Redline Communications Reports Q3 2015 Results

TORONTO, Nov. 9, 2015 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), a leading provider of mission-critical networks, today announced unaudited operating results¹ for the three months ended September 30, 2015 (Q3 2015).

Q3 2015 Financial Highlights:

  • $6.4M Total Revenue
  • 47% Gross Margin
  • $1.3M Adjusted EBITDA² loss
  • $1.7M Net Loss
  • $12.9M Cash
  • $9.5M new Order Bookings²
  • $16.1M Order Backlog²

Total revenue for Q3 2015 was $6.4 million, down 30% over the same period in 2014. Order bookings for Q3 2015 were $9.5 million, up 12% over the same period in 2014 and up 7% sequentially over Q2 2015.  The order backlog at September 30, 2015 was $16.1 million, an increase of $3.2 million sequentially from Q2 2015.

"Ongoing low oil prices and subsequent delays in purchasing have negatively impacted overall sales to the energy sector and therefore overall company revenues in Q3 2015," said Robert Williams, Redline CEO. "While the oil and gas market continues to be an area of focus for the company, we have increased our emphasis on sales to non-energy sector customers. This has resulted in a quarter-over-quarter increase in total order bookings, driven largely by orders from non-energy sector customers and this sector diversity is expected to continue." 

Overall gross margin for Q3 2015 was 47%, down 3 percentage points from 50% reported in the same period in 2014. Lower gross margins in Q3 2015 are attributed largely to a one-time inventory write-down charge of $0.4 million that reduced gross margins by 6 percentage points. Overall operating expenses were $4.6 million for Q3 2015, up 2% over $4.5 million for the same period last year. At the end of September 2015, the Company undertook a minor restructuring, reducing the number of employees and contractors. This restructuring is expected to reduce annual costs by $2.0 million, or $0.5 million per quarter starting in the fourth quarter of 2015.

Adjusted EBITDA loss for Q3 2015 was $1.3 million, compared to Adjusted EBITDA of $0.4 million reported in the same period in 2014. Net loss for Q3 2015 was $1.7 million, or ($0.10) per share, compared to a net loss of $0.1 million, or ($0.01) per share reported in the same period in 2014.  As of September 30, 2015 the Company had $12.9 million of cash, or $0.75 per common share, a decrease of $3.5 million from $16.4 million at December 31, 2014.

The Company had 17,046,241 common shares outstanding as of September 30, 2015.

A conference call and webcast to discuss the Company's Q3 2015 financial results have been scheduled for November 10, 2015 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 69310639.  A recorded webcast of the call will be available on Redline's website.

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 Redline's business, the Company reports on several key metrics and non-IFRS measures, including "Orders or Bookings", "Backlog", "EBITDA" and "Adjusted EBITDA".  Further information including definitions of these categories and a reconciliation to their closest IFRS measures, when applicable, can be found in the Company's Management Discussion and Analysis for the three and nine months ended September 30, 2015 ("Q3 2015 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended September 30, 2015 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 September 30, 2015 and the Q3 2015 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.






Condensed Consolidated Interim Statements of Financial Position




(Unaudited, expressed in U.S. dollars)

















September 30,
2015


December 31,
2014

ASSETS






Current assets:







Cash 



$

12,866,883


$

16,364,077


Trade receivables



11,833,730


12,163,006


Other receivables



962,250


780,313


Inventories 



6,603,819


5,479,981


Prepaid expenses and other deposits



490,243


595,174





32,756,925


35,382,551

Non-current assets:







Property, plant and equipment



1,461,353


1,590,011


Intangible assets



1,830,430


1,943,678


Other assets 



67,157


77,250





3,358,940


3,610,939

Total Assets



$

36,115,865


$

38,993,490








LIABILITIES AND SHAREHOLDERS' EQUITY 






Current liabilities







Trade and other payables



4,366,890


6,307,092


Income tax payable



155,063


155,063


Deferred revenue



1,323,333


1,467,123


Convertible debenture (principal and interest)



232,415


-


Fair market value adjustment on convertible debenture



41,509


-


Borrowings



3,751,241


4,311,077





9,870,451


12,240,355

Non-current liabilities







Other payables



354,772


478,311


Other financial liability



-


159


Convertible debenture (principal and interest)



-


265,614


Fair market value adjustment on convertible debenture



-


91,040





354,772


835,124

Total Liabilities



10,225,223


13,075,479








SHAREHOLDERS' EQUITY






Share capital 



172,662,177


172,617,023

Warrant 



310,000


310,000

Contributed surplus



8,417,067


8,167,450

Deficit



(155,498,602)


(155,176,462)





25,890,642


25,918,011

Total liabilities and equity



$

36,115,865


$

38,993,490

 

REDLINE COMMUNICATIONS GROUP INC.









