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Redline Communications Reports 2018 Second Quarter Results

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Redline Communications Reports 2018 Second Quarter Results

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TORONTO, Aug. 8, 2018 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. ((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 second quarter ended June 30, 2018.

Redline Communications Group Inc. (CNW Group/Redline Communications Group Inc.)

Key Financial Highlights for the three months ended June 30, 2018 ("Q2 2018") include: 

  • Revenues of $7.3 million, up 48% over Q2 2017
  • Gross margins of 55%, up 3 percentage points over Q2 2017
  • Operating expenses of $3.7 million, up 15% over Q2 2017
  • Net profit of $0.3 million, an improvement of $1.0 million over Q2 2017
  • Adjusted EBITDA1 of $0.6 million, an improvement of $1.0 million over Q2 2017
  • Cash of $11.4 million, up $0.3 million from Q1 2018
  • Bookings1 of $7.1 million, up 16% over Q2 2017
  • Order Backlog1 of $6.9 million, down 13% from Q1 2018

Key Financial Highlights for the six months ended June 30, 2018 include: 

  • Revenues of $13.0 million, up 40% over the same period in 2017
  • Gross margins of 53%, down 1 percentage point over the same period in 2017
  • Operating expenses of $7.1 million, up 11% over the same period in 2017
  • Net loss of $0.1 million, an improvement of $1.3 million over the same period in 2017
  • Adjusted EBITDA of $0.4 million, an improvement of $1.1 million over the same period in 2017
  • Cash of $11.4 million, down $0.5 million from Q4 2017
  • Bookings of $14.4 million, up 27% over the same period in 2017
  • Order Backlog of $6.9 million, up 13% over Q4 2017

Financial Review

Revenues for Q2 2018 were $7.3 million up 48% over Q2 2017, driven largely by increased demand for customers in the oil and gas sector. Total Bookings were $7.1M, up 16% over the same period in 2017. "The ongoing recovery of oil prices is fueling a resurgence in business from the oil and gas sector, especially outside of North America," stated Rob Williams, Redline CEO. "We're seeing multiple customers in this sector grow their Redline networks. We also continue to work with multiple new oil and mining prospects who are testing our iLTETM solution."

Overall gross margin for the second quarter of 2018 was 55%, up three percentage points over the same period in 2017 as a result of an expected shift in product sales to include more sales of higher margin industrial products to customers in the energy and mining markets.

Overall operating expenses for the second quarter of 2018 were $3.7 million, up 15% over the same period in 2017.  The increase in operating expenses was mainly a result of increased personnel costs, including recruitment, salary increases, and commissions.

Higher revenues and strong gross margins have resulted in a significantly improved bottom line over the same period last year," stated Joan Ritchie, Redline CFO. "We are now carefully investing in growing our team to be able to sustain this momentum."

Adjusted EBITDA for the second quarter of 2018 was $0.6 million, an improvement of $1.0 million over the Adjusted EBITDA loss of $0.4 million in the same period in 2017. Net profit for the second quarter of 2018 was $0.3 million, or $0.02 per share, an improvement of $1.0 million over the net loss of $0.7 million, or ($0.04) per share reported in the second quarter of 2017.

At June 30th, 2018, Redline held cash of $11.4 million, up $0.3 million from March 31, 2018.

Conference Call and Webcast – August 9th, 2018 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Thursday, August 9, 2018 at 10:00 a.m. Eastern Time. To participate, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide conference ID 3371409. A recording of the call will be available through August 16, 2018 on Redline's website or by dialing 1-416-849-0833 and entering the same conference ID.

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 Redline's business, the Company reports on non-IFRS metrics, including "Orders or Bookings", "Shipped or Shipments", "Backlog", "EBITDA", and "Adjusted EDITDA". 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 six months ended June 30, 2018 ("Q2 2018 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and six month results ended June 30, 2018 can be found in the condensed consolidated interim statement of financial position, condensed consolidated interim statement of comprehensive income, 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 and six months ended June 30, 2018 and the Q2 2018 MD&A.

 

Adjusted EBITDA (Loss)

(Unaudited, Expressed in thousands of U.S. dollars)

The table below reconciles Adjusted EBITDA (loss) to net profit (loss):




Three months ended June 30,

Six months ended June 30,



2018

2017

2018

2017

Revenue

$

7,304

$

4,930

$

13,006

$

9,263

Net profit (loss)

326

(675)

(79)

(1,413)

Add back:






Share based payments

149

44

195

158


Depreciation and amortization

150

190

305

394


Finance (income) expense

(14)

4

(22)

15


Foreign exchange (gain) loss 

7

37

(23)

70


Income tax expense

3

5

9

12


Total

295

280

464

649

Adjusted EBITDA (loss)

$

621

$

(395)

$

385

$

(764)







Adjusted EBITDA margin

9%

-8%

3%

-8%

 

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 effects 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)



June 30,
2018

December 31,
2017

ASSETS



Current assets:




Cash 

$

11,411,021

$

11,960,062


Trade receivables

7,051,552

8,160,646


Other receivables

446,438

304,526


Inventories 

4,872,636

5,438,530


Prepaid expenses and other deposits

420,417

211,511



24,202,064

26,075,275

Non-current assets:




