TORONTO, Nov. 3, 2014 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), a leading provider of mission-critical networks, today announced unaudited operating results¹ for the three and nine months ended September 30, 2014.
Financial summary for the three months ended September 30, 2014 (Q3 2014):
- Revenue of $9.1 million
- Gross Margin of 50%
- Adjusted EBITDA² of $0.4 million
- Net Loss of $0.1 million, ($0.01 per share)
- Cash balance of $16.5 million
- Order Bookings² of $8.4 million
- Order Backlog² of $17.4 million
Overall Revenue for Q3 2014 was $9.1 million, up 29% over the same period in 2013, largely attributed to increasing revenue from the oil and gas sector.
Overall gross margins for Q3 2014 were 50%, a 19 percentage point decrease from the 69% reported for the same period in 2013. In Q3 2014, Redline recognized a greater than usual percentage of revenue from services and third party products, which are sold by Redline as part of a complete solution for a customer's network. This revenue, typically sold at lower margins than the hardware and software portion of a network, was sold at a lower than average margin during this quarter, pulling down the overall gross margin.
"We're pleased to see our revenues increase year over year, and quarter over quarter as Q3 is traditionally a slower quarter for Redline." said George Kypreos, Redline CFO. "We continue to see demand for Redline to act as the overall network solution provider which gives us better control over the quality of the solution and increased revenue for services and third party products. While the increase in revenue from third party products has put and may continue to put downward pressure on overall margins, we expect to see them improve and be closer to normal levels in future quarters."
Overall operating expenses for Q3 2014, were $4.5 million, a decrease of 34% compared to $6.8 million reported for the same period in 2013, with the decrease attributed to the restructuring plan put in place in December 2013.
Adjusted EBITDA for Q3 2014 was $0.4 million, an increase of $1.9 million over the Adjusted EBITDA loss of $1.5 million for the corresponding period in 2013. The improvement was primarily the result of lower operating costs resulting from the restructuring program initiated in December 2013.
Net loss for Q3 2014 was $0.1 million or ($0.01) per share, a $1.1 million improvement over the net loss of $1.2 million, or ($0.08) per share reported in the same period in 2013.
During Q3 2014, the Company used $2 million in cash for working capital and $2 million to acquire the assets of Purewave Networks, bringing the Company's cash balance to $16.5 million at September 30, 2014.
Order Bookings for Q3 2014 were $8.4 million, up 34% over the same period in 2013. Total Order Backlog at September 30, 2014 was $17.4 million.
Customers in the oil and gas sector accounted for 73% of total order value for Q3 2014. Among the five orders for new oilfield networks were two large contracts for digital oilfield networks from two new South American customers as well as a smaller order in the USA for an oilfield owned and operated by a "super-major" oil company, one of the five largest publicly-owned global oil and gas companies. This is the second super-major oil company to deploy Redline into their digital oilfield operations. This brings the total number of deployments for oilfield networks in 2014 to 12, up from three during the same nine-month period in 2013.
"With a record 12 pilot projects started in Q3, Redline continues to successfully penetrate the oil and gas sector," said Robert Williams, Redline CEO. "We now have 22 prospective customers piloting our products in their actual field environments, paving the way for many more full deployments to add to the 39 Redline networks already in place across the globe."
Redline tracks the number of pilot projects within the Energy sector as an indicator of future Order Bookings. Pilot projects vary in size and scope and give prospective customers the opportunity to evaluate Redline's solutions in a real field setting. In Q3 2014 Redline initiated pilot projects in 12 new oilfields in 10 different countries. This brings the total number of pilot projects deployed in 2014 to 20, as compared to 4 pilot projects initiated during the same nine-month period in 2013.
On September 9, 2014 Redline announced that it had signed a definitive agreement to acquire the assets of PureWave Networks, a privately-held LTE wireless technology company for a cash purchase price of $2 million. Redline has hired 7 former PureWave Networks employees and is working to integrate the team and the technology. The acquisition of PureWave's technology assets will enable Redline to accelerate the expansion of its suite of high performance rugged network solutions to include LTE-based capabilities.
