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Redline Communications Reports 2012 Fourth Quarter and Year End Results

Redline Communications Reports 2012 Fourth Quarter and Year End Results 
Company delivers solid operating results and a strengthened balance sheet 
TORONTO, March 27, 2013 /CNW/ - Redline Communications (www.rdlcom.com Group 
Inc. TSX: RDL), a leading provider of broadband wireless solutions for 
machine-to-machine (M2M) communications, today announced operating results for 
the three and twelve month periods ended December 31, 2012. 
Highlights for the fiscal year ended December 31, 2012 include: 
Solid sales traction and operating results: 


    --  Record new Bookings² of $49.5 million of which approximately
        45% were in Energy vertical
    --  Recognized revenue of $49.0 million
    --  $14.6 million Backlog² at December 31, 2012
    --  63% gross margin on core Broadband Wireless Infrastructure
        (BWI) product sales, and 56% blended gross margin
    --  Operating expenses down 9% from fiscal 2011
    --  Adjusted EBITDA² of $3.8 million marking the third consecutive
        year of positive Adjusted EBITDA
    --  EPS of $0.29, excluding the non-cash expense relating to the
        fair market adjustment on the Debenture²

Strengthened Balance Sheet:
    --  Established Cdn. $10.0 million credit facility with HSBC Bank
        Canada
    --  Amended loan agreement with Ontario Ministry of Economic
        Development and Innovation reducing interest charges by $0.7
        million
    --  Warrant exercises (during and subsequent to 2012) resulted in
        approximately Cdn. $13.4 million cash receipts to the Company

Financial Review

Order Bookings² for the year ended December 31, 2012 were a record $49.5 
million and outpaced Shipments in the year of $35.9 million. This resulted in 
a healthy Backlog of $14.6 million at the end of the 2012 fiscal year, largely 
as a result of larger orders with associated longer delivery timeframes. 
Bookings in 2012 were primarily driven from strong and growing sales to the 
energy sector, which represented approximately 45% of total Bookings, as well 
as continued strength in the telecom and public safety sectors.

BWI Revenue for the three months ended December 31, 2012 was $10.4 million, 
the strongest BWI quarterly revenue for fiscal 2012. BWI Revenue was 
strengthened by several large contracts in oil and gas and telecom. BWI 
Revenue for the three months ended December 31, 2012 was down 8% from $11.3 
million for the same period last year, primarily as a result of final 
acceptance on a large oil and gas project received in the fourth quarter of 
fiscal 2011 for work undertaken throughout 2011. Overall for the 2012 year, 
BWI Revenue was $30.0 million, down marginally from the $31.0 million reported 
for the 2011 year.

"I am very happy with our 2012 results. Strong product performance, high 
customer satisfaction and a growing reputation helped us increase our sales 
momentum, our average contract size is larger, and our top-tier customers are 
expanding their networks," said Eric Melka, Redline's CEO. "These complex 
networks are providing significant long term opportunity for Redline as they 
roll out over time and I am very excited about the future."

Included in the definition of total Recognized Revenue is amortized deferred 
revenue from prior RedMAX™ sales. As the timeframe associated with the 
recognition of amortized deferred revenue from prior RedMAX sales ended June 
30, 2012, the lower amount of amortized revenue in 2012 lowered the 
year-over-year comparative performance of total Recognized Revenue. Hence 
for the 2012 year, total Recognized Revenue was $49.0 million, a decrease from 
$58.0 million reported in 2011 which included $18.7 million of amortized 
deferred revenue, versus $9.0 million of amortized deferred revenue included 
in 2012. Similarly, total Recognized Revenue for the three months ended 
December 31, 2012 was $11.0 million, down $7.2 million from $18.2 million for 
the same period last year, which included $4.7 million of amortized deferred 
revenue.

