Redline Communications Reports Q1 2016 Results

TORONTO, May 4, 2016 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), a leading provider of mission-critical wireless networks, today announced unaudited operating results¹ for the three months ended March 31, 2016 (Q1 2016).

Q1 2016 Financial Highlights

  • $6.2M Revenue
  • 59% Gross Margin
  • $0.6M Adjusted EBITDA² loss
  • $0.9M Net Loss
  • $13.0M Cash
  • $6.9M new Order Bookings²
  • $17.7M Order Backlog²

Total revenue for Q1 2016 was $6.2 million, up $1.1 million or 21% over the preceding quarter, down $3.4 million or 35% over the same period in 2015. The year-over-year decrease can be attributed to lower sales to energy companies whose businesses have been affected by the downturn in global oil prices.

Order Bookings for Q1 2016 were $6.9 million, up 13% over the same period in 2015.  The Order Backlog at March 21, 2016 was a healthy $17.7 million, up $4.4 million or 33% when compared to the same period in 2015.

"Redline is making progress in the diversification of its business. In Q1 2016, approximately 80% of our new orders came from customers in markets other than oil and gas," stated Rob Williams, Redline CEO. "We will continue to grow and diversify our customer base and we know that we are also well positioned in the energy sector once the oil and gas sector rebounds."

Overall operating expenses for Q1 2016 were $4.6 million, a decrease of $0.2 million, or 4% compared to $4.8 million reported for the same period in 2015, primarily as a result of decreased numbers of staff and their associated costs. The decreases were partially offset by an increase in costs to support the upcoming LTE product line and legal fees to implement a shareholder rights plan. 

Adjusted EBITDA loss for Q1 2016 was $0.6 million, an improvement of $0.5 million or 44% over the Adjusted EBITDA loss of $1.1 million for the quarter ended December 31, 2015, but an increased loss of $2 million over the Adjusted EBITDA of $1.3 million for the same period in 2015. The increased loss over Q1 2015 can largely be attributed to lower revenues in the period.

Net loss for Q1 2016 was $0.9 million or ($0.05) per share, a $2.0 million decrease over the net profit of $1.1 million, or $0.06 per share reported in the same period in 2015.  As of March 31, 2016, the Company reported $13.0 million of cash, a decrease of $1.6 million over the $14.5 million as at December 31, 2015. The decrease was largely attributable to the net loss and increased working capital requirements.

The Company had 17,215,469 common shares outstanding as of March 31, 2016.

Conference Call and Webcast – May 5th, 2016 at 10:00 a.m. ET

A conference call and webcast to discuss the Company's financial results have been scheduled for May 5, 2016 at 10:00 a.m. Eastern Time. To participate in the call, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide passcode 93573631. A recorded webcast of the call will be available on Redline's website at http://www.rdlcom.com/en/about/investors/webcasts through July 31, 2016.

About Redline Communications

Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for the most challenging applications and locations. Used by oil and gas companies to manage their assets, militaries for secure battlefield communications, municipalities to remotely monitor highways, utilities and other infrastructures, and telecom service providers to deliver premium services, Redline's powerful and versatile networks reliably and securely deliver voice, data, M2M and video communications for mission-critical applications.

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 key metrics, including "Orders or Bookings", "Backlog", "EBITDA", "Adjusted EBITDA", "EPS excluding the non-cash expense relating to the fair market adjustment on financial instruments", and "Amortized Deferred Revenue".  Further information including definitions of these categories can be found in the Company's Management Discussion and Analysis for the three months ended March 31, 2016 ("Q1 2016 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended March 31, 2016 can be found in the condensed consolidated interim statement of financial position, condensed consolidated interim statement of comprehensive loss, condensed consolidated interim statement of changes in equity and condensed consolidated interim 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 Interim Financial Statements of the Company for the three months ended March 31, 2016 and the Q1 2016 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.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited, expressed in U.S. dollars)












March 31,
2016


December 31,
2015

ASSETS







Current assets:








Cash



$

12,986,728

$

14,548,954


Trade receivables




8,316,306


8,187,806


Other receivables




422,570


466,668


Inventories




6,213,900


7,100,207


Deferred cost of revenue




33,318


-


Prepaid expenses and other deposits




608,419


266,578





28,581,241


30,570,213

Non-current assets:








