Redline Communications Reports 2017 Second Quarter Results

TORONTO, Aug. 9, 2017 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), a leading provider of wide-area wireless networks for the most challenging applications and locations, today announced operating results (in US dollars unless otherwise noted) for the three months ended June 30, 2017 (Q2 2017).

Q2 2017 Financial Highlights:

• Revenues of $4.9 million, essentially unchanged from Q2 2016
• Gross margins of 52%, up 3 percentage points over Q2 2016
• Operating expenses of $3.2 million, a reduction of 36% over Q2 2016
• Net loss of $0.7 million, an improvement of $1.9 million over Q2 2016
• Adjusted EBITDA loss of $0.4 million, an improvement of $1.8 million over Q2 2016
• Cash of $11.5 million, or Cdn. $ 0.87/share, unchanged from Q1 2017
• Order Bookings of $6.1 million, essentially unchanged from Q2 2016
• Order Backlog of $6.3 million, up 20% over Q1 2017

Financial Review

Total revenue for Q2 2017 was $4.9 million, up 14% over Q1 2017 and essentially unchanged from the same period in 2016. New Order Bookings for Q2 2017 were $6.1 million, up 16% over Q1 2017 and unchanged from the same period in 2016.

"Redline has seen four consecutive quarters of Bookings growth, fueled by an increase in orders for our recently announced commercial product portfolio with its cost-reduced Enterprise radio, and by our first significant order for our new LTE product," stated Robert Williams, Redline CEO. "This growth in orders has translated into double-digit increases in Revenues and Backlog compared to Q1 2017. We are pleased that our investments in new products and initiatives to reduce costs are starting to produce results."

Overall gross margin for Q2 2017 was 52%, up three percentage points over the same period in 2016 but down five percentage points over Q1 2017, reflecting a shift in product mix in Q2 2017 to more revenue from the Company's lower margin commercial product portfolio.

Overall operating expenses for Q2 2017 were $3.2 million, unchanged from the previous quarter and an improvement of 36% over the same period in 2016.  The year-over-year decrease in operating costs is attributed to cost reduction initiatives implemented during the fourth quarter of 2016 to reduce compensation costs and contractual costs.

"Our attention to working capital and cost management has allowed us to introduce more competitively priced products while protecting our bottom line," stated Jane Todd, Redline CFO. "We remain committed to closely managing our business as we continue to implement our strategic initiatives."

Net Loss for Q2 2017 was $0.7 million, or ($0.04) per share, an improvement of 9% over Q1 2017 and an improvement of 73% as compared to a Net Loss of $2.5 million, or ($0.15) per share in the same period in 2016.

Adjusted EBITDA loss for Q2 2017 was $0.4 million, essentially unchanged from Q1 2017, and an improvement of $1.8 million, or 82% over the same period in 2016.

At June 30, 2017, Redline held cash of $11.5 million, unchanged from Q1 2017 and up $0.4 million from December 31, 2016.

The Redline Board of Directors also announced today that Jane Todd, Chief Financial and Operating Officer, has decided to leave the company to pursue another career opportunity.  Jane joined the Company in the capacity as Chief Financial and Operating Officer in May 2016. The Board has appointed Joan Ritchie, VP Finance and Organizational Development, as Interim Chief Financial Officer.  Jane has agreed to stay with Redline for a period of time to support an orderly transition.

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

A conference call and webcast to discuss the results has been scheduled for Thursday August 10, 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 56370080. A recording of the call will be available through August 18, 2017 on Redline's website or by dialing 1-416-849-0833 and entering the same passcode.

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 (Loss)", 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 six months ended June 30, 2017 ("Q2 2017 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and six months ended June 30, 2017 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, 2017 and the Q2 2017 MD&A.

Adjusted EBITDA Loss
(Unaudited, Expressed in thousands of U.S. dollars)
The table below reconciles Adjusted EBITDA loss to the most directly comparable IFRS measure:
		Three months ended June 30,					Six months ended June 30,
		2017		2016			2017		2016
Revenue		$	4,930	$	5,005		$	9,263	$	11,222
Net loss		(675)		(2,545)			(1,413)		(3,473)
Add back:
	Share based payments	44		90			158		174
	Depreciation and amortization	190		255			394		516
	Finance (income) expense	4		(5)			15		(202)
	Loss on fair market value of financial instruments	-		-			-		16
	Foreign exchange loss	37		12			70		143
	Income tax expense	5		27			12		28
	Total	280		379			649		675
Adjusted EBITDA loss		$	(395)	$	(2,166)		$	(764)	$	(2,798)
Adjusted EBITDA margin		-8%		-43%			-8%		-25%

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)
				June 30, 2017			December 31, 2016
ASSETS
Current assets:
	Cash			$	11,520,557		$	11,147,235
	Trade receivables			6,453,503			7,837,145
	Other receivables			348,086			231,398
	Inventories			5,331,336			5,513,985
	Prepaid expenses and other deposits			357,175			151,880
				24,010,657			24,881,643
Non-current assets:
	Property, plant and equipment			960,132			1,119,690
	Intangible assets			1,308,520			1,494,603
	Other assets			81,222			78,908
				2,349,874			2,693,201
Total Assets				$	26,360,531		$	27,574,844
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables			$	4,261,274		$	3,322,059
	Income tax payable			10,741			10,741
	Deferred revenue			861,772			960,475
	Borrowings			722,170			1,478,418
				5,855,957			5,771,693
Non-current liabilities:
	Borrowings			1,386,638			1,340,165
	Other payables			211,585			247,799
				1,598,223			1,587,964
Total Liabilities				7,454,180			7,359,657
SHAREHOLDERS' EQUITY
Share capital				172,929,341			172,929,341
Contributed surplus				9,102,765			8,998,245
Deficit				(163,125,755)			(161,712,399)
				18,906,351			20,215,187
Total liabilities and equity				$	26,360,531		$	27,574,844