Gross margin on core (BWI) product sales during the 2012 fourth quarter and 
for the 2012 year was 63%. Blended gross margin for the 2012 fourth quarter 
was 61%, an improvement of nine percentage points compared to blended gross 
margin of 52% reported for the fourth quarter of 2011. The increase was the 
result of a higher relative contribution of BWI sales in the comparative sales 
mix. For the year, blended gross margin was 56% compared to a blended gross 
margin of 58% for the year ended December 31, 2011. The small decrease is 
primarily a result of a higher relative mix of lower margin "other" products 
required to deliver complete solutions in 2012.

The Company's ongoing commitment to manage operating costs and improve 
operating efficiencies resulted in a decrease in overall operating expenses of 
3% to $6.9 million for the three months ended December 31, 2012 compared to 
$7.1 million reported for the same period last year. Overall operating 
expenses for the 2012 year were $25.3 million, 9% lower than the $27.8 million 
reported for the same period last year, largely the result of efficiencies 
from the implementation of new information technology, which allowed the 
Company to continue to reduce overall staffing levels.

Adjusted EBITDA for the three months ended December 31, 2012 was $0.3 million, 
a decrease of $2.6 million over the $2.9 million for the corresponding period 
in 2011. Adjusted EBITDA for the year ended December 31, 2012 was $3.8 
million, a decrease of $4.0 million compared to $7.8 million for the 
corresponding period in 2011. The decrease is a direct result of the decrease 
in revenue as a result of the completion of the amortization period of all 
RedMAX Amortized Deferred Revenue at the end of June 30, 2012.

A non-cash loss of $6.4 million in the fourth quarter of 2012 relating to the 
fair market value adjustment on the Debenture resulted in a Net Loss for the 
period of $5.6 million, or ($0.58) per share as compared to a profit of $1.1 
million, or $0.20 per share in the fourth quarter of 2011. For the full year, 
Redline reported a Net Loss of $9.5 million, or ($1.00) per share, as compared 
to a Net Profit of $4.1 million, $0.76 per share in 2011. The difference is 
attributed to a $12.3 million non-cash expense in 2012 relating to the fair 
market value adjustment on the Debenture and the effects of substantial 
deferred amortized revenue present in 2011 and not equally present for 2012. 
Excluding the non-cash expense relating to the fair market adjustment on the 
Debenture, net income for the 2012 year was $2.8 million or $0.29 per share, 
and for the three months ended December 31, 2012 was $0.9 million or $0.09 per 
share.

During 2012, the Company received approximately Cdn. $10.5 million in 
consideration from the exercise of warrants associated with the Debenture. 
Subsequent to December 31, 2012 the Company received an additional 
approximately Cdn. $2.9 million from the exercise of additional warrants, also 
associated with the Debenture. The Company also obtained a demand operating 
facility of Cdn. $10.0 million with HSBC Bank Canada ("HSBC"), providing 
additional working capital.

"Redline's balance sheet has been greatly strengthened this year providing 
working capital for our anticipated growth," added Melka. "The conversion of 
almost all of the outstanding Debenture and associated warrants has added to 
our cash and has also significantly reduced the non-cash charges, which have 
obscured otherwise positive net income for the second year in a row."

At December 31, 2012, Redline held cash of approximately $8.3 million, up $3.5 
million from the cash and short term investments balance of $4.8million at 
December 31, 2011.

2012 business highlights included:

Selected Customer Wins:
    --  The Company received and shipped a large BWI product order to
        complete a major expansion of its wireless project for Shell
        Oil joint venture Petroleum Development Oman LLC (PDO), making
        it the Company's largest oil field deployment with over 5000
        radios.
    --  Redline's wireless products were chosen by the Abu Dhabi
        Company for Onshore Oil Operations in the United Arab Emirates
        as part of an integrated digital oil field system to be
        delivered by systems integrator Alcatel-Lucent.
    --  Redline received a contract representing approximately 10% of
        Redline's annual revenue for 2012 with an existing oil and gas
        customer. Redline will be their prime contractor for a
        high-capacity wireless network in their new location in Oman.
    --  Redline received and shipped a $2 million order for its RAS
        system to a major US-based oil and gas company, providing
        high-capacity, high-availability mobile communications for
        drilling rigs.
    --  In the service provider space, Redline won a multi-million
        dollar multi-phase order for BWI product from an existing
        customer in Pakistan.

