Redline Communications Reports 2021 Third Quarter Results

TORONTO, Nov. 11, 2021 /CNW/ - Redline Communications Group Inc. (TSX: RDL), a leading provider of mission-critical data infrastructure for remote & harsh environments, today announced operating results for the third quarter ended September 30, 2021.

All figures are in US Dollars unless otherwise noted.

• Revenues increased 9.3% to $5.2 million from $4.7 million in Q2 2021 and decreased $0.04 million from Q3 2020
• Q3 2021 Gross margin was 66% compared to 52% for Q3 2020 and 61% for Q2 2021.
• Over 70% of revenues were fulfilled via distribution and reseller partners
• Bookings $6.3 million in Q3 2021 an increase of 20% from Q2 2021 reflecting sales momentum since the beginning of the year.
• Backlog increased to $12.5M at the end of Q3 2021 (up from $11.8M at Q2 2021)
• Adjusted EBITDA loss improved to $195,000 in Q3 2021 compared to losses of $668,000 in Q2 2021 and $409,000 in Q3 2020.

"We are pleased to report quarter over quarter improvements in cash, revenues, bookings, backlog, EBITDA and net profit," stated Richard Yoon, Chief Executive Officer. "The company has made great strides this past quarter in driving revenue growth while also increasing gross margin to 66%, a dramatic improvement over the 52% achieved in the same quarter last year. I am extremely encouraged by the current market conditions and the increase  in deployments from our customer base. Coming out of the softness in the business caused by the COVID pandemic, we are seeing more customers ramping up their digital transformation plans, which we expect to be a key driver of product demand in the coming quarters".

Financial and Business Review

Gross margin of 66% in Q3 2021 was up 5 percentage points from Q2 2021 and up substantially from 52% in Q3 2020. The changes are primarily due to changes in sales mix.

Total operating expenses for Q3 2021 were $3.9 million, up 12% from $3.5 million in Q3 2020 and flat compared to Q2 2021. The year-over-year increase was due primarily to increased expenses in R&D related to new product development as well as increased sales costs associated with the increase in gross profit.

Adjusted EBITDA loss for Q3 2021 was $0.2 million, an improvement of $0.5 million and $0.2 million compared to Q2 2021 and Q3 2020 respectively.

Net loss improved from $0.7 million  in Q2 2021 and $0.4 million in  Q3 2020 to $0.1 million  in Q3 2021.

Key financial highlights for the three months ended September 30, 2021 ("Q3 2021") include:
	Q3 2021	Q2 2021	Increase (decrease)	% Change	Q3 2020	Increase (decrease)	% Change
Revenue	$5.2 M	$4.7 M	$0.5 M	9%	$5.2 M	($0.04 M)	-1%
Gross profit margin %	66%	61%	5%		52%	14%
Operating expenses	$3.9 M	$3.9 M	-	0%	$3.5 M	$0.4 M	12%
Net loss	$0.1 M	$0.7 M	$0.6 M	86%	$0.4 M	$0.3 M	72%
Adjusted EBITDA loss^1	$0.2 M	$0.7 M	$0.5 M	71%	$0.4 M	$0.2 M	52%
CEWS benefit	$0.2 M	$0.4 M	($0.2 M)	-50%	$0.3 M	($0.1 M)	-27%
Bookings^1	$6.3 M	$5.3 M	$1.0 M	20%	$6.5 M	($0.2 M)	-3%
	September 30, 2021	June 30, 2021	Increase (decrease)	% Change	September 30, 2020	Increase (decrease)	% Change
Cash	$3.8 M	$2.7 M	$1.1 M	41%	$5.1 M	($1.3 M)	25%
Inventory	$4.7 M	$5.1 M	($0.4 M)	-8%	$6.5 M	($1.8 M)	28%
Order Backlog^1	$12.5 M	$11.8 M	$0.7 M	7%	$11.1 M	$1.4 M	13%
Key financial highlights for the nine months ended September 30, 2021 include:
	2021-09 YTD	2021-06 YTD	Increase (decrease)	% Change	2020-09 YTD	Increase (decrease)	% Change
Revenue	$13.7 M	$8.5 M	$5.2 M	61%	$13.8 M	($0.1 M)	-1%
Gross profit margin %	65%	64%	1%		57%	8%
Operating expenses	$11.6 M	$7.8 M	$3.8 M	49%	$11.3 M	$0.3 M	3%
Net loss	$2.0 M	$1.9 M	($0.1 M)	-5%	$2.3 M	$0.3 M	12%
Adjusted EBITDA loss^1	$1.9 M	$1.7 M	($0.2 M)	-12%	$2.5 M	$0.6 M	22%
CEWS benefit	$0.9 M	$0.67 M	$0.23 M	34%	$1.0 M	($0.1 M)	-12%
Bookings^1	$14.9 M	$8.6 M	$6.3 M	73%	$17.0 M	($2.1 M)	-12%
	September 30, 2021	June 30, 2021	Increase (decrease)	% Change	December 31, 2020	Increase (decrease)	% Change
Cash	$3.8 M	$2.7 M	$1.1 M	41%	$5.3 M	($1.5 M)	-28%
Inventory	$4.7 M	$5.1 M	($0.4 M)	-8%	$5.5 M	($0.8 M)	-15%
Order Backlog^1	$12.5 M	$11.8 M	$0.7 M	7%	$11.8 M	$0.7 M	7%

