TORONTO, Aug. 10, 2020 /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 second
quarter ended June 30, 2020.
Key financial highlights for the three and six months ended
June 30, 2020 ("Q2 2020")
include:
|
Q2 2020
(millions)
|
Q2 2019
(millions)
|
Increase
(decrease)
|
%
Change
|
|
2020-06
YTD
(millions)
|
2019-06
YTD
(millions)
|
Increase
(decrease)
|
%
Change
|
Revenue
|
$4.1M
|
$5.7 M
|
($1.6 M)
|
-28%
|
|
$8.6M
|
$11.6M
|
($3.0M)
|
-26%
|
Gross
margin %
|
58%
|
59%
|
-1%
|
|
|
60%
|
55%
|
5%
|
|
Operating
expenses
|
$3.8M
|
$4.3M
|
($0.5M)
|
-13%
|
|
$7.9M
|
$8.4M
|
($0.5M)
|
-6%
|
Net
loss
|
$0.9M
|
$0.9M
|
($0.0M)
|
-6%
|
|
$1.9M
|
$2.2M
|
($0.3M)
|
-12%
|
Adjusted
EBITDA
loss1
|
$1.1M
|
$0.6M
|
$0.5M
|
78%
|
|
$2.1M
|
$1.4M
|
$0.7M
|
47%
|
CEWS
benefit
|
$0.7M
|
Nil
|
$0.7M
|
|
|
$0.7M
|
Nil
|
$0.7M
|
|
Bookings1
|
$4.6M
|
$6.1M
|
($1.5M)
|
-25%
|
|
$10.5M
|
$11.8M
|
($1.3M)
|
-11%
|
|
|
|
|
|
|
|
|
|
|
|
30-Jun-20
|
31-Mar-20
|
Increase
(decrease)
|
%
Change
|
|
30-Jun-20
|
31-Dec-19
|
Increase
(decrease)
|
%
Change
|
Cash
|
$5.1M
|
$6.8M
|
($1.7M)
|
-27%
|
|
$5.1M
|
$6.5M
|
($1.4M)
|
-22%
|
Inventory
|
$7.2M
|
$7.9M
|
($0.7M)
|
-9%
|
|
$7.2M
|
$7.7M
|
($0.5M)
|
-7%
|
Order
Backlog1
|
$10.3M
|
$9.9M
|
$0.4M
|
4%
|
|
$10.3M
|
$8.5M
|
$1.8M
|
21%
|
Note: CEWS
benefit is NOT included in the Adjusted EBITDA
results
|
Financial and Business Review
Revenue for the second quarter ended June
30, 2020 was $4.1 million,
down 28% over Q2 2019, mainly the result of approximately
$1.8 million of product shipments to
a single customer that continues to be delayed due to the impact of
COVID-19.
Order Bookings for Q2 2020 were $4.6
million, down 25% over Q2 2019. The decrease was primarily
due a decrease in orders from telecom service providers. Orders
from other markets remain largely flat.
"Redline's backlog of orders continues to grow during the
COVID-19 pandemic. We're focused on mission critical applications
in demanding industrial markets such as IoT. This strategy
generates higher gross margins as we expand existing networks built
with our Virtual Fiber technology," stated Stephen Sorocky, Redline CEO. "The pandemic has
impacted our shipments and revenues but we're aggressively
controlling expenses and continue the development of LTE/5G
products."
Gross margin for Q2 2020 was 58%, down a single percentage point
over Q2 2019. The decrease was a result of a number of factors,
primarily the result of the change in revenue mix year over year,
with the 2020 Q2 having a greater percentage of sales from the
lower margin, non-core verticals. This was partially offset by
continued quarter-over-quarter growth in revenue from maintenance
and support contracts, which, in addition to being recurring
revenue, also have higher margins.
Overall operating expenses for Q2 2020 were $3.8 million, down 13% over Q2 2019, primarily a
result of decreased sales and marketing costs, as COVID-19 prompted
the suspension of all business travel and the cancelation of
in-person marketing events.