Partnerships:
    --  Redline joined the Cisco Developer Network as a Solution
        Developer and  Redline's RDL-3000 system successfully completed
        interoperability testing with Cisco Access Points.
    --  Redline joined Honeywell's PKS Advantage™ program,
        together demonstrating complete integrated M2M solutions for
        the oil and gas industry.

Product Milestones:
    --  In the third quarter of fiscal 2012, Redline announced the
        availability and shipment of over 300 of their ruggedized
        nomadic RAS Solution, the first wireless broadband networking
        system to automatically locate, and connect to a network base
        station, providing automatic, reliable wireless connectivity
        for mobile rigs and vehicles.
    --  In November 2012, Redline's RAS Nomadic Platform won top honors
        in the Backhaul Innovation category of the Fierce Innovation
        Awards.

Quality Recognition:
    --  Redline once again completed its ISO 9001 certification,
        receiving a perfect score.
    --  Subsequent to the end of 2012, Redline won the BSI Group Award
        of Excellence in recognition of its commitment to quality and
        business excellence in all aspects of its operation.

Conference Call and Webcast - March 27th, 2013 at 10:00 a.m. ET

A conference call and webcast to discuss the results will be held March 27, 
2013 at 10:00 a.m. ET. 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 99021008. A recording of the call will 
be available through April 4, 2012. To listen to the rebroadcast please dial 
1-416-849-0833 or 1-855-859-2056 and enter passcode 99021008. A webcast of 
the call will also be available on Redline's website at 
http://www.rdlcom.com/en/about/investors/webcasts.

The selected financial information included in this release is qualified in 
its entirety by, and should be read together with the Consolidated Financial 
Statements of the Company for the year ended December 31, 2012 and the 
Company's Management Discussion and Analysis for the three and twelve month 
periods ended December 31, 2012 ("2012 MD&A"), copies of which are available 
on SEDAR at www.sedar.com.

About Redline Communications

Redline Communications (www.rdlcom.com) the innovator of Virtual Fiber™, a 
specialized wireless broadband system used by companies and governments 
worldwide to cost-effectively deploy distributed services and applications. 
Redline Virtual Fiber™ solutions are used to facilitate and enhance public 
safety networks, deploy and extend secure networks, connect digital oil fields 
and smart grids, and bring dedicated Internet access wherever and whenever 
it's needed. Redline has been delivering powerful, versatile and reliable 
wireless systems to governments, the military, oil and gas, and the telecom 
industry for over a decade through its global network of certified partners. 
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", "Shipped or Shipments", "Backlog", "EBITDA", "EPS
     excluding the non-cash expense relating to the fair market
     adjustment on the Debenture", 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 twelve months ended December 31, 2012 ("Q4 and 2012
     Year MD&A"), copies of which are available on SEDAR at
     www.sedar.com. Further details
     on the three and twelve month results ended December 31, 2012 can
     be found in the condensed consolidated annual audited statement of
     financial position, condensed consolidated annual audited
     statement of comprehensive income, condensed consolidated annual
     audited statement of changes in equity and condensed consolidated
     annual auditedstatement 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 Audited Financial
     Statements of the Company for the three and twelve months ended
     December 31, 2012 and the  Q4 and 2012 Year 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.                                      

Consolidated Statements of                                             
Financial Position

(Expressed in U.S. dollars)                                            
                                                                       
                                        December 31,       December 31,
                                                                   2011
                                                2012

ASSETS                                                                 

Current assets:                                                        

  Cash                              $      8,286,732    $     4,651,284

  Short-term investment                            -             92,144

  Restricted short-term                            -             33,003
  investments

