Redline Communications Reports 2019 First Quarter Results

TORONTO, May 7, 2019 /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 first quarter ended March 31, 2019.

Key financial highlights for the first quarter ended March 31, 2019 ("Q1 2019") include:

• Revenues of $5.8 million, up 2% over Q1 2018
• Gross margins of 50%, down 2 percentage points from Q1 2018
• Operating expenses of $4 million, up 19% over Q1 2018
• Net loss of $1.3 million, an increase of $0.9 million from Q1 2018
• Cash of $9.3 million, down $0.4 million from Q1 2018
• Adjusted EBITDA¹ loss of $0.8 million, an increase of $0.5 million over Q1 2018
• Bookings¹ of $5.7 million, down 22% over Q1 2018
• Order Backlog¹ of $9.8 million, down 2% from Q4 2018

Financial Review

Revenue for the first quarter of 2019 was up 2% over the same period in 2018, driven by increased revenue from telecom service providers.

Order Bookings for the first quarter were $5.7 million, down 22% over Q1 2018 due to lower bookings from the mining sector.  Order backlog was $9.8 million, down 2% from Q4 2018, and up 24% when compared to the same period in 2018.

Overall gross margin for the first quarter was 50%, as compared to 52% in the same period in 2018. The decrease reflects a shift in product mix in Q1 2019 as the Company shipped more lower-margin TV White Space products to the rural ISP market.

"As I have engaged at Redline, I am excited about the potential of our business opportunities, particularly in LTE and the potential for recurring revenues arising from value added services," stated Stephen Sorocky, Redline's CEO. "Also, in this quarter, Redline's Internet Service Provider initiative, launched in late 2018 as part of Microsoft's Airband program, has resulted in the acquisition of 35 new ISP customers. We are pleased at the early progress we are making with this new product offering."

Overall operating expenses for the first quarter of 2019 was $4.0 million up 19% over the same period in 2018.  The increase in operating expenses in the first quarter 2019 over the same period in 2018 was the result of increased headcount in support of LTE deployments and severance costs.

Adjusted EBITDA loss for the first quarter 2019 was $0.78 million, an increase of $0.54 million over the Adjusted EBITDA loss of $0.24 million for the same period in 2018.

Net loss for the first quarter of 2019 was $1.3 million, or ($0.07) per share, as compared to $0.4 million, or ($0.02) per share, in the first quarter of 2018.

At March 31st, 2019, Redline held cash of $9.3 million, down $0.4 million from December 31, 2018.  The decrease is largely attributable to a scheduled $0.7 million payment against the Company's Ontario Loan, reducing the amount of the loan outstanding to $0.7 million.

Conference Call and Webcast – May 8th, 2019 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Wednesday, May 8th, 2019 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 3449679. A recording of the call will be available through May 15, 2019 on Redline's website or by dialing 1-416-849-0833 and entering the same passcode.

About Redline Communications
Redline Communications (TSX:RDL) designs and manufactures powerful wide-area wireless networks for mission-critical applications in challenging locations. Redline networks are used by oil & gas companies onshore and offshore, mining companies on surface and underground operations, by municipalities to remotely monitor infrastructure, and by specialized 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 IoT, 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 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 months ended March 31, 2019 ("Q1 2019 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three months ended March 31, 2019 can be found in the condensed consolidated interim statement of financial position, statement of comprehensive income (loss), statement of changes in equity and 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 March 31, 2019 and the Q1 2019 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 March 31,
		2019		2018
Revenue		$	5,834	$	5,702
Net loss		(1,257)		(405)
Add back:
	Share based payments	114		46
	Depreciation and amortization	220		154
	Finance (income) expense	(17)		(7)
	(Gain) loss on fair market value  of financial instruments	88		-
	Foreign exchange (gain) loss	65		(30)
	Income tax expense	6		5
	Total	476		168
Adjusted EBITDA (loss)		$	(781)	$	(237)
Adjusted EBITDA margin		-13%		-4%

