Lucas Skoczkowski - Chief Executive Officer David Charron - Chief Financial Officer

Michael Urlocker - GMP Securities Eyal Ofir - Dundee Capital Partners Robert Young - Canaccord Genuity

Great, thank you. Good morning everyone and thank you for joining us today.

With me is David Charron, our Chief Financial Officer. Before I begin, I would like to draw your attention to Slide 2 of our presentation where we have outlined company disclaimers and cautions regarding forward-looking statements.

Yesterday after market close, we reported our fourth quarter and fiscal 2016 financial results. The press release and accompanying financial documents are available on the Investor Relations section of our website as well as on SEDAR.

In addition, if you haven’t done so already, I encourage you to download the presentation which provides further analysis of our quarterly results. David and I will be referring to this presentation during today’s call.

The agenda for today’s call is as follows. I will begin with an overview of the quarter, David will then review our financial results in detail, and then I’ll return to discuss Friday’s announcements of $80 million investment in Redknee.

We’ll then open up the call to your questions. Beginning with a high level overview of fourth quarter, our results continue to reflect ongoing delays in customer decisions across the global communication industry that have impacted our business throughout 2016 and which were compounded by a strategic review process we announced in late August and associated communication which resulted in additional uncertainty.

During this challenging time, our continuing focus on our near-term priorities resulted in sequential improvement in our results for the fourth quarter, highlighted by significantly improved adjusted EBITDA and cash from operations. We continue to win new contracts based on the comparative strength of our solution in helping service providers around the world achieve their key business objectives, especially in the current environment.

Notably, we signed a multi-million dollar cloud contract to deliver the real-time optimization solution to a leading retailer in Latin America. This deal highlights the growing demand for our solutions delivered from the Redknee cloud.

We also won a multi-million dollar contract with a Tier 1 CSB in EMEA. This is evidence of growing customer demand for Redknee Unified and its ability to help customers monetize multiple lines of business, delivering an enhanced customer experience, and reduced churn through automated promotions.

We ended the quarter with a healthy order backlog of $175 million, which is up 10% on a year-over-year basis and down 3% from the $181 million at the end of Q3 2016. That said, we do believe that the uncertainty of the strategic review process we undertook in late August had an impact on our business in the second half of Q4 and throughout most of Q1.

I’ll discuss this more in a few minutes. Turning to the results for the fourth quarter, revenue was $40.7 million.

Gross profit for the quarter was $23.1 million or 57% of the revenue, which reflects a return to more historical levels following the dip in Q3 gross profit as a result of higher than normal third party revenues. Adjusted EBITDA improved sequentially to $3 million from a loss of $1.9 million in Q3 2016.

This is a direct result of the impact of our restructuring efforts as well as our ongoing focus on cost management. Cash from operations also improved sequentially to $5.4 million, or $13.8 million when restructuring costs are excluded.

Looking at the year as a whole, we generated revenue of $171.1 million with gross margin of 54% and adjusted EBITDA of $3.5 million or 2% of revenues. Recurring revenues for the last 12 months was $102.2 million, as a percentage of revenue was 60% versus 46% for the year ended September 2015.

Fiscal 2016 has been a very difficult year for the industry, our customers, and as a result for our company, but it was not without its successes. We have made meaningful progress on our short-term priorities, most notably reducing our cost structure, including a significant restructuring which itself resulted in $30 million in annualized savings beginning next year and strengthening our cash flow generation.

At the same time, we have been steadfast in driving forward the continued evolution of our business critical software offerings and the strength of our solutions, including adaptability of our solution to different types of business, and our high level of service continues to be recognized by the industry. Recently we were named a Visionary in Gartner’s 2016 Magic Quadrant for integrated revenue and customer management.

Furthermore, we were ranked as one of the top 4 converted billing vendors globally in Analysys Mason’s Revenue Management System Market Share Report, highlighting our position as a preferred provider by many CSBs around the world. It is our ability to provide innovative solutions to our customers in both telecom and non-telecom environments, supported by our track record of delivering custom implementation on time and on budget, that underpins our long-term opportunity.

It’s an opportunity that has been invigorated with our announcement on Friday, an of investment in our business. I will discuss this in more detail after David’s review of our financial results.

David?

Thank you, Lucas, and good morning everyone. Our complete financial statements, MD&A, and earnings release for the quarter and 2016 fiscal year are available on SEDAR and on our website, and I encourage everyone to review them.

As a reminder, our financial results are presented under International Financial Reporting Standards and are presented in U.S. dollars.

