Redline Communications Reports Solid Q2 2012 Financial Results
Strong Bookings and Growing Backlog Highlight a Solid Quarter
TORONTO, Aug. 14, 2012 /CNW/ - Redline Communications Group Inc. (TSX: RDL) ("Redline" or the "Company"), a leading provider of ruggedized wireless infrastructure systems, today reported financial results for the three and six month periods ended June 30, 2012.
Financial Summary for the three months ended June 30, 2012
-- $12.1M Bookings², slightly ahead of strong Q1 2012 Bookings
-- $10.1M Shipments, up 16% over Q1 2012
-- $7.8M Order Backlog, up 25% over Q1 2012
-- $17.4M Revenue, up 37% over same period last year
-- $6.3M Operating Expenses, a 5% improvement over the same period
last year
-- $3.9M Adjusted EBITDA¹, up 168% over the same period last year
-- $7.8M Net Profit compared to $0.06M in the same period last
year
-- EPS of $0.08 on a fully diluted basis
Financial Highlights for the three months ended June 30, 2012
-- Strong demand for the core Broadband Wireless Infrastructure
("BWI") product line helped the Company secure record Bookings
totaling $12.1 million in the quarter. These Bookings were
driven primarily from sales to the energy sector, including
several large oil and gas projects in North America and the
Middle East.
-- The Company's flagship BWI product line accounted for 78% of
new product orders in the quarter as the Company continued to
de-emphasize its WiMAX™ business.
-- The Company finished the quarter with a Backlog of orders
totalling $7.75 million, an increase of 25% over the Backlog at
March 31, 2012.
-- Gross margin in the first quarter improved to 57% from 52%
reported in the first quarter of 2012.
-- The Company continues to deliver on its plan to reduce
operating expenses, reporting a reduction of 5.1% to $6.35
million in the quarter as compared to the same period in 2011.
-- Adjusted EBITDA, was $3.91 million, an increase of 168% from
adjusted EBITDA of $1.46 million for the same period in 2011.
Operating Highlights for the three months ended June 30, 2012
-- Redline received and shipped a $2-million order for its rugged
industrial wireless system to a major oil and gas company,
providing high-capacity, high-availability communications
between the company's US-based drilling rigs and centralized
control offices.
-- Redline announced that their rugged industrial wireless
products were chosen to create a wireless infrastructure for a
major oil field operated by the Abu Dhabi Company for Onshore
Oil Operations (ADCO) in the United Arab Emirates. Redline's
systems integrator Alcatel-Lucent (ALU) will deliver the
complete and integrated digital oil field system.
-- Redline advanced in the Cisco Developer Network as a solution
developer within the wireless and mobility technology
categories and Redline's
RDL-3000
system has successfully completed interoperability testing with
Cisco Access Points.
-- The Company announced the availability of Enterprise, a new
compact carrier-grade wireless networking solution with the
fastest bi-directional wireless broadband capacity in the
industry.
-- Subsequent to the end of the quarter, Redline completed a 1:4
share consolidation effective July 13, 2012.
Financial Details
Strong demand for Redline's core Broadband Wireless Infrastructure ("BWI")
product line helped the Company secure Bookings totaling $12.1 million for a
second quarter in a row. These Bookings were driven primarily from sales to
the energy sector, including several large oil and gas projects in the both
the Middle East and North America. The Company's flagship BWI product line
accounted for 78% of new product Bookings in the quarter as the Company
continued to de-emphasize its lower margin legacy RedMAX™ WiMAX business.
The Company finished the quarter with a Backlog of orders totaling $7.8
million, up 25% from $6.2 million recorded at the end of the first quarter
2012.
"I am very pleased with this solid quarter. We had strong Bookings once again,
and our Backlog has grown to nearly $8 million." said Eric Melka, President
and CEO of Redline Communications. "We've been winning larger deals with new
and existing oil & gas customers. These typically have longer roll-out
periods, so our Backlog has increased along with our Revenues. This increase
in Backlog also provides better visibility into future Revenue."
Shipments for the second quarter were $10.1 million, up 16% over the $8.7
million reported in the first quarter 2012. BWI product accounted for 87% of
total product shipments compared with 77% for the first quarter 2012. The
portion of BWI product shipped to customers within the Energy sector increased
to approximately 50% from approximately 40% for the first quarter of 2012.
