Redline Communications Reports 2014 Fourth Quarter and Year End Results

TORONTO, March 12, 2015 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), the creator of powerful wide-area wireless networks for mission-critical applications in challenging locations, today announced operating results¹ for the three months (fourth quarter) and the fiscal year ended December 31, 2014.

Financial highlights for the fiscal year ended December 31, 2014 include:

  • Cash of $16.4 million as of December 31, 2014, up $2.9 million over 2013, with cash flow of $3.2 million from operating activities, up $6.8 million over 2013
  • Order Bookings² were $40.8 million, up 10.7% over 2013
  • Revenues were $36.4 million, up 14.9% over 2013
  • $17.4 million Order Backlog² at December 31, 2014, up 2.4% over 2013
  • 56% overall gross margin, down five percentage points over 2013
  • Operating expenses were $18.4 million, down 29.3% over 2013
  • Adjusted EBITDA² of $3.0 million, an increase of $8.6 million over the Adjusted EBITDA loss of $5.6 million in 2013
  • EPS of $0.15 compared to EPS of ($0.29) in 2013, an improvement of $0.44 per share
  • Acquired the assets of PureWave Networks, a privately held wireless technology company located in Santa Clara, California, for a cash purchase price of $2 million in September 2014.

Financial Review

Order Bookings for the fourth quarter and year ended December 31, 2014 were $12.0 million and $40.8 million respectively, up 88% and 11% over the same periods in 2013. Management estimates that approximately 50% of total Bookings for the year were from customers in the Energy sector, accounting for the majority of the year-over-year growth in total order value and providing a balanced mix of orders from different market segments.  Total recognized revenue for the fourth quarter and year ended December 31, 2014 was $11.5 million and $36.4 million, up 50% and 15% over the same periods in 2013.

Gross margin on Redline product sales during the fourth quarter and year ended December 31, 2014 was 69% and 67% respectively, up one percentage point over the same periods in 2013.  Overall gross margin for the fourth quarter and year ended December 31, 2014 was 53% and 56% respectively, down eight and five percentage points over the same periods in 2013. This was due to a larger percentage of revenue from lower margin professional services and sales of 3rd party equipment.

Overall operating expenses for the fourth quarter and year ended December 31, 2014, were $4.9 million and $18.4 million, an improvement of 17% and 29% over the same periods in 2013.  The restructuring announced on December 3, 2013 resulted in a cost savings of $8.0 million which was partially offset by $0.7 million in additional costs incurred in the fourth quarter 2014 as a result of the acquisition of the assets of PureWave Networks.

Adjusted EBITDA for the fourth quarter and year ended December 31, 2014 was $1.4 million and $3.0 million respectively, an increase of $2.5 million and $8.6 million over the corresponding periods in 2013. The Adjusted EBITDA increase for both periods was a result of the decrease in operating costs and increase in revenue and gross profit as compared to the corresponding periods in 2013.

"2014 was a year in which Redline realized growth in orders, revenues, net income and cash, even as we completed the purchase of the assets of PureWave Technologies and introduced new products," said Robert Williams, Redline CEO. "It's a testament to the discipline and focus of our team that we have grown in all areas while reducing our expenses, and it positions us well going into 2015."

Increased revenues and decreased operating costs resulted in a Net Profit for the fourth quarter of 2014 of $1.4 million, or $0.08 per share as compared to a Net Profit of $0.1 million, or $0.01 per share in the fourth quarter of 2013. For the full year 2014, Redline reported a Net Profit of $2.5 million, or $0.15 per share, as compared to a Net Loss of $4.1 million, ($0.29) per share in 2013.

At December 31st, 2014, Redline held cash of $16.4 million, up $2.9 million from the cash of approximately $13.5 million at December 31, 2013.

Conference Call and Webcast – March 13th, 2015 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Friday March 13, 2015 at 10:00 a.m. Eastern Time. To participate, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide passcode 91333078. A recording of the call will be available through April 30, 2015 on Redline's website.