For comparative purposes, our previous year’s results are also shown under equivalent accounting standards in functional currency. At the outset, I’d like to reiterate Lucas’ earlier comments that amidst this challenging environment, we are making progress on our short-term financial priorities, as evidenced in the sequential improvement in our quarterly results.

Total revenue for the fourth quarter was $40.7 million compared with $59.8 million for the same quarter last year, with the decrease primarily attributable to continuing purchasing decision delays by customers and the overall reduced spending in the global communications market that we’ve discussed on recent calls. On a sequential basis, our revenue rose slightly from $40.5 million.

Overall for fiscal 2016, total revenue was $171.1 million compared to $222.7 million that we recorded one year ago. Recurring revenue, which we define as revenue from support and maintenance agreements, term-based product licenses and long-term service agreements, was $25.7 million or 63% of revenue in Q4, which is essentially unchanged from the same quarter of last year.

Full-year recurring revenue was $102.2 million or 60% of total revenue compared to $102.9 million or 46% of revenue in fiscal 2015. Adjusted EBITDA for the fourth quarter was $3 million compared with adjusted EBITDA of $7.7 million in Q4 of last year, and on a sequential basis adjusted EBITDA improved by $4.9 million from an adjusted EBITDA loss of $1.9 million, reflecting the impact of our restructuring efforts and our disciplined cost management strategy.

2016 adjusted EBITDA was $3.5 million compared to $34.4 million in fiscal 2015. Net loss was $14.7 million or a loss per share of $0.14 compared to with a net loss of $4.4 million or a $0.04 per share loss for Q4 of last year.

Here I’d like to note three items around net loss for the quarter. First, it includes restructuring costs of $6.2 million as during the fourth quarter, we incurred additional costs related to the final discussions with the Works Council which resulted in a change of actual cost from our previous estimates.

We expect savings from our restructuring program this year to be approximately $30 million on an annualized basis. Excluding the restructuring charge, net loss for Q4 this year was $8.5 million.

Second, it includes other income in the amount of $6.4 million resulting from the reversal of a provision for an onerous contract stemming from the Orga acquisition. During the quarter, the contract was assessed to be no longer onerous due to information about future cash flows relating to the project, and the provision was reversed.

Third, at September 30 we recorded a provision of $3.7 million as the best estimate of our obligations arising from transactions related to the acquisition of Nokia’s BSS division. Drilling down into the components of revenue, software license and service revenue for Q4 was $15.1 million, down from $32.1 million in Q4 of last year.

The estimated split between software licenses and services revenue was $6.1 million and $9 million, compared with $16.7 million and $15.3 million for Q4 of last year. Support subscription revenue increased by $0.2 million to $23.9 million or 60% of revenue, up from $23.7 million or 40% of revenue for the same period last year.

Sales of third party hardware and software components were $1.6 million or 4% of total revenue compared to $4 million or about 7% of total revenue for Q4 of last year. Gross margin for the fourth quarter was 57% versus 58% in the same quarter of last year, and fiscal 2016 gross margin was 54%.

Total operating expenses for Q4 were $34.4 million compared with $30.9 million in Q4 of last year. Excluding restructuring costs and acquisition costs, operating expenses for Q4 were $24.5 million or 60% of total revenue, down from $30 million or 50% of total revenue a year ago.

The year-over-year decrease of $5.5 million is primarily the result of lower sales and marketing costs, as well as lower R&D expenses. Overall, the impact of the restructuring we announced in March has resulted in savings in Q4 of $7.7 million and $16.6 million for fiscal 2016.

Now looking at each of the operating expense line items individually, sales and marketing costs totaled $6.6 million, a 26% decrease from the same period last year. As a percentage of revenue, sales and marketing expenses were 16%, which was unchanged from the same quarter a year ago.

General and administrative costs decreased 5% to $7.6 million from $8 million for Q4 of last year. Excluding stock compensation and amortization, G&A was $4.2 million or 10% of revenue, down from $5.9 million or 10% of revenue in Q4 of last year.

The decrease is mainly attributable to the lower headcount costs and other cost optimization initiatives. R&D expenses decreased 21% to $10.3 million from the $13.1 million for the same period last year.

As a percentage of revenue, R&D was 25% of revenue. The decrease in R&D costs is primarily a result of our ongoing cost optimization plan.

Turning now to key balance sheet items for the quarter, cash and equivalents, including restricted cash, at the end of Q4 totaled $41.7 million, down from $43 million at the end of Q3 2016. As Lucas mentioned, we generated $5.4 million in cash from operations which adjusted cash from operations, which excludes cash used for our restructuring initiatives, was $13.8 million.

