Redline Communications Reports Q2 2015 Results

TORONTO, Aug. 5 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 June 30, 2015 (Q2 2015).

Q2 2015 Financial Highlights

• $9.0M Total Revenue, up 4%
• 58% Gross Margin
• $0.6M Adjusted EBITDA²
• $0.3M Net Profit
• $16.1M Cash
• $8.9M new Order Bookings²
• $12.8M Order Backlog²

Total revenue for Q2 2015 was $9.0 million, up 4% over the same period in 2014. Overall operating expenses were $5.0 million for Q2 2015, up 5% over the $4.3 million for the same period last year. Overall gross margin for Q2 2015 was 58%, down 5 percentage points from the 61% reported in the same period in 2014, largely attributed to a decrease in professional services revenue.

Adjusted EBITDA for Q2 2015 was $0.6 million or 7% of revenue, an decrease of $0.4 million over the Adjusted EBITDA of $1.1 million or 12% of revenue reported in the same period in 2014. The Adjusted EBITDA decrease was primarily a result of the decrease in margins associated with professional services revenues and an increase in operating costs.

"Redline continues to see revenue growth in the oil and gas sector outside of North America despite ongoing low oil prices. In addition, revenues in other vertical markets, specifically telecom and public safety also increased", said Robert Williams, Redline CEO. "This revenue diversity and ongoing expense management has resulted in a positive EBITDA for the 6^th consecutive quarter."

Net profit for Q2 2015 was $0.3 million or $0.02 per share, a $0.3 million decrease over the net profit of $0.6 million, or $0.04 per share reported in the same period in 2014.  As of June 30, 2015 the Company ended the quarter with $16.1 million of cash, an increase of $0.8 million over the $15.3 million as at March 31, 2015.

Order Bookings for the three months ended June 30, 2015 were $8.9 million, down 23% over the same period in 2014.  The Order Backlog at June 30, 2015 was $12.8 million.

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 Q2 2015 bringing the total of ongoing oil and gas pilot programs to 30 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 17,035,462 common shares outstanding as of June 30, 2015.

Conference Call and Webcast – August 6th, 2015 at 10:00 a.m. ET

A conference call and webcast to discuss the Company's financial results have been scheduled for August 6, 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 90583306. A recorded webcast of the call will be available on Redline's website at http://www.rdlcom.com/en/about/investors/webcasts through October 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 June 30, 2015 ("Q2 2015 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended June 30, 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 June 30, 2015 and the Q2 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)
				June 30, 2015			December 31, 2014
ASSETS
Current assets:
	Cash		$	16,093,828		$	16,364,077
	Trade receivables			11,851,361			12,163,006
	Other receivables			994,007			780,313
	Inventories			6,929,008			5,479,981
	Prepaid expenses and other deposits			710,451			595,174
				36,578,655			35,382,551
Non-current assets:
	Property, plant and equipment			1,494,325			1,590,011
	Intangible assets			1,915,149			1,943,678
	Other assets			71,751			77,250
				3,481,225			3,610,939
Total Assets			$	40,059,880		$	38,993,490
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Trade and other payables			6,494,316			6,307,092
	Income tax payable			155,063			155,063
	Deferred revenue			1,112,405			1,467,123
	Convertible debenture (principal and interest)			247,781			-
	Fair market value adjustment on convertible debenture			87,097			-
	Borrowings			4,078,350			4,311,077
				12,175,012			12,240,355
Non-current liabilities
	Other payables			400,986			478,311
	Other financial liability			-			159
	Convertible debenture (principal and interest)			-			265,614
	Fair market value adjustment on convertible debenture			-			91,040
				400,986			835,124
Total Liabilities				12,575,998			13,075,479
SHAREHOLDERS' EQUITY
Share capital				172,617,023			172,617,023
Warrant				310,000			310,000
Contributed surplus				8,378,777			8,167,450
Deficit				(153,821,918)			(155,176,462)
				27,483,882			25,918,011
Total liabilities and equity			$	40,059,880		$	38,993,490

