Redline Communications Reports 2018 Third Quarter Results

TORONTO, Nov. 12, 2018 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: 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 third quarter ended September 30, 2018.

Key Financial Highlights for the three months ended September 30, 2018 ("Q3 2018") include:

• Revenues of $6.6 million, up 26% over Q3 2017
• Gross margins of 46%, down 4 percentage points over Q3 2017
• Operating expenses of $3.5 million, up 1% over Q3 2017
• Net loss of $0.5 million, an improvement of $0.5 million over Q3 2017
• Cash of $9.8 million, down $1.6 million from Q2 2018
• Adjusted EBITDA¹ loss of $0.3 million, an improvement of $0.3 million over Q3 2017
• Bookings¹ of $7.6 million, down 9% over Q3 2017
• Order Backlog¹ of $7.9 million, up 14% from Q2 2018

Key Financial Highlights for the nine months ended September 30, 2018 include:

• Revenues of $19.6 million, up 35% over the same period in 2017
• Gross margins of 51%, down 2 percentage points over the same period in 2017
• Operating expenses of $10.6 million, up 8% over the same period in 2017
• Net loss of $0.6 million, an improvement of $1.8 million over the same period in 2017
• Cash of $9.8 million, down $2.2 million from Q4 2017
• Adjusted EBITDA¹ of $0.1 million, an improvement of $1.4 million over the same period in 2017
• Bookings¹ of $22.0 million, up 12% over the same period in 2017
• Order Backlog¹ of $7.9 million, up 29% over Q4 2017

Financial Review

Revenues for Q3 2018 were $6.6 million up 26% over Q3 2017, driven largely by increased demand from customers in the oil and gas sector. Total Bookings were $7.6M, down 9% over the same period in 2017, mainly due to reduced orders from the energy sector, offset by increased orders from the service provider sector.

Order Bookings and Backlog both increased quarter over quarter while Revenue was down slightly, reflecting fluctuations due to timing of large projects in different industries and in different parts of the world rather than a long term trend.  Quarter over quarter increase in Bookings can be attributed to a growth in orders from the telecom service provider sector.

"We're pleased to see that our ongoing investments in the Energy and Service Provider markets continue to contribute to our top line," stated Robert Williams, Redline CEO. "Our entry into the African market has resulted in a $1.3 million order from a major telecom service provider and our oil and gas customers are continuing to expand their Redline networks."

Overall gross margin for the third quarter of 2018 was 46%, down four percentage points over the same period in 2017 as a result of higher production costs associated with component shortages and aggressive pricing to capture a narrowband replacement opportunity with Redline's more powerful broadband solution in the energy sector.

LTE opportunities for the Company continue to progress in the Mining, Energy and Utility markets.  One of Redline's larger mining customers has expanded the scope of its deployment to include control of autonomous vehicles.   This demanding application is showcasing the effectiveness of Redline's LTE network to support these advanced requirements.

Overall operating expenses for the third quarter of 2018 were $3.5 million, up 1% over the same period in 2017.  The increase in operating expenses was mainly a result of increased personnel costs, including additional salary and recruitment costs, as the Company invests to capture LTE opportunities as well as higher commission costs related to improved revenue, offset by reduced costs associated with strategic initiatives.

Adjusted EBITDA loss for the third quarter of 2018 was $0.3 million, an improvement of $0.3 million over the Adjusted EBITDA loss of $0.6 million in the same period in 2017. Net loss for the third quarter of 2018 was $0.5 million, or ($0.03) per share, an improvement of $0.5 million over the net loss of $1.0 million, or ($0.06) per share reported in the third quarter of 2017.

At September 30th, 2018, Redline held cash of $9.8 million, down $1.6 million from June 30, 2018.

Conference Call and Webcast – November 13th, 2018 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Tuesday, November 13th, 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 3975607. A recording of the call will be available through November 20, 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 nine months ended September 30, 2018 ("Q3 2018 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and nine month results ended September 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 nine months ended September 30, 2018 and the Q3 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 September 30,				Nine months ended September 30,
		2018		2017		2018		2017
Revenue		$	6,575	$	5,203	$	19,581	$	14,466
Net loss		(516)		(968)		(595)		(2,381)
Add back:
	Share based payments	65		147		260		305
	Depreciation and amortization	147		172		451		567
	Finance (income) expense	(18)		4		(39)		18
	Gain on fair market value
	of financial instruments	(11)		-		(11)		-
	Foreign exchange (gain) loss	17		55		(6)		125
	Income tax expense	9		7		17		19
	Total	209		385		672		1,034
Adjusted EBITDA (loss)		$	(307)	$	(583)	$	77	$	(1,347)
Adjusted EBITDA margin		-5%		-11%		0%		-9%