Property, plant and equipment




1,362,825


1,389,727


Intangible assets




1,904,841


1,974,672


Other assets




81,170


64,755





3,348,836


3,429,154

Total Assets



$

31,930,077

$

33,999,367








LIABILITIES AND SHAREHOLDERS' EQUITY 







Current liabilities:








Trade and other payables



$

3,600,213

$

4,475,662


Income tax payable




94,063


94,063


Deferred revenue




1,198,370


1,534,731


Convertible debenture (principal and interest)




-


224,595


Fair market value adjustment on convertible debenture




-


11,817


Borrowings




749,076


2,833,752





5,641,722


9,174,620

Non-current liabilities:








Borrowings




2,078,355


-


Other payables




321,802


322,116





2,400,157


322,116

Total Liabilities




8,041,879


9,496,736








SHAREHOLDERS' EQUITY







Share capital 




172,929,341


172,662,177

Warrant 




310,000


310,000

Contributed surplus




8,503,936


8,457,415

Deficit




(157,855,079)


(156,926,961)





23,888,198


24,502,631

Total liabilities and equity



$

31,930,077

$

33,999,367

 

 

REDLINE COMMUNICATIONS GROUP INC.

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

(Unaudited, expressed in U.S. dollars)









Three months ended March 31,




2016


2015







Revenue


$

6,216,608

$

9,618,664

Cost of revenue



2,549,091


3,753,012

Gross profit



3,667,517


5,865,652







Expenses:







Research and development



855,559


733,742


Administration and finance



1,444,158


1,608,610


Sales and marketing



2,073,531


2,188,763


Operations and customer support



271,713


296,258




4,644,961


4,827,373

Profit (loss) before undernoted items



(977,444)


1,038,279







Other expenses (income):







Finance (income) expense



(196,884)


27,387


Loss (gain) on fair market value of financial instruments



16,314


(5,318)


Foreign exchange loss (gain)



130,595


(47,628)




(49,975)


(25,559)

Profit (loss) before income taxes



(927,469)


1,063,838

Income tax expense



649


390

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


$

(928,118)

$

1,063,448













Earnings (loss) per share







Basic


$

(0.05)

$

0.06


Diluted


$

(0.05)

$

0.06

 

 

REDLINE COMMUNICATIONS GROUP INC.

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited, 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 profit


-


-


-


1,063,448


1,063,448


Share-based payments


-


-


83,363


-


83,363

Balance at
March 31, 2015

$

172,617,023

$

310,000

$

8,250,813

$

(154,113,014)

$

27,064,822

Balance at
January 1, 2016

$

172,662,177

$

310,000

$

8,457,415

$

(156,926,961)

$

24,502,631


Net loss


-


-


-


(928,118)


(928,118)


Conversion of debenture


267,164


-


-


-


267,164


Share-based payments


-


-


46,521


-


46,521

Balance at
March 31, 2016

$

172,929,341

$

310,000

$

8,503,936

$

(157,855,079)

$

23,888,198

 

 

REDLINE COMMUNICATIONS GROUP INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited, expressed in U.S. dollars)







Three months ended March 31,



2016


2015






Cash flows from operating activities:






Net profit (loss)

$

(928,118)

$

1,063,448








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







Finance (income) expense


(196,884)


27,387



Depreciation and amortization of non-current assets


260,813


205,783



Gain on disposal of assets


-


(9,950)



Recognition of share based payments


46,521


83,363



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


(102,963)


368,517



Foreign exchange loss (gain) on borrowings


201,226


(392,606)



Loss (gain) on fair market value of financial instruments


16,314


(5,318)



(703,091)


1,340,624


Change in non-cash operating assets and liabilities:







Increase in deferred cost of revenue


(33,318)


-



(Decrease) increase in deferred revenue


(336,361)


114,079



Change in other non-cash operating assets and liabilities


(432,114)


(1,882,995)

Cash used in operating activities


(1,504,884)


(428,292)






Cash flows used in investing activities:






Acquisition of property, plant and equipment


(83,860)


(47,271)


Proceeds on sale of property, plant and equipment


-


9,950


Acquisition of intangible assets


(80,220)


(196,852)

Cash used in investing activities


(164,080)


(234,173)






Cash flows from financing activities:






Finance income


3,775


9,585

Cash from financing activities


3,775


9,585

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


102,963


(368,517)

Decrease in cash


(1,562,226)


(1,021,397)

Cash, beginning of the year


14,548,954


16,364,077

Cash, end of the year

$

12,986,728

$

15,342,680

 

SOURCE Redline Communications Group Inc.

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

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