TORONTO, Nov. 11, 2019 /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 third quarter ended
September 30, 2019 ("Q3 2019").
Key financial highlights for Q3 2019 versus Q3 2018 include:
- Revenues of $7.1 million, up
8%
- Gross margins of 54%, up 8 percentage points
- Operating expenses of $4.1
million, up 15%
- Net loss of $0.2 million, an
improvement of $0.3 million
- Adjusted EBITDA1 loss of $0.03 million, an improvement of $0.3 million
- Bookings1 of $5.8
million, down 25%
- Order Backlog1 of $7.4
million, down 7%
Key financial highlights for the nine months ended September 30, 2019 versus the same period in 2018
include:
- Revenues of $18.6 million, down
5%
- Gross margins of 54%, up 3 percentage points
- Operating expenses of $12.5
million (including severance costs of $0.6 million), up 18%
- Net loss of $2.4 million, as
compared to net loss of $0.6
million
- Adjusted EBITDA loss of $1.4
million, as compared to Adjusted EBITDA of $0.1 million
- Bookings of $17.6 million, down
20%
At September 30th,
2019, Redline held cash of $8.2
million, up $0.4 million from
June 30, 2019.
Financial and Business Review
Revenues for Q3 2019 were $7.1
million, an increase of $0.5
million or 8% over the same period in 2018 and an increase
of $1.4 million or 24% from Q2 2019.
In both time frames revenue growth was driven largely by sales to
customers in the oil and gas market as existing customers,
especially those outside of North
America, continue to extend their Redline networks.
Compared to Q2 2019, the Company's Q3 results reflect progress
toward the goal of improved profitability. Q3 revenues grew 24%
quarter over quarter and profitability improved by $0.7 million. Despite showing a small loss in the
quarter, cash increased by $0.4
million quarter over quarter as a result of improved
inventory management and receivable collections.
The Company continues to focus its efforts on sales to core
vertical markets including oil & gas, mining and utilities. "We
are pleased with our progress towards improved financial
performance," stated Stephen
Sorocky, Redline CEO. "We've improved our bottom line with
an almost $1 million improvement in
the last two quarters, and increased cash in the quarter."
Order Bookings for Q3 2019 were $5.8
million, down 25% over Q3 2018 with the decrease primarily
due to a large order received from a telecom service provider in Q3
2018 that was not repeated in Q3 2019. Order backlog was
$7.4 million at end of Q3 2019, down
7% from the end of Q2 as the Company focuses on reducing the time
from order to shipment.
Looking forward, the Company points to the September
announcement by the FCC that they have given permission for limited
commercial deployments of services using CBRS spectrum. Until this
announcement the lack of readily available cost-effective LTE
spectrum made the deployment of private LTE networks challenging.
Initial trials are underway with Redline being an early
participant.
Overall gross margin for Q3 2019 was 54%, an 8 percentage point
improvement over the 46% recorded in the same period in 2018. The
increase reflects both the product mix, which consisted of higher
margin sector controller hardware and software keys, combined with
cost reduction initiatives on high-volume products achieved through
re-engineering.
Overall operating expenses for the third quarter of 2019 were
$4.1 million, up 15% over the same
period in 2018 and down 6% over Q2 2019. The increase in
operating expenses in the third quarter 2019 over the same period
in 2018 was the result of an increase in headcount and other
personnel related costs.
Adjusted EBITDA loss for Q3 2019 was $0.03 million, an improvement of $0.3 million over the Adjusted EBITDA loss of
$0.3 million for Q3 2018 and an
improvement of $0.6 million over Q2
2019.
Net loss for the third quarter of 2019 was $0.2 million, or ($0.01) per share, as compared to net loss of
$0.5 million, or ($0.03) per share, in Q3 2018 and net loss of
$0.9 million, or ($0.05) per share, in Q2 2019.
Conference Call and Webcast – November
12th, 2019 at 10:00 a.m.