Condensed Consolidated Interim Statements of Comprehensive Income (Loss)




(Unaudited, expressed in U.S. dollars)



























Three months ended September 30,


Nine months ended September 30,




2015


2014


2015


2014

Revenue




$

6,368,540


$

9,126,636


$

24,994,234


$

24,896,705

Cost of revenue




3,378,249


4,565,806


10,915,898


10,540,933

Gross profit




2,990,291


4,560,830


14,078,336


14,355,772













Expenses:












Research and development




938,985


795,351


2,329,310


2,239,205


Administration and finance




1,249,466


1,264,466


4,384,587


4,343,789


Sales and marketing




2,028,462


2,112,682


6,655,008


5,995,789


Operations and customer support




344,978


308,404


975,035


902,729






4,561,891


4,480,903


14,343,940


13,481,512

Profit (loss) before undernoted items




(1,571,600)


79,927


(265,604)


874,260













Other expenses (gains)












Finance expense




28,652


26,398


83,583


100,854


Restructuring costs




235,155


-


235,155


-


Gain on fair market value  of financial instruments




(40,008)


(61,283)


(37,532)


(451,130)


Foreign exchange (gain) loss




(162,549)


203,860


(272,032)


114,899






61,250


168,975


9,174


(235,377)

Profit (loss) before income taxes




(1,632,850)


(89,048)


(274,778)


1,109,637

Income tax expense




43,834


5,649


47,362


43,068

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

$

(1,676,684)


$

(94,697)


$

(322,140)


$

1,066,569

























Earnings (loss) per share












Basic




$

(0.10)


$

(0.01)


$

(0.02)


$

0.07


Diluted




$

(0.10)


$

(0.01)


$

(0.02)


$

0.06

 

REDLINE COMMUNICATIONS GROUP INC.





Condensed Consolidated Interim Statements of Changes in Equity




(Unaudited, expressed in U.S. dollars)
















Share
capital

Share purchase
loan

Warrant

Contributed
surplus

Deficit

Total

Balance at
January 1, 2014

$

168,903,267

$

(365,780)

$

310,000

$

8,911,025

$

(157,656,002)

$

20,102,510


Net profit

-

-

-

-

1,066,569

1,066,569


Exercise of options

1,764,500

-

-

(827,460)

-

937,040


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

-

-

-

238,646

-

238,646

Balance at
September 30, 2014

$

172,591,351

$

-

$

310,000

$

8,120,418

$

(156,589,433)

$

24,432,336

Balance at
January 1, 2015

$

172,617,023

$

-

$

310,000

$

8,167,450

$

(155,176,462)

$

25,918,011


Net loss

-

-

-

-

(322,140)

(322,140)


Exercise of options

45,154

-

-

(24,791)

-

20,363


Share-based payments

-

-

-

274,408

-

274,408

Balance at
September 30, 2015

$

172,662,177

$

-

$

310,000

$

8,417,067

$

(155,498,602)

$

25,890,642

 

REDLINE COMMUNICATIONS GROUP INC.







Condensed Consolidated Interim Statements of Cash Flows





(Unaudited, expressed in U.S. dollars)


















Three months ended September 30,


Nine months ended September 30,


2015

2014


2015

2014








Cash flows from operating activities:








Net profit (loss)


$

(1,676,684)

$

(94,697)


$

(322,140)

$

1,066,569


Adjustments to reconcile net profit to net cash from operating activities









Finance expense


28,652

26,398


83,583

100,854



Depreciation and amortization of non-current assets


215,475

169,049


640,150

378,255



(Gain) loss on disposal of assets


-

-


(9,950)

15,652



Recognition of share based payments


63,081

85,227


274,408

274,854



Foreign exchange loss on cash held in foreign currency


151,560

415,412


510,594

381,756



Foreign exchange gain on borrowings


(280,871)

(267,174)


(613,274)

(312,206)



Gain on fair market value of Debenture


(40,008)

(61,283)


(37,532)

(451,130)





(1,538,795)

272,932


525,839

1,454,604


Change in non-cash operating assets and liabilities 









Decrease in deferred cost of revenue


-

-


-

40,059



(Decrease) increase in deferred revenue


210,928

(1,059,839)


(143,790)

410,199












Change in other non-cash operating assets and liabilities 


(1,574,261)

(1,181,801)


(2,925,216)

893,199

Cash from (used in) operating activities


(2,902,128)

(1,968,708)


(2,543,167)

2,798,061








Cash flows used in investing activities:








Acquisition of property, plant and equipment


(69,773)

(340,879)


(168,889)

(396,498)


Proceeds on sale of property, plant and equipment


-

-


9,950

14,424


Acquisition of intangible assets


(28,011)

(1,733,534)


(229,355)

(1,874,034)

Cash used in investing activities


(97,784)

(2,074,413)


(388,294)

(2,256,108)








Cash flows from financing activities:








Finance income


7,476

21,794


27,810

42,482


Proceeds from exercise of options


20,363

33,981


20,363

937,040


Proceeds from conversion of debenture and warrants


-

-


-

1,919,290


Repayment of borrowings


(103,312)

-


(103,312)

-

Cash from (used in) financing activities


(75,473)

55,775


(55,139)

2,898,812

Foreign exchange loss on cash held in foreign currency


(151,560)

(415,412)


(510,594)

(381,756)

Increase (decrease) in cash


(3,226,945)

(4,402,758)


(3,497,194)

3,059,009

Cash, beginning of the period


16,093,828

20,935,013


16,364,077

13,473,246

Cash, end of the period


$

12,866,883

$

16,532,255


$

12,866,883

$

16,532,255

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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