Redline Communications Reports 2016 Fourth Quarter and Year End Results

TORONTO, March 6, 2017 /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 results (in US dollars unless otherwise noted) for the fourth quarter and the fiscal year ended December 31, 2016.

Financial highlights for the fourth quarter ended December 31, 2016 include:

  • Revenues of $6.3 million, up 23% over Q4 2015
  • Bookings1 of $4.4 million, down 39% over Q4 2015
  • Gross margins of 56%, up 2 percentage points over Q4 2015
  • Operating expenses of $3.6 million, down 15% over Q4 2015
  • Adjusted EBITDA of $0.3 million, an improvement of $1.4 million over Q4 2015
  • Net loss of $0.1 million, an improvement of $1.3 million over Q4 2015
  • Order Backlog of $5.7 million, down 39% over Q3 2016
  • Cash of $11.1 million, or Cdn. $ 0.87/share, up $0.5 million over Q3 2016

Financial highlights for the fiscal year ended December 31, 2016 include:

  • Revenues of $22.8 million, down 24% over 2015
  • Bookings of $21.6 million, down 32% over 2015
  • Gross margins of 55%, down 1 percentage point over 2015
  • Operating expenses of $17.3 million, down 7% over 2015
  • Adjusted EBITDA loss of $3.4 million, as compared to $0.5 million loss in 2015
  • Net loss of $4.8 million, as compared to a net loss of $1.8 million in 2015
  • Order Backlog of $5.7 million, down 68% over 2015
  • Cash of $11.1 million as of December 31, 2016, down $3.4 million over 2015

Financial Review

Total revenue for the fourth quarter and year ended December 31, 2016 was $6.3 million and $22.8 million, respectively, with fourth quarter revenue up 23% over the same period in 2015 and annual revenue down 24% year over year.  Revenue in the fourth quarter was up 21% over the prior quarter.

Adjusted EBITDA for the fourth quarter was $0.3 million, up $1.4 million over the Adjusted EBITDA loss of $1.1 million for the same period in 2015. The increase in the Adjusted EBITDA was a result of higher revenues and lower operating expenses compared to the same period in 2015.  The adjusted EBITDA loss for the year ended December 31, 2016 was $3.4 million, an increased loss of $2.9 million over the same period in 2015, attributed to lower revenues.

"Redline ended 2016 on a stronger note with revenue growth quarter over quarter and over Q4 last year that included a resurgence of revenue from the energy sector," stated Robert Williams, Redline CEO. "This revenue growth combined with steady gross margins and reduced operating expenses has resulted in a positive EBITDA for the fourth quarter."

Order Bookings for the fourth quarter and year ended December 31, 2016 were $4.4 million and $21.6 million respectively, down 39% and 32% over the same periods in 2015. The decrease in Order Bookings year over year can be largely attributed to reduced spending from energy sector clients in the first three quarters of 2016 as a result of lower oil prices.

"We are seeing signs of renewal in our energy sector customer base and in the fourth quarter several existing and new customers placed orders for new networks," added Williams. "Market trials of our new LTE product are being well received and our cost reduction program continues as planned. We believe that our strategy of revenue diversification and ongoing cost management will continue to produce improved results going forward."

Overall gross margin for the fourth quarter and year ended December 31, 2016 was 56% and 55% respectively, up two percentage points and down one percentage point over the same periods in 2015.

Overall operating expenses for the fourth quarter and year ended December 31, 2016 were $3.6 million and $17.3 million, an improvement of 15% and 7% respectively over the same periods in 2015.  The decrease in operating expenses in the fourth quarter was the result of the cost reduction initiative implemented during the quarter to reduce compensation costs and contractual costs. The decrease in operating expenses in 2016 was primarily a result of reduced compensation costs, offset in part by an increase in bad debt expenses and an increase in spending for trial deployments of the Company's new LTE product line.