In the quarter, the Government of Canada announced the Canada Emergency Wage Subsidy ("CEWS") in
response to the COVID-19 pandemic. The Company has recognized
$0.7 million of CEWS benefit as part
of other income, covering periods up to end of June.
Net loss for Q2 2020 was $0.9
million, or ($0.05) per share,
essentially unchanged from the net loss of $0.9 million, or ($0.05) per share, for Q2 2019.
Adjusted EBITDA loss for Q2 2020 was $1.1
million (excluding the CEWS benefit of $0.7 million), as compared to Adjusted EBITDA
loss of $0.6 million for Q2 2019.
Conference Call and Webcast – August
11, 2020 at 10:00 a.m.
ET
A conference call and webcast to discuss the results has been
scheduled for Tuesday August 11, 2020
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 7769062. A
recording of the call will be available through August 18, 2020 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 "Bookings", "Order Backlog" 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 six months ended June 30, 2020 ("Q2
2020 MD&A"), copies of which are available on SEDAR at
www.sedar.com. Further details on the three and six months ended
June 30, 2020 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
six months ended June 30, 2020 and the Q2 2020 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
June 30,
|
Six months ended June
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue
|
$
|
4,123
|
$
|
5,722
|
$
|
8,598
|
$
|
11,556
|
Net profit
(loss)
|
|
(857)
|
|
(915)
|
|
(1,901)
|
|
(2,172)
|
Add back:
|
|
|
|
|
|
|
|
|
Share based
payments
|
|
40
|
|
122
|
|
91
|
|
236
|
Depreciation and
amortization
|
|
268
|
|
218
|
|
537
|
|
437
|
Covid-19 related
Canada Emergency Wage Subsidy
|
|
(706)
|
|
-
|
|
(706)
|
|
-
|
Finance (income)
expense
|
|
8
|
|
(15)
|
|
9
|
|
(32)
|
(Gain) loss on fair
market value of financial instruments
|
|
45
|
|
(71)
|
|
(73)
|
|
17
|
Foreign exchange
(gain) loss
|
|
64
|
|
34
|
|
(69)
|
|
100
|
Income tax
expense
|
|
26
|
|
1
|
|
44
|
|
7
|
Total
|
|
(255)
|
|
289
|
|
(167)
|
|
765
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(loss)
|
$
|
(1,112)
|
$
|
(626)
|
$
|
(2,068)
|
$
|
(1,407)
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
-27%
|
|
-11%
|
|
-24%
|
|
-12%
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
5,082,621
|
$
|
6,507,606
|
|
Trade
receivables
|
|
3,465,785
|
|
7,089,043
|
|
Other
receivables
|
|
349,108
|
|
260,216
|
|
Inventories
|
|
7,169,909
|
|
7,707,578
|
|
Deferred cost of
revenue
|
|
2,195
|
|
6,910
|
|
Prepaid expenses and
other deposits
|
|
431,841
|
|
285,519
|
|
|
|
16,501,459
|
|
21,856,872
|
Non-current
assets:
|
|
|
|
|
|
Property, plant and
equipment
|
|
957,970
|
|
999,435
|
|
Intangible
assets
|
|
1,280,911
|
|
1,373,526
|
|
Right of use
assets
|
|
668,891
|
|
798,080
|
|
Other
assets
|
|
61,111
|
|
76,284
|
|
|
|
2,968,883
|
|
3,247,325
|
Total
Assets
|
$
|
19,470,342
|
$
|
25,104,197
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Trade and other
payables
|
$
|
3,310,065
|
$
|
6,035,496
|
|
Income tax
payable
|
|
12,398
|
|
12,398
|
|
Deferred
revenue
|
|
1,899,862
|
|
1,966,282
|
|
Lease
liabilities
|
|
237,271
|
|
277,945
|
|
Borrowings
|
|
-
|
|
716,832
|
|
|
|
5,459,596
|
|
9,008,953
|
Non-current
liabilities:
|
|
|
|
|
|
Deferred
revenue
|
|
336,372
|
|
429,414
|
|
Lease
liabilities
|
|
611,294
|
|
788,572
|
|
|
|
947,666
|
|
1,217,986
|
Total
Liabilities
|
|
6,407,262
|
|
10,226,939
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Share
capital
|
|
172,929,341
|
|
172,929,341
|
Contributed
surplus
|
|
9,612,702
|
|
9,525,694
|
Deficit
|
|
(169,478,963)
|
|
(167,577,777)
|
|
|
|
13,063,080
|
|
14,877,258
|
Total Liabilities
and Equity
|
$
|
19,470,342
|
$
|
25,104,197
|
REDLINE
COMMUNICATIONS GROUP INC.
