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Redline Communications Reports 2017 Fourth Quarter and Year End Results
[March 07, 2018]

Redline Communications Reports 2017 Fourth Quarter and Year End Results


TORONTO, March 7, 2018 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL), the creator of powerful wide-area wireless networks for mission-critical applications in challenging locations, today announced operating results (in US dollars unless otherwise noted) for the fourth quarter and the fiscal year ended December 31, 2017.

Financial highlights for the fourth quarter ended December 31, 2017 include:

  • Revenues of $8.3 million, up 31% over Q4 2016
  • Gross margins of 56%, unchanged from Q4 2016
  • Operating expenses of $3.9 million, an increase of 8% over Q4 2016
  • Net profit of $0.8 million, an improvement of $0.9 million over Q4 2016
  • Adjusted EBITDA of $1.0 million, an improvement of $0.7 million over Q4 2016
  • Cash of $12.0 million, up $0.9 million over Q3 2017
  • Bookings of $5.6 million, up 27% over Q4 2016
  • Order Backlog of $6.1 million, down 33% over Q3 2017

Financial highlights for the fiscal year ended December 31, 2017 include:

  • Revenues of $22.8 million, unchanged from 2016
  • Gross margins of 54%, down 1 percentage point over 2016
  • Operating expenses of $13.7 million, a reduction of 21% over 2016
  • Net loss of $1.6 million, an improvement of $3.2 million over 2016
  • Adjusted EBITDA loss of $0.4 million, an improvement of $3.0 million over 2016
  • Cash of $12.0 million as of December 31, 2017, up $0.8 million over 2016
  • Bookings of $25.4 million, up 18% over 2016
  • Order Backlog of $6.1 million, up 8% over 2016

Financial Review

Total revenue for the fourth quarter and year ended December 31, 2017 was $8.3 million and $22.8 million respectively, with fourth quarter revenue up 31% over the same period in 2016 and annual revenue relatively unchanged year over year.  Revenue in the fourth quarter 2017 was up 60% over the prior quarter.

Adjusted EBITDA for the fourth quarter 2017 was $1.0 million, up $0.7 million over the Adjusted EBITDA of $0.3 million for the same period in 2016, largely due to higher revenues compared to the same period in 2016.  The adjusted EBITDA loss for the year ended December 31, 2017 was $0.4 million,  an improvement of $3.0 million over the same period in 2016, attributed to lower expenses.

"Redline ended 2017 on a positive note. Revenue growth quarter over quarter coupled with stable gross margins has resulted in a profitable fourth quarter," stated Robert Williams, Redline CEO.

Order Bookings for the fourth quarter and year ended December 31, 2017 were $5.6 million and $25.4 million respectively, up 27% and 18% over the same periods in 2016. The increase in Order Bookings year over year can be largely attributed to stronger spending from energy sector clients in the second half of 2017.

"We are seeing increasing demand from both new and existing clients across multiple vertical markets and in multiple geographies," added Williams. "Sales of our traditional RDL-3000 product remain strong, our new iLTETM product is being well received particularly in the mining sector and our operating costs have been managed effectively. We believe that our strategy of revenue diversification and ongoing cost management will continue to produce improved results going forward."

Overall gross margin for the fourth quarter and year ended December 31, 2017 was 56% and 54% respectively, unchanged and down one percentage point over the same periods in 2016.

Overall operating expenses for the fourth quarter and year ended December 31, 2017 were $3.9 million and $13.7 million, up 8% and down 21% respectively over the same periods in 2016.  The increase in operating expenses in the fourth quarter 2017 over the same period in 2016 was the result of a bad debt expense. The decrease in operating expenses in the year ending December 31, 2017 was primarily a result of reduced compensation and contractual costs.

Net Profit for the fourth quarter of 2017 was $0.8 million, or $0.05 per share as compared to a Net Loss of $0.1 million, or ($0.01) per share in the fourth quarter of 2016. For the full year 2017, Redline reported a Net Loss of $1.6 million, or ($0.09) per share, as compared to a Net Loss of $4.8 million, or ($0.28) per share in 2016.

At December 31st, 2017, Redline held cash of $12.0 million, up $0.9 million from September 30, 2017, and up $0.8 million from December 31, 2016.

The Redline Board of Directors also announced today that Joan Ritchie, who has held the position of Interim Chief Financial Officer, since September 5, 2017 has been appointed Chief Financial Officer.

Conference Call and Webcast – March 8th, 2018 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Thursday March 8, 2018 at 10:00 a.m. Eastern Time. To participate, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide passcode 4379546. A recording of the call will be available through March 17, 2018 on Redline's website or by dialing 1-416-849-0833 and entering the same passcode.