The improvement in cash from operations is directly attributable to the success of our working capital optimization and disciplined collection efforts. I will note that cash from operations has improved sequentially in each quarter this year.

During Q4, we used cash of $8.4 million for restructuring related costs. Accounts receivable at the end of fiscal 2016 was $43.2 million, down 36% from $67.4 million at the end of fiscal 2015.

Our days sales outstanding decreased to 92 days from 96 days at 2015 fiscal year-end and remains below our target range of between 100 and 110 days. Unbilled revenue was $27.3 million, down $11 million or 29% from the $38.3 million at the end of fiscal 2015.

Conversely, deferred revenue was $19.6 million or up $5.4 million or 38% from the $14.2 million at the end of fiscal 2015. The changes in A/R, unbilled revenue and deferred revenue have all resulted in sources of cash for the company in fiscal year ’16.

Working capital at the end of the year was negative $15.5 million compared with $87.9 million at the end of fiscal 2015. It’s important to note here that our debt has been classified as a current liability as at September 30.

Excluding loans and borrowing from the current liabilities, our working capital balance was $35 million. Now turning to an update on our credit facility, for the fourth quarter and year ended September 30, we obtained an amendment and waiver under which our lenders waived our financial covenants for the quarter.

Additionally, on December 9 we entered into a new waiver and amendment to the credit agreement which waives the financial covenants for the December 31 period and requires that the private placement transaction we announced closes on or before January 31. I should note that we plan on using the $80 million investment for the following: first, to repay our credit facility in full; second, to finance the cost of our restructuring program; and third, to provide additional working capital for the company.

Finally, our order backlog at the end of 2016 was $175 million compared to $180.7 million at the end of Q3. Of this amount, we expect approximately 58% to be converted to revenue in the next 12 months with the remainder converted in future periods.

This concludes my financial review. I’ll now turn the call back over to Lucas.

Great, thank you, David. Despite the long-term opportunities for our company, the protracted macro environment and its impact on our business and our financial position required that we take steps back and consider various strategic and financial alternatives to enhance shareholder value.

As you are aware, in August a special committee was formed to explore such alternatives. Last Friday, we announced the outcome of this process, an agreement for U.S.

$80 million private placement of preferred shares and warrants with a subsidiary of Constellation Software. The agreement followed a fulsome process under which all available alternatives were explored.

The Constellation agreement was recommended by the special committee as the best alternative for the company identified during the process and was after substantial consideration approved by the Board of Directors. The transaction required shareholder approval and we expect to hold a special meeting for such purpose in late January.

Notably, following completion of the transaction, Constellation will have the right to nominate four individuals for election to Redknee’s board of directors. The number of directors will be initially set at seven: two existing directors, the four Constellation nominees, and Redknee’s CEO.

This financing is beneficial to Redknee in several respects. One, it provides significantly improved financial flexibility.

The proceeds will e used to repay approximately $53 million under our senior secured credit facility. The balance will go towards funding our previously announced restructuring costs as well as working capital.

Number two, it provides Redknee shareholders with the opportunity to participate in the long-term growth potential of our company. Number three, it adds a strong strategic partner and anchor shareholder that will provide enhanced support to our company, including the expertise of the new board members as we continue to execute on our business plans and growth strategy.

Four, the deal structure preserves the possibility of a premium change of control transaction that will be entirely within the authority of the independent directors to facilitate and recommend, and the common shareholders to accept or not independent of Constellation. With the process concluded, we are now able to turn our focus back to servicing our customers and delivering against our business plan to the benefit of all shareholders.

As I noted earlier, the uncertainty of the strategic review and the company’s financial condition had further dampened our business, resulting in additional delays in orders and new contracts in the short term. We are confident, however, the flexibility provided by the financing alongside the confidence shown by our new strategic partner and the support of our largest shareholder will be recognized by existing and prospective customers.

Accordingly, we are reiterating our previously provided guidance for fiscal 2017 of $15 million to $20 million of EBITDA on $170 million to $180 million of revenue. We expect our EBITDA will be at the high end of the guidance range and potentially above.

We expect our revenue will be at the lower end of our guidance range, but with the announcement of our financing transaction expect customer uncertainty to be alleviated and purchase orders that have been deferred to be placed by our customers on a normalized basis. I would like to note that we expect our financial results to be weighted towards the back half of the year for the reasons I just discussed.

Fundamentally, our business and our long-term growth opportunities remain unchanged, yet in many ways this transaction marks the beginning of a new chapter for our company. Our industry-leading business solutions, now supported by a strengthened financial position and new strategic partner, positions us for a renewed pursuit of our long-term vision.

