Redline Communications Reports 2017 Third Quarter Results

TORONTO, Nov. 8, 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 September 30, 2017 (Q3 2017).

Q3 2017 Financial Highlights:

• Revenues of $5.2 million, unchanged from Q3 2016
• Gross margins of 50%, down 6 percentage points over Q3 2016
• Operating expenses of $3.5 million, a reduction of 14% over Q3 2016
• Net loss of $1.0 million, an improvement of $0.2 million over Q3 2016
• Adjusted EBITDA loss of $0.6 million, an improvement of $0.3 million over Q3 2016
• Cash of $11.0 million, down $0.5 million from Q2 2017
• Bookings of $8.4 million, up 102% over Q3 2016
• Order Backlog of $9.1 million, up 44% over Q2 2017

Financial Review

Order Bookings for Q3 2017 were $8.4 million, up 38% over Q2 2017 and up 102% from the same period in 2016. Total revenue for Q3 2017 was $5.2 million, up 6% over Q2 2017 and unchanged from the same period in 2016.

"Redline has now seen four consecutive quarters of Bookings growth, fueled most recently by an increase in orders from the oil and gas sector and growing revenue from our LTE solution," stated Robert Williams, Redline CEO. "This growth in orders coupled with ongoing interest in our LTE product line is encouraging, and we are focused on having this trend continue." 

Overall gross margin for Q3 2017 was 50%, down six percentage points over the same period in 2016 and down two percentage points over Q2 2017. The decrease is attributed to an increase in lower-margin third party product sales in the quarter.

Overall operating expenses for Q3 2017 were $3.5 million, down 14% over the same period in 2016, and up 9% over $3.2 million in Q2 2017. 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, partially offset by a planned increase in spending in Q3 2017 in support of the Company's growth in orders.

Net Loss for Q3 2017 was $1.0 million, or ($0.06) per share, an improvement of $0.2 million or 18% as compared to a Net Loss of $1.2 million, or ($0.07) per share in the same period in 2016. Net Loss for Q2 2017 was $0.7 million.

Adjusted EBITDA loss for Q3 2017 was $0.6 million, an improvement of $0.3 million, or 34% over the same period in 2016. Adjusted EBITDA loss for Q2 2017 was $0.4 million.

At September 30, 2017, Redline held cash of $11.0 million, down $0.5 million from Q2 2017 and down $0.1 million from December 31, 2016.

Conference Call and Webcast – November 9^th, 2017 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Thursday November 9, 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 98024063. A recording of the call will be available through November 17, 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 nine months ended September 30, 2017 ("Q3 2017 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and nine months ended September 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 nine months ended September 30, 2017 and the Q3 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 September 30,					Nine months ended September 30,
		2017		2016			2017		2016
Revenue		$	5,203	$	5,210		$	14,466	$	16,432
Net loss		(968)		(1,182)			(2,381)		(4,656)
Add back:
	Share based payments	147		53			305		227
	Depreciation and amortization	172		256			567		772
	Finance (income) expense	4		23			18		(179)
	Loss on fair market value of financial instruments	-		-			-		16
	Foreign exchange (gain) loss	55		(35)			125		108
	Income tax expense	7		1			19		28
	Total	385		298			1,034		972
Adjusted EBITDA loss		$	(583)	$	(884)		$	(1,347)	$	(3,684)
Adjusted EBITDA margin		-11%		-17%			-9%		-22%

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)
			September 30, 2017		December 31, 2016
ASSETS
Current assets:
	Cash	$	11,038,667	$	11,147,235
	Trade receivables		7,155,813		7,837,145
	Other receivables		196,503		231,398
	Inventories		5,729,053		5,513,985
	Prepaid expenses and other deposits		317,383		151,880
			24,437,419		24,881,643
Non-current assets:
	Property, plant and equipment		889,378		1,119,690
	Intangible assets		1,236,531		1,494,603
	Other assets		83,972		78,908
			2,209,881		2,693,201
Total Assets		$	26,647,300	$	27,574,844
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables	$	5,255,196	$	3,322,059
	Income tax payable		10,741		10,741
	Deferred revenue		1,023,399		960,475
	Borrowings		773,553		1,478,418
			7,062,889		5,771,693
Non-current liabilities:
	Borrowings		1,441,859		1,340,165
	Other payables		182,314		247,799
			1,624,173		1,587,964
Total Liabilities			8,687,062		7,359,657
SHAREHOLDERS' EQUITY
Share capital			172,929,341		172,929,341
Contributed surplus			9,124,325		8,998,245
Deficit			(164,093,428)		(161,712,399)
			17,960,238		20,215,187
Total liabilities and equity		$	26,647,300	$	27,574,844

