Redline Communications Reports Q1 2015 Results

TORONTO, May 6, 2015 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), a leading provider of mission-critical networks, today announced unaudited operating results¹ for the three months ended March 31, 2015 (Q1 2015).

Q1 2015 Financial Highlights

• $9.6M Revenue, up 36%
• 61% Gross Margin
• $1.3M Adjusted EBITDA²
• $1.1M Net Profit
• $15.3M Cash
• $6.1M new Order Bookings²
• $13.3M Order Backlog²

Total revenue for Q1 2015 was $9.6 million, up 36% over the same period in 2014 driven by an increase in the number of large oil and gas network deployments that occurred in the quarter.

Overall operating expenses were $4.8 million for Q1 2015, up 13% over the $4.3 million for the same period last year. The increase is primarily the result of higher compensation costs associated with an increase of staff associated with our LTE development.  The increase was offset by a $0.3 million decrease in overall costs associated with the year over year improvement of the U.S. dollar as compared with the Canadian dollar. Overall gross margin for Q1 2015 was 61%, consistent with the 61% reported in the same period in 2014.

Adjusted EBITDA for Q1 2015 was $1.3 million or 14% of revenue, an increase of $1.1 million over the Adjusted EBITDA of $0.2 million or 2.8% of revenue reported in the same period in 2014. The difference can be largely attributed to increased revenue.

"Redline delivered strong year-over-year revenue growth this quarter", said George Kypreos, Redline CFO.  "That revenue growth, our ongoing operating expense management, and our strong gross margins have also combined to produce a much improved EBITDA."

Net profit for Q1 2015 was $1.1 million or $0.06 per share, a $0.5 million improvement over the net profit of $0.6 million, or ($0.04) per share reported in the same period in 2014.  As of March 31, 2015 the Company ended the quarter with $15.3 million of cash, a decrease of $1.1 million over the $16.4 million as at December 31, 2014. The decrease was largely attributable to working capital requirements.

Order Bookings for the three months ended March 31, 2015 were $6.1 million, down 31% over the same period in 2014.  The Order Backlog at March 21, 2015 was a healthy $13.3 million.

"In Q1 we received orders from customers in all markets including expansion orders from several of our energy sector clients in South America and the Middle East, and more recently our first order for our new LTE product" said Robert Williams, Redline CEO. "Interest in Redline systems continues to be strong across the globe and across all markets but ongoing turmoil in the US energy sector has delayed decision-making for new networks in several customer organizations. While this has affected our US bookings in the quarter, we currently don't anticipate any long-term impact from this shift."

In addition to Order Bookings, Redline tracks pilot projects in the Energy sector as a leading indicator of future Order Bookings for this sector. The Company added 4 new pilot projects in Q1 2015 bringing the total of ongoing oil and gas pilot programs to 27, up from 15 at this time in 2014. These projects vary in size and scope and give prospective customers the opportunity to evaluate Redline's solutions in a real field setting.

The Company had 17,035,460 common shares outstanding as of March 31, 2015.

Conference Call and Webcast – May 7th, 2015 at 10:00 a.m. ET

A conference call and webcast to discuss the Company's financial results have been scheduled for May 7, 2015 at 10:00 a.m. Eastern Time. To participate in the call, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide passcode 37760454. A recorded webcast of the call will be available on Redline's website at http://www.rdlcom.com/en/about/investors/webcasts through July 31, 2015.

About Redline Communications

Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for the most challenging applications and locations. Used by oil and gas companies to manage their assets, militaries for secure battlefield communications, municipalities to remotely monitor highways, utilities and other infrastructures, and telecom service providers to deliver premium services, Redline's powerful and versatile networks reliably and securely deliver voice, data, M2M and video communications for mission-critical applications.

For more information visit www.rdlcom.com.

NOTES:
1	All amounts reported in this press release are in US dollars unless otherwise stated.
2	To better assess the health and growth of the Redline's business, the Company reports on several key metrics, including "Orders or Bookings", "Backlog", "EBITDA", "Adjusted EBITDA", "EPS excluding the non-cash expense relating to the fair market adjustment on financial instruments", and "Amortized Deferred Revenue".  Further information including definitions of these categories can be found in the Company's Management Discussion and Analysis for the three months ended March 31, 2015 ("Q1 2015 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended March 31, 2015 can be found in the condensed consolidated interim statement of financial position, condensed consolidated interim statement of comprehensive loss, 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 months ended March 31, 2015 and the Q1 2015 MD&A.