I’d like to now open the call to your questions. Operator?

Thank you, good morning. Thanks for taking my question.

I had two things I wanted to pursue, first with David and then with Lucas. David, certainly it’s good to see cash generation.

It’s improved through the year, as you observed. If we look at the accounts receivable and the cash generated on accounts receivable, it roughly went from Q1 to Q4 something like $2 million, $4 million, $8 million, $9 million right, so it’s been improving substantially.

Is that a result of new processes you’ve put in or a change in the -- what’s the word, a burning incentive to generate cash, or some other factors with the customers?

No, I think, Michael, it’s just a result of very disciplined cash collection processes that we’ve had in the company all along, and we’ve stated on our previous calls that we were very focused on this. We remain focused on it, and it’s good to see that our efforts had this very positive result.

Okay, thank you. Then for Lucas, kind of at a high level, Lucas, it’s important for equity investors to understand, if they can, the motivation and strategy of Constellation’s investment.

So from your perspective, have you had personal dialog with Mark Leonard since August on what their goals and strategies and processes are?

So I think--I’ve spoken with folks from within Constellation’s organization, but a lot of the dialog and the negotiations have been conducted by our special committee. But I’ve had discussions with folks that Mark Leonard supports, and I think our focus was around the best practices in areas where we can continue to drive opportunity in Redknee.

Okay, thank you. I appreciate that.

Great.

Thanks. Just want to ask about the macro environment.

You’ve talked about over the last few quarters that obviously it’s been elongated in terms of pushing out the deals. Obviously it’s had some impact now because you went into the strategic review, but can you give us a sense of are you seeing the picture improve, is it still the same?

Are there specific pockets where it’s taking longer, and then also how much should we--from a modeling standpoint, how much should we model into the back end versus the front end? Thanks.

Thanks Eyal. Good and long question, as always.

So a couple things - I think a year ago, more than a year ago now, I’ve been talking about slowdown in our industry, and I was told that maybe I’m being too pessimistic, so I have to be careful not being now over-optimistic. But a couple things that I observed from our vantage point, one is our customers continue to go through fairly constrained opex and capex cycles.

That being said, our pipeline of engagement despite the noise we have had through the strategic process review and the letters that went to shareholders, I think despite all that our pipeline has grown. Our engagement with opportunities to replace our competitors has increased, and our competitors in these dynamics have also weakened.

So I think overall, if I look over next 12 months, I’m encouraged that some of our customers will proceed with expansions. I am encouraged that we do see opportunities for upgrades, and I do expect to add additional new logos in our business where we have been selected for technology, but obviously our competitors have been pointing out that we might not exist, so the decisions have been in a holding pattern until we come out of this process.

I think the industry will have another tough year, is my expectation, but I do expect that some of our segments on customer care policy on our converged multi-play business for Tier 2s and Tier 3s actually will experience opportunity to improve and drive improvement in margins. Is that helpful, Eyal?

Yes, it is. Then, I’m also trying to figure out, in the past you’ve also talked about opportunities with different partners.

Has that changed at all, and what’s your view on that?

So we’re working--it’s been interesting. Obviously we are very much engaged with our existing partners, and additional partners have contacted us, so that remains, I think, robust and we are selling with them, not necessarily through them, would be probably one.

But that cooperation, the number both in telecom and non-telecom has increased. We are looking to have non-telecom platform, a cloud-based API for developer partners to open up next quarter, and I expect that to continue to grow as we both make it available on Azure as well as on other cloud platforms that are out there that developers request us to support.

But I think the work we’ve done in both here in North America as well as the work we’ve done in APAC with those development partners, I think continues to be very positive. In telecom, we’ve got a handful of partners that we go to market with, but as well the focus for us lately has been obviously our own development as partners also want to see what’s the outcome of the process.

Okay. I’ll pass the line.

I have more questions, but I’ll jump back into the queue. Thanks.

Great, thank you, Eyal.

Hi, good morning. I just wanted to clarify something I think you said about the covenant relief you’d received from the current creditors.

I think you’re clear until the end of December, but that’s contingent on closing the current financing you have in front of you with Constellation by the end of January. Do I understand that correctly, or are there other options available to you if something doesn’t materialize on this option of Constellation?

You’ve understood that correctly, Rob. We have the waiver that gets us through the December quarter, and all expectation is that this transaction will close before the end of January.

Okay, and the current creditor, do you have any talks about potential to extend that if necessary, or is this a [indiscernible] with the current credit facility?

There have been no specific discussions on that, Rob, but if that happens, I’m sure we’ll open a dialog with them.