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Unaudited, Expressed in U.S. dollars)
			Three months ended September 30,						Nine months ended September 30,
			2017			2016			2017			2016
Revenue			$	5,202,859		$	5,209,736		$	14,465,760		$	16,431,949
Cost of revenue			2,597,019			2,309,535			6,837,408			7,395,306
Gross profit			2,605,840			2,900,201			7,628,352			9,036,643
Expenses:
	Research and development		591,733			703,902			1,683,103			2,275,254
	Administration and finance		1,254,673			1,228,582			3,422,285			4,683,001
	Sales and marketing		1,467,343			1,894,061			4,194,752			5,923,678
	Operations and customer support		194,297			267,126			546,637			836,502
			3,508,046			4,093,671			9,846,777			13,718,435
Loss before undernoted items			(902,206)			(1,193,470)			(2,218,425)			(4,681,792)
Other expenses (income):
	Finance (income) expense		3,602			22,887			18,029			(178,846)
	Loss on fair market value of financial instruments		-			-			-			16,314
	Foreign exchange (gain) loss		54,938			(34,585)			125,243			108,313
			58,540			(11,698)			143,272			(54,219)
Loss before income taxes			(960,746)			(1,181,772)			(2,361,697)			(4,627,573)
Income tax expense			6,927			653			19,332			28,428
Net loss and total comprehensive loss			$	(967,673)		$	(1,182,425)		$	(2,381,029)		$	(4,656,001)
Loss per share
	Basic and diluted		$	(0.06)		$	(0.07)		$	(0.14)		$	(0.27)

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		-		-		-		(4,656,001)		(4,656,001)
	Conversion of debenture		267,164		-		-		-		267,164
	Expiry of warrants		-		(310,000)		310,000		-		-
	Stock option expense		-		-		183,320		-		183,320
Balance at September 30, 2016			$	172,929,341	$	-	$	8,950,735	$	(161,582,962)	$	20,297,114
Balance at January 1, 2017			$	172,929,341	$	-	$	8,998,245	$	(161,712,399)	$	20,215,187
	Net loss		-		-		-		(2,381,029)		(2,381,029)
	Stock option expense		-		-		126,080		-		126,080
Balance at September 30, 2017			$	172,929,341	$	-	$	9,124,325	$	(164,093,428)	$	17,960,238

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,
				2017		2016			2017		2016
Cash flows from operating activities:
	Net loss			$	(967,673)	$	(1,182,425)		$	(2,381,029)	$	(4,656,001)
	Adjustments to reconcile net loss to net cash from operating activities:
		Finance (income) expense		3,602		22,887			18,029		(178,846)
		Depreciation and amortization of non-current assets		172,359		255,677			566,619		771,969
		Gain on disposal of assets		-		(10,213)			-		(10,213)
		Stock option expense		21,560		79,558			126,080		183,320
		Foreign exchange (gain) loss on cash held in foreign currency		(53,021)		19,644			(86,891)		(89,797)
		Foreign exchange (gain) loss on borrowings		84,018		(43,830)			171,940		172,584
		Loss on fair market value of financial instruments		-		-			-		16,314
				(739,155)		(858,702)			(1,585,252)		(3,790,670)
	Change in non-cash operating assets and liabilities:
		Increase (decrease) in deferred revenue		161,627		(100,520)			62,924		(715,004)
		Change in other non-cash operating assets and liabilities		53,249		529,348			2,198,244		635,011
Cash from (used in) operating activities				(524,279)		(429,874)			675,916		(3,870,663)
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(11,164)		(53,573)			(51,275)		(196,816)
	Proceeds on sale of property, plant and equipment			-		20,300			-		20,300
	Acquisition of intangible assets			(18,452)		-			(26,960)		(81,437)
Cash used in investing activities				(29,616)		(33,273)			(78,235)		(257,953)
Cash flows from financing activities:
	Finance income			18,984		5,858			51,568		43,444
	Repayment of borrowings			-		-			(844,708)		-
Cash from (used in) financing activities				18,984		5,858			(793,140)		43,444
Foreign exchange gain (loss) on cash held in foreign currency				53,021		(19,644)			86,891		89,797
Decrease in cash				(481,890)		(476,933)			(108,568)		(3,995,375)
Cash, beginning of the period				11,520,557		11,030,512			11,147,235		14,548,954
Cash, end of the period				$	11,038,667	$	10,553,579		$	11,038,667	$	10,553,579

SOURCE Redline Communications Group Inc.

Redline Contact(s): Joan Ritchie, Interim Chief Financial Officer, [phone], [email protected]; Cory Pala, Investor Relations, [phone], [email protected]

Related Links

http://www.redlinecommunications.com/