About Redline Communications

Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for mission-critical applications in challenging locations. Redline networks are used by oil and gas companies to manage onshore and offshore assets, by militaries for secure battlefield communications, by municipalities to remotely monitor infrastructure, and by telecom service providers to deliver premium services. Hundreds of businesses worldwide rely on Redline to engineer, plan and deliver ruggedized, secure and reliable networks for their M2M, voice, data and video communications needs - in locations that include the deserts of the Middle East, the rainforests of South America, and the frozen Alaskan slopes. For more information visit www.rdlcom.com.

NOTES:

1

All amounts reported in this press release are in US dollars unless otherwise stated.

2

To better assess the health and growth of the Redline's business, the Company reports on several non-IFRS metrics, including "Orders or Bookings", "Shipped or Shipments", "Backlog", "EBITDA", "Adjusted EDITDA","EPS excluding the non-cash expense relating to the fair market adjustment on the Debenture", and "Amortized Deferred Revenue". Further information including definitions of these measures and a reconciliation to their closest IFRS measures, if applicable, can be found in the Company's Management Discussion and Analysis for the three and twelve months ended December 31, 2014 ("Q4 and 2014 Year MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and twelve month results ended December 31, 2014 can be found in the condensed consolidated annual audited statement of financial position, condensed consolidated annual audited statement of comprehensive income, condensed consolidated annual audited statement of changes in equity and condensed consolidated annual audited statement of cash flows reproduced at the end of this press release. The selected financial information included in this release is qualified in its entirety by, and should be read together with the Condensed Consolidated Audited Financial Statements of the Company for the three and twelve months ended December 31, 2014 and the Q4 and 2014 Year MD&A.

Forward Looking Statements

Certain statements in this release may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking statements can be identified by terms such as "could", "expect", "may", "will", "anticipate", "believe", "intend", "estimate", "plan", "potential", "project" or other expressions concerning matters that are not historical facts. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Redline to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements, by their nature, are based on certain assumptions regarding expected growth, management's current plans, estimates, projections, beliefs, opinions and business prospects and opportunities (collectively, the "Assumptions"). While the Company considers these Assumptions to be reasonable, based on the information currently available, they may prove to be incorrect.

Many risks, uncertainties and other factors could cause the actual results of Redline to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include but are not limited to the following: significant competition, competitive pricing practices, cautious capital spending by customers, industry consolidations, rapidly changing technologies, evolving industry standards, frequent new product introductions, short product life cycles and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Redline's performance if its expectations regarding market demand for particular products prove to be wrong; any negative developments associated with Redline's suppliers and contract manufacturing agreements including the Company's reliance on certain suppliers for key components; potential penalties, damages or cancelled customer contracts from failure to meet delivery and installation deadlines and any defects or errors in Redline's current or planned products; fluctuations in foreign currency exchange rates; potential higher operational and financial risks associated with Redline's efforts to expand internationally; a failure to protect Redline's intellectual property rights, or any adverse judgments or settlements arising out of disputes regarding intellectual property; changes in regulation of the wireless industry or other aspects of the industry; any failure to successfully operate or integrate strategic acquisitions, or failure to consummate or succeed with strategic alliances; and Redline's potential inability to attract or retain the personnel necessary to achieve its business objectives or to maintain an effective risk management strategy (collectively, the "Risks").

For additional information on these Risks, see Redline's most recently filed Annual Information Form ("AIF") and Annual MD&A, which are available on SEDAR at www.sedar.com and on the Company's website at www.redlinecommunications.com. Redline assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law. All forward-looking statements contained in this release are expressly qualified in their entirety by this cautionary statement.

REDLINE COMMUNICATIONS GROUP INC.