Okay. The bookings that are implied in the backlog, it looks as though that was a little bit--book-to-bill was a bit weak.

You’d said that the pipeline was as strong as you’ve seen and that you--I think last quarter you said the best visibility you’d seen in recent history with the business. So I’m trying to understand what the bottleneck is.

Is it really just your customers that are not signing longer duration deals, or is there a competitive factor here? Just trying to understand what’s the bottleneck to conversion.

The bottleneck was Eric’s letter in August spooked customers, number one, because it created uncertainty. I had a lot of discussions with customers asking me what is the future of the business, because our customers make decisions for five-plus years, and it put a lot of pause for all of our customers to be able to give us orders.

That being said, I expect those to resume. I think some of the discussion will continue until we have completion of the transaction, or the transaction gets approved end of January, but I think from our perspective, the discussions from a technical perspective have been very robust.

Competitively, I think we’re in a very good position and I feel that we actually now can move into an advantageous position. Post-investment, I think we will be in a much better position than some of our competitors, but noise is not suitable to do business in, especially in the telecom sector.

I want to refer everybody to memories of Nortel, and noise is bad for business. Is that helpful, Rob?

Yes, sure. Have you received any announcements from your customers that they’re going to churn off the platform given all of this noise that’s happened, or have you managed to hang onto them all?

We have managed to hang onto all of them, so that’s positive. I’ve had a lot of dialog with Vishal and David with our key customers, really walking them through and giving them up to date on how we’re progressing through both the process in our business and what our plans are.

I think from our perspective, customers have been very supportive as seen through both collections and from orders that we have received, but obviously understandably they also have been cautious because they want to see--they also understand that as much as management has plans and desires, this process has been driven by the independent committee, so they wanted to see agreement and announcements to alleviate their concerns.

Okay. Last question from me - to perhaps offset the perception that the Constellation option is a financing option of last resort, is there any benefit that you can talk about that you’re expecting to see from this increased board representation from Constellation?

What’s that going to do from your perspective to improve Redknee for shareholders?

I think from our perspective, we’ve had good discussion with members of Constellation Software with respect to best practices that they have identified and developed over the last 20 years of their operations, and in my view the discussions have been both refreshing and valuable and we want to continue those so we can apply them in our business. I think from the perspective of our business is larger now and how we deal with the broader product scope, how we deal with the global market and how we create the right dynamic of our customers to drive required profitability, I think there’s very good discussions that I look forward to not only having but also acting on with our expanded board.

Maybe one specific area, one area investors have criticized Redknee, is the lack of ability to increase the service and maintenance component from their existing customers. Is that an area that you think Constellation will be able to provide some support and advice for?

I think that critique is I think is misfounded. I think in the process, everybody has confirmed that from a support perspective, we have margins which are in line, if not on the higher side of the industry in telecom, and there continues to be quite a bit of pressure.

But I think their approach on the investing capital allocation to drive investment on software and how it’s sold, I think we will benefit from.

Okay, thanks for the color.

Thanks. Just a quick question for David.

Is there more restructuring charges to be coming over the next one or two quarters?

We’re not expecting to do additional restructuring specifically, Eyal, but we are always looking at ways to reduce our cost structure, and that can happen under a number of different avenues. Over the last 12 months, we’ve had many internal discussions about opportunities to continue to make sure that our cost structure matches the revenue visibility that we have, and we will continue to do that; but we’re not specifically expecting another restructuring going forward.

Okay, and then a question for Lucas. On the IoT market, I think in the past you guys have had some success in entering other markets outside of telecom.

Have you looked at just trying to maybe even accelerate that to take some of this pressure off your business?

I think definitely from a perspective of opportunity, there remains a very real one. As I mentioned, we are going to move with Open API where there will be a software API available in the cloud to other developers, so as opposed to trying to do heavy lifting, make the application try to do everything for different verticals, we have been working with different partners to give them our capability as an application programming interface so that they can leverage capability through a cloud or a SaaS model.

So that I think will be a way for us to reach the market without heavy investment in sales and marketing that would be required otherwise. We have invested in business development and support framework to support developers, so that’s work; but obviously we will review that once we have a new commissioner of the board of the strategy and how we allocate capital for it.

But I remain of the view that that definitely is exciting and there’s opportunity there.

Okay, thank you.

Thank you.

Awesome. Thank you everyone for joining us on today’s call.

We look forward to updating you about our progress, both the results of the vote as well as our next quarterly results. In the meantime, I’d like to wish you happy holidays and happy new year.

Thanks everyone, take care.