RDL Redline Communications Group Inc

TORONTO, May 12, 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 months ended March 31, 2014 (Q1 2014).

Financial summary for the three months ended March 31, 2014:

• Revenue of $7.1 million
• Gross Margin of 61%
• Adjusted EBITDA² of $0.2 million
• Net Profit of $0.6 million
• Increased Cash by $1.1 million
• Order Bookings² of $8.9 million
• Order Backlog² of $18.5 million

Overall Revenue for Q1 2014 was $7.1 million, down 12% over the same period in 2013. The difference can largely be attributed to a large oil and gas deployment that occurred in the same period in 2013.

Adjusted EBITDA for Q1 2014 was $0.2 million, an increase of $2.3 million over the EBITDA loss of $2.1 million reported in the same period in 2013. The difference can be attributed to strong gross margins and lower operating costs in the quarter resulting from the restructuring program initiated in December 2013.

"We are very pleased with the results of the restructuring plan we put in place in December 2013," said George Kypreos, Redline CFO.  "Our reduced expenses coupled with our strong gross margins have contributed to a positive EBITDA despite lower revenues. Our goal was to become EBITDA positive in 2014 and we have realized this goal in the first quarter of the year."

Overall gross margin for Q1 2014 was 61%, up ten percentage points over the 51% reported in the same period in 2013. The difference can largely be attributed to an improvement in gross margin from professional services revenue as Q1 2013 included a large percentage of lower margin third-party equipment.

Overall operating expenses were $4.3 million for Q1 2014, down 33% over the $6.4 million for the same period last year, with the decrease attributed to the restructuring plan put in place during December 2013.

Net profit for Q1 2014 was $0.6 million or $0.04 per share, a $3.1 million improvement over the net loss of $2.5 million, or ($0.18) per share reported in the same period in 2013.

As of March 31, 2014 the Company added cash from operating activities, ending the quarter with $14.6 million of cash, an increase of $1.1 million over the $13.5 million as at December 31, 2013.

Order Bookings for the three months ended March 31, 2014 were $8.9 million, up 40% over Q4 2013 but down 31% over the same period in 2013 which included a significant order from a single large customer. The Order Backlog at March 21, 2014 was a healthy $18.5 million.

Order Bookings were realized in all markets and included a $1.7 million dollar order for a large public security network in Mexico announced after the end of the quarter.  The Company continues to see strong interest from oil and gas companies worldwide, fueled by increasing adoption of digital technology in the oilfield and by Redline's growing reputation as a quality provider of oilfield solutions. Subsequent to the end of Q1 2014, Redline received a large contract from a new oil and gas customer. The contract is to provide five end-to-end oilfield networks that Management expects will be deployed before the end of 2014.

Redline tracks pilot projects in the Energy sector as a leading indicator of future Order Bookings. The Company added 6 new pilot projects in Q1 2014 bringing the total of ongoing oil and gas pilot programs to 15, up from one at the same time in 2013. These projects vary in size and scope and give prospective customers the opportunity to evaluate Redline's solutions in a real field setting.

"We are starting to see the results of our shift to a sales model that uses pilot projects to demonstrate the capabilities of our networks," said Robert Williams, Redline CEO, "Our latest customer win in the Bakken field demonstrates that pilot projects can lead to significant orders. We have entered Q2 with strong oil and gas pilot activity, several large contracts that are expected to be fully delivered this calendar year, and we are seeing a strong high margin revenue start to the quarter."

Conference Call and Webcast - May 13th, 2013 at 10:00 a.m. ET

A conference call and webcast to discuss the Company's financial results have been scheduled for May 13, 2014 at 10:00 a.m. Eastern Time. To participate in the call, please dial 1-647-427-7450 or 1-888-231-8191 approximately 10 minutes before the conference call, and provide passcode 35047884. A recording of the call will be available through July 31, 2014. To listen to the rebroadcast please dial 1-416-849-0833 or 1-855-859-2056 and enter passcode 35047884. A webcast of the call will also be available on Redline's website at http://www.rdlcom.com/en/about/investors/webcasts.

About Redline Communications

Redline Communications (www.rdlcom.com) is the 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.

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.

SOURCE Redline Communications Group Inc.