ET
A conference call and webcast to discuss the results has been
scheduled for Tuesday, November
12th, 2019 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 4466128. A recording of the call will be available through
November 19, 2019 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 "Orders or Bookings", "Shipped or
Shipments", "Backlog", "EBITDA", 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 and nine months ended September 30, 2019 ("Q3 2019
MD&A"), copies of which are available on SEDAR at
www.sedar.com. Further details on the three and nine months ended
September 30, 2019 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 and nine months ended September 30, 2019 and the Q3 2019
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,
|
|
2019
|
2018
|
2019
|
2018
|
Revenue
|
$
|
7,089
|
$
|
6,575
|
$
|
18,645
|
$
|
19,581
|
Net loss
|
(248)
|
(516)
|
(2,420)
|
(595)
|
Add back:
|
|
|
|
|
Share based
payments
|
44
|
65
|
279
|
260
|
Depreciation and
amortization
|
210
|
147
|
647
|
451
|
Finance (income)
expense
|
(11)
|
(18)
|
(43)
|
(40)
|
(Gain) Loss on fair
market value
|
|
|
|
|
of financial
instruments
|
(27)
|
(11)
|
(10)
|
(11)
|
Foreign exchange
(gain) loss
|
(6)
|
17
|
94
|
(6)
|
Income tax
expense
|
5
|
9
|
12
|
17
|
Total
|
215
|
209
|
980
|
671
|
|
|
|
|
|
|
Adjusted EBITDA
(loss)
|
$
|
(33)
|
$
|
(307)
|
$
|
(1,440)
|
$
|
76
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
0%
|
-5%
|
-8%
|
0%
|
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,
2019
|
December 31,
2018
|
ASSETS
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
8,185,608
|
$
|
9,625,845
|
|
Trade
receivables
|
6,543,565
|
9,857,857
|
|
Other
receivables
|
368,172
|
392,632
|
|
Inventories
|
7,091,100
|
6,605,517
|
|
Deferred cost of
revenue
|
8,349
|
-
|
|
Prepaid expenses and
other deposits
|
340,493
|
308,273
|
|
|
22,537,287
|
26,790,124
|
Non-current
assets:
|
|
|
|
Property, plant and
equipment
|
646,186
|
800,374
|
|
Intangible
assets
|
1,047,508
|
1,277,637
|
|
Right of use
assets
|
865,501
|
-
|
|
Other
assets
|
75,049
|
73,538
|
|
|
2,634,244
|
2,151,549
|
Total
Assets
|
$
|
25,171,531
|
$
|
28,941,673
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
|
Trade and other
payables
|
$
|
5,447,432
|
$
|
7,415,403
|
|
Income tax
payable
|
10,741
|
10,741
|
|
Deferred
revenue
|
1,751,350
|
1,626,687
|
|
Lease
liabilities
|
285,582
|
-
|
|
Borrowings
|
695,923
|
705,413
|
|
|
8,191,028
|
9,758,244
|
Non-current
liabilities:
|
|
|
|
Lease
liabilities
|
823,490
|
-
|
|
Borrowings
|
-
|
659,522
|
|
Other
payables
|
-
|
135,184
|
|
|
823,490
|
794,706
|
Total
Liabilities
|
9,014,518
|
10,552,950
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
Share
capital
|
172,929,341
|
172,929,341
|
Contributed
surplus
|
9,481,093
|
9,292,321
|
Deficit
|
(166,253,421)
|
(163,832,939)
|
|
|
16,157,013
|
18,388,723
|
Total Liabilities
and Equity
|
$
|
25,171,531
|
$
|
28,941,673
|
REDLINE
COMMUNICATIONS GROUP INC.
|
Condensed
Consolidated Interim Statements of Comprehensive Income
(Loss)
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
2018
|
Revenue
|
$
|
7,089,235
|
$
|
6,575,071
|
$
|
18,644,734
|
$
|
19,581,404
|
Cost of
revenue
|
3,291,151
|
3,557,287
|
8,543,973
|
9,611,289
|
Gross
profit
|
3,798,084
|
3,017,784
|
10,100,761
|
9,970,115
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Research and
development
|
1,063,385
|
597,706
|
2,376,048
|
1,794,589
|
|
Administration and
finance
|
1,156,924
|
977,165
|
3,766,480
|
3,240,639
|
|
Sales and
marketing
|
1,588,275
|
1,749,347
|
5,563,229
|
4,964,627
|
|
Operations and
customer support
|
276,808
|
212,729
|
763,042
|
604,634
|
|
|
4,085,392
|
3,536,947
|
12,468,799
|
10,604,489
|
Loss before
undernoted items
|
(287,308)
|
(519,163)
|
(2,368,038)
|
(634,374)
|
|
|
|
|
|
|
Other (income)
expenses:
|
|
|
|
|
|
Finance (income)
expense
|
