TORONTO, Aug. 7, 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 second quarter ended
June 30, 2019 ("Q2 2019").
Key financial highlights for Q2 2019 versus Q2 2018 include:
- Revenues of $5.7 million, down
22%
- Gross margins of 59%, up 4 percentage points
- Operating expenses of $4.3
million, up 18%
- Net loss of $0.9 million, as
compared to net profit of $0.3
million
- Adjusted EBITDA1 loss of $0.6
million (including severance costs of $0.3 million), as compared to Adjusted EBITDA of
$0.6 million
- Bookings1 of $6.1
million, down 14%
- Order Backlog1 of $9.6
million, up 39%
Key financial highlights for the six months ended
June 30, 2019 versus the same period
in 2018 include:
- Revenues of $11.6 million, down
11%
- Gross margins of 55%, up 2 percentage points
- Operating expenses of $8.4
million, up 19%
- Net loss of $2.2 million, as
compared to net loss of $0.1
million
- Adjusted EBITDA loss of $1.4
million (including severance costs of $0.6 million), as compared to Adjusted EBITDA of
$0.4 million
- Bookings of $11.9 million, down
18%
"I am excited by Redline's opportunities in mission
critical applications where we excel. I am focused on improving
cash flow and achieving positive EBITDA each quarter. Our
immediate priorities are to generate more sales in attractive
verticals, to streamline production and deliveries, and to manage
costs," stated Stephen
Sorocky, Redline's CEO.
Financial Review
Revenues for Q2 2019 were $5.7 million, a decrease of $1.6 million or 22% over the same period in 2018
and largely unchanged from Q1 2019. In both time frames, lower
comparable sales to the oil and gas sector were partially offset by
increased sales to telecom service providers.
Order Bookings for Q2 2019 were $6.1
million, down 14% over Q2 2018 with the decrease primarily
due to a large mining order received in 2018 not repeated in Q2
2019. Order backlog was $9.6
million at end of Q2 2019.
Overall gross margin for Q2 2019 was 59%, a 4 percentage point
improvement over the 55% recorded in the same period in 2018. The
increase reflects the product mix which consisted of higher margin
sector controller hardware and software keys.
On a consecutive quarterly basis, gross margins for the second
quarter of 2019 were 59%, a 9 percentage point improvement over the
first quarter of 2019, resulting in a $0.44
million increase in gross profit. This more than offset
slightly higher operating expenses to produce a $0.34 million improvement in the net loss
quarter-over-quarter.
Overall operating expenses for the second quarter of 2019 were
$4.3 million, up 18% over the same
period in 2018 and up 7% over Q1 2019. The increase in
operating expenses in the second quarter 2019 over the same period
in 2018 was the result of increased headcount, commissions and
severance costs.
Adjusted EBITDA loss for Q2 2019 was $0.6
million, a decline of $1.2
million over the Adjusted EBITDA of $0.6 million for Q2 2018 and an improvement of
$0.15 million over Q1 2019 as growth
in gross profit more than offset higher operating expenses.
Net loss for the second quarter of 2019 was $0.9 million, or ($0.05) per share, as compared to net profit of
$0.3 million, or $0.02 per share, in the second quarter of
2018.
At June 30th, 2019,
Redline held cash of $7.8 million,
down $1.5 million from March 31, 2019.
Conference Call and Webcast – August
8th, 2019 at 10:00 a.m.