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 affects 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.redlinecommunications.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, 2015			December 31, 2014
ASSETS
Current assets:
	Cash			$	15,342,680		$	16,364,077
	Trade receivables			13,176,958			12,163,006
	Other receivables			904,757			780,313
	Inventories			6,197,518			5,479,981
	Prepaid expenses and other deposits			652,698			595,174
				36,274,611			35,382,551
Non-current assets:
	Property, plant and equipment			1,542,023			1,590,011
	Intangible assets			2,030,006			1,943,678
	Other assets			70,754			77,250
				3,642,783			3,610,939
Total Assets				$	39,917,394		$	38,993,490
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Trade and other payables			6,392,523			6,307,092
	Income tax payable			155,063			155,063
	Deferred revenue			1,581,202			1,467,123
	Borrowings			3,984,931			4,311,077
				12,113,719			12,240,355
Non-current liabilities
	Other payables			416,846			478,311
	Other financial liability			-			159
	Convertible debenture (principal and interest)			243,806			265,614
	Fair market value adjustment on convertible debenture			78,201			91,040
				738,853			835,124
Total Liabilities				12,852,572			13,075,479
SHAREHOLDERS' EQUITY
Share capital				172,617,023			172,617,023
Warrant				310,000			310,000
Contributed surplus				8,250,813			8,167,450
Deficit				(154,113,014)			(155,176,462)
				27,064,822			25,918,011
Total liabilities and equity				$	39,917,394		$	38,993,490

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(Unaudited, expressed in U.S. dollars)
					Three months ended March 31,
					2015			2014
Revenue					$	9,618,664		$	7,087,941
Cost of revenue					3,753,012			2,798,948
Gross profit					5,865,652			4,288,993
Expenses:
	Research and development				733,742			836,394
	Administration and finance				1,608,610			1,347,254
	Sales and marketing				2,188,763			1,786,321
	Operations and customer support				296,258			294,228
					4,827,373			4,264,197
Profit before undernoted items					1,038,279			24,796
Other expenses (gains)
	Finance expense				27,387			37,267
	Gain on fair market value  of financial instruments				(5,318)			(584,340)
	Foreign exchange gain				(47,628)			(28,682)
					(25,559)			(575,755)
Profit before income taxes					1,063,838			600,551
Income tax expense					390			25,921
Net profit and total comprehensive income					$	1,063,448		$	574,630
Earnings per share
	Basic				$	0.06		$	0.04
	Diluted				$	0.06		$	0.04

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Changes in Equity
(Unaudited, expressed in U.S. dollars)
		Share capital		Share purchase loan		Warrant		Contributed surplus		Deficit		Total
Balance at January 1, 2014		$	168,903,267	$	(365,780)	$	310,000	$	8,911,025	$	(157,656,002)	$	20,102,510
	Net profit	-		-		-		-		574,630		574,630
	Exercise of options	545,031		-		-		(218,567)		-		326,464
	Repurchase and cancellation of options	-		-		-		(201,793)		-		(201,793)
	Share-based payments	-		-		-		31,634		-		31,634
Balance at March 31, 2014		$	169,448,298	$	(365,780)	$	310,000	$	8,522,299	$	(157,081,372)	$	20,833,445
Balance at January 1, 2015		$	172,617,023	$	-	$	310,000	$	8,167,450	$	(155,176,462)	$	25,918,011
	Net profit	-		-		-		-		1,063,448		1,063,448
	Share-based payments	-		-		-		83,363		-		83,363
Balance at March 31, 2015		$	172,617,023	$	-	$	310,000	$	8,250,813	$	(154,113,014)	$	27,064,822

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, expressed in U.S. dollars)
				Three months ended March 31,
				2015		2014
Cash flows from operating activities:
	Net profit			$	1,063,448	$	574,630
	Adjustments to reconcile net profit to net cash from operating activities
		Finance expense		27,387		37,267
		Depreciation and amortization of non-current assets		205,783		109,788
		(Gain) Loss on disposal of assets		(9,950)		10,692
		Recognition of share based payments		83,363		31,634
		Foreign exchange loss on cash held in foreign currency		368,517		182,768
		Foreign exchange gain on borrowings		(392,606)		(238,656)
		Gain on fair market value of Debenture		(5,318)		(584,340)
				1,340,624		123,783
	Change in non-cash operating assets and liabilities
		Decrease in deferred cost of revenue		-		40,059
		Increase in deferred revenue		114,079		17,903
		Change in other non-cash operating assets and liabilities		(1,882,995)		862,619
Cash from (used in) operating activities				(428,292)		1,044,364
Cash flows from investing activities:
	Acquisition of property, plant and equipment			(47,271)		(17,533)
	Proceeds on sale of property, plant and equipment			9,950		13,500
	Acquisition of intangible assets			(196,852)		(20,000)
Cash used in investing activities				(234,173)		(24,033)
Cash flows from financing activities:
	Finance income			9,585		9,460
	Proceeds from exercise of options			-		326,464
Cash from financing activities				9,585		335,924
Foreign exchange loss on cash held in foreign currency				(368,517)		(182,768)
(Decrease) increase in cash				(1,021,397)		1,173,487
Cash, beginning of the period				16,364,077		13,473,246
Cash, end of the period				$	15,342,680	$	14,646,733

SOURCE Redline Communications Group Inc.

Redline Contact(s), Lynda Partner, Corporate Communications, [phone], [email protected]; George Kypreos, Chief Financial Officer, [phone], [email protected]; Cory Pala, Investor Relations, [phone], [email protected]