(10,966)
|
(18,440)
|
(43,195)
|
(40,273)
|
|
(Gain) loss on fair
market value of financial instruments
|
(27,073)
|
(10,736)
|
(9,913)
|
(10,736)
|
|
Foreign exchange
(gain) loss
|
(6,237)
|
17,333
|
93,528
|
(5,589)
|
|
|
(44,276)
|
(11,843)
|
40,420
|
(56,598)
|
Loss before income
taxes
|
(243,032)
|
(507,320)
|
(2,408,458)
|
(577,776)
|
Income tax
expense
|
4,967
|
9,111
|
12,024
|
17,426
|
Net loss and total
comprehensive loss
|
$
|
(247,999)
|
$
|
(516,431)
|
$
|
(2,420,482)
|
$
|
(595,202)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share
|
|
|
|
|
|
Basic and
diluted
|
$
|
(0.01)
|
$
|
(0.03)
|
$
|
(0.14)
|
$
|
(0.03)
|
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, 2018
|
$
|
172,929,341
|
$
|
9,155,798
|
$
|
(163,308,323)
|
$
|
18,776,816
|
|
IFRS 15 transition
adjustment
|
-
|
-
|
(136,000)
|
(136,000)
|
|
Net loss
|
-
|
-
|
(595,202)
|
(595,202)
|
|
Stock option
expense
|
-
|
115,639
|
-
|
115,639
|
Balance at
September 30, 2018
|
$
|
172,929,341
|
$
|
9,271,437
|
$
|
(164,039,525)
|
$
|
18,161,253
|
Balance at
January 1, 2019
|
$
|
172,929,341
|
$
|
9,292,321
|
$
|
(163,832,939)
|
$
|
18,388,723
|
|
Net loss
|
-
|
-
|
(2,420,482)
|
(2,420,482)
|
|
Stock option
expense
|
-
|
188,772
|
-
|
188,772
|
Balance at September
30, 2019
|
$
|
172,929,341
|
$
|
9,481,093
|
$
|
(166,253,421)
|
$
|
16,157,013
|
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,
|
|
2019
|
2018
|
2019
|
2018
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(247,999)
|
$
|
(516,431)
|
$
|
(2,420,482)
|
$
|
(595,202)
|
|
Adjustments to
reconcile net loss to net cash from operating
activities:
|
|
|
|
|
|
|
Finance (income)
expense
|
(10,966)
|
(18,440)
|
(43,195)
|
(40,273)
|
|
|
Depreciation and
amortization of non-current assets
|
210,422
|
146,886
|
647,741
|
451,337
|
|
|
Gain on disposal of
assets
|
(1,801)
|
-
|
(1,801)
|
-
|
|
|
Stock option
expense
|
38,009
|
31,225
|
188,772
|
115,639
|
|
|
Foreign exchange
(gain) loss on cash held in foreign currency
|
17,385
|
(20,882)
|
(29,800)
|
59,536
|
|
|
Foreign exchange
(gain) loss on borrowings and lease liabilities
|
(21,561)
|
23,935
|
75,413
|
(49,187)
|
|
|
IFRS 15 transition
adjustment
|
-
|
-
|
-
|
(136,000)
|
|
|
|
|
|
|
|
|
|
|
(16,511)
|
(353,707)
|
(1,583,352)
|
(194,150)
|
|
Change in non-cash
operating assets and liabilities:
|
|
|
|
|
|
|
(Increase) decrease
in deferred cost of revenue
|
(3,155)
|
-
|
(8,349)
|
-
|
|
|
Increase (decrease)
in deferred revenue
|
341,324
|
166,837
|
124,663
|
(18,004)
|
|
|
Change in other
non-cash operating assets and liabilities
|
113,864
|
(1,422,108)
|
999,514
|
(805,805)
|
Cash from (used in)
operating activities
|
435,522
|
(1,608,978)
|
(467,524)
|
(1,017,959)
|
Cash flows used in
investing activities:
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
(15,739)
|
(76,063)
|
(112,752)
|
(196,255)
|
|
Proceeds on sale of
property, plant and equipment
|
25,812
|
-
|
25,812
|
-
|
|
Acquisition of
intangible assets
|
-
|
(16,948)
|
(14,100)
|
(210,394)
|
Cash from (used in)
investing activities
|
10,073
|
(93,011)
|
(101,040)
|
(406,649)
|
Cash flows used in
financing activities:
|
|
|
|
|
|
Interest
income
|
31,331
|
33,759
|
109,876
|
90,945
|
|
Interest
expense
|
(13,250)
|
(847)
|
(41,041)
|
(2,472)
|
|
Repayment of
borrowings
|
-
|
-
|
(735,505)
|
(801,565)
|
|
Repayment of lease
liabilities
|
(64,136)
|
-
|
(234,803)
|
-
|
Cash from (used in)
financing activities
|
(46,055)
|
32,912
|
(901,473)
|
(713,092)
|
Foreign exchange gain
(loss) on cash held in foreign currency
|
(17,385)
|
20,882
|
29,800
|
(59,536)
|
Increase (decrease)
in cash
|
382,155
|
(1,648,195)
|
(1,440,237)
|
(2,197,236)
|
Cash, beginning of
the period
|
7,803,453
|
11,411,021
|
9,625,845
|
11,960,062
|
Cash, end of the
period
|
$
|
8,185,608
|
$
|
9,762,826
|
$
|
8,185,608
|
$
|
9,762,826
|
SOURCE Redline Communications Group Inc.