Conference Call and Webcast – November 4th, 2014 at 10:00 a.m. ET
A conference call and webcast to discuss the Company's financial results have been scheduled for November 4, 2014 at 10:00 a.m. Eastern Time. To participate in the call, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide passcode 24222776. A recording of the call will be available through January 31, 2015 on Redline's website at http://www.rdlcom.com/en/about/investors/webcasts.
About Redline Communications
Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for the most challenging applications and locations. They are used by oil and gas companies to manage their assets, militaries for secure battlefield communications, municipalities to remotely monitor highways, utilities and other infrastructures, and telecom service providers to deliver premium services. Redline's powerful and versatile networks reliably and securely deliver voice, data, M2M and video communications for mission-critical applications. 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 sometimes reports on several non-IFRS financial measures, including "Orders or Bookings", "Backlog", "EBITDA", "Adjusted EBITDA", "EPS excluding the non-cash expense relating to the fair market adjustment on financial instruments". Further information including definitions of these categories and reconciliation to their most directly comparable IFRS measures can be found in the Company's Management Discussion and Analysis for the three months ended September 30, 2014 ("Q3 2014 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended September 30, 2014 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 September 30, 2014 and the Q3 2014 MD&A. Any non-IFRS financial measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS revenues, net income or cash flows. Further, Redline's financial measures may be calculated differently from similarly titled financial measures of other companies. |
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.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) | |||||
September 30, | December 31, | ||||
ASSETS | |||||
Current assets: | |||||
Cash | $ 16,532,255 | $ 13,473,246 | |||
Trade receivables | 10,121,824 | 10,340,537 | |||
Other receivables | 791,473 | 1,155,514 | |||
Inventories | 6,376,448 | 6,138,547 | |||
Deferred cost of revenue | - | 40,059 | |||
Prepaid expenses and other deposits | 423,992 | 928,350 | |||
34,245,992 | 32,076,253 | ||||
Non-current assets: | |||||
Property, plant and equipment | 1,857,316 | 1,768,479 | |||
Intangible assets | 1,833,173 | 59,809 | |||
Other assets | 80,016 | 99,753 | |||
3,770,505 | 1,928,041 | ||||
Total Assets | $ 38,016,497 | $ 34,004,294 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current liabilities | |||||
Trade and other payables | 6,047,636 | 5,553,916 | |||
Income tax payable | 155,063 | 153,403 | |||
Deferred revenue | 1,515,532 | 1,105,333 | |||
Borrowings | 4,868,777 | 4,981,078 | |||
12,587,008 | 11,793,730 | ||||
Non-current liabilities | |||||
Other payables | 519,256 | 788,592 | |||
Other financial liability | 75,785 | 111,548 | |||
Convertible debenture (principal and interest) | 274,516 | 287,175 | |||
Fair market value adjustment on convertible debenture | 127,596 | 920,739 | |||
997,153 | 2,108,054 | ||||
Total Liabilities | 13,584,161 | 13,901,784 | |||
