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Redline Communications Reports 2013 Third Quarter Financial Results, Provides Update on Previously Announced Potential Acquisitions(Canada Newswire Via Acquire Media NewsEdge) TORONTO, Nov. 14, 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 and nine months ended September 30, 2013. Financial summary for the three months ended September 30, 2013 (Q3-2013): Order Bookings² of $6.3 million Overall revenue was $7.1 million Overall gross margin of 69% Adjusted EBITDA² loss of $1.5 million Completed a Cdn. $10.6 million private placement financing Cash net of bank indebtedness of $14.3 million Financial Review Order Bookings² for Q3-2013 were $6.3 million for Q3-2013, down 58% over the same period in 2012. The shortfall was largely due to fewer orders from the energy sector where orders were estimated by Management to be approximately 24% of total Bookings. "We are seeing strong growth in our sales pipeline and we are not losing business to competitors," said Robert Williams, interim CEO of Redline Communications. "While our excitement about the potential in the energy market is greater than ever, the timing of the growing number of potential orders in our pipeline is dependent on the buying cycles of these large companies." Order Backlog² at September 30, 2013 was $20.1 million, an increase of $4.0 million over the September 30, 2012 backlog of $16.1 million. Revenue for Q3-2013 was $7.1 million, down 13% from the $8.1 million reported for the same period in 2012. Lower revenue was related to the timing of the roll-out of two large contracted oil & gas projects underway in the Middle East - both are expected to continue to ship in the fourth quarter of 2013 and into 2014. Gross margin on core (BWI) product sales for Q3-2013 was very strong at 72%, an increase of 15 percentage points over the same period last year. Overall gross margin was 69%, an increase of 13 percentage points over 56% reported in the same period in 2012. Higher overall margins in Q3-2013 were due to an increased percentage of higher margin software sales associated with the BWI product line, an increase in revenue from high margin professional services, and a reduction in the amount of lower margin "other" products that were included in revenue during the same period last year. Overall operating expenses for Q3-2013 were in line with management's expectations at $6.8 million, an increase of 13% over $6.0 million reported for the same period in 2012, and relatively unchanged from Q2-2013. The Adjusted EBITDA² loss for Q3-2013 was $1.5 million, as compared to the adjusted EBITDA2 loss of $1.1 million for the same period in 2012. Net Loss for Q3-2013 was $1.2 million, or ($0.08) per share, compared to a net loss of $5.2 million, or ($0.55) per share for the same period in 2012. During Q3-2012, the Company completed a bought deal private placement financing for aggregate gross proceeds of Cdn $10.6 million, bringing Redline's current cash position to over $17.6 million with cash net of bank indebtedness of $14.3 million. On June 20, 2013 Redline announced that it had executed two separate non-binding letters of intent to acquire two companies. Following due diligence, Redline has now concluded that it will not pursue these acquisitions. Significant company milestones for Q3- 2013: Key Customer Wins: Redline won a strategic managed services contract with a long term Middle East oil & gas client, demonstrating additional value beyond network infrastructure. Part of this contract was to develop a long term plan to expand this client's Redline network. Service Provider revenue continues to be strong, especially in the Middle East. After a successful pilot program, one of the top 10 oil & gas producers in the world, a "supermajor", has standardized on Redline for their oilfield networks worldwide, and is now including Redline in their corporate field telecom shared infrastructure architecture. Product Milestones: Redline announced that its wireless broadband system for the sub-700 MHz frequency bands - the so-called television white space - is the fastest white space technology with the longest range to be certified by both the U.S. Federal