RSI International Systems settles billing dispute with client as restructuring continues

Toronto-listed RSI International Systems Inc (CVE:RSY) revealed it had settled a previously reported billing dispute with one of its clients as it continues to make restructuring and efficiency improvements.

As reported in November last year, RSI, which supplies a property management system, or ‘PMS’, to the hotels and the hospitality sector,  was in the process of negotiating a billing dispute with one customer.

That customer represents around 5% of RSI’s hotel property portfolio, RSI said.

“Although we feel our case was strong, the prospect of a protracted and time-consuming litigation with uncertain consequences led us to conclude that settlement was the best course of action, allowing us to direct our full focus on improving our business,” Tim Major, RSI’s president and  chief executive, told investors.

The company boss said the firm had worked hard and was “extremely disappointed” that it hadn’t been able to renew its business relationship with this customer.

“However, as a result of careful planning, the loss of this account will not change our focus of becoming free cash flow positive and continuing to progress on bringing to market new incremental innovations and features.”

The client will now not be required to pay for services from May 1 last year to May 15 this year, and as of that date, RSI will cease to provide services.

RSI will also reimburse the customer a total of C$130,000 in instalments over 12 months, the hotel software group said.

In terms of the RSI financial statements,  it has been fully providing for the affected billings in its allowance for doubtful accounts, it said.

Billings to the client between May 1 last year and the end of 2017, will not be included as revenue in the company’s 2017 fiscal year, but will be offset by the elimination of the allowance, so that earnings data will be unaffected.

“Given the payment agreed to in this settlement and the timing of some of the restructuring and efficiency improvements, the company expects that it will have a period of off-trend cash flow performance until most of the benefits of the company’s restructuring take effect by the middle of 2018,” it added.

Shares closed at C$0.12 in Toronto on Friday.

Story by ProactiveInvestors