Conference Call and Webcast – November 11, 2021 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Thursday, November 11, 2021 at 10:00 a.m. Eastern Time. To participate, please dial 1-416-764-8659 approximately 10 minutes before the conference call and provide passcode 37221496. A recording of the call will be available through November 18, 2021 on Redline's website or by dialing 1-416-764-8677 and entering the passcode 221496.

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 certain non-IFRS metrics, including "Bookings", "Order Backlog","Adjusted EBITDA" and "Adjusted EBITDA Margin". Further information including definitions of these measures and a reconciliation to their closest IFRS measure, if applicable, can be found in the Company's Management Discussion and Analysis for the three and nine months  ended September 30, 2021 ("Q3 2021 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and nine months ended September 30, 2021 can be found in the condensed consolidated  statement of financial position, statement of comprehensive 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 financial statements of the Company for the three and nine months ended September 30, 2021 and the Q3 2021 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,
		(unaudited)				(unaudited)
(in thousands)		2021		2020		2021		2020
Revenue		$	5,195	$	5,235	$	13,678	$	13,833
Net profit (loss)		(97)		(350)		(1,979)		(2,251)
Add back:
	Share based payments	6		51		92		142
	Depreciation and amortization	256		263		766		800
	Canada Emergency Wage Subsidy	(243)		(335)		(912)		(1,041)
	Finance (income) expense	12		7		28		16
	(Gain) loss on fair market value     of financial instruments	(94)		(77)		26		(150)
	Foreign exchange (gain) loss	(46)		18		2		(51)
	Income tax expense	10		14		53		58
	Total	(99)		(59)		55		(226)
Adjusted EBITDA (loss)		$	(196)	$	(409)	$	(1,924)	$	(2,477)
Adjusted EBITDA margin		-4%		-8%		-14%		-18%

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, 2021		December 31, 2020
ASSETS
Current assets:
	Cash	$	3,803,539	$	5,334,486
	Trade receivables	5,184,606		4,237,183
	Other receivables	209,687		180,881
	Inventories	4,679,132		5,492,931
	Deferred cost of revenue	23		498
	Prepaid expenses and other deposits	417,722		431,559
		14,294,709		15,677,538
Non-current assets:
	Property, plant and equipment	700,457		901,234
	Intangible assets	922,459		1,148,050
	Right of use assets	464,778		565,213
	Other assets	85,278		65,223
		2,172,972		2,679,720
Total Assets		$	16,467,681	$	18,357,258
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables	$	3,641,582	$	3,944,374
	Income tax payable	29,459		29,459
	Deferred revenue	931,300		2,057,944
	Lease liabilities	298,456		250,068
		4,900,797		6,281,845
Non-current liabilities:
	Deferred revenue	1,151,589		364,391
	Lease liabilities	356,902		554,396
	Other financial liabilties -   SIF Loan	307,162		-
	Deferred Grant Income -  SIF Loan	493,090		-
		2,308,743		918,787
Total Liabilities		7,209,540		7,200,632
SHAREHOLDERS' EQUITY
Share capital		172,929,341		172,929,341
Contributed surplus		9,785,302		9,704,769
Deficit		(173,456,503)		(171,477,484)
		9,258,140		11,156,626
Total Liabilities and Equity		$	16,467,681	$	18,357,258

See accompanying notes to the interim condensed consolidated financial statements