SHAREHOLDERS' EQUITY | |||||
Share capital | 172,591,351 | 168,903,267 | |||
Share purchase loan | - | (365,780) | |||
Warrant | 310,000 | 310,000 | |||
Contributed surplus | 8,120,418 | 8,911,025 | |||
Deficit | (156,589,433) | (157,656,002) | |||
24,432,336 | 20,102,510 | ||||
Total liabilities and equity | $ 38,016,497 | $ 34,004,294 | |||
REDLINE COMMUNICATIONS GROUP INC. | |||||||||
Condensed Consolidated Interim Statements of Comprehensive Income (Loss) | |||||||||
(Unaudited, expressed in U.S. dollars) | |||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||
2014 | 2013 | 2014 | 2013 | ||||||
Revenue | $ 9,126,636 | $ 7,068,730 | $ 24,896,705 | $ 24,015,729 | |||||
Cost of revenue | 4,565,806 | 2,157,280 | 10,540,933 | 9,330,462 | |||||
Gross profit | 4,560,830 | 4,911,450 | 14,355,772 | 14,685,267 | |||||
Expenses: | |||||||||
Research and development | 795,351 | 1,657,640 | 2,239,205 | 4,842,290 | |||||
Administration and finance | 1,264,466 | 2,151,735 | 4,343,789 | 6,074,321 | |||||
Sales and marketing | 2,112,682 | 2,592,551 | 5,995,789 | 8,034,017 | |||||
Operations and customer support | 308,404 | 390,616 | 902,729 | 1,154,250 | |||||
4,480,903 | 6,792,542 | 13,481,512 | 20,104,878 | ||||||
Profit (loss) before undernoted items | 79,927 | (1,881,092) | 874,260 | (5,419,611) | |||||
Other expenses (gains) | |||||||||
Finance expense | 26,398 | 65,946 | 100,854 | 233,074 | |||||
Loss (gain) on fair market value | (61,283) | (955,713) | (451,130) | (1,476,534) | |||||
Foreign exchange loss (gain) | 203,860 | 226,215 | 114,899 | (129,538) | |||||
168,975 | (663,552) | (235,377) | (1,372,998) | ||||||
Profit (loss) before income taxes | (89,048) | (1,217,540) | 1,109,637 | (4,046,613) | |||||
Income tax expense | 5,649 | 24,456 | 43,068 | 197,520 | |||||
Net profit (loss) and total comprehensive income (loss) | $ (94,697) | $ (1,241,996) | $ 1,066,569 | $ (4,244,133) | |||||
Earnings (loss) per share | |||||||||
Basic | $ (0.01) | $ (0.08) | $ 0.07 | $ (0.30) | |||||
Diluted | $ (0.01) | $ (0.08) | $ 0.06 | $ (0.30) | |||||
REDLINE COMMUNICATIONS GROUP INC. | |||||||
Condensed Consolidated Interim Statements of Changes in Equity | |||||||
(Unaudited, expressed in U.S. dollars) | |||||||
Share | Share purchase loan | Warrant | Contributed surplus | Deficit | Total | ||
Balance at | $ 152,123,803 | $ (365,780) | $ 310,000 | $ 8,361,465 | $ (153,538,978) | $ 6,890,510 | |
Net loss | - | - | - | - | (4,244,133) | (4,244,133) | |
Conversion of debenture | 2,132,243 | - | - | - | - | 2,132,243 | |
Conversion of warrants | 5,334,306 | - | - | - | - | 5,334,306 | |
Private placement | 8,835,392 | - | - | - | - | 8,835,392 | |
Exercise of options | 477,523 | - | - | (209,795) | - | 267,728 | |
Share-based payments | - | - | - | 693,939 | - | 693,939 | |
Balance at | $ 168,903,267 | $ (365,780) | $ 310,000 | $ 8,845,609 | $ (157,783,111) | $ 19,909,985 | |
Balance at | $ 168,903,267 | $ (365,780) | $ 310,000 | $ 8,911,025 | $ (157,656,002) | $ 20,102,510 | |
Net profit | - | - | - | - | 1,066,569 | 1,066,569 | |
Exercise of options | 1,764,500 | - | - | (827,460) | - | 937,040 | |
Conversion of warrants | 2,253,156 | - | - | - | - | 2,253,156 | |
Share purchase loan settlement | (329,572) | 365,780 | - | - | - | 36,208 | |
Repurchase and cancellation of options | - | - | - | (201,793) | - | (201,793) | |
