Redline Communications Reports Q1 2016 Results

TORONTO, May 4, 2016 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), a leading provider of mission-critical wireless networks, today announced unaudited operating results¹ for the three months ended March 31, 2016 (Q1 2016).

Q1 2016 Financial Highlights

• $6.2M Revenue
• 59% Gross Margin
• $0.6M Adjusted EBITDA² loss
• $0.9M Net Loss
• $13.0M Cash
• $6.9M new Order Bookings²
• $17.7M Order Backlog²

Total revenue for Q1 2016 was $6.2 million, up $1.1 million or 21% over the preceding quarter, down $3.4 million or 35% over the same period in 2015. The year-over-year decrease can be attributed to lower sales to energy companies whose businesses have been affected by the downturn in global oil prices.

Order Bookings for Q1 2016 were $6.9 million, up 13% over the same period in 2015.  The Order Backlog at March 21, 2016 was a healthy $17.7 million, up $4.4 million or 33% when compared to the same period in 2015.

"Redline is making progress in the diversification of its business. In Q1 2016, approximately 80% of our new orders came from customers in markets other than oil and gas," stated Rob Williams, Redline CEO. "We will continue to grow and diversify our customer base and we know that we are also well positioned in the energy sector once the oil and gas sector rebounds."

Overall operating expenses for Q1 2016 were $4.6 million, a decrease of $0.2 million, or 4% compared to $4.8 million reported for the same period in 2015, primarily as a result of decreased numbers of staff and their associated costs. The decreases were partially offset by an increase in costs to support the upcoming LTE product line and legal fees to implement a shareholder rights plan. 

Adjusted EBITDA loss for Q1 2016 was $0.6 million, an improvement of $0.5 million or 44% over the Adjusted EBITDA loss of $1.1 million for the quarter ended December 31, 2015, but an increased loss of $2 million over the Adjusted EBITDA of $1.3 million for the same period in 2015. The increased loss over Q1 2015 can largely be attributed to lower revenues in the period.

Net loss for Q1 2016 was $0.9 million or ($0.05) per share, a $2.0 million decrease over the net profit of $1.1 million, or $0.06 per share reported in the same period in 2015.  As of March 31, 2016, the Company reported $13.0 million of cash, a decrease of $1.6 million over the $14.5 million as at December 31, 2015. The decrease was largely attributable to the net loss and increased working capital requirements.

The Company had 17,215,469 common shares outstanding as of March 31, 2016.

Conference Call and Webcast – May 5th, 2016 at 10:00 a.m. ET

A conference call and webcast to discuss the Company's financial results have been scheduled for May 5, 2016 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 93573631. 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, 2016.

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, 2016 ("Q1 2016 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended March 31, 2016 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, 2016 and the Q1 2016 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, 2016		December 31, 2015
ASSETS
Current assets:
	Cash			$	12,986,728	$	14,548,954
	Trade receivables				8,316,306		8,187,806
	Other receivables				422,570		466,668
	Inventories				6,213,900		7,100,207
	Deferred cost of revenue				33,318		-
	Prepaid expenses and other deposits				608,419		266,578
					28,581,241		30,570,213
Non-current assets:
	Property, plant and equipment				1,362,825		1,389,727
	Intangible assets				1,904,841		1,974,672
	Other assets				81,170		64,755
					3,348,836		3,429,154
Total Assets				$	31,930,077	$	33,999,367
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Trade and other payables			$	3,600,213	$	4,475,662
	Income tax payable				94,063		94,063
	Deferred revenue				1,198,370		1,534,731
	Convertible debenture (principal and interest)				-		224,595
	Fair market value adjustment on convertible debenture				-		11,817
	Borrowings				749,076		2,833,752
					5,641,722		9,174,620
Non-current liabilities:
	Borrowings				2,078,355		-
	Other payables				321,802		322,116
					2,400,157		322,116
Total Liabilities					8,041,879		9,496,736
SHAREHOLDERS' EQUITY
Share capital					172,929,341		172,662,177
Warrant					310,000		310,000
Contributed surplus					8,503,936		8,457,415
Deficit					(157,855,079)		(156,926,961)
					23,888,198		24,502,631
Total liabilities and equity				$	31,930,077	$	33,999,367

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(Unaudited, expressed in U.S. dollars)
			Three months ended March 31,
				2016		2015
Revenue			$	6,216,608	$	9,618,664
Cost of revenue				2,549,091		3,753,012
Gross profit				3,667,517		5,865,652
Expenses:
	Research and development			855,559		733,742
	Administration and finance			1,444,158		1,608,610
	Sales and marketing			2,073,531		2,188,763
	Operations and customer support			271,713		296,258
				4,644,961		4,827,373
Profit (loss) before undernoted items				(977,444)		1,038,279
Other expenses (income):
	Finance (income) expense			(196,884)		27,387
	Loss (gain) on fair market value of financial instruments			16,314		(5,318)
	Foreign exchange loss (gain)			130,595		(47,628)
				(49,975)		(25,559)
Profit (loss) before income taxes				(927,469)		1,063,838
Income tax expense				649		390
Net profit (loss) and total comprehensive income (loss)			$	(928,118)	$	1,063,448
Earnings (loss) per share
	Basic		$	(0.05)	$	0.06
	Diluted		$	(0.05)	$	0.06

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Changes in Equity
(Unaudited, expressed in U.S. dollars)
		Share capital		Warrant		Contributed surplus		Deficit		Total
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
Balance at January 1, 2016		$	172,662,177	$	310,000	$	8,457,415	$	(156,926,961)	$	24,502,631
	Net loss		-		-		-		(928,118)		(928,118)
	Conversion of debenture		267,164		-		-		-		267,164
	Share-based payments		-		-		46,521		-		46,521
Balance at March 31, 2016		$	172,929,341	$	310,000	$	8,503,936	$	(157,855,079)	$	23,888,198

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, expressed in U.S. dollars)
			Three months ended March 31,
				2016		2015
Cash flows from operating activities:
	Net profit (loss)		$	(928,118)	$	1,063,448
	Adjustments to reconcile net profit (loss) to net cash from operating activities:
		Finance (income) expense		(196,884)		27,387
		Depreciation and amortization of non-current assets		260,813		205,783
		Gain on disposal of assets		-		(9,950)
		Recognition of share based payments		46,521		83,363
		Foreign exchange (gain) loss on cash held in foreign currency		(102,963)		368,517
		Foreign exchange loss (gain) on borrowings		201,226		(392,606)
		Loss (gain) on fair market value of financial instruments		16,314		(5,318)
				(703,091)		1,340,624
	Change in non-cash operating assets and liabilities:
		Increase in deferred cost of revenue		(33,318)		-
		(Decrease) increase in deferred revenue		(336,361)		114,079
		Change in other non-cash operating assets and liabilities		(432,114)		(1,882,995)
Cash used in operating activities				(1,504,884)		(428,292)
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(83,860)		(47,271)
	Proceeds on sale of property, plant and equipment			-		9,950
	Acquisition of intangible assets			(80,220)		(196,852)
Cash used in investing activities				(164,080)		(234,173)
Cash flows from financing activities:
	Finance income			3,775		9,585
Cash from financing activities				3,775		9,585
Foreign exchange gain (loss) on cash held in foreign currency				102,963		(368,517)
Decrease in cash				(1,562,226)		(1,021,397)
Cash, beginning of the year				14,548,954		16,364,077
Cash, end of the year			$	12,986,728	$	15,342,680

SOURCE Redline Communications Group Inc.

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