-- Growth in Digital Oil Fields Driving Demand for Redline Wireless
Networks --
TORONTO, May 15, 2013 /CNW/ - Redline Communications (www.rdlcom.com Group Inc. TSX: RDL), a leading provider of secure broadband wireless solutions for
machine-to-machine (M2M) communications, today announced operating
results¹ for the three months ended March 31, 2013.
Financial summary for the three months ended March 31, 2013:
-
Record Order Bookings² from Energy sector were approximately $9 million,
up approximately 150% over the same period last year. Total Order
Bookings were $13.0 million, of which approximately 70% were from the
Energy sector.
-
Revenue from core BWI product line up 57% to $7.4 million from $4.7
million reported for the same period in 2012. Overall revenue of $8.0
million, down $4.5 million from the same period in 2012, the difference
entirely attributed to Deferred RedMAX™ revenue³ which ended June 30,
2012.
-
Gross margin on BWI product sales of 55%, and overall gross margin of
51%.
-
Adjusted EBITDA² loss was $2.0 million, a decrease of $2.7 million over
the adjusted EBITDA of $0.7 million for the same period in 2012.
Financial Review
Order Bookings for the three months ended March 31, 2013 were $13.0
million, up 8% over the same period in 2012. Bookings in the quarter
were primarily driven from strong and growing sales to major operators
in the energy sector which management estimates represented
approximately 70% of total Bookings, or approximately $9 million, up
approximately 150% over the same period last year.
Order Backlog at March 31, 2013 was $19.7 million, more than triple the
backlog of $6.2 million at March 21, 2012 and providing visibility into
future revenue. Continued growth in Order Backlog can be attributed to
the receipt of a number of multi-million dollar orders from oil and gas
customers expected to be delivered over the next twelve to eighteen
months.
"We are experiencing significant growth in the energy sector," said Eric
Melka, Redline CEO. "We grew revenues from $1 million in 2010 to $9
million in revenues in 2011, and then added order bookings of $23
million in 2012. This year we've already received bookings from the
energy sector totaling $9 million."
"This speaks to our ability to execute on our strategy," added Melka.
"With the expected significant growth in the energy sector, we
anticipate related bookings in 2013 will grow by more than 35%,
contributing $30 million to $35 million, or about 60% of our total
expected order bookings for the year."
Revenue associated with the Company's core BWI product line was $7.4
million for the three months ended March 31, 2013, up 57% from the $4.7
million reported for the same period in 2012.
Overall revenue for the three months ended March 31, 2013 was $8.0
million, down $4.5 million from the same period last year. The
difference was entirely attributed to $4.7 million of amortized
deferred revenue from prior RedMAX sales included in the three months
ended March 31, 2012 as compared to $nil of amortized deferred revenue
in the three months ended March 31, 2013.³
Overall gross margin for the three months ended March 31, 2013 was 51%,
similar to the overall gross margin of 52% reported for the same period
in 2012. Gross Margin on core BWI product revenue was 55%. Lower BWI
margins in the first quarter of 2013 (55% vs 65% in the same period in
2012) were a result of a shift in product mix for the first quarter of
2013 which included a higher percentage of lower margin product sales
to the telecom industry.
Overall operating expenses were $6.4 million for the three months ended
March 31, 2013, an increase of 5% compared to $6.1 million reported for
the same period last year with the increase due primarily to a one-time
expense for severance and planned greater sales expenses in the period.
Adjusted EBITDA loss for the three months ended March 31, 2013 was $2.0
million, a decrease of $2.7 million over the adjusted EBITDA of $0.7
million for the corresponding period in 2012. The decrease is a direct
result of the decrease in overall revenue as a result of the completion
of the amortization period of all RedMAX Amortized Deferred Revenue³ at
the end of June 30, 2012. Excluding the impact of RedMAX Amortized
Deferred Revenue and associated costs, adjusted EBITDA loss for the
three months ended March 31, 2012 would have been $1.5 million.
Net Loss for the three months ended March 31, 2013 was $2.5 million, or
($0.18) per share, a $4.1 million improvement over the net loss of $6.6
million, or ($0.70) per share reported in the same period in 2012,
although period over period comparisons are difficult as a result of
the impact of amortized deferred revenue from prior RedMAX sales as
well as the significant loss on the fair market value of the Debenture
included in the three months ended March 31, 2012.