Net Loss for the fourth quarter of 2016 was $0.1 million, or ($0.01) per share as compared to a Net Loss of $1.4 million, or ($0.08) per share in the fourth quarter of 2015. For the full year 2016, Redline reported a Net Loss of $4.8 million, or ($0.28) per share, as compared to a Net Loss of $1.8 million, or ($0.10) per share in 2015.

At December 31st, 2016, Redline held cash of $11.1 million, up $0.5 million from September 30, 2016, and down $3.4 million from the cash of approximately $14.4 million at December 31, 2015.

Conference Call and Webcast – March 7th, 2017 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Tuesday March 7, 2017 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 73966035. A recording of the call will be available through March 17, 2017 on Redline's website or by dialing 1-416-849-0833 and entering passcode 73966035.

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

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", and "EPS excluding non-cash gain (loss) on fair market value of financial instruments". 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, 2016 ("Q4 and 2016 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, 2016 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, 2016 and the Q4 and 2016 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.rdlcom.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,
2016


December 31,
2015

ASSETS







Current assets:








Cash 


$

11,147,235


$

14,548,954


Trade receivables



7,837,145



8,187,806


Other receivables



231,398



466,668


Inventories 



5,513,985



7,100,207


Prepaid expenses and other deposits



151,880



266,578





24,881,643



30,570,213

Non-current assets:








Property, plant and equipment



1,119,690



1,389,727


Intangible assets



1,494,603



1,974,672


Other assets 



78,908



64,755





2,693,201



3,429,154

Total Assets


$

27,574,844


$

33,999,367









LIABILITIES AND SHAREHOLDERS' EQUITY 







Current liabilities:








Trade and other payables


$

3,322,059


$

4,475,662


Income tax payable



10,741



94,063


Deferred revenue



960,475



1,534,731


Convertible debenture (principal and interest)



-



224,595


Fair market value adjustment on convertible debenture



-



11,817


Borrowings



1,478,418



2,833,752





5,771,693



9,174,620

Non-current liabilities:








Borrowings



1,340,165



-


Other payables



247,799



322,116





1,587,964



322,116

Total Liabilities



7,359,657



9,496,736









SHAREHOLDERS' EQUITY







Share capital 



172,929,341



172,662,177

Warrant 



-



310,000

Contributed surplus



8,998,245



8,457,415

Deficit



(161,712,399)



(156,926,961)





20,215,187



24,502,631

Total liabilities and equity


$

27,574,844


$

33,999,367

 

REDLINE COMMUNICATIONS GROUP INC.

Consolidated Statements of Comprehensive Loss

(Expressed in U.S. dollars)














Three months ended December 31,

Year ended December 31,




2016


2015


2016


2015

Revenue


$

6,320,376

$

5,135,419

$

22,752,325

$

30,129,653

Cost of revenue



2,768,040


2,352,593


10,163,346


13,268,491

Gross profit



3,552,336


2,782,826


12,588,979


16,861,162












Expenses:











Research and development



669,305


969,027


2,944,559


3,298,337


Administration and finance



1,090,756


1,106,671


5,773,757


5,491,258


Sales and marketing



1,587,059


1,833,648


7,510,737


8,488,656


Operations and customer support



227,138


293,495


1,063,640


1,268,530





3,574,258


4,202,841


17,292,693


18,546,781

Loss before undernoted items



(21,922)


(1,420,015)


(4,703,714)


(1,685,619)












Other expenses (income):











Finance (income) expense



22,962


53,979


(155,884)


137,562


Restructuring costs



242,632


-


242,632


235,155


(Gain) loss on fair market value of
financial instruments



-


(28,207)


16,314


(65,739)


Foreign exchange (gain) loss



(55,074)


(65,479)


53,239


(337,511)





210,520


(39,707)


156,301


(30,533)

Loss before income taxes



(232,442)


(1,380,308)


(4,860,015)


(1,655,086)

Income tax (recovery) expense



(103,005)


48,051


(74,577)


95,413

Net loss and total comprehensive loss


$

(129,437)

$

(1,428,359)

$

(4,785,438)

$

(1,750,499)























Loss per share











Basic and diluted


$

(0.01)

$

(0.08)

$

(0.28)

$

(0.10)

 

REDLINE COMMUNICATIONS GROUP INC.

