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RDM Corporation Reports Second Quarter Results

WATERLOO, ON, May 2 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 March 31, 2007.

Q2 2008 Highlights - Transaction volumes for RDM's Image & Transaction Management System (ITMS(R)) averaged 2.5 million items per week during the second quarter of fiscal 2008, compared to 1.3 million items per week a year earlier, and 2.1 million items per week during Q1 2008. - ITMS(R) end user locations increased from 10,000 to 11,500 during the second quarter. - Total revenues were $6.8 million in Q2 2008, compared to $7.9 million in Q2 2007. - Digital Imaging segment revenues were $5.6 million, compared to $6.5 million a year earlier. - Gross profit was $2.7 million or 39% of revenues, compared to $3.4 million or 43% of revenues in Q2 2007. - Net loss was $269,000 or $(0.01) per share in the second quarter of 2008, compared to net earnings of $587,000 or $0.03 per share a year earlier. - Cash and equivalents at March 31, 2008 were $17.9 million. - The Company shipped 10,300 proprietary scanner units in the second quarter of 2008, compared to 11,990 in the second quarter of 2007, and 10,700 in the first quarter of 2008. - RDM added one additional bank distributor and two resellers during the quarter. Subsequent Events - Subsequent to quarter-end, the Company announced the release of three new products: RDM SYNERGY II, the second generation of its all-in-one payment terminal; the fourth generation of ITMS WebClient software product; and Simply Deposit(TM), a remote deposit capture solution designed specifically for the needs of small businesses.

"Our ITMS business continues to grow rapidly. We added 1,500 end user locations during the second quarter and processed an additional 350,000 items per week," said Douglas Newman, President and CEO of RDM Corporation. "The recent launch of our Simply Deposit(TM) solution will broaden our reach and help us better serve the small business market which has been estimated to include more than 14 million businesses. I feel very confident in RDM's long-term prospects for growth in the remote deposit capture space."

Mr. Newman continued: "Scanner sales during the quarter were disappointing, however, as the timing of certain anticipated orders was delayed. Furthermore, the exchange rate continues to impact our year-over-year reported revenues. While we expect to see growth in the second half of the year, we do not expect our full-year revenues to exceed the total reported in fiscal 2007, which included an unusually strong first quarter.

Financial Review

RDM recorded revenues of $6.8 million in the three months ended March 31, 2008, a decrease of $1.1 million from the comparable period of fiscal 2007. The decrease in reported revenue was primarily caused by the rapid appreciation over the past year of the Canadian dollar compared to the U.S. dollar, the currency in which virtually all of the Company's revenues are generated. The Digital Imaging segment generated $5.6 million of revenues, a decrease of 14% from Q2 2007, as lower scanner sales were only partially offset by the continued growth in ITMS revenues.

Revenues in the Electronic Payments Solutions segment, comprised of custom development projects for government agencies and financial institution customers, were $805,000 in Q2 2008, in line with management expectations and 4% higher than the $774,000 recorded a year earlier. Revenues in the Quality Assurance segment, comprised of quality control products sold to commercial check printers and processors, were below expectations at $389,000, compared to $594,000 in Q2 2007. Both segments made a positive contribution to operating income.

Gross profit was $2.7 million in Q2 2008 compared to $3.3 million in the second quarter of 2007. Expressed as a percentage of revenue, gross margin was 39% in Q2 2008 compared to 43% a year earlier, due to the negative impact of exchange rates and a change in product mix.

Sales and marketing expense increased to $1.2 million from $0.9 million in Q2 2007, as efforts were focused on signing new ITMS banks, preparing for the introduction of a batch scanner, and the launch of Simply Deposit(TM). Research and development expenses were flat at $0.9 million as the Company continued to invest in new product development. General and administration expenses were also unchanged at $0.5 million for the quarter.

RDM recorded a net loss of $269,000 in the second quarter of 2008, or $(0.01) per share, compared to net earnings of $587,000 or $0.03 per share a year earlier. The decrease was primarily attributable to the dramatic change in exchange rates and the increase in sales and marketing efforts. The Company had 21,487,826 common shares outstanding at March 31, 2008.