Total revenue for the second quarter 2012 was $17.4 million, an increase of
37% from $12.7 million in the same period in 2011. Revenue from BWI product
and services was $7.8 million, an increase of 25% from $6.3 million in the
same period in 2011. Revenue from RedMAX product and services was $9.6 million
of which $1.3 million was new RedMAX revenue and the balance was Amortized
Deferred revenue¹. The second quarter of 2012 is the final amortization
period for RedMAX deferred revenue. The amortized amounts will remain in prior
reported revenues for comparative purposes however there will be no such
ongoing amortization as the revenue has now been fully amortized. Further
detail can be found in the Company's MD&A filed with SEDAR.
Overall Gross Margins on Revenue were 56.8% for the second quarter 2012, up
4.9 points from the first quarter of 2012, and down 2.8 points from the same
period last year as a result of expected fluctuations in revenue mix. Gross
margins on core BWI product revenue remained very strong at 67% for the second
quarter 2012.
Operating expenses for the second quarter of 2012 were $6.4 million, down 5%
from $6.7 million reported in the second quarter of 2011. Reductions in
legal and accounting expenses related to the now-settled class action lawsuit
and the completion of the Company's conversion to IFRS accounted for the
majority of the savings.
Higher revenues and lower operating costs have resulted in increases in
adjusted EBITDA¹, for both the three and six months ended June 30, 2012.
Adjusted EBITDA for second quarter 2012 was $3.9 million, a 168% increase over
adjusted EBITDA of $1.5 million for the same period in 2011.
Redline reported a non-cash gain of $4.0 million for the second quarter,
related to the June 30, 2012 fair market valuation of the debenture and
warrants associated with the private placement completed in June 2011. This
compares to a non-cash charge of $0.6 million in the second quarter 2011, also
related to the fair market value calculation of the debenture. Redline
realized a Net Profit of $7.8 million for the second quarter of 2012, compared
to $0.06 million in the same period last year.
"We continue to focus on cost management, positive earnings and cash
generation." said Melka. "Our costs continue to decrease, we reported an
EBITDA of 22% of revenue, and we generated cash from earnings which has been
used for working capital to accommodate our growing revenues. We are currently
exploring with our financial partners how to best leverage this working
capital."
At June 30, 2012, Redline held cash and short-term investments of
approximately $2.3 million compared to $4.7 million at December 31, 2011.
Conference Call and Webcast -10:00 a.m. EDT
A conference call and webcast to discuss the results will be held August 15,
2012, at 10:00 a.m. EDT. To participate in the conference call, please dial
1-647-427-7450 or 1-888-231-8191 approximately 10 minutes before the
conference call, and provide passcode 14614310.
A recording of the call will be available through August 22, 2012. Please dial
1-416-849-0833 or 1-855-859-2056 and enter passcode 14614310 to listen to the
rebroadcast. A webcast of the call will also be available on Redline's
website at http://www.rdlcom.com/en/about/investors/webcasts.
About Redline Communications
Redline Communications (www.rdlcom.com) is the innovator of Virtual Fiber™,
a rugged broadband wireless solution used to cost-effectively deploy and
extend secure networks, enable machine-to-machine (M2M) applications, connect
digital oil fields and smart grids, facilitate and enhance public safety
networks, and bring Internet access wherever and whenever it's needed -
regardless of terrain or remote location. For more than a decade Redline has
delivered powerful, versatile and reliable wireless systems to governments,
militaries, oil and gas companies and telecom service providers through its
global network of certified partners.
NOTES:
1 The term Adjusted EBITDA refers to Profit before deducting
share-based payment expense, finance expense, foreign exchange
gain (loss), FMV gain (loss) on debenture, depreciation and
income taxes. Adjusted EBITDA margin refers to the percentage
that Adjusted EBITDA for any period represents as a portion of
total revenue for that period. We believe that Adjusted EBITDA
and Adjusted EBITDA margin are useful supplemental information
as they provide an indication of the results generated by the
Company's main business activities prior to taking into
consideration how those activities are financed and taxed and
also prior to taking into consideration share-based payment
expense and the other items listed above. Accordingly, we
believe that these measures may also be useful to investors in
enhancing their understanding of the Company's operating
performance. See ―Results of Operations - Adjusted
EBITDA.