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)
				March 31, 2019			December 31, 2018
ASSETS
Current assets:
	Cash			$	9,254,405		$	9,625,845
	Trade receivables			6,617,672			9,857,857
	Other receivables			348,030			392,632
	Inventories			6,597,074			6,605,517
	Deferred cost of revenue			1,812			-
	Prepaid expenses and other deposits			602,918			308,273
				23,421,911			26,790,124
Non-current assets:
	Property, plant and equipment			730,178			800,374
	Intangible assets			1,207,037			1,277,637
	Right of use assets			966,220			-
	Other assets			74,486			73,538
				2,977,921			2,151,549
Total Assets				$	26,399,832		$	28,941,673
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables			$	5,511,613		$	7,415,403
	Income tax payable			10,741			10,741
	Deferred revenue			1,763,605			1,626,687
	Lease liabilities			301,018			-
	Borrowings			675,664			705,413
				8,262,641			9,758,244
Non-current liabilities:
	Lease liabilities			912,431			-
	Borrowings			-			659,522
	Other payables			-			135,184
				912,431			794,706
Total Liabilities				9,175,072			10,552,950
SHAREHOLDERS' EQUITY
Share capital				172,929,341			172,929,341
Contributed surplus				9,385,766			9,292,321
Deficit				(165,090,347)			(163,832,939)
				17,224,760			18,388,723
Total Liabilities and Equity				$	26,399,832		$	28,941,673

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Unaudited, Expressed in U.S. dollars)
					Three months ended March 31,
					2019			2018
Revenue					$	5,833,514		$	5,701,946
Cost of revenue					2,900,333			2,740,513
Gross profit					2,933,181			2,961,433
Expenses:
	Research and development				491,246			630,219
	Administration and finance				1,452,760			1,067,224
	Sales and marketing				1,868,954			1,518,192
	Operations and customer support				234,494			182,725
					4,047,454			3,398,360
Loss before undernoted items					(1,114,273)			(436,927)
Other (income) expenses:
	Finance (income) expense				(16,991)			(7,466)
	Loss on fair market value of financial instruments				88,379			-
	Foreign exchange (gain) loss				65,487			(29,948)
					136,875			(37,414)
Loss before income taxes					(1,251,148)			(399,513)
Income tax expense					6,260			5,444
Net loss and total comprehensive loss					$	(1,257,408)		$	(404,957)
Loss per share
	Basic and diluted				$	(0.07)		$	(0.02)

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, 2018			$	172,929,341	$	9,155,798	$	(163,308,323)	$	18,776,816
	IFRS 15 transition adjustment		-		-		(136,000)		(136,000)
	Net loss		-		-		(404,957)		(404,957)
	Stock option expense		-		14,521		-		14,521
Balance at March 31, 2018			$	172,929,341	$	9,170,319	$	(163,849,280)	$	18,250,380
Balance at January 1, 2019			$	172,929,341	$	9,292,321	$	(163,832,939)	$	18,388,723
	Net loss		-		-		(1,257,408)		(1,257,408)
	Stock option expense		-		93,445		-		93,445
Balance at March 31, 2019			$	172,929,341	$	9,385,766	$	(165,090,347)	$	17,224,760

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, Expressed in U.S. dollars)
				Three months ended March 31,
				2019		2018
Cash flows from (used in) operating activities:
	Net loss			$	(1,257,408)	$	(404,957)
	Adjustments to reconcile net loss to net cash from operating activities:
		Finance (income) expense		(16,991)		(7,466)
		Depreciation and amortization of non-current assets		219,700		153,870
		Stock option expense		93,445		14,521
		Foreign exchange (gain) loss on cash held in foreign currency		(29,178)		41,288
		Foreign exchange (gain) loss on borrowings and lease liabilities		60,277		(43,758)
		IFRS 15 transition adjustment		-		(136,000)
				(930,155)		(382,502)
	Change in non-cash operating assets and liabilities:
		(Increase) decrease in deferred cost of revenue		(1,812)		-
		Increase (decrease) in deferred revenue		136,918		(37,216)
		Change in other non-cash operating assets and liabilities		1,241,894		664,992
Cash from (used in) operating activities				446,845		245,274
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(40,269)		(102,095)
	Acquisition of intangible assets			(14,100)		(166,667)
Cash used in investing activities				(54,369)		(268,762)
Cash flows used in financing activities:
	Interest income			42,988		28,457
	Interest expense			(14,448)		(1,625)
	Repayment of borrowings			(735,505)		(801,565)
	Repayment of lease liabilities			(86,129)		-
Cash used in financing activities				(793,094)		(774,733)
Foreign exchange gain (loss) on cash held in foreign currency				29,178		(41,288)
Increase (decrease) in cash				(371,440)		(839,509)
Cash, beginning of the period				9,625,845		11,960,062
Cash, end of the period				$	9,254,405	$	11,120,553

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