Communications Commission (FCC) and Industry Canada. Management and Board Changes: Redline announced the appointment of John Wilson to its board of directors. Mr. Wilson has spent the past 32 years working at the intersection of technology and the oil & gas industry and is president and chief executive officer of Quantapoint Inc, a technology-driven solutions provider to the oil & gas industry. Redline announced that Eric Melka, Redline's CEO, would be taking a medical leave of absence to address a back injury and subsequent to the end of the quarter, announced that Mr. Melka would not be returning to his duties as CEO or Board Member. Robert Williams, President Middle East and Africa (MENA) for Redline, has assumed the role of interim CEO. Conference Call and Webcast - November 15th, 2013 at 10:00 a.m. ET A conference call and webcast to discuss the results has been scheduled for November 15th, 2013 at 10:00 a.m. Eastern Time. To participate, please dial 1-647-427-7450 or 1-888-231-8191 approximately 10 minutes before the conference call, and provide passcode 90027350. A recording of the call will be available through November 30, 2013. To listen to the rebroadcast please dial 1-416-849-0833 or 1-855-859-2056 and enter passcode 90027350. 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 oilfields 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 & 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 uses non-IFRS measures to assess its operating performance. These include but are not limited to "Orders or Bookings", "Shipped or Shipments", "Backlog", "EBITDA", "Adjusted EBITDA", "Income before non-operating items", "EPS excluding the non-cash expense relating to the fair market adjustment on the Debenture", and "Amortized Deferred Revenue". Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. Further information including definitions of these categories can be found in the Company's Management Discussion and Analysis for the three months and nine months ended September 30, 2013 ("Q3 2013 MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the results for the three and nine months ended September 30, 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 and nine months ended September 30, 2013 and the Q3 2013 MD&A. Forward Looking StatementsCertain 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.rdlcom.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 30,2013 December 31, 2012 ASSETS Current assets: Cash $17,607,660 $ 8,286,732 Trade receivables 12,388,761 12,639,570 Other receivables 1,414,889 571,382 Inventories 5,951,883 6,973,414 Deferred cost of revenue 87,888 905,250 Prepaid expenses and other deposits 945,289 1,061,622 38,396,370 30,437,970 Non-current assets: Property, plant and equipment 1,834,406 875,352 Intangible assets 80,090 107,593 Other assets 102,174 99,180 2,016,670 1,082,125 Total Assets $40,413,040 $ 31,520,095 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness $3,353,590 $ 2,296,855 Trade and other payables 5,928,243 4,249,973 Income tax payable 142,953 292,927 Deferred revenue 1,351,683 2,796,497 Borrowings 5,091,321 5,116,527 15,867,790 14,752,779 Non-current liabilities Other payables 896,861 418,622 Other financial liability 375,657 - Convertible debenture (principal and interest) 295,796 1,100,788 Fair market value adjustment on debenture 3,066,951 8,357,396 4,635,265 9,876,806 Total Liabilities 20,503,055 24,629,585 SHAREHOLDERS' EQUITY Share capital 168,903,267 152,123,803 Share purchase loan (365,780) (365,780) Warrant 310,000 310,000 Contributed surplus 8,845,609 8,361,465 Deficit (157,783,111) (153,538,978) 19,909,985 6,890,510 Total liabilities and equity $40,413,040 $ 31,520,095 REDLINE COMMUNICATIONS GROUP INC. Condensed Consolidated Interim Statements of Comprehensive Loss (Unaudited, expressed in U.S. dollars) Three months ended September 30, Nine months ended September 30,2013 2012 2013 2012 Revenue $ 7,068,730 $ 8,145,984 $24,015,729 $ 38,033,918 Cost of revenue 2,157,280 3,606,736 9,330,462 17,131,369 Gross profit 4,911,450 4,539,248 14,685,267 20,902,549 Expenses: Research and development 1,657,640 1,426,750 4,842,290 4,577,763 Finance and administration 2,151,735 1,841,489 6,074,321 5,397,817 