Redline Communications Reports 2020 First Quarter Results

TORONTO, May 13, 2020 /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, 2020.

Key financial highlights for the three months ended March 31, 2020 ("Q1 2020") include:

• Revenue of $4.5 million, down 23% over Q1 2019
• Gross margins of 63%, up 13 percentage points over Q1 2019
• Operating expenses of $4.1 million, up 1% over Q1 2019
• Net loss of $1.0 million, as compared to net loss of $1.3 million in Q1 2019
• Cash balance of $6.8 million, up $0.3 million from December 31, 2019
• Borrowings of $0.0, down $0.7 million from December 31, 2019
• Adjusted EBITDA¹ loss of $1.0 million, versus Adjusted EBITDA loss of $0.8 million in Q1 2019
• Bookings¹ of $5.9 million, up 3% over Q1 2019
• Order Backlog¹ of $9.9 million, up 16% from December 31, 2019

Financial and Business Review

Revenue for the first quarter ended March 31, 2020 was $4.5 million, down 23% over Q1 2019, mainly the result of product shipments which could not be delivered to a small number of customers due to temporary border closures in South America and the Middle East and other logistics challenges associated with COVID-19.

Order Bookings for Q1 2020 were $5.9 million, up 3% over Q1 2019. The increase was primarily driven by an increase in orders from customers in the Company's core industrial vertical markets, including from oil & gas customers.

"The COVID-19 pandemic continues to be a significant concern and has impacted our product shipments and revenue. Nevertheless, we are proud of how we've been able to win new business with increased year over year bookings, generate positive cashflow, eliminate our borrowing, grow our margins, support our customers operations, and ensure the safety of our staff," stated Stephen Sorocky, Redline CEO. "We will continue to closely monitor the ongoing impacts of the COVID-19 pandemic and the recent decline in oil prices on our business and continue to take measures to mitigate negative effects upon our business including aggressively reviewing, monitoring and controlling expenses.  We are encouraged by the new customers we continue to bring onboard, most notably a key win in Saudi Arabia that was announced on April 20 and the market potential of our product development, including the RDL6000 for the USA CBRS market released last week."

Gross margin for Q1 2020 was 63%, up 13 percentage points over Q1 2019. The improvement was a result of a number of factors, most notably a shift in revenue mix to sales of higher margin industrial products to our core verticals and continued quarter-over-quarter growth in revenue from maintenance and support contracts.

Overall operating expenses for Q1 2020 were $4.1 million, up 1% over Q1 2019, primarily a result of increased  research and development costs to support new product development, offset by a decrease in severance costs. 

Net loss for Q1 2020 was $1.0 million, or ($0.06) per share, an improvement of $0.3 million over the net loss of $1.3 million, or ($0.07) per share, for Q1 2019.

"We continue to focus on proactive programs to better manage working capital.  The company has made significant progress in the areas of billing and collections, resulting in positive cashflow from operations of $1.3 million in the quarter and continues to explore new processes and initiative to reduce our level of inventory," stated Philip Jones, Redline CFO.

Adjusted EBITDA loss for Q1 2020 was $1.0 million, as compared to Adjusted EBITDA loss of $0.8 million for Q1 2019.

Annual General Meeting

The Company also announces that after careful consideration and amid COVID-19 concerns, it has decided to schedule its 2020 Annual Shareholders Meeting, normally held in June, on August 17, 2020.   This was not a decision taken lightly but one which will allow the Company to continue to focus its limited resources on operating activities and other matters during these extraordinary times.   Further announcements related to the annual meeting, including shareholder record dates, form of the meeting (virtual platform or in-person) will be made in the following weeks.

Conference Call and Webcast – May 14, 2020 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Thursday, May 14, 2020 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 4186136. A recording of the call will be available through May 21, 2020 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 "Bookings", "Order Backlog" 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, 2020 ("Q1 2020 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three months ended March 31, 2020 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, 2020 and the Q1 2020 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,
			2020		2019
Revenue			$	4,475	$	5,834
Net profit (loss)			(1,044)		(1,257)
Add back:
	Share based payments		51		114
	Depreciation and amortization		269		220
	Finance (income) expense		1		(17)
	(Gain) loss on fair market value   of financial instruments		(118)		88
	Foreign exchange (gain) loss		(133)		65
	Income tax expense		18		6
	Total		88		476
Adjusted EBITDA (loss)			$	(956)	$	(781)
Adjusted EBITDA margin			-21%		-13%