Share-based payments | - | - | - | 238,646 | - | 238,646 | |
Balance at | $ 172,591,351 | $ - | $ 310,000 | $ 8,120,418 | $ (156,589,433) | $ 24,432,336 | |
REDLINE COMMUNICATIONS GROUP INC. | |||||||
Condensed Consolidated Interim Statements of Cash Flows | |||||||
(Unaudited, expressed in U.S. dollars) | |||||||
Three months ended September 30, | Nine months ended September 30, | ||||||
2014 | 2013 | 2014 | 2013 | ||||
Cash flows from operating activities: | |||||||
Net profit (loss) | $ (94,697) | $ (1,241,996) | $ 1,066,569 | $ (4,244,133) | |||
Adjustments to reconcile net profit (loss) to net cash from operating activities | |||||||
Finance expense | 26,398 | 65,946 | 100,854 | 233,074 | |||
Depreciation and amortization of non-current assets | 169,049 | 105,701 | 378,255 | 274,839 | |||
Loss on disposal of asset | - | 28,963 | 15,652 | 28,963 | |||
Recognition of share based payments | 85,227 | 209,413 | 274,854 | 693,939 | |||
Foreign exchange loss on cash held in foreign currency | 415,412 | 42,079 | 814,604 | 170,636 | |||
Foreign exchange loss (gain) on borrowings | (267,174) | 187,490 | (312,206) | (376,090) | |||
Gain on fair market value of Debenture | (61,283) | (955,713) | (451,130) | (1,476,534) | |||
Income tax | - | 24,456 | - | 197,520 | |||
272,932 | (1,533,661) | 1,887,452 | (4,497,786) | ||||
Change in non-cash operating assets and liabilities | |||||||
Decrease in deferred cost of revenue | - | (87,888) | 40,059 | 817,362 | |||
Increase (decrease) in deferred revenue | (1,059,839) | 350,100 | 410,199 | (1,444,814) | |||
Change in other non-cash operating assets and liabilities | (1,181,801) | 1,663,395 | 893,199 | 2,360,985 | |||
Cash from (used in) operating activities | (1,968,708) | 391,946 | 3,230,909 | (2,764,253) | |||
Cash flows from investing activities: | |||||||
Acquisition of property, plant and equipment | (340,879) | (832,276) | (396,498) | (1,202,398) | |||
Proceeds on sale of property, plant and equipment | - | - | 14,424 | - | |||
Acquisition of intangible assets | (1,733,534) | (16,855) | (1,874,034) | (32,955) | |||
Cash used in investing activities | (2,074,413) | (849,131) | (2,256,108) | (1,235,353) | |||
Cash flows from financing activities: | |||||||
Finance income (costs) | 21,794 | (24,701) | 42,482 | (87,247) | |||
Proceeds from exercise of options | 33,981 | 88,841 | 937,040 | 267,728 | |||
Proceeds from conversion of debenture and warrants | - | 1,919,290 | 2,931,614 | ||||
Proceeds from (repayment of) bank indebtedness | - | (952,007) | - | 1,056,735 | |||
Proceeds from private placement | - | 9,322,340 | - | 9,322,340 | |||
Cash from financing activities | 55,775 | 8,434,473 | 2,898,812 | 13,491,170 | |||
Foreign exchange loss on cash held in foreign currency | (415,412) | (42,079) | (814,604) | (170,636) | |||
Increase (decrease) in cash | (4,402,758) | 7,935,209 | 3,059,009 | 9,320,928 | |||
Cash, beginning of the period | 20,935,013 | 9,672,451 | 13,473,246 | 8,286,732 | |||
Cash, end of the period | $ 16,532,255 | $ 17,607,660 | $ 16,532,255 | $ 17,607,660 | |||
Cash | $ 16,532,255 | $ 17,607,660 | $ 16,532,255 | $ 17,607,660 | |||
Bank indebtedness | - | (3,353,590) | - | (3,353,590) | |||
Cash, net of bank indebtedness | $ 16,532,255 | $ 14,254,070 | $ 16,532,255 | $ 14,254,070 | |||
SOURCE Redline Communications Group Inc.