Consolidated Statements of Financial Position

(Expressed in U.S. dollars)












December 31,
2014


December 31,
2013

ASSETS






Current assets:







Cash 



$        16,364,077


$        13,473,246


Trade receivables



12,163,006


10,340,537


Other receivables



780,313


1,155,514


Inventories 



5,479,981


6,138,547


Deferred cost of revenue



-


40,059


Prepaid expenses and other deposits



595,174


928,350





35,382,551


32,076,253

Non-current assets:







Property, plant and equipment



1,590,011


1,768,479


Intangible assets



1,943,678


59,809


Other assets 



77,250


99,753





3,610,939


1,928,041

Total Assets



$        38,993,490


$        34,004,294








LIABILITIES AND SHAREHOLDERS' EQUITY 






Current liabilities







Trade and other payables



6,307,092


5,553,916


Income tax payable



155,063


153,403


Deferred revenue



1,467,123


1,105,333


Borrowings



4,311,077


4,981,078





12,240,355


11,793,730

Non-current liabilities







Other payables



478,311


788,592


Other financial liability



159


111,548


Convertible debenture (principal and interest)



265,614


287,175


Fair market value adjustment on convertible debenture



91,040


920,739





835,124


2,108,054

Total Liabilities



13,075,479


13,901,784








SHAREHOLDERS' EQUITY






Share capital 



172,617,023


168,903,267

Share purchase loan 



-


(365,780)

Warrant 



310,000


310,000

Contributed surplus



8,167,450


8,911,025

Deficit



(155,176,462)


(157,656,002)





25,918,011


20,102,510

Total liabilities and equity



$        38,993,490


$        34,004,294

 

REDLINE COMMUNICATIONS GROUP INC.

Consolidated Statements of Comprehensive Income (Loss)

(Expressed in U.S. dollars)















Three months ended December 31,


Year ended December 31,



2014


2013


2014


2013











Revenue



$   11,542,106


$    7,687,118


$   36,438,811


$  31,702,847

Cost of revenue



5,444,019


2,997,792


15,984,952


12,328,254

Gross profit



6,098,087


4,689,326


20,453,859


19,374,593












Expenses:











Research and development



792,432


1,206,873


3,031,637


6,049,163


Administration and finance



1,685,415


2,099,519


6,029,204


8,173,840


Sales and marketing



2,134,537


2,297,358


8,130,326


10,331,375


Operations and customer support



307,912


331,170


1,210,641


1,485,420





4,920,296


5,934,920


18,401,808


26,039,798

Profit (loss) before undernoted items



1,177,791


(1,245,594)


2,052,051


(6,665,205)












Other expenses (gains)











Finance expense



26,596


41,564


127,450


274,638


Restructuring costs



-


841,069


-


841,069


Gain on fair market value
  of financial instruments



(105,098)


(2,301,672)


(556,228)


(3,778,206)


Foreign exchange gain



(159,971)


(4,778)


(45,072)


(134,316)





(238,473)


(1,423,817)


(473,850)


(2,796,815)

Profit (loss) before income taxes



1,416,264


178,223


2,525,901


(3,868,390)

Income tax expense



3,293


51,114


46,361


248,634

Net profit (loss) and total comprehensive income (loss)



$     1,412,971


$       127,109


$     2,479,540


$   (4,117,024)























Earnings (loss) per share











Basic



$              0.08


$             0.01


$              0.15


$            (0.29)


Diluted



$              0.08


$             0.01


$              0.15


$            (0.29)

 

REDLINE COMMUNICATIONS GROUP INC.

Consolidated Statements of Changes in Equity

(Expressed in U.S. dollars)











Share

capital

Share purchase

loan

Warrant

Contributed

surplus

Deficit

Total

Balance at
January 1, 2013

$    152,123,803

$     (365,780)

$           310,000

$        8,361,465

$  (153,538,978)

$        6,890,510


Net loss

-

-

-

-

(4,117,024)

(4,117,024)


Conversion of debenture

2,132,243

-

-

-

-

2,132,243


Conversion of warrants

5,334,306

-

-

-

-

5,334,306


Private placement

8,835,392

-

-

-

-

8,835,392


Exercise of options

477,523

-

-

(209,795)