As of March 31, 2013 the Company increased cash by $4.4 million to $12.7
million from $8.3 million at December 31, 2012.
Business highlights for the three months ended March 31, 2013:
-
Key Customer Win in Energy Sector:
-
Redline received its largest contract to date for a wireless oilfield
network installation. The contract is from an existing oil and gas
customer and has a value over its life of more than 10% of Redline's
2013 revenue budget.
-
Product Milestones:
-
Redline announced its entire family of RDL-3000 wireless broadband
systems now operate in the 3300-3800 MHz licensed band, one of the
licensed spectrum profiles used by telecom operators and allowing them
to re-use this spectrum as they migrate to LTE.
-
Quality Recognition:
-
Redline won the annual BSI Group Award of Excellence in Canada in recognition of its commitment to quality and business
excellence in all aspects of its operation.
-
Management changes support growth plans:
-
Redline made several key management appointments including: promoting
Rob Williams (formerly Redline's COO) to president of Middle East and
Africa and Bojan Subasic to vice president R&D; hiring Carl McKinnon,
previously global sales director for communications at GE Digital
Energy, as vice president of worldwide sales; appointing Rick Cuthill
general manager of Redline's new business unit, Redline Military
Technologies (RMT).
-
International expansion:
-
Redline opened an office in Oman to better support operations in the
region, moving a key executive from the Company's Markham-based office
to run operations in the Middle East.
Conference Call and Webcast - May 15th, 2013 at 10:00 a.m. ET
A conference call and webcast to discuss the results will be held May
15, 2013 at 10:00 a.m. ET. To participate, please dial 1-647-427-7450
or 1-888-231-8191 approximately 10 minutes before the conference call,
and provide passcode 65765411. A recording of the call will be
available through May 31, 2013. To listen to the rebroadcast please
dial 1-416-849-0833 or 1-855-859-2056 and enter passcode 65765411. 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) 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", "Adjusted 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 months
ended March 31, 2013 ("Q1 2013 MD&A"), copies of which are available on
SEDAR at www.sedar.com. Further details on the three month results ended March 31, 2013 can be
found in the condensed consolidated interim statement of financial
position, condensed consolidated interim statement of comprehensive
loss, 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 months ended March 31, 2013 and
the Q1 2013 MD&A.
|
3
|
During the period from January 1st 2006 to the third quarter of 2009, the Company's RedMAX products, which
have now reached end of life, were sold with post contract support
which included unspecified upgrades where the fair market value of the
undelivered elements could not be established. The Company has
amortized this RedMAX product revenue and the associated cost of this
revenue on a straight line basis over the period of post contract
support and unspecified upgrades which ended at June 30, 2012. This
amortized RedMAX revenue is called Amortized Deferred Revenue. This
Amortized Deferred Revenue is included in the financial results for the
three months ended 2012 but not in the three months ended 2013.