2 All amounts reported in this press release are in US dollars
unless otherwise stated. To better assess the health and growth
of the Redline's business, the Company reports on several key
metrics, including "Orders or Bookings", "Shipped or Shipments",
"Backlog", "EBITDA" 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 and six months ended June 30, 2012 ("Q2 and First Half
2012 MD&A"), copies of which are available on SEDAR at
www.sedar.com. Further
details on the three and six month results ended June 30, 2012
can be found in the condensed consolidated interim statement of
financial position, condensed consolidated interim statement of
comprehensive income, 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 and six months ended
June 30, 2012 and the Q2 and First Half 2012 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, December 31,
2011
2012
ASSETS
Current assets:
Cash $ 2,279,577 $ 4,651,284
Short-term investment - 92,144
Restricted short-term investments 33,003 33,003
Trade receivables 11,288,757 9,913,208
Other receivables 165,234 340,499
Inventories 7,176,821 7,851,884
Deferred WiMAX cost of revenue - 7,484,581
Deferred cost of revenue 1,766,120 333,287
Prepaid expenses and other 838,521 2,214,309
deposits
23,548,033 32,914,199
Non-current assets:
Property, plant and equipment 940,513 1,026,480
Intangible assets 151,680 158,239
Other assets 97,240 97,365
1,189,433 1,282,084
Total Assets $ 24,737,466 $ 34,196,283
LIABILITIES AND SHAREHOLDERS'
DEFICIENCY
Current liabilities
Trade and other payables $ 6,892,563 $ 9,081,197
Income tax payable 292,927 292,927
Deferred WiMAX revenue - 14,213,501
Deferred revenue 4,889,357 2,285,406
Current portion of borrowings 6,292,241 6,182,398
18,367,088 32,055,429
Non-current liabilities
Convertible debenture (principal 1,335,811 1,344,095
and interest)
Fair market value adjustment on 5,306,982 2,918,446
convertible debenture
Convertible debenture at fair 6,642,793 4,262,541
market value
Total Liabilities 25,009,881 36,317,970
SHAREHOLDERS' DEFICIENCY
Share capital 134,485,251 134,336,023
Share purchase loan (365,780) (365,780)
Warrant 310,000 310,000
Contributed surplus 8,078,738 7,635,506
Deficit (142,780,624) (144,037,436)
(272,415) (2,121,687)
Total liabilities and equity $ 24,737,466 $ 34,196,283
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,
2012 2011 2012 2011
Revenue $ 17,381,474 $ 12,710,559 $ 29,887,934 $ 26,171,076
Cost of revenue 7,506,207 5,130,994 13,524,633 10,276,472
Gross profit 9,875,267 7,579,565 16,363,301 15,894,604
Expenses:
Research and 1,609,159 1,109,947 3,151,013 2,592,642
development
Finance and 1,929,272 2,710,307 3,556,328 5,130,433
administration
Sales and 2,331,816 2,254,133 4,805,751 4,419,087
marketing
Operations and
customer 476,426 613,468 934,689 1,341,545
support
Gain on
disposal of - - - (1,519)
assets
6,346,673 6,687,855 12,447,781 13,482,188
Income before
non-operating 3,528,594 891,710 3,915,520 2,412,416
items
Other expenses
Finance 77,247 109,836 173,491 215,236
expense
(Gain) loss on
fair market (3,962,940) 582,791 2,648,217 582,791
value of
Debenture
Foreign
exchange (399,123) 135,657 (163,000) 423,076
(gain) loss
(4,284,816) 828,284 2,658,708 1,221,103
Profit before 7,813,410 63,426 1,256,812 1,191,313
income taxes
Income tax - - - -
expense
Net profit and
total $ 7,813,410 $ 63,426 $ 1,256,812 $ 1,191,313
comprehensive
income
Earnings per
share ((1))
Basic $ 0.21 $ - $ 0.03 $ 0.05
Diluted $ 0.08 $ - $ 0.08 $ 0.05
REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Changes in Equity
(Unaudited, expressed in U.S. dollars)
Share Share Contributed
capital purchase Warrant surplus Deficit Total
loan
Balance at
December 31,
2010 $ 128,532,124 $ (365,780) $ 310,000 $ 6,387,487 $ (148,099,590) $ (13,235,759)
Net profit - - - - 1,191,313 1,191,313
Share-based - - - 735,688 - 735,688
payments
Exercise of 67,354 - - (31,602) - 35,752
options
Balance at
June 30, 2011 $ 128,599,478 $ (365,780) $ 310,000 $ 7,091,573 $ (146,908,277) $ (11,273,006)
Balance at
December 31,
2011 $ 134,336,023 $ (365,780) $ 310,000 $ 7,635,506 $ (144,037,436) $ (2,121,687)
Net profit - - - - 1,256,812 1,256,812
Shares
issued on
conversion of debenture 115,726 - - - - 115,726
Exercise of 33,502 - - (14,546) - 18,956 options
Share-based - - - 457,778 - 457,778 payments
Balance at June 30, 2012 $ 134,485,251 $ (365,780) $ 310,000 $ 8,078,738 $ (142,780,624) $ (272,415)
REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, expressed in U.S. dollars)
Three months ended June Six months ended June 30,
30,
2012 2011 2012 2011
Cash flows from
operating
activities:
Net profit $ 7,813,410 $ 63,426 $ 1,256,812 $ 1,191,313
Adjustments to
reconcile
profit before
taxes to net
cash from
operating
activities
Finance 77,247 109,836 173,491 215,236
expense
Depreciation
and
amortization 101,032 89,224 206,888 210,868
of
non-current
assets
Recognition
of share 282,742 478,113 457,778 735,688
based
payments
Foreign
exchange
loss (gain) - - 1,501 (1,167)
on cash held
in foreign
currency
Foreign
exchange
(gain) loss (406,615) 120,016 (207,461) 278,878
on
borrowings
Loss on fair
market value (3,962,940) 582,791 2,648,217 582,791
of Debenture
3,904,876 1,443,406 4,537,226 3,213,607
Change in
non-cash
operating
assets and
liabilities
Decrease in
deferred 3,797,561 1,725,207 6,051,748 4,085,428
cost of
revenue
Decrease in
deferred (7,370,148) (2,757,789) (11,609,550) (8,548,386)
revenue
Change in
other non-cash
operating (1,444,032) (4,344,261) (1,337,942) (5,938,740)
assets and
liabilities
Cash used in
operating (1,111,743) (3,933,437) (2,358,518) (7,188,091)
activities
Cash flows from
investing
activities:
Acquisition of
property, (19,361) (7,509) (64,286) (65,408)
plant and
equipment
Acquisition of
intangible (18,963) (140,095) (50,076) (228,226)
assets
Redemption
(purchase) of - (5,184,033) 92,144 (5,284,033)
investments
Cash (used in)
investing (38,324) (5,331,637) (22,218) (5,577,667)
activities
Cash flows from
financing
activities:
Finance costs (770) (371) (8,426) (45,102)
paid
Proceeds from
exercise of 18,956 35,752 18,956 35,752
options
Proceeds of - 8,516,687 - 8,516,687
borrowings
Repayment of - (19,577) - (78,400)
borrowings
Cash from
financing 18,186 8,532,491 10,530 8,428,937
activities
Foreign exchange
(loss) gain on - - (1,501) 1,167
cash held in
foreign currency
Decrease in (1,131,881) (732,583) (2,371,707) (4,335,654)
cash
Cash, beginning 3,411,458 2,419,999 4,651,284 6,023,070
of the period
Cash, end of the $ 2,279,577 $ 1,687,416 $ 2,279,577 $ 1,687,416
period
Company Contacts:
George Kypreos Chief Financial Officer +1.905.479.8344 gkypreos@rdlcom.com
Lynda Partner Corporate Communications +1-613-618-3200 lpartner@rdlcom.com
Cory Pala Investor Relations +1-416-657-2400 Cory.Pala@evestor.com
SOURCE: Redline Communications Group Inc.
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CO: Redline Communications Group Inc.
ST: Ontario
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