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(Unaudited, expressed in U.S. dollars)
				Three months ended June 30,						Six months ended June 30,
					2015			2014			2015			2014
Revenue				$	9,007,030		$	8,682,128		$	18,625,694		$	15,770,069
Cost of revenue					3,784,637			3,176,179			7,537,649			5,975,127
Gross profit					5,222,393			5,505,949			11,088,045			9,794,942
Expenses:
	Research and development				656,583			607,460			1,390,325			1,443,854
	Administration and finance				1,526,511			1,732,069			3,135,121			3,079,323
	Sales and marketing				2,437,783			2,096,786			4,626,546			3,883,107
	Operations and customer support				333,799			300,097			630,057			594,325
					4,954,676			4,736,412			9,782,049			9,000,609
Profit before undernoted items					267,717			769,537			1,305,996			794,333
Other expenses (gains)
	Finance expense				27,544			37,189			54,931			74,456
	Loss (gain) on fair market value of financial instruments				7,794			194,493			2,476			(389,847)
	Foreign exchange gain				(61,855)			(60,279)			(109,483)			(88,961)
					(26,517)			171,403			(52,076)			(404,352)
Profit before income taxes					294,234			598,134			1,358,072			1,198,685
Income tax expense					3,138			11,498			3,528			37,419
Net profit and total comprehensive income				$	291,096		$	586,636		$	1,354,544		$	1,161,266
Earnings per share
	Basic			$	0.02		$	0.04		$	0.08		$	0.07
	Diluted			$	0.02		$	0.04		$	0.08		$	0.07

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		-		-		-		-		1,161,266		1,161,266
	Exercise of options		1,620,027		-		-		(716,968)		-		903,059
	Conversion of warrants		2,253,156		-		-		-		-		2,253,156
	Share purchase loan settlement		(329,572)		365,780		-		-		-		36,208
	Repurchase and cancellation of options		-		-		-		(201,793)		-		(201,793)
	Share-based payments		-		-		-		153,419		-		153,419
Balance at June 30, 2014		$	172,446,878	$	-	$	310,000	$	8,145,683	$	(156,494,736)	$	24,407,825
Balance at January 1, 2015		$	172,617,023	$	-	$	310,000	$	8,167,450	$	(155,176,462)	$	25,918,011
	Net profit		-		-		-		-		1,354,544		1,354,544
	Share-based payments		-		-		-		211,327		-		211,327
Balance at June 30, 2015		$	172,617,023	$	-	$	310,000	$	8,378,777	$	(153,821,918)	$	27,483,882

REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, expressed in U.S. dollars)
				Three months ended June 30,				Six months ended June 30,
				2015		2014		2015		2014
Cash flows from operating activities:
	Net profit		$	291,096	$	586,636	$	1,354,544	$	1,161,266
	Adjustments to reconcile net profit to net cash from operating activities
		Finance expense		27,544		37,189		54,931		74,456
		Depreciation and amortization of non-current assets		218,892		99,418		424,675		209,206
		Loss (gain) on disposal of assets		-		4,960		(9,950)		15,652
		Recognition of share based payments		127,964		157,993		211,327		189,627
		Foreign exchange (gain) loss on cash held in foreign currency		(9,483)		(216,424)		359,034		(33,656)
		Foreign exchange loss (gain) on borrowings		60,203		193,624		(332,403)		(45,032)
		Loss (gain) on fair market value of Debenture		7,794		194,493		2,476		(389,847)
				724,010		1,057,889		2,064,634		1,181,672
	Change in non-cash operating assets and liabilities
		Decrease in deferred cost of revenue		-		-		-		40,059
		(Decrease) increase in deferred revenue		(468,797)		1,452,135		(354,718)		1,470,038
		Change in other non-cash operating assets and liabilities		532,040		1,212,381		(1,350,955)		2,075,000
Cash from operating activities				787,253		3,722,405		358,961		4,766,769
Cash flows from investing activities:
	Acquisition of property, plant and equipment			(51,845)		(38,086)		(99,116)		(55,619)
	Proceeds on sale of property, plant and equipment			-		924		9,950		14,424
	Acquisition of intangible assets			(4,492)		(120,500)		(201,344)		(140,500)
Cash used in investing activities				(56,337)		(157,662)		(290,510)		(181,695)
Cash flows from financing activities:
	Finance income			10,749		11,228		20,334		20,688
	Proceeds from exercise of options			-		576,595		-		903,059
	Proceeds from conversion of debenture and warrants			-		1,919,290		-		1,919,290
Cash from financing activities				10,749		2,507,113		20,334		2,843,037
Foreign exchange gain (loss) on cash held in foreign currency				9,483		216,424		(359,034)		33,656
Increase (decrease) in cash				751,148		6,288,280		(270,249)		7,461,767
Cash, beginning of the period				15,342,680		14,646,733		16,364,077		13,473,246
Cash, end of the period			$	16,093,828	$	20,935,013	$	16,093,828	$	20,935,013

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]