REDLINE COMMUNICATIONS GROUP INC
Condensed Consolidated Interim Statements of Comprehensive Loss
(Unaudited, Expressed in U.S. dollars)
		Three months ended June 30,				Six months ended June 30,
		2017		2016		2017		2016
Revenue		$	4,929,502	$	5,005,605	$	9,262,901	$	11,222,213
Cost of revenue		2,365,557		2,536,680		4,240,389		5,085,771
Gross profit		2,563,945		2,468,925		5,022,512		6,136,442
Expenses:
	Research and development	512,307		715,793		1,091,370		1,571,352
	Administration and finance	1,097,816		2,010,261		2,167,612		3,454,419
	Sales and marketing	1,389,487		1,956,086		2,727,409		4,029,617
	Operations and customer support	193,237		297,663		352,340		569,376
		3,192,847		4,979,803		6,338,731		9,624,764
Loss before undernoted items		(628,902)		(2,510,878)		(1,316,219)		(3,488,322)
Other expenses (income):
	Finance (income) expense	3,881		(4,849)		14,427		(201,733)
	Loss on fair market value of financial instruments	-		-		-		16,314
	Foreign exchange loss	36,686		12,303		70,305		142,898
		40,567		7,454		84,732		(42,521)
Loss before income taxes		(669,469)		(2,518,332)		(1,400,951)		(3,445,801)
Income tax expense		5,210		27,126		12,405		27,775
Net loss and total comprehensive loss		$	(674,679)	$	(2,545,458)	$	(1,413,356)	$	(3,473,576)
Loss per share
	Basic and diluted	$	(0.04)	$	(0.15)	$	(0.08)	$	(0.20)

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, 2016			$	172,662,177	$	310,000	$	8,457,415	$	(156,926,961)	$	24,502,631
	Net loss		-		-		-		(3,473,576)		(3,473,576)
	Conversion of debenture		267,164		-		-		-		267,164
	Expiry of warrants		-		(310,000)		310,000		-		-
	Share-based payments		-		-		103,762		-		103,762
Balance at June 30, 2016			$	172,929,341	$	-	$	8,871,177	$	(160,400,537)	$	21,399,981
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)
	Share-based payments		-		-		104,520		-		104,520
Balance at June 30, 2017			$	172,929,341	$	-	$	9,102,765	$	(163,125,755)	$	18,906,351

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,
				2017	2016		2017	2016
Cash flows from operating activities:
	Net loss			$      (674,679)	$   (2,545,458)		$   (1,413,356)	$   (3,473,576)
	Adjustments to reconcile net loss to net cash from operating activities:
		Finance (income) expense		3,881	(4,849)		14,427	(201,733)
		Depreciation and amortization of non-current assets		190,453	255,479		394,260	516,292
		Recognition of share based payments		49,616	57,241		104,520	103,762
		Foreign exchange gain on cash held in foreign currency		(16,852)	(6,478)		(33,870)	(109,441)
		Foreign exchange loss on borrowings		51,172	15,188		87,922	216,414
		Loss on fair market value of financial instruments		-	-		-	16,314
				(396,409)	(2,228,877)		(846,097)	(2,931,968)
	Change in non-cash operating assets and liabilities:
		(Increase) decrease in deferred cost of revenue		-	33,318		-	-
		Increase (decrease) in deferred revenue		21,800	(278,123)		(98,703)	(614,484)
		Change in other non-cash operating assets and liabilities		371,600	537,777		2,144,995	105,663
Cash from (used in) operating activities				(3,009)	(1,935,905)		1,200,195	(3,440,789)
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(23,035)	(59,383)		(40,111)	(143,243)
	Acquisition of intangible assets			-	(1,217)		(8,508)	(81,437)
Cash used in investing activities				(23,035)	(60,600)		(48,619)	(224,680)
Cash flows from financing activities:
	Finance income			17,006	33,811		32,584	37,586
	Repayment of borrowings			-	-		(844,708)	-
Cash from (used in) financing activities				17,006	33,811		(812,124)	37,586
Foreign exchange gain on cash held in foreign currency				16,852	6,478		33,870	109,441
Increase (decrease) in cash				7,814	(1,956,216)		373,322	(3,518,442)
Cash, beginning of the period				11,512,743	12,986,728		11,147,235	14,548,954
Cash, end of the period				$   11,520,557	$   11,030,512		$   11,520,557	$   11,030,512

SOURCE Redline Communications Group Inc.

Redline Contact(s): Jane Todd, Chief Financial & Operating Officer, [phone], [email protected]; Cory Pala, Investor Relations, [phone], [email protected]

Related Links

http://www.redlinecommunications.com/