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, 2018			December 31, 2017
ASSETS
Current assets:
	Cash			$	9,762,826		$	11,960,062
	Trade receivables			8,654,446			8,160,646
	Other receivables			376,563			304,526
	Inventories			5,441,581			5,438,530
	Prepaid expenses and other deposits			422,677			211,511
				24,658,093			26,075,275
Non-current assets:
	Property, plant and equipment			831,645			829,720
	Intangible assets			1,123,120			1,169,733
	Other assets			77,249			83,600
				2,032,014			2,083,053
Total Assets				$	26,690,107		$	28,158,328
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables			$	5,677,557		$	5,698,664
	Income tax payable			10,741			10,741
	Deferred revenue			1,257,871			1,275,875
	Borrowings			728,854			792,051
				7,675,023			7,777,331
Non-current liabilities:
	Borrowings			695,033			1,434,388
	Other payables			158,798			169,793
				853,831			1,604,181
Total Liabilities				8,528,854			9,381,512
SHAREHOLDERS' EQUITY
Share capital				172,929,341			172,929,341
Contributed surplus				9,271,437			9,155,798
Deficit				(164,039,525)			(163,308,323)
				18,161,253			18,776,816
Total liabilities and equity				$	26,690,107		$	28,158,328

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,
					2018			2017			2018			2017
Revenue					$	6,575,071		$	5,202,859		$	19,581,404		$	14,465,760
Cost of revenue					3,557,287			2,597,019			9,611,289			6,837,408
Gross profit					3,017,784			2,605,840			9,970,115			7,628,352
Expenses:
	Research and development				597,706			591,733			1,794,589			1,683,103
	Administration and finance				977,165			1,254,673			3,240,639			3,422,285
	Sales and marketing				1,749,347			1,467,343			4,964,627			4,194,752
	Operations and customer support				212,729			194,297			604,634			546,637
					3,536,947			3,508,046			10,604,489			9,846,777
Loss before undernoted items					(519,163)			(902,206)			(634,374)			(2,218,425)
Other (income) expenses:
	Finance (income) expense				(18,440)			3,602			(40,273)			18,029
	Gain on fair market value
	of financial instruments				(10,736)			-			(10,736)			-
	Foreign exchange (gain) loss				17,333			54,938			(5,589)			125,243
					(11,843)			58,540			(56,598)			143,272
Loss before income taxes					(507,320)			(960,746)			(577,776)			(2,361,697)
Income tax expense					9,111			6,927			17,426			19,332
Net loss and total comprehensive loss					$	(516,431)		$	(967,673)		$	(595,202)		$	(2,381,029)
Loss per share
	Basic and diluted				$	(0.03)		$	(0.06)		$	(0.03)		$	(0.14)

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		-		-		(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
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		-		-		(595,202)		(595,202)
	Stock option expense		-		115,639		-		115,639
Balance at September 30, 2018			$	172,929,341	$	9,271,437	$	(164,039,525)	$	18,161,253

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,
				2018		2017			2018		2017
Cash flows from (used in) operating activities:
	Net loss			$	(516,431)	$	(967,673)		$	(595,202)	$	(2,381,029)
	Adjustments to reconcile net loss to net cash from operating activities:
		Finance (income) expense		(18,440)		3,602			(40,273)		18,029
		Depreciation and amortization of non-current assets		146,886		172,359			451,337		566,619
		Stock option expense		31,225		21,560			115,639		126,080
		Foreign exchange (gain) loss on cash held in foreign currency		(20,882)		(53,021)			59,536		(86,891)
		Foreign exchange (gain) loss on borrowings		23,935		84,018			(49,187)		171,940
		IFRS 15 transition adjustment		-		-			(136,000)		-
				(353,707)		(739,155)			(194,150)		(1,585,252)
	Change in non-cash operating assets and liabilities:
		Increase (decrease) in deferred revenue		166,837		161,627			(18,004)		62,924
		Change in other non-cash operating assets and liabilities		(1,422,108)		53,249			(805,805)		2,198,244
Cash from (used in) operating activities				(1,608,978)		(524,279)			(1,017,959)		675,916
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(76,063)		(11,164)			(196,255)		(51,275)
	Acquisition of intangible assets			(16,948)		(18,452)			(210,394)		(26,960)
Cash used in investing activities				(93,011)		(29,616)			(406,649)		(78,235)
Cash flows used in financing activities:
	Net finance income			32,912		18,984			88,473		51,568
	Repayment of borrowings			-		-			(801,565)		(844,708)
Cash from (used in) financing activities				32,912		18,984			(713,092)		(793,140)
Foreign exchange gain (loss) on cash held in foreign currency				20,882		53,021			(59,536)		86,891
Decrease in cash				(1,648,195)		(481,890)			(2,197,236)		(108,568)
Cash, beginning of the period				11,411,021		11,520,557			11,960,062		11,147,235
Cash, end of the period				$	9,762,826	$	11,038,667		$	9,762,826	$	11,038,667

SOURCE Redline Communications Group Inc.

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

Related Links

http://www.redlinecommunications.com