  Trade receivables                       12,639,570          9,913,208

  Other receivables                          571,382            340,499

  Inventories                              6,973,414          7,851,884

  Deferred RedMAX cost of revenue                  -          7,484,581

  Deferred cost of revenue                   905,250            333,287

  Prepaid expenses and other               1,061,622          2,214,309
  deposits
                                          30,437,970         32,914,199

Non-current assets:                                                    

  Property, plant and equipment              875,352          1,026,480

  Intangible assets                          107,593            158,239

  Other assets                                99,180             97,365
                                           1,082,125          1,282,084

Total Assets                        $     31,520,095    $    34,196,283
                                                                       

LIABILITIES AND SHAREHOLDERS'                                          
EQUITY (DEFICIENCY)

Current liabilities                                                    

  Bank indebtedness                 $      2,296,855    $             -

  Trade and other payables                 4,249,973          9,081,197

  Income tax payable                         292,927            292,927

  Deferred RedMAX revenue                          -         14,213,501

  Deferred revenue                         2,796,497          2,285,406

  Current portion of borrowings            5,116,527          6,182,398
                                          14,752,779         32,055,429

Non-current liabilities                                                

  Other payables                             418,622                  -

  Convertible debenture                    1,100,788          1,344,095
  (principal and interest)

  Fair market value adjustment on          8,357,396          2,918,446
  convertible debenture
                                           9,876,806          4,262,541

Total Liabilities                         24,629,585         36,317,970
                                                                       

SHAREHOLDERS' EQUITY (DEFICIENCY)                                      

Share capital                            152,123,803        134,336,023

Share purchase loan                        (365,780)          (365,780)

Warrant                                      310,000            310,000

Contributed surplus                        8,361,465          7,635,506

Deficit                                (153,538,978)      (144,037,436)
                                           6,890,510        (2,121,687)

Total liabilities and equity        $     31,520,095    $    34,196,283
                                                                       

    

REDLINE COMMUNICATIONS GROUP INC.                                    

Consolidated Statements of                                           
Comprehensive (Loss) Income

(Expressed in U.S. dollars)                                          
                                                                     


                                             2012            2011 
Revenue                                 $  49,041,485    $ 58,023,426 
Cost of revenue                            21,373,057      24,248,263 
Gross profit                               27,668,428      33,775,163 
                                                                  
Expenses:                                                             
Research and development                  6,240,559       5,776,334 
Finance and administration                7,572,283       9,489,000 
Sales and marketing                       9,685,446      10,314,476 
Operations and customer support           1,790,628       2,303,826 
Gain on disposal of assets                        -        (51,519) 
                                       25,288,916      27,832,117 
Profit before other expenses (income)       2,379,512       5,943,046 
                                                                  
Other expenses (income)                                               
Finance (income) expense                  (390,804)         749,295 
Loss on fair market value of             12,287,156       1,285,811
  Debenture 
Foreign exchange loss (gain)                110,288       (274,214) 


                                           12,006,640       1,760,892

(Loss) profit before income taxes         (9,627,128)       4,182,154

Income tax (recovery) expense               (125,586)         120,000

Net (loss) profit and total             $ (9,501,542)    $  4,062,154
comprehensive (loss) income
                                                                     
                                                                     

Earnings (loss) per share                                            

  Basic                                 $      (1.00)    $       0.76

  Diluted                               $      (1.00)    $       0.71
                                                                     
                                                          

REDLINE COMMUNICATIONS GROUP INC.        