|
|
|
Condensed
Consolidated Interim Statements of Comprehensive Loss
|
|
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue
|
|
$
|
4,123,330
|
$
|
5,721,985
|
$
|
8,597,919
|
$
|
11,555,499
|
Cost of
revenue
|
|
|
1,752,201
|
|
2,352,489
|
|
3,402,364
|
|
5,252,822
|
Gross
profit
|
|
|
2,371,129
|
|
3,369,496
|
|
5,195,555
|
|
6,302,677
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
1,045,544
|
|
821,417
|
|
2,170,530
|
|
1,312,663
|
|
General and
administrative
|
|
|
1,140,250
|
|
1,156,796
|
|
2,420,014
|
|
2,609,556
|
|
Sales and
marketing
|
|
|
1,397,867
|
|
2,106,000
|
|
2,855,517
|
|
3,974,954
|
|
Operations and
customer support
|
|
|
207,702
|
|
251,740
|
|
446,274
|
|
486,234
|
|
|
|
|
3,791,363
|
|
4,335,953
|
|
7,892,335
|
|
8,383,407
|
Loss before
undernoted items
|
|
|
(1,420,234)
|
|
(966,457)
|
|
(2,696,780)
|
|
(2,080,730)
|
|
|
|
|
|
|
|
|
|
|
|
Other (income)
expenses:
|
|
|
|
|
|
|
|
|
|
|
Covid-19 related
Canada Emergency Wage Subsidy
|
|
(705,954)
|
|
-
|
|
(705,954)
|
|
-
|
|
Finance (income)
expense
|
|
|
7,730
|
|
(15,238)
|
|
8,757
|
|
(32,229)
|
|
(Gain) loss on fair
market value of financial instruments
|
|
44,868
|
|
(71,219)
|
|
(73,693)
|
|
17,160
|
|
Foreign exchange
(gain) loss
|
|
|
63,938
|
|
34,278
|
|
(68,850)
|
|
99,765
|
|
|
|
|
(589,418)
|
|
(52,179)
|
|
(839,740)
|
|
84,696
|
Loss before income
taxes
|
|
|
(830,816)
|
|
(914,278)
|
|
(1,857,040)
|
|
(2,165,426)
|
Income tax
expense
|
|
|
26,246
|
|
797
|
|
44,146
|
|
7,057
|
Net loss and total
comprehensive loss
|
|
$
|
(857,062)
|
$
|
(915,075)
|
$
|
(1,901,186)
|
$
|
(2,172,483)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.05)
|
$
|
(0.05)
|
$
|
(0.11)
|
$
|
(0.13)
|
|
|
|
|
|
|
|
|
|
|
|
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, 2019
|
|
$
|
172,929,341
|
$
|
9,292,321
|
$
|
(163,832,939)
|
$
|
18,388,723
|
|
Net loss
|
|
|
-
|
|
-
|
|
(2,172,483)
|
|
(2,172,483)
|
|
Stock option
expense
|
|
|
-
|
|
150,763
|
|
-
|
|
150,763
|
Balance at
June 30, 2019
|
|
$
|
172,929,341
|
$
|
9,443,084
|
$
|
(166,005,422)
|
$
|
16,367,003
|
Balance at
January 1, 2020
|
|
$
|
172,929,341
|
$
|
9,525,694
|
$
|
(167,577,777)
|
$
|
14,877,258
|
|
Net loss
|
|
|
-
|
|
-
|
|
(1,901,186)
|
|
(1,901,186)
|
|
Stock option
expense
|
|
|
-
|
|
87,008
|
|
-
|
|
87,008
|
Balance at
June 30, 2020
|
|
$
|
172,929,341
|
$
|
9,612,702
|
$
|
(169,478,963)
|
$
|
13,063,080
