-- 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.