|
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)
|
|
|
|
|
|
|
|
|
|
|
March 31,
2013
|
|
|
December 31,
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
12,690,820
|
|
|
$
|
8,286,732
|
|
Trade receivables
|
|
|
|
10,149,541
|
|
|
|
12,639,570
|
|
Other receivables
|
|
|
|
817,637
|
|
|
|
571,382
|
|
Inventories
|
|
|
|
7,125,006
|
|
|
|
6,973,414
|
|
Deferred cost of revenue
|
|
|
|
314,328
|
|
|
|
905,250
|
|
Prepaid expenses and other deposits
|
|
|
|
1,076,812
|
|
|
|
1,061,622
|
|
|
|
|
32,174,144
|
|
|
|
30,437,970
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
877,597
|
|
|
|
875,352
|
|
Intangible assets
|
|
|
|
87,468
|
|
|
|
107,593
|
|
Other assets
|
|
|
|
97,425
|
|
|
|
99,180
|
|
|
|
|
1,062,490
|
|
|
|
1,082,125
|
Total Assets
|
|
|
$
|
33,236,634
|
|
|
$
|
31,520,095
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
$
|
3,234,031
|
|
|
$
|
2,296,855
|
|
Trade and other payables
|
|
|
|
5,795,842
|
|
|
|
4,249,973
|
|
Income tax payable
|
|
|
|
143,730
|
|
|
|
292,927
|
|
Deferred revenue
|
|
|
|
1,651,699
|
|
|
|
2,796,497
|
|
Current portion of borrowings
|
|
|
|
5,060,613
|
|
|
|
5,116,527
|
|
|
|
|
15,885,915
|
|
|
|
14,752,779
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
|
|
351,367
|
|
|
|
418,622
|
|
Convertible debenture (principal and interest)
|
|
|
|
298,627
|
|
|
|
1,100,788
|
|
Fair market value adjustment on convertible debenture
|
|
|
|
4,451,253
|
|
|
|
8,357,396
|
|
|
|
|
5,101,247
|
|
|
|
9,876,806
|
Total Liabilities
|
|
|
|
20,987,162
|
|
|
|
24,629,585
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
159,905,015
|
|
|
|
152,123,803
|
Share purchase loan
|
|
|
|
(365,780)
|
|
|
|
(365,780)
|
Warrant
|
|
|
|
310,000
|
|
|
|
310,000
|
Contributed surplus
|
|
|
|
8,407,463
|
|
|
|
8,361,465
|
Deficit
|
|
|
|
(156,007,226)
|
|
|
|
(153,538,978)
|
|
|
|
|
12,249,472
|
|
|
|
6,890,510
|
Total liabilities and equity
|
|
|
$
|
33,236,634
|
|
|
$
|
31,520,095
|
|
|
|
|
|
|
|
|
|
REDLINE COMMUNICATIONS GROUP INC.
|
Condensed Consolidated Interim Statements of Comprehensive Loss
|
(Unaudited, expressed in U.S. dollars)
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
8,022,741
|
|
|
$
|
12,506,460
|
Cost of revenue
|
|
|
|
3,969,053
|
|
|
|
6,018,426
|
Gross profit
|
|
|
|
4,053,688
|
|
|
|
6,488,034
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
1,778,934
|
|
|
|
1,541,854
|
|
Finance and administration
|
|
|
|
1,656,350
|
|
|
|
1,627,056
|
|
Sales and marketing
|
|
|
|
2,601,828
|
|
|
|
2,473,935
|
|
Operations and customer support
|
|
|
|
370,450
|
|
|
|
458,263
|
|
|
|
|
6,407,562
|
|
|
|
6,101,108
|
(Loss) profit before other expenses
|
|
|
|
(2,353,874)
|
|
|
|
386,926
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
|
81,879
|
|
|
|
96,244
|
|
(Gain) loss on fair market value of Debenture
|
|
|
|
(54,393)
|
|
|
|
6,611,157
|
|
Foreign exchange (gain) loss
|
|
|
|
(85,435)
|
|
|
|
236,123
|
|
|
|
|
(57,949)
|
|
|
|
6,943,524
|
Loss before income taxes
|
|
|
|
(2,295,925)
|
|
|
|
(6,556,598)
|
Income tax expense
|
|
|
|
172,323
|
|
|
|
-
|
Net loss and total comprehensive loss
|
|
|
$
|
(2,468,248)
|
|
|
$
|
(6,556,598)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
(0.18)
|
|
|
$
|
(0.70)
|
|
Diluted
|
|
|
$
|
(0.18)
|
|
|
$
|
(0.70)
|
|
|
|
|
|
|
|
|
|
REDLINE COMMUNICATIONS GROUP INC.