-

267,728


Share-based payments

-

-

-

759,355

-

759,355

Balance at
December 31, 2013

$    168,903,267

$     (365,780)

$           310,000

$        8,911,025

$  (157,656,002)

$      20,102,510


Net profit

-

-

-

-

2,479,540

2,479,540


Exercise of options

1,790,172

-

-

(835,117)

-

955,055


Conversion of warrants

2,253,156

-

-

-

-

2,253,156










Share purchase loan settlement

(329,572)

365,780

-

-

-

36,208


Repurchase and cancellation of options

-

-

-

(201,793)

-

(201,793)


Share-based payments

-

-

-

293,335

-

293,335

Balance at
December 31, 2014

$    172,617,023

$                    -

$           310,000

$        8,167,450

$  (155,176,462)

$      25,918,011

 

REDLINE COMMUNICATIONS GROUP INC.

Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)












Three months ended December 31,


Year ended December 31,


2014

2013


2014

2013

Cash flows from operating activities:








Net profit (loss)


$     1,412,971

$        127,109


$     2,479,540

$   (4,117,024)










Adjustments to reconcile net profit (loss) to net cash from operating activities









Finance expense


26,596

41,564


127,450

274,638



Depreciation and amortization of non-current assets


178,104

110,632


556,359

385,471



(Gain) Loss on disposal of assets


(23,757)

-


(8,105)

28,963



Recognition of share based payments


54,689

65,416


329,543

759,355



Foreign exchange loss (gain) on cash held in foreign currency


198,866

(32,314)


580,622

138,322



Foreign exchange gain on borrowings


(174,237)

(277,627)


(486,443)

(653,717)



Gain on fair market value of Debenture


(105,098)

(2,301,672)


(556,228)

(3,778,206)





1,568,134

(2,266,892)


3,022,738

(6,962,198)


Change in non-cash operating assets and liabilities 









Decrease in deferred cost of revenue


-

47,829


40,059

865,191



(Decrease) increase in deferred revenue


(48,409)

(246,350)


361,790

(1,691,164)



Change in other non-cash operating assets and liabilities 


(1,083,460)

1,658,351


(190,261)

4,216,856

Cash from (used in) operating activities


436,265

(807,062)


3,234,326

(3,571,315)








Cash flows from investing activities:








Acquisition of property, plant and equipment


(7,264)

(24,424)


(403,762)

(1,226,822)


Proceeds on sale of property, plant and equipment


201,705

-


216,129

-


Acquisition of intangible assets


(191,988)

-


(2,066,022)

(32,955)

Cash from (used in) investing activities


2,453

(24,424)


(2,253,655)

(1,259,777)








Cash flows from financing activities:








Finance income (costs)


16,198

18,348


58,680

(68,899)


Proceeds from exercise of options


18,015

-


955,055

267,728


Proceeds from conversion of debenture and warrants


-

-


1,919,290

2,931,614


Repayment of borrowings


(442,243)

-


(442,243)

-


Repayment of bank indebtedness


-

(3,353,590)


-

(2,296,855)


Proceeds from private placement


-

-


-

9,322,340

Cash (used in) from financing activities


(408,030)

(3,335,242)


2,490,782

10,155,928

Foreign exchange loss on cash held in foreign currency


(198,866)

32,314


(580,622)

(138,322)

(Decrease) increase in cash 


(168,178)

(4,134,414)


2,890,831

5,186,514

Cash, beginning of the period


16,532,255

17,607,660


13,473,246

8,286,732

Cash, end of the period


$   16,364,077

$   13,473,246


$   16,364,077

$   13,473,246

 

SOURCE Redline Communications Group Inc.

For further information: Lynda Partner, Chief Communications Officer, +1-613-618-3200, lpartner@rdlcom.com; George Kypreos, Chief Financial Officer, +1-905-479-8344, gkypreos@rdlcom.com; Cory Pala, Investor Relations, +1-416-657-2400, cory.pala@evestor.com

RELATED LINKS
http://www.redlinecommunications.com/

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890