RDM Corporation Reports Fourth Quarter and Year End Financial Results and Change in Management

Toronto Stock Exchange Symbol: RC

WATERLOO, ON, Dec. 6 /PRNewswire-FirstCall/ - RDM Corporation (TSX: RC), a leading developer of specialized software and hardware products for electronic payment processing, today announced a management change, as well as financial results for the three and twelve-month periods ended September 30, 2010.  All figures are reported in Canadian dollars unless otherwise stated.

Management Change
RDM's Board of Directors has accepted the resignation of Douglas Newman from his position of Chief Executive Officer of the Company and his seat on the Board of Directors.  Mr. Randy Fowlie, an existing member of RDM's Board, has agreed to serve as interim CEO as the Board conducts a search for a permanent replacement.  This resignation is effective immediately, however Mr. Newman has agreed to support with the transition as needed.  The Board has expressed sincere thanks to Mr. Newman for his past services and wishes him well in his future endeavours.

Fiscal 2010 Financial Highlights

• Total revenues were $20.8 million in fiscal 2010, compared to $24.5 million in 2009, with the decline due mainly to the weakening of the U.S. dollar against the Canadian dollar during the year.
• Payment Processing Services segment revenues, which are recurring in nature, were $9.3 million in 2010, down from $9.9 million a year earlier due to exchange.  Measured in U.S. dollars, revenue increased 8% due primarily to the growth in end users and value added charges.
• Gross profit was $7.8 million or 38% of revenues, compared to $10.4 million or 42% of revenues in the previous year.
• Cost reduction efforts and the alignment of commission programs with corporate objectives led to total savings of $1.7 million for the year in Sales & Marketing, General & Administration, and Research & Development expenses.
• Net loss was $3.0 million or $0.14 per share in 2010, compared to a loss of $2.0 million or $0.10 per share in 2009. The 2010 results included $1.1 million of non-recurring restructuring charges.
• Cash and equivalents were $14.2 million at September 30, 2010, compared to $15.7 million at September 30, 2009.

Fiscal 2010 Operational Highlights

• RDM shipped 23,053 proprietary scanners in 2010, compared to 22,081 the previous year.
• RDM's Image & Transaction Management System (ITMS®) end user locations increased from 17,800 to 18,979 during the year.
• Transaction volumes for ITMS averaged 3.5 million items per week during the fourth quarter of 2010, compared to 3.7 million items per week in Q4 2009, and 3.6 million items per week during Q3 2010.
• The Company added seven additional bank distributors in fiscal 2010 to end the year with 48, and 19 new Independent Sales Organizations (ISOs) and vertical market partners to end the year with 72.
• The Company developed and launched the RDM Connect™ multi-purpose document scanner.
• RDM added Apply Payments functionality to its ITMS WebClient and Simply Deposit® applications to integrate with customers' accounting systems.

"Results for the year were affected by the slow pace of economic recovery and by the strengthening of the Canadian dollar," said Thomas Di Giacomo, Chairman of the Board of Directors of RDM Corporation.  "We responded by reducing our operating cost base, while still managing to make important progress in product development so that we maintain our position of technology leadership."

"In recent months we have seen encouraging signs of increased momentum in remote deposit capture adoption rates," said James Merwin, CFO & Vice President of Corporate Development of RDM Corporation.  "Some of our key bank distributors have become more actively engaged in rolling out the service to their customers, as evidenced by a sharp increase in the fourth quarter in the custom development work we do for financial institutions.  We are also seeing healthy increases in scanner shipments in the first quarter of the new fiscal year.  On the basis of these improving fundamentals, combined with our more competitive cost structure, I am optimistic that we can return to a position of profitability in fiscal 2011."

Special Committee

In July, 2010 the Board of Directors established a Special Committee to work with management to assess corporate alternatives and to right size the company given the current economic environment and level of sales.  The outcome of the Special Committee's work was a reduction in staff and re-organization of parts of the Company and the Board continues to assess alternatives to enhance shareholder value.

Financial Review

Operating Results by Segment
For the Year Ended September 30, 2010

Operating Results by Segment
For the Year Ended September 30, 2009

RDM generated total revenues of $20.8 million in the year ended September 30, 2010, a decrease of $3.7 million or 15% the previous year.  The decrease was primarily attributable to a $2.9 million impact from a shift in currency exchange rates over the past year.

Payment Processing Services segment revenues of $9.3 million in 2010 represented a decrease of $0.6 million or 6% from a year earlier, as 7% growth in ITMS end user locations was offset by the negative effect of the shift in exchange rates.  Revenues in the Digital Imaging Products segment decreased $2.0 million or 17% to $9.8 million due primarily to the currency impact, as well as a change in product mix which led to a higher proportion of lower-priced scanners being sold compared to 2009.  The Electronic Payments Solutions segment and the Quality Assurance segment, which represented a combined 8% of total revenues for the year, generated revenues of $0.6 million and $1.1 million, respectively, compared to $1.3 million and $1.5 million, respectively, in 2009.

Gross profit of $7.8 million in 2010 was down by $2.6 million from $10.4 million in 2009.  Expressed as a percentage of revenues, the gross margin was 38%, compared to 42% a year earlier.  Decreased margins were primarily due to unfavourable impact of exchange rates, and were experienced in both of the Company's major operating segments. 

RDM realized savings in each of its operating expenses in 2010 as the Company undertook a restructuring exercise and reduced spending levels on non-core sales and marketing and research and development activities.  Sales and marketing expense was $3.8 million in 2010, a decrease of 26% from $5.1 million the previous year.  Research and development expenses of $4.2 million were 6% below the 2009 spending of $4.5 million.  General and administration expenses decreased 7% to $1.8 million.  Cost reduction efforts led to restructuring charges totaling $1.1 million, and are expected to result in annualized cost savings of $1.75 million in employee costs.

RDM recorded a foreign exchange gain of $517,000 in 2010, compared to a loss of $367,000 in 2009, due to unrealized gains on forward foreign exchange contracts as the Company's hedging program succeeded in offsetting some of the negative impact of shifting exchange rates.

Net loss was $3.0 million in 2010, or $0.14 per share, compared to a net loss of $2.0 million or $0.10 per share a year earlier. 

RDM repurchased 61,100 shares during the year under its Normal Course Issuer Bids.  At September 30, 2010, the Company had 20,740,626 common shares outstanding.

Fourth Quarter Review

RDM recorded revenues of $5.1 million in the three month period ended September 30, 2010, down from $5.7 million in the fourth quarter of 2009.  Revenue in the Electronic Payment Solutions segment was $312,000, representing more than half of the year's revenues for the segment, and up from $141,000 in Q4 2009, due to an increase in the level of custom development work for US financial institutions.

Gross margin was 37% in the fourth quarter of 2010 compared to 42% a year earlier.  Operating expenses were $2.0 million, compared to $2.1 million in Q4 2009.

Fourth quarter 2010 earnings were positively impacted by the recognition of a $421,000 foreign exchange gain due to the effects of the strengthening of the Canadian dollar during the quarter.  Similarly, Q4 2009 results included a $952,000 exchange gain.  Fourth quarter 2010 earnings were negatively impacted by restructuring charges totaling $692,000.

The net loss was $557,000 or $0.00 per share in the fourth quarter of 2010, compared to net earnings of $286,000 or $0.01 per share in Q4 2009.

Conference Call

RDM will be hosting a conference call to discuss the Company's fiscal 2010 results on December 7, 2010 at 9:00 a.m. EST.  Dial-in numbers are 647-427-7450 or 1-888-231-8191.  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 more 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.

SOURCE RDM Corporation