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,
		2021		2020		2021		2020
Revenue		$	5,194,806	$	5,234,885	13,678,100		$	13,832,804
Cost of revenue		1,789,633		2,506,794		4,829,013		5,909,158
Gross profit		3,405,173		2,728,091		8,849,087		7,923,646
Expenses:
	Research and development	1,063,194		946,317		3,439,727		3,116,847
	General and administrative	1,188,355		1,179,184		3,373,983		3,599,198
	Sales and marketing	1,294,906		1,103,574		3,849,943		3,959,091
	Operations and customer support	316,828		221,574		971,165		667,848
		3,863,283		3,450,649		11,634,818		11,342,984
Loss before undernoted items		(458,110)		(722,558)		(2,785,731)		(3,419,338)
Other (income) expenses:
	Canada Emergency Wage Subsidy	(243,273)		(334,763)		(912,721)		(1,040,717)
	Finance (income) expense	11,501		7,422		23,379		16,179
	Loss (Gain)  on fair market value of financial instruments	(93,654)		(77,476)		26,564		(151,169)
	Foreign exchange loss (gain)	(45,785)		17,680		2,854		(51,170)
		(371,211)		(387,137)		(859,924)		(1,226,877)
Loss before income taxes		(86,899)		(335,421)		(1,925,807)		(2,192,461)
Income tax expense		9,841		14,498		53,212		58,644
Net loss and total comprehensive loss		$	(96,740)	$	(349,919)	$	(1,979,019)	$	(2,251,105)
Loss per share
	Basic and diluted	$	(0.01)	$	(0.02)	$	(0.11)	$	(0.13)

See accompanying notes to the interim condensed consolidated financial statements

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, 2020			$	172,929,341	$	9,525,694	$	(167,577,777)	14,877,258
	Net loss		-		-		(2,251,105)		(2,251,105)
	Stock option expense		-		137,626		-		137,626
Balance at September 30, 2020			$	172,929,341	$	9,663,320	$	(169,828,882)	$	12,763,779
Balance at January 1, 2021			$	172,929,341	$	9,704,769	$	(171,477,484)	$	11,156,626
	Net loss		-		-		(1,979,019)		(1,979,019)
	Stock option expense		-		80,533		-		80,533
Balance at September 30, 2021			$	172,929,341	$	9,785,302	$	(173,456,503)	$	9,258,140
See accompanying notes to the interim condensed consolidated financial statements

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,
			2021		2020		2021		2020
Cash flows from (used in) operating activities:
	Net loss		$	(96,740)	$	(349,919)		(1,979,019)	$	(2,251,105)
	Adjustments to reconcile net loss to net cash from operating activities:
		Finance expense	11,501		7,422		23,379		16,179
		Depreciation and Amortization	256,318		263,423		766,820		800,695
		Stock option expense	(5,587)		50,618		80,533		137,626
		Foreign exchange (gain) loss on cash held in foreign currency	(4,403)		(5,483)		(20,062)		39,285
		Foreign exchange (gain) loss on borrowings and lease liabilities	(17,622)		17,774		5,001		(50,456)
		Loss on disposal of assets	-				1,753		5,668
			143,467		(16,165)		(1,121,595)		(1,302,108)
	Change in non-cash operating assets and liabilities:
		Decrease in deferred cost of revenue	2		1,141		475		5,856
		Decrease (Increase) in deferred revenue	30,792		(172,612)		(339,446)		(332,074)
		Change in other non-cash operating assets and liabilities	710,407		489,891		(471,442)		1,705,346
Cash generated from (used in) operating activities			884,668		302,255		(1,932,008)		77,020
Cash flows from (used in) investing activities:
	Acquisition of property, plant and equipment		(65,294)		(90,048)		(176,583)		(239,296)
	Proceeds on sale of property, plant and equipment		-		-		4,600		-
	Acquisition of intangible assets		(61,330)		(109,750)		(69,785)		(240,173)
Cash (used in) investing activities			(126,624)		(199,798)		(241,768)		(479,469)
Cash flows from (used in) financing activities:
	Interest income		1,825		2,704		5,881		22,255
	Interest expense		(6,976)		(10,126)		(22,237)		(33,748)
	Government Loan (SIF) including Deferred Grant Income		340,353				793,229		-
	Repayment of borrowings		-				-		(701,491)
	Lease Right of Use Asset		51,274		-		51,274		-
	Repayment of lease liabilities		(50,449)		(48,781)		(205,380)		(218,530)
Cash generated from (used in) financing activities			336,027		(56,203)		622,767		(931,514)
Foreign exchange gain (loss) on cash held in foreign currency			4,403		5,483		20,062		(39,285)
Increase (Decrease) in cash			1,098,474		51,737		(1,530,947)		(1,373,248)
Cash, beginning of the period			2,705,065		5,082,621		5,334,486		6,507,606
Cash, end of the period			$	3,803,539	$	5,134,358	$	3,803,539	$	5,134,358
See accompanying notes to the interim condensed consolidated financial statements

SOURCE Redline Communications Group Inc.

Redline Contact(s), Richard Yoon, Chief Executive Officer, [phone], [email protected]; Philip Jones, Chief Financial Officer, [phone], [email protected]; Investor Relations Contact, Ron Shuttleworth, Partner, OakHill Financial, [phone], [email protected]

Related Links

http://www.redlinecommunications.com