|
Condensed Consolidated Interim Statements of Changes in Equity
|
(Unaudited, expressed in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
Share purchase
loan
|
|
|
Warrant
|
|
|
Contributed
surplus
|
|
|
Deficit
|
|
|
Total
|
Balance at
December 31, 2011
|
|
$
|
134,336,023
|
|
$
|
(365,780)
|
|
$
|
310,000
|
|
$
|
7,635,506
|
|
$
|
(144,037,436)
|
|
$
|
(2,121,687)
|
|
Net profit
|
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
|
(6,556,598)
|
|
|
(6,556,598)
|
|
Shares issued on
conversion of debenture
|
|
|
115,726
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
115,726
|
|
Share-based payments
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
175,036
|
|
|
-
|
|
|
175,036
|
Balance at
March 31, 2012
|
|
$
|
134,451,749
|
|
$
|
(365,780)
|
|
$
|
310,000
|
|
$
|
7,810,542
|
|
$
|
(150,594,034)
|
|
$
|
(8,387,523)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012
|
|
$
|
152,123,803
|
|
$
|
(365,780)
|
|
$
|
310,000
|
|
$
|
8,361,465
|
|
$
|
(153,538,978)
|
|
$
|
6,890,510
|
|
Net loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,468,248)
|
|
|
(2,468,248)
|
|
Shares issued on
conversion of debenture
|
|
|
2,132,243
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,132,243
|
|
Shares issued on
conversion of warrants
|
|
|
5,334,306
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,334,306
|
|
Exercise of options
|
|
|
314,663
|
|
|
-
|
|
|
-
|
|
|
(139,467)
|
|
|
-
|
|
|
175,196
|
|
Share-based payments
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
185,465
|
|
|
-
|
|
|
185,465
|
Balance at
March 31, 2013
|
|
$
|
159,905,015
|
|
$
|
(365,780)
|
|
$
|
310,000
|
|
$
|
8,407,463
|
|
$
|
(156,007,226)
|
|
$
|
12,249,472
|
REDLINE COMMUNICATIONS GROUP INC.
|
Condensed Consolidated Interim Statements of Cash Flows
|
(Unaudited, expressed in U.S. dollars)
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(2,468,248)
|
|
|
$
|
(6,556,598)
|
|
Adjustments to reconcile loss before taxes to net cash from operating
activities
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
|
81,879
|
|
|
|
96,244
|
|
|
Depreciation and amortization of non-current assets
|
|
|
|
82,047
|
|
|
|
105,856
|
|
|
Recognition of share based payments
|
|
|
|
185,465
|
|
|
|
175,036
|
|
|
Foreign exchange loss (gain) on cash held in foreign currency
|
|
|
|
121,761
|
|
|
|
(27,164)
|
|
|
Foreign exchange (gain) loss on borrowings
|
|
|
|
(228,662)
|
|
|
|
199,154
|
|
|
Loss on fair market value of Debenture
|
|
|
|
(54,393)
|
|
|
|
6,611,157
|
|
|
Income tax
|
|
|
|
172,323
|
|
|
|
-
|
|
|
|
|
(2,107,828)
|
|
|
|
603,685
|
|
Change in non-cash operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Decrease in deferred cost of revenue
|
|
|
|
590,922
|
|
|
|
2,254,187
|
|
|
Decrease in deferred revenue
|
|
|
|
(1,144,798)
|
|
|
|
(4,239,402)
|
|
|
Change in other non-cash operating assets and liabilities
|
|
|
|
3,264,434
|
|
|
|
106,090
|
Cash from (used in) operating activities
|
|
|
|
602,730
|
|
|
|
(1,275,440)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
|
|
(64,167)
|
|
|
|
(44,925)
|
|
Acquisition of intangible assets
|
|
|
|
-
|
|
|
|
(31,113)
|
|
Redemption of investments
|
|
|
|
-
|
|
|
|
92,144
|
Cash (used in) from investing activities
|
|
|
|
(64,167)
|
|
|
|
16,106
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
|
(17,919)
|
|
|
|
(7,656)
|
|
Proceeds from exercise of options
|
|
|
|
175,196
|
|
|
|
-
|
|
Proceeds from conversion of warrants
|
|
|
|
2,892,833
|
|
|
|
-
|
|
Proceeds from bank indebtedness
|
|
|
|
937,176
|
|
|
|
-
|
Cash from (used in) financing activities
|
|
|
|
3,987,286
|
|
|
|
(7,656)
|
Foreign exchange gain on cash held in foreign currency
|
|
|
|
(121,761)
|
|
|
|
27,164
|
Increase (decrease) in cash
|
|
|
|
4,404,088
|
|
|
|
(1,239,826)
|
Cash, beginning of the period
|
|
|
|
8,286,732
|
|
|
|
4,651,284
|
Cash, end of the period
|
|
|
$
|
12,690,820
|
|
|
$
|
3,411,458
|
|
|
|
|
|
|
|
|
|
|
SOURCE: Redline Communications Group Inc.