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, 2020			December 31, 2019
ASSETS
Current assets:
	Cash			$	6,838,831		$	6,507,606
	Trade receivables			4,210,852			7,089,043
	Other receivables			109,910			260,216
	Inventories			7,876,803			7,707,578
	Deferred cost of revenue			3,817			6,910
	Prepaid expenses and other deposits			336,436			285,519
				19,376,649			21,856,872
Non-current assets:
	Property, plant and equipment			999,961			999,435
	Intangible assets			1,345,163			1,373,526
	Right of use assets			730,904			798,080
	Other assets			70,866			76,284
				3,146,894			3,247,325
Total Assets				$	22,523,543		$	25,104,197
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables			$	5,113,330		$	6,035,496
	Income tax payable			12,398			12,398
	Deferred revenue			2,285,866			1,966,282
	Lease liabilities			240,600			277,945
	Borrowings			-			716,832
				7,652,194			9,008,953
Non-current liabilities:
	Deferred revenue			337,169			429,414
	Lease liabilities			654,108			788,572
				991,277			1,217,986
Total Liabilities				8,643,471			10,226,939
SHAREHOLDERS' EQUITY
Share capital				172,929,341			172,929,341
Contributed surplus				9,572,632			9,525,694
Deficit				(168,621,901)			(167,577,777)
				13,880,072			14,877,258
Total Liabilities and Equity				$	22,523,543		$	25,104,197

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Unaudited, Expressed in U.S. dollars)
		Note		Three months ended March 31,
				2020			2019
Revenue				$	4,474,589		$	5,833,514
Cost of revenue				1,650,163			2,900,333
Gross profit				2,824,426			2,933,181
Expenses:
	Research and development			1,124,986			491,246
	General and administrative			1,279,764			1,452,760
	Sales and marketing			1,457,650			1,868,954
	Operations and customer support			238,572			234,494
				4,100,972			4,047,454
Loss before undernoted items				(1,276,546)			(1,114,273)
Other (income) expenses:
	Finance (income) expense			1,027			(16,991)
	(Gain) loss on fair market value of financial instruments			(118,561)			88,379
	Foreign exchange (gain) loss			(132,788)			65,487
				(250,322)			136,875
Loss before income taxes				(1,026,224)			(1,251,148)
Income tax expense				17,900			6,260
Net loss and total comprehensive loss				$	(1,044,124)		$	(1,257,408)
Loss per share
	Basic and diluted			$	(0.06)		$	(0.07)

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, 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
Balance at January 1, 2020			$	172,929,341	$	9,525,694	$	(167,577,777)	$	14,877,258
	Net loss		-		-		(1,044,124)		(1,044,124)
	Stock option expense		-		46,938		-		46,938
Balance at March 31, 2020			$	172,929,341	$	9,572,632	$	(168,621,901)	$	13,880,072

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, Expressed in U.S. dollars)
				Three months ended March 31,
			Note	2020		2019
Cash flows from (used in) operating activities:
	Net loss			$	(1,044,124)	$	(1,257,408)
	Adjustments to reconcile net loss to net cash from operating activities:
		Finance (income) expense		1,027		(16,991)
		Depreciation and amortization of non-current assets		269,200		219,700
		Stock option expense		46,938		93,445
		Foreign exchange (gain) loss on cash held in foreign currency		55,395		(29,178)
		Foreign exchange (gain) loss on borrowings and lease liabilities		(102,900)		60,277
				(774,464)		(930,155)
	Change in non-cash operating assets and liabilities:
		(Increase) decrease in deferred cost of revenue		3,093		(1,812)
		Increase in deferred revenue		227,339		136,918
		Change in other non-cash operating assets and liabilities		1,891,607		1,241,894
Cash from operating activities				1,347,575		446,845
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(92,187)		(40,269)
	Acquisition of intangible assets			(82,000)		(14,100)
Cash used in investing activities				(174,187)		(54,369)
Cash flows used in financing activities:
	Interest income			16,307		42,988
	Interest expense			(12,648)		(14,448)
	Repayment of borrowings			(701,491)		(735,505)
	Repayment of lease liabilities			(88,936)		(86,129)
Cash used in financing activities				(786,768)		(793,094)
Foreign exchange gain (loss) on cash held in foreign currency				(55,395)		29,178
Increase (decrease) in cash				331,225		(371,440)
Cash, beginning of the period				6,507,606		9,625,845
Cash, end of the period				$	6,838,831	$	9,254,405

SOURCE Redline Communications Group Inc.

Redline Contact(s), Stephen Sorocky, Chief Executive Officer, [phone], [email protected]; Philip Jones, Chief Financial Officer, [phone], [email protected]

Related Links

http://www.redlinecommunications.com