Sales and marketing 2,592,551 2,277,960 8,034,017 7,083,711 Operations and customer support 390,616 441,107 1,154,250 1,375,796 6,792,542 5,987,306 20,104,878 18,435,087 (Loss) profit before other expenses (1,881,092) (1,448,058) (5,419,611) 2,467,462 Other expenses Finance expense 65,946 41,267 233,074 214,758 (Gain) loss on fair market value of financial instruments (955,713) 3,192,165 (1,476,534) 5,840,382 Foreign exchange loss (gain) 226,215 480,272 (129,538) 317,272 (663,552) 3,713,704 (1,372,998) 6,372,412 Loss before income taxes (1,217,540) (5,161,762) (4,046,613) (3,904,950) Income tax expense 24,456 - 197,520 - Net loss and total comprehensive loss $ (1,241,996) $ (5,161,762) $(4,244,133) $ (3,904,950) Loss per share Basic $ (0.08) $ (0.55) $(0.30) $ (0.42) Diluted $ (0.08) $ (0.55) $(0.30) $ (0.42) 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 - - - - (3,904,950) (3,904,950) Shares issued on conversion of debenture 205,450 - - - - 205,450 Shares issued on conversion of warrants 66,434 - - - - 66,434 Exercise of options 124,273 - - (70,164) - 54,109 Share-based payments - - - 648,125 - 648,125 Balance at September 30, 2012 $ 134,732,180 $ (365,780) $ 310,000 $ 8,213,467 $ (147,942,386) $ (5,052,519) Balance at December 31, 2012 $ 152,123,803 $ (365,780) $ 310,000 $ 8,361,465 $ (153,538,978) $ 6,890,510 Net loss - - - - (4,244,133) (4,244,133) Shares issued on conversion of debenture 2,132,243 - - - - 2,132,243 Shares issued on conversion of warrants 5,334,306 - - - - 5,334,306 Shares issued on 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 September 30, 2013 $ 168,903,267 $ (365,780) $ 310,000 $ 8,845,609 $ (157,783,111) $ 19,909,985 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 30,2013 2012 2013 2012 Cash flows from operating activities: Net loss $(1,241,996) $ (5,161,762) $(4,244,133) $ (3,904,950) Adjustments to reconcile net (loss) profit to net cash from operating activities Finance expense 65,946 41,267 233,074 214,758 Depreciation and amortization of non-current assets 105,701 104,508 274,839 311,396 Loss on disposal of asset 28,963 - 28,963 - Recognition of share based payments 209,413 296,073 693,939 753,851 Foreign exchange loss (gain) on cash held in foreign currency 42,079 (6,651) 170,636 (47,768) Foreign exchange loss (gain) on borrowings 187,490 460,173 (376,090) 252,713 (Gain) loss on fair market value of financial instruments (955,713) 3,192,165 (1,476,534) 5,840,382 Income tax 24,456 - 197,520 - (1,533,661) (1,074,227) (4,497,786) 3,420,382 Change in non-cash operating assets and liabilities (Increase) decrease in deferred cost of revenue (87,888) 921,387 817,362 6,973,135 Decrease (increase) in deferred revenue 350,100 (1,821,965) (1,444,814) (13,431,515) Change in other non-cash operating assets and liabilities 1,663,395 382,651 2,360,985 (955,291) Cash from (used in) operating activities 391,946 (1,592,154) (2,764,253) (3,993,289) Cash flows from investing activities: Acquisition of property, plant and equipment (832,276) (38,263) (1,202,398) (102,549) Acquisition of intangible assets (16,855) (4,635) (32,955) (54,711) Redemption of investments - - - 92,144 Cash (used in) investing activities (849,131) (42,898) (1,235,353) (65,116) Cash flows from financing activities: Finance costs (14,903) 34,694 (77,449) 26,267 Proceeds from exercise of options 88,841 35,153 267,728 54,109 Proceeds from conversion of warrants - 31,493 2,931,614 31,493 (Payment) proceeds from bank indebtedness (952,007) - 1,056,735 - Proceeds from private placement 9,322,340 - 9,322,340 - Principal payment of obligations under finance leases (9,798) - (9,798) - Cash from financing activities 8,434,473 101,340 13,491,170 111,869 Foreign exchange (loss) gain on cash held in foreign currency (42,079) 6,651 (170,636) 47,768 Increase (decrease) in cash 7,935,209 (1,527,061) 9,320,928 (3,898,768) Cash, beginning of the period 9,672,451 2,279,577 8,286,732 4,651,284 Cash, end of the period $17,607,660 $ 752,516 $17,607,660 $ 752,516 Cash $17,607,660 $ 752,516 $17,607,660 $ 752,516 Bank indebtedness (3,353,590) - (3,353,590) - Cash net of bank indebtedness $14,254,070 $ 752,516 $14,254,070 $ 752,516 SOURCE Redline Communications Group Inc. |