Conference Call

RDM will be hosting a conference call to discuss the Company's second quarter financial results on May 2, 2008 at 9:00 a.m. EDT. Dial-in numbers are 416-644-3418 or 1-800-732-0232. An audio webcast of the call will be webcast live and archived at www.rdmcorp.com. Detailed financial results and management's discussion and analysis for the second quarter of fiscal 2008 will be filed at 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 cheque conversion systems and web-based image and transaction management services for banks, retailers, payment processors and government agencies. RDM's Image & Transaction Management System (ITMS(R)) is an industry leading e-check processing solution whereby transaction information can be remotely captured and processed electronically from distributed locations, freeing up significant customer float time and significantly reducing costs associated with returned checks. 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) ————————————————————————————————————- March 31, September 2008 30, 2007 Unaudited Audited ————————————————————————————————————— Assets: Current assets: Cash and cash equivalents $ 17,850 $ 17,418 Accounts receivable 5,420 6,365 Other receivable 503 503 Inventories 7,316 4,720 Investment tax credit receivable 1,541 1,451 Other 230 1,843 ————————————————————————————————————- Total current assets 32,860 32,300 Furniture and equipment 3,034 2,011 Intangible assets 274 235 ————————————————————————————————————- Total assets $ 36,168 $ 34,546 ————————————————————————————————————- ————————————————————————————————————- Liabilities and shareholders' equity: Current liabilities: Accounts payable and accrued liabilities $ 5,785 $ 4,587 Future income tax liability 210 210 Deferred revenue 530 427 ————————————————————————————————————- Total current liabilities 6,525 5,224 Future income tax liability 27 32 Shareholders' equity: Share capital 28,299 27,978 Contributed surplus 1,184 927 Retained earnings 133 401 Share purchase loans 0 (16) ————————————————————————————————————- Total shareholders' equity 29,616 29,290 ————————————————————————————————————- Total liabilities and shareholders' equity $ 36,168 $ 34,546 ————————————————————————————————————- ————————————————————————————————————- RDM CORPORATION Consolidated Statements of Operations and Deficit (Amounts in Canadian Dollars, In Thousands, Except Per Share Amounts) Three months ended Six months ended March March 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ————————————————————————————————————- Revenue $ 6,823 $ 7,882 $ 13,894 $ 19,628 Cost of revenue 4,171 4,520 8,453 11,797 ————————————————————————————————————- Gross Profit 2,652 3,362 5,441 7,831 Operating expenses: Sales and marketing 1,151 901 2,295 1,902 Research and development 945 942 1,959 1,910 General and administration 498 496 887 1,009 Depreciation and amortization 176 177 363 339 Stock-based compensation 136 95 257 170 Foreign exchange loss (gain) 213 (47) 284 240 Interest (128) (89) (331) (128) ————————————————————————————————————- 2,991 2,475 5,714 5,442 ————————————————————————————————————- Earnings before taxes (339) 887 (273) 2,389 Future income tax expense (recovery) (70) 300 5 508 ————————————————————————————————————- Net earnings (loss) and comprehensive earnings $ (269) $ 587 $ (268) $ 1,881 Retained earnings (Deficit), beginning of period $ 402 $ (4,062) $ 401 $ (5,356) ————————————————————————————————————- Retained earnings (Deficit), end of period $ 133 $ (3,475) $ 133 $ (3,475) ————————————————————————————————————- ————————————————————————————————————- ————————————————————————————————————- Earnings per share - basic and diluted $ (0.01) $ 0.03 $ (0.01) $ 0.09 ————————————————————————————————————- ————————————————————————————————————- RDM CORPORATION Consolidated Statements of Cash Flows (Amounts in Canadian Dollars, In Thousands) Three months ended Six months ended March March 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ————————————————————————————————————- Cash provided by (used in): Operations: Net earnings (loss) $ (269) $ 587 $ (268) $ 1,881 Items not involving cash: Amortization of furniture and equipment 165 169 344 324 Amortization of intangible assets 11 8 19 15 Stock-based compensation 136 95 257 170 Future income taxes (70) 300 (5) 508 Change in non-cash operating working capital 489 88 1,173 313 ————————————————————————————————————- Cash provided by operations 462 1,247 1,520 3,211 Financing: Issuance of share capital 321 166 321 1,130 Repayment of share purchase loans 8 8 16 16 ————————————————————————————————————- Cash provided by financing activities 329 174 337 1,146 Investing: Purchase of furniture and equipment (883) (236) (1,367) (429) Additions to intangible assets (56) (36) (58) (40) ————————————————————————————————————- Cash used in investing activities (939) (272) (1,425) (469) Increase (decrease) in cash (148) 1,149 432 3,888 Cash and cash equivalents, beginning of period 17,998 8,913 17,418 6,174 ————————————————————————————————————- Cash and cash equivalents, end of period $ 17,850 $ 10,062 $ 17,850 $ 10,062 ————————————————————————————————————- ————————————————————————————————————-

SOURCE RDM Corporation

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