating expenses:
      Sales and marketing       1,233        1,269        3,879        3,564
      Research and development  1,130          888        3,295        2,846
      General and
       administration             533          584        1,449        1,471
      Depreciation and
       amortization                64           60          186          176
      Stock-based compensation     75          126          332          383
      Foreign exchange
       loss (gain)               (692)        (131)       1,319          153
      Interest Income             (12)        (181)        (117)        (512)
      Gain on sale of long
       term investment              -         (559)           -         (559)
    -------------------------------------------------------------------------
                                2,331        2,056       10,343        7,522
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes                 175         (298)      (2,309)        (571)
    Future Income Tax expense
     (recovery)                     -            -            -           (5)
    -------------------------------------------------------------------------
    Net earnings (loss) and
     comprehensive
     earnings (loss)              175         (298)      (2,309)        (566)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings (loss) per share
     - basic and diluted      $   .01      $  (.01)    $   (.11)    $   (.03)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                               RDM CORPORATION
                      Statement of Shareholder's Equity
                 (Amounts in Canadian Dollars, In Thousands)

    -------------------------------------------------------------------------
                       Share  Contributed   Retained       Share       Total
                     Capital     Surplus    earnings    Purchase
                                            (deficit)      Loans
    -------------------------------------------------------------------------
    Balance as at
     October 1,
     2007          $  27,978   $     927   $     401   $     (16)  $  29,290

    Net earnings
     (loss) and
     comprehensive
     earnings (loss)       -           -        (566)          -        (566)
    Stock-based
     compensation          -         383           -           -         383
    Repayment of
     share purchase
     loans                 -           -           -          16          16
    Issuance of
     Capital             321           -           -           -         321
    Repurchase of
     Share Capital       (20)          -           -           -         (20)
    -------------------------------------------------------------------------
    Balance as at
     June 30, 2008 $  28,279   $   1,310   $    (165)  $     (16)  $  29,424
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance as at
     September 30,
     2008             28,338   $   1,162   $    (641)  $       -   $  28,859

    Net earnings
     (loss) and
     comprehensive
     earnings (loss)       -           -      (2,309)          -      (2,309)
    Repurchase of
     share capital      (358)          -           -           -        (358)
    Stock-based
     compensation          -         332           -           -         332
    -------------------------------------------------------------------------
    Balance as at
     June 30, 2009 $  27,980   $   1,494   $  (2,950)  $       -   $  26,524
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                               RDM CORPORATION
                    Consolidated Statements of Cash Flows
                 (Amounts in Canadian Dollars, In Thousands)

                                Three months ended         Nine months ended
                                      June                      June
                               2009         2008         2009         2008
                           (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    -------------------------------------------------------------------------
    Cash provided by (used
     in):
    Operations:
      Net earnings (loss)
      Items not
       involving cash:       $    175     $   (298)    $ (2,309)    $   (566)
        Amortization of
         furniture and
         equipment                262          235          711          580
        Amortization of
         intangible assets         13           11           36           30
        Stock-based
         compensation              75          126          332          383
        Future income
         taxes                     10            -          (64)          (5)
        Gain on sale of
         long-term
         investment                 -         (559)           -         (559)
      Change in non-cash
       operating working
       capital                   (238)      (1,052)       2,159          121
    -------------------------------------------------------------------------
    Cash provided by (used
     in) operations               297       (1,537)         865          (16)
    Financing:
      Issuance of share
       capital; net of
       issue costs                  -            -            -          321
      Repayment of share
       purchase loans               -            -            -           16
    -------------------------------------------------------------------------
    Cash provided by
     financing activities           -            -            -          337
    Investing:
      Repurchase of
       share capital              (25)         (20)        (358)         (20)
      Cash proceeds on sale
       of long-term
       investment                   -        1,062            -        1,062
      Purchase of furniture
       and equipment             (181)        (232)        (913)      (1,600)
      Additions to
       intangible assets          (16)         (16)         (76)         (74)
    -------------------------------------------------------------------------
    Cash used in
     investing
     activities                  (222)         794       (1,347)        (632)
    Increase (decrease)
     in cash and
     cash equivalents              75         (743)        (482)        (311)
    Cash and cash
     equivalents,
     beginning of period       16,864       17,850       17,421       17,418
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period               $ 16,939     $ 17,107     $ 16,939     $ 17,107
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

SOURCE RDM Corporation