ET
A conference call and webcast to discuss the results has been
scheduled for Thursday, August
8th, 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 6167829. A recording of the call will be available through
August 15, 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 six months ended June 30, 2019 ("Q2 2019 MD&A"),
copies of which are available on SEDAR at www.sedar.com. Further
details on the three and six months ended June 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 six months ended June
30, 2019 and the Q2 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
June 30,
|
|
Six months ended June
30,
|
|
2019
|
2018
|
|
2019
|
2018
|
Revenue
|
$
|
5,722
|
$
|
7,304
|
|
$
|
11,556
|
$
|
13,006
|
Net profit
(loss)
|
(915)
|
326
|
|
(2,172)
|
(79)
|
Add back:
|
|
|
|
|
|
|
Share based
payments
|
122
|
149
|
|
236
|
195
|
|
Depreciation and
amortization
|
218
|
150
|
|
437
|
305
|
|
Finance (income)
expense
|
(15)
|
(14)
|
|
(32)
|
(22)
|
|
(Gain) Loss on fair
market value
of financial instruments
|
(71)
|
-
|
|
17
|
-
|
|
Foreign exchange
(gain) loss
|
34
|
7
|
|
100
|
(23)
|
|
Income tax
expense
|
1
|
3
|
|
7
|
9
|
|
Total
|
289
|
295
|
|
765
|
464
|
|
|
|
|
|
|
|
Adjusted EBITDA
(loss)
|
$
|
(626)
|
$
|
621
|
|
$
|
(1,407)
|
$
|
385
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
-11%
|
9%
|
|
-12%
|
3%
|
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,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
|
$
|
7,803,453
|
|
$
|
9,625,845
|
|
Trade
receivables
|
|
6,214,714
|
|
|
9,857,857
|
|
Other
receivables
|
|
436,690
|
|
|
392,632
|
|
Inventories
|
|
7,411,607
|
|
|
6,605,517
|
|
Deferred cost of
revenue
|
|
5,194
|
|
|
-
|
|
Prepaid expenses and
other deposits
|
|
366,249
|
|
|
308,273
|
|
|
|
22,237,907
|
|
|
26,790,124
|
Non-current
assets:
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
718,411
|
|
|
800,374
|
|
Intangible
assets
|
|
1,126,286
|
|
|
1,277,637
|
|
Right of use
assets
|
|
897,863
|
|
|
-
|
|
Other
assets
|
|
75,800
|
|
|
73,538
|
|
|
|
2,818,360
|
|
|
2,151,549
|
Total
Assets
|
$
|
25,056,267
|
|
$
|
28,941,673
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Trade and other
payables
|
$
|
5,420,249
|
|
$
|
7,415,403
|
|
Income tax
payable
|
|
10,741
|
|
|
10,741
|
|
Deferred
revenue
|
|
1,410,026
|
|
|
1,626,687
|
|
Lease
liabilities
|
|
306,159
|
|
|
-
|
|
Borrowings
|
|
697,027
|
|
|
705,413
|
|
|
7,844,202
|
|
|
9,758,244
|
Non-current
liabilities:
|
|
|
|
|
|
|
Lease
liabilities
|
|
845,062
|
|
|
-
|
|
Borrowings
|
|
-
|
|
|
659,522
|
|
Other
payables
|
|
-
|
|
|
135,184
|
|
|
845,062
|
|
|
794,706
|
Total
Liabilities
|
|
8,689,264
|
|
|
10,552,950
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
Share
capital
|
|
172,929,341
|
|
|
172,929,341
|
Contributed
surplus
|
|
9,443,084
|
|
|
9,292,321
|
Deficit
|
|
(166,005,422)
|
|
|
(163,832,939)
|
|
|
16,367,003
|
|
|
18,388,723
|
Total Liabilities
and Equity
|
$
|
25,056,267
|
|
$
|
28,941,673
|
REDLINE
COMMUNICATIONS GROUP INC.
|
Condensed
Consolidated Interim Statements of Comprehensive Income
(Loss)
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
5,721,985
|
$
|
7,304,387
|
|
$
|
11,555,499
|
$
|
13,006,333
|
Cost of
revenue
|
2,352,489
|
3,313,489
|
|
5,252,822
|
6,054,002
|
Gross
profit
|
3,369,496
|
3,990,898
|
|
6,302,677
|
6,952,331
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Research and
development
|
821,417
|
566,664
|
|
1,312,663
|
1,196,883
|
|
Administration and
finance
|
1,156,796
|
1,196,250
|
|
2,609,556
|
2,263,474
|
|
Sales and
marketing
|
2,106,000
|
1,697,088
|
|
3,974,954
|
3,215,280
|
|
Operations and
customer support
|
251,740
|
209,180