Consolidated Statements of Changes in Equity        

(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                 -              -            -                -          4,062,154         4,062,154

  Shares
  issued on


                 5,562,950              -            -                -                  -         5,562,950
  conversion
  of
  debenture                                                                                         
Share-based                -              -            -        1,382,301                  -         1,382,301
  payments                                                                                          
Exercise of          240,949              -            -        (134,282)                  -           106,667
  options                                                                                           
Balance at
December 31,                                                                                    
2011             $ 134,336,023    $ (365,780)    $ 310,000    $   7,635,506    $ (144,037,436)    $  (2,121,687) 
Balance at
December 31,                                                                                    
2011             $ 134,336,023    $ (365,780)    $ 310,000    $   7,635,506    $ (144,037,436)    $  (2,121,687) 
Net loss                   -              -            -                -        (9,501,542)       (9,501,542) 
Shares
  issued on 
                   905,627              -            -                -                  -           905,627
  conversion
  of
  debenture                                                                                         
Shares
  issued on 
                16,709,436              -            -                -                  -        16,709,436
  conversion
  of warrants                                                                                       
Exercise of          172,717              -            -         (92,929)                  -            79,788
  options                                                                                           
Share-based                -              -            -          818,888                  -           818,888
  payments                                                                                          
Balance at
December 31,                                                                                    
2012             $ 152,123,803    $ (365,780)    $ 310,000    $   8,361,465    $ (153,538,978)    $    6,890,510 


                                                                                                                

    

REDLINE COMMUNICATIONS GROUP INC.                                      

Consolidated Statements of Cash                                        
Flows

(Expressed in U.S. dollars)                                            
                                                                       
                                                 2012              2011

Cash flows from operating                                              
activities:
    Net profit (loss)                 $   (9,501,542)    $    4,062,154
    Adjustments to reconcile
    profit (loss) before taxes to                                      
    net cash from
    operating activities
      Finance expense                       (390,804)           749,295
      Depreciation and
      amortization of non-current             413,177           438,715
      assets
      Gain on disposal of asset                     -          (51,519)
      Recognition of share based              818,888         1,382,301
      payments
      Foreign exchange (gain) loss
      on cash held in foreign                (29,199)               824
      currency
      Foreign exchange loss (gain)            100,955         (578,584)
      on borrowings
      Loss on fair market value of         12,287,156         1,285,811
      Debenture
      Income tax                            (125,586)           120,000
                                            3,573,045         7,408,997
    Change in non-cash operating                                       
    assets and liabilities 
      Decrease in deferred cost of          6,912,618        10,997,382
      revenue
      Decrease in deferred revenue       (13,702,410)      (20,554,729)
      Change in other non-cash
      operating assets and                (5,340,505)       (6,882,569)
      liabilities 

Cash used in operating activities         (8,557,252)       (9,030,919)

Cash flows from investing                                              
activities:
    Acquisition of property, plant          (156,692)         (583,582)
    and equipment
    Acquisition of intangible                (54,711)         (272,056)
    assets
    Proceeds from the disposal of                   -            51,519
    property, plant and equipment
    Redemption (purchase) of                  125,147          (32,707)
    investments

Cash (used in) from investing                (86,256)         (836,826)
activities

Cash flows from financing                                              
activities:
    Finance costs                              21,234          (66,424)
    Proceeds from exercise of                  79,788           106,667
    options
    Proceeds from conversion of            10,513,308                 -
    warrants
    Proceeds from bank                      2,296,855                 -
    indebtedness
    Proceeds of borrowings                    103,488         8,534,848
    Repayment of borrowings                 (764,916)          (78,308)

Cash from (used in) financing              12,249,757         8,496,783
activities

Foreign exchange gain (loss) on                29,199             (824)
cash held in foreign currency

Increase (decrease) in cash                 3,635,448       (1,371,786)

Cash, beginning of the period               4,651,284         6,023,070

Cash, end of the period               $     8,286,732    $    4,651,284
                                                                       





Redline Contact(s)

Lynda Partner Communications +1-613-618-3200 lpartner@rdlcom.com

George Kypreos Chief Financial Officer +1-905-479-8344 gkypreos@rdlcom.com

Cory Pala Investor Relations +1-416-657-2400 cory.pala@evestor.com

Twitter:@rdlcom Press Kit:http://redline.mobilitypr.com

SOURCE: Redline Communications Group Inc.

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