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(857,062)
|
$
|
(915,075)
|
$
|
(1,901,186)
|
$
|
(2,172,483)
|
|
Adjustments to
reconcile net loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Finance (income)
expense
|
|
7,730
|
|
(15,238)
|
|
8,757
|
|
(32,229)
|
|
|
Depreciation and
amortization of non-current assets
|
|
268,072
|
|
217,619
|
|
537,272
|
|
437,319
|
|
|
Stock option
expense
|
|
40,070
|
|
57,318
|
|
87,008
|
|
150,763
|
|
|
Foreign exchange
(gain) loss on cash held in foreign currency
|
|
(10,627)
|
|
(18,007)
|
|
44,768
|
|
(47,185)
|
|
|
Foreign exchange
(gain) loss on borrowings and lease liabilities
|
|
34,670
|
|
36,697
|
|
(68,230)
|
|
96,974
|
|
|
Loss on disposal of
assets
|
|
5,668
|
|
-
|
|
5,668
|
|
-
|
|
|
|
|
(511,479)
|
|
(636,686)
|
|
(1,285,943)
|
|
(1,566,841)
|
|
Change in non-cash
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease
in deferred cost of revenue
|
|
1,622
|
|
(3,382)
|
|
4,715
|
|
(5,194)
|
|
|
Decrease in deferred
revenue
|
|
(386,801)
|
|
(353,579)
|
|
(159,462)
|
|
(216,661)
|
|
|
Change in other
non-cash operating assets and liabilities
|
|
(676,152)
|
|
(356,244)
|
|
1,215,455
|
|
885,650
|
Cash used in
operating activities
|
|
(1,572,810)
|
|
(1,349,891)
|
|
(225,235)
|
|
(903,046)
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
|
(57,061)
|
|
(56,744)
|
|
(149,248)
|
|
(97,013)
|
|
Acquisition of
intangible assets
|
|
(48,423)
|
|
-
|
|
(130,423)
|
|
(14,100)
|
Cash used in
investing activities
|
|
(105,484)
|
|
(56,744)
|
|
(279,671)
|
|
(111,113)
|
Cash flows used in
financing activities:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
3,244
|
|
35,557
|
|
19,551
|
|
78,545
|
|
Interest
expense
|
|
(10,974)
|
|
(13,343)
|
|
(23,622)
|
|
(27,791)
|
|
Repayment of
borrowings
|
|
-
|
|
-
|
|
(701,491)
|
|
(735,505)
|
|
Repayment of lease
liabilities
|
|
(80,813)
|
|
(84,538)
|
|
(169,749)
|
|
(170,667)
|
Cash used in
financing activities
|
|
(88,543)
|
|
(62,324)
|
|
(875,311)
|
|
(855,418)
|
Foreign exchange gain
(loss) on cash held in foreign currency
|
|
10,627
|
|
18,007
|
|
(44,768)
|
|
47,185
|
Increase (decrease)
in cash
|
|
(1,756,210)
|
|
(1,450,952)
|
|
(1,424,985)
|
|
(1,822,392)
|
Cash, beginning of
the period
|
|
6,838,831
|
|
9,254,405
|
|
6,507,606
|
|
9,625,845
|
Cash, end of the
period
|
$
|
5,082,621
|
$
|
7,803,453
|
$
|
5,082,621
|
$
|
7,803,453
|
SOURCE Redline Communications Group Inc.