|
|
486,234
|
391,905
|
|
4,335,953
|
3,669,182
|
|
8,383,407
|
7,067,542
|
Profit (loss) before
undernoted items
|
(966,457)
|
321,716
|
|
(2,080,730)
|
(115,211)
|
|
|
|
|
|
|
Other (income)
expenses:
|
|
|
|
|
|
|
Finance (income)
expense
|
(15,238)
|
(14,367)
|
|
(32,229)
|
(21,833)
|
|
(Gain) loss on fair
market value of financial instruments
|
(71,219)
|
-
|
|
17,160
|
-
|
|
Foreign exchange
(gain) loss
|
34,278
|
7,026
|
|
99,765
|
(22,922)
|
|
(52,179)
|
(7,341)
|
|
84,696
|
(44,755)
|
Profit (loss) before
income taxes
|
(914,278)
|
329,057
|
|
(2,165,426)
|
(70,456)
|
|
|
|
|
|
|
Income tax
expense
|
797
|
2,871
|
|
7,057
|
8,315
|
Net profit (loss) and
total comprehensive income (loss)
|
$
|
(915,075)
|
$
|
326,186
|
|
$
|
(2,172,483)
|
$
|
(78,771)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share
|
|
|
|
|
|
|
Basic and
diluted
|
$
|
(0.05)
|
$
|
0.02
|
|
$
|
(0.13)
|
$
|
(0.00)
|
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
|
|
-
|
-
|
(78,771)
|
(78,771)
|
|
Stock option
expense
|
|
-
|
84,414
|
-
|
84,414
|
Balance at
June 30, 2018
|
|
$
|
172,929,341
|
$
|
9,240,212
|
$
|
(163,523,094)
|
$
|
18,646,459
|
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
|
|
|
|
|
|
|
|
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,
|
|
|
2019
|
2018
|
|
2019
|
2018
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
|
|
|
Net profit
(loss)
|
|
$
|
(915,075)
|
$
|
326,186
|
|
$
|
(2,172,483)
|
$
|
(78,771)
|
|
Adjustments to
reconcile net loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
Finance (income)
expense
|
|
(15,238)
|
(14,367)
|
|
(32,229)
|
(21,833)
|
|
|
Depreciation and
amortization of non-current assets
|
|
217,619
|
150,581
|
|
437,319
|
304,451
|
|
|
Stock option
expense
|
|
57,318
|
69,893
|
|
150,763
|
84,414
|
|
|
Foreign exchange
(gain) loss on cash held in foreign currency
|
|
(18,007)
|
39,130
|
|
(47,185)
|
80,418
|
|
|
Foreign exchange
(gain) loss on borrowings and lease liabilities
|
|
36,697
|
(29,363)
|
|
96,974
|
(73,122)
|
|
|
IFRS 15 transition
adjustment
|
|
-
|
-
|
|
-
|
(136,000)
|
|
|
(636,686)
|
542,060
|
|
(1,566,841)
|
159,557
|
|
Change in non-cash
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease
in deferred cost of revenue
|
|
(3,382)
|
-
|
|
(5,194)
|
-
|
|
|
Increase (decrease)
in deferred revenue
|
|
(353,579)
|
(147,625)
|
|
(216,661)
|
(184,841)
|
|
|
Change in other
non-cash operating assets and liabilities
|
|
(356,244)
|
(48,689)
|
|
885,650
|
616,303
|
Cash from (used in)
operating activities
|
|
(1,349,891)
|
345,746
|
|
(903,046)
|
591,019
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
|
(56,744)
|
(18,097)
|
|
(97,013)
|
(120,192)
|
|
Acquisition of
intangible assets
|
|
-
|
(26,779)
|
|
(14,100)
|
(193,446)
|
Cash used in
investing activities
|
|
(56,744)
|
(44,876)
|
|
(111,113)
|
(313,638)
|
Cash flows used in
financing activities:
|
|
|
|
|
|
|
|
Interest
income
|
|
35,557
|
28,728
|
|
78,545
|
57,186
|
|
Interest
expense
|
|
(13,343)
|
-
|
|
(27,791)
|
(1,625)
|
|
Repayment of
borrowings
|
|
-
|
-
|
|
(735,505)
|
(801,565)
|
|
Repayment of lease
liabilities
|
|
(84,538)
|
-
|
|
(170,667)
|
-
|
Cash from (used in)
financing activities
|
|
(62,324)
|
28,728
|
|
(855,418)
|
(746,004)
|
Foreign exchange gain
(loss) on cash held in foreign currency
|
|
18,007
|
(39,130)
|
|
47,185
|
(80,418)
|
Increase (decrease)
in cash
|
|
(1,450,952)
|
290,468
|
|
(1,822,392)
|
(549,041)
|
Cash, beginning of
the period
|
|
9,254,405
|
11,120,553
|
|
9,625,845
|
11,960,062
|
Cash, end of the
period
|
|
$
|
7,803,453
|
$
|
11,411,021
|
|
$
|
7,803,453
|
$
|
11,411,021
|
SOURCE Redline Communications Group Inc.