Property, plant and equipment

817,747

829,720


Intangible assets

1,190,893

1,169,733


Other assets 

79,841

83,600



2,088,481

2,083,053

Total Assets

$

26,290,545

$

28,158,328





LIABILITIES AND SHAREHOLDERS' EQUITY 



Current liabilities:




Trade and other payables

$ 4,984,716

$ 5,698,664


Income tax payable

10,741

10,741


Deferred revenue

1,091,034

1,275,875


Borrowings

702,218

792,051



6,788,709

7,777,331

Non-current liabilities:




Borrowings

683,262

1,434,388


Other payables

172,115

169,793



855,377

1,604,181

Total Liabilities

7,644,086

9,381,512





SHAREHOLDERS' EQUITY



Share capital 

172,929,341

172,929,341

Contributed surplus

9,240,212

9,155,798

Deficit

(163,523,094)

(163,308,323)



18,646,459

18,776,816

Total liabilities and equity

$

26,290,545

$

28,158,328

 

REDLINE COMMUNICATIONS GROUP INC.

Condensed Consolidated Interim Statements  of Comprehensive Income (Loss)

(Unaudited, Expressed in U.S. dollars)




Three months ended June 30,

Six months ended June 30,



2018

2017

2018

2017

Revenue


$

7,304,387

$

4,929,502

$

13,006,333

$

9,262,901

Cost of revenue


3,313,489

2,365,557

6,054,002

4,240,389

Gross profit


3,990,898

2,563,945

6,952,331

5,022,512







Expenses:







Research and development


566,664

512,307

1,196,883

1,091,370


Administration and finance


1,196,250

1,097,816

2,263,474

2,167,612


Sales and marketing


1,697,088

1,389,487

3,215,280

2,727,409


Operations and customer support


209,180

193,237

391,905

352,340




3,669,182

3,192,847

7,067,542

6,338,731

Profit (Loss) before undernoted items


321,716

(628,902)

(115,211)

(1,316,219)








Other (income) expenses:







Finance (income) expense


(14,367)

3,881

(21,833)

14,427


Foreign exchange (gain) loss


7,026

36,686

(22,922)

70,305




(7,341)

40,567

(44,755)

84,732

Profit (Loss) before income taxes


329,057

(669,469)

(70,456)

(1,400,951)

Income tax expense


2,871

5,210

8,315

12,405

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


$

326,186

$

(674,679)

$

(78,771)

$

(1,413,356)











Earnings (Loss) per share







Basic and diluted


$

0.02

$

(0.04)

$

(0.00)

$

(0.08)

 

REDLINE COMMUNICATIONS GROUP INC.

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited, Expressed in U.S. dollars)




Share
capital

Contributed
surplus

Deficit

Total

Balance at
January 1, 2017

$

172,929,341

$

8,998,245

$

(161,712,399)

$

20,215,187


Net loss

-

-

(1,413,356)

(1,413,356)


Stock option expense

-

104,520

-

104,520

Balance at
June 30, 2017

$

172,929,341

$

9,102,765

$

(163,125,755)

$

18,906,351

Balance at
January 1, 2018

$

172,929,341

$

9,155,798

$

(163,308,323)

$

18,776,816


IFRS 15 transition adjustment

-

-

(136,000)

(136,000)


Net loss

-

-

(78,771)

(78,771)


Stock option expense

-

84,414

-

84,414

Balance at
June 30, 2018

$

172,929,341

$

9,240,212

$

(163,523,094)

$

18,646,459

 

REDLINE COMMUNICATIONS GROUP INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited, Expressed in U.S. dollars)



Three months ended June 30,

Six months ended June 30,


2018

2017

2018

2017






Cash flows from operating activities:






Net profit (loss)

$

326,186

$

(674,679)

$

(78,771)

$

(1,413,356)


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







Finance (income) expense

(14,367)

3,881

(21,833)

14,427



Depreciation and amortization of non-current assets

150,581

190,453

304,451

394,260



Stock option expense

69,893

49,616

84,414

104,520



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

39,130

(16,852)

80,418

(33,870)



Foreign exchange (gain) loss on borrowings

(29,363)

51,172

(73,122)

87,922



IFRS 15 transition adjustment

-

-

(136,000)

-




542,060

(396,409)

159,557

(846,097)


Change in non-cash operating assets and liabilities: 







Increase (decrease) in deferred revenue

(147,625)

21,800

(184,841)

(98,703)



Change in other non-cash operating assets and liabilities 

(48,689)

371,600

616,303

2,144,995

Cash from (used in) operating activities

345,746

(3,009)

591,019

1,200,195






Cash flows used in investing activities:






Acquisition of property, plant and equipment

(18,097)

(23,035)

(120,192)

(40,111)


Acquisition of intangible assets

(26,779)

-

(193,446)

(8,508)

Cash used in investing activities

(44,876)

(23,035)

(313,638)

(48,619)






Cash flows used in financing activities:






Finance income

28,728

17,006

55,561

32,584


Repayment of borrowings

-

-

(801,565)

(844,708)

Cash from (used in) financing activities

28,728

17,006

(746,004)

(812,124)

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

(39,130)

16,852

(80,418)

33,870

Increase (decrease) in cash

290,468

7,814

(549,041)

373,322

Cash, beginning of the period

11,120,553

11,512,743

11,960,062

11,147,235

Cash, end of the period

$

11,411,021

$

11,520,557

$

11,411,021

$

11,520,557

 

SOURCE Redline Communications Group Inc.

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