Consolidated Statements of Changes in Equity

(Expressed in U.S. dollars)

















Share
capital

Warrant

Contributed
surplus

Deficit

Total

Balance at
January 1, 2015


$

172,617,023

$

310,000

$

8,167,450

$

(155,176,462)

$

25,918,011


Net loss



-


-


-


(1,750,499)


(1,750,499)


Exercise of options



45,154


-


(24,791)


-


20,363


Share-based payments



-


-


314,756


-


314,756

Balance at
December 31, 2015


$

172,662,177

$

310,000

$

8,457,415

$

(156,926,961)

$

24,502,631


Net loss



-


-


-


(4,785,438)


(4,785,438)


Conversion of debenture



267,164


-


-


-


267,164


Expiry of warrants



-


(310,000)


310,000


-


-


Share-based payments



-


-


230,830


-


230,830

Balance at
December 31, 2016


$

172,929,341

$

-

$

8,998,245

$

(161,712,399)

$

20,215,187

 

REDLINE COMMUNICATIONS GROUP INC.










Consolidated Statements of Cash Flows










(Expressed in U.S. dollars)
























Three months ended December 31,

Year ended December 31,




2016


2015


2016


2015

Cash flows from operating activities:











Net loss


$

(129,437)

$

(1,428,359)

$

(4,785,438)

$

(1,750,499)


Adjustments to reconcile net loss to net
cash from operating activities:












Finance (income) expense



22,962


53,979


(155,884)


137,562



Depreciation and amortization of
non-current assets



246,303


218,879


1,018,272


859,029



Gain on disposal of assets



-


-


(10,213)


(9,950)



Recognition of share based payments



47,510


40,348


230,830


314,756



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



26,947


68,938


(62,850)


579,532



Foreign exchange (gain) loss on
borrowings



(65,960)


(114,146)


106,624


(727,420)



(Gain) loss on fair market value of
financial instruments



-


(28,207)


16,314


(65,739)


















148,325


(1,188,568)


(3,642,345)


(662,729)


Change in non-cash operating assets and
liabilities: 












Increase (decrease) in deferred revenue



140,748


211,398


(574,256)


67,608



Change in other non-cash operating
assets and liabilities 



326,445


3,886,301


961,456


961,085

Cash from (used in) operating activities



615,518


2,909,131


(3,255,145)


365,964

Cash flows used in investing activities:











Acquisition of property, plant and equipment



-


(28,495)


(196,816)


(197,384)


Proceeds on sale of property, plant and
equipment



-


-


20,300


9,950


Acquisition of intangible assets



-


(263,000)


(81,437)


(492,355)

Cash used in investing activities



-


(291,495)


(257,953)


(679,789)

Cash flows from financing activities:











Finance income



5,085


(25,427)


48,529


2,383


Proceeds from exercise of options



-


-


-


20,363


Repayment of borrowings



-


(841,200)


-


(944,512)

Cash from (used in) financing activities



5,085


(866,627)


48,529


(921,766)

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



(26,947)


(68,938)


62,850


(579,532)

Increase (decrease) in cash



593,656


1,682,071


(3,401,719)


(1,815,123)

Cash, beginning of the period



10,553,579


12,866,883


14,548,954


16,364,077

Cash, end of the period


$

11,147,235

$

14,548,954

$

11,147,235

$

14,548,954

 

SOURCE Redline Communications Group Inc.

For further information: Redline Contact(s): Jane Todd, Chief Financial & Operating Officer, +1-905-479-8344, jtodd@rdlcom.com; Cory Pala, Investor Relations, +1-416-657-2400, cory.pala@evestor.com

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