About Redline Communications
Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for mission-critical applications in challenging locations. Redline networks are used by oil and gas companies to manage onshore and offshore assets, by militaries for secure battlefield communications, by municipalities to remotely monitor infrastructure, and by telecom service providers to deliver premium services. Hundreds of businesses worldwide rely on Redline to engineer, plan and deliver ruggedized, secure and reliable networks for their M2M, voice, data and video communications needs - in locations that include the deserts of the Middle East, the rainforests of South America, and the frozen Alaskan slopes. For more information visit www.rdlcom.com.





NOTES:

1

To better assess the health and growth of the Redline's business, the Company reports on non-IFRS metrics, including "Orders or Bookings", "Shipped or Shipments", "Backlog", "EBITDA", and "Adjusted EDITDA". Further information including definitions of these measures and a reconciliation to their closest IFRS measures, if applicable, can be found in the Company's Management Discussion and Analysis for the three and twelve months ended December 31, 2017 ("Q4 and 2017 Year MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and twelve month results ended December 31, 2017 can be found in the condensed consolidated annual audited statement of financial position, condensed consolidated annual audited statement of comprehensive income, condensed consolidated annual audited statement of changes in equity and condensed consolidated annual audited 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 Audited Financial Statements of the Company for the three and twelve months ended December 31, 2017 and the Q4 and 2017 Year MD&A.


 

Adjusted EBITDA (Loss)

(Unaudited, Expressed in thousands of U.S. dollars)

The table below reconciles Adjusted EBITDA loss to the most directly comparable IFRS measure:









Three months ended December 31,

Year ended December 31,



2017

2016

2017

2016

Revenue

$

8,302

$

6,320

$

22,768

$

22,752

Net profit (loss)

785

(129)

(1,596)

(4,785)

Add back:






Share based payments

74

83

379

310


Depreciation and amortization

154

246

721

1,018


Finance (income) expense

7

23

25

(156)


Restructuring costs

-

243

-

243


Loss on fair market value of financial instruments

-

-

-

16


Foreign exchange loss 

(38)

(55)

87

53


Income tax expense

(4)

(103)

16

(75)


Total

193

437

1,228

1,409







Adjusted EBITDA (loss)

$

978

$

308

$

(368)

$

(3,376)







Adjusted EBITDA margin

12%

5%

-2%

-15%

 

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.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.



Consolidated Statements of Financial Position



(Expressed in U.S. dollars)









December 31,
2017

December 31,
2016

ASSETS



Current assets:




Cash 

$

11,960,062

$

11,147,235


Trade receivables

8,160,646

7,837,145


Other receivables

304,526

231,398


Inventories 

5,438,530

5,513,985


Prepaid expenses and other deposits

211,511

151,880



26,075,275

24,881,643

Non-current assets:




Property, plant and equipment

829,720

1,119,690


Intangible assets

1,169,733

1,494,603


Other assets 

83,600

78,908



2,083,053

2,693,201

Total Assets

$

28,158,328

$

27,574,844





LIABILITIES AND SHAREHOLDERS' EQUITY 



Current liabilities:




Trade and other payables

$

5,698,664

$

3,322,059


Income tax payable

10,741

10,741


Deferred revenue

1,275,875

960,475


Borrowings

792,051

1,478,418



7,777,331

5,771,693

Non-current liabilities:




Borrowings

1,434,388

1,340,165


Other payables

169,793

247,799



1,604,181

1,587,964

Total Liabilities

9,381,512

7,359,657





SHAREHOLDERS' EQUITY



Share capital 

172,929,341

172,929,341

Contributed surplus

9,155,798

8,998,245

Deficit

(163,308,323)

(161,712,399)



18,776,816

20,215,187

Total liabilities and equity

$

28,158,328

$

27,574,844

 

REDLINE COMMUNICATIONS GROUP INC.





Consolidated Statements of Comprehensive Loss





(Expressed in U.S. dollars)












Three months ended December 31,

Year ended December 31,

2017

2016

2017

2016

Revenue

$

8,302,334

$

6,320,376

$

22,768,094

$

22,752,325

Cost of revenue

3,680,267

2,768,040

10,517,675

10,163,346

Gross profit

4,622,067

3,552,336

12,250,419

12,588,979







Expenses:






Research and development

647,162

669,305

2,330,265

2,944,559


Administration and finance

1,492,753

1,090,756

4,915,038

5,773,757


Sales and marketing

1,550,475

1,587,059

5,745,227

7,510,737


Operations and customer support

181,485

227,138

728,122

1,063,640



3,871,875

3,574,258

13,718,652

17,292,693

Profit (loss) before undernoted items

750,192

(21,922)

(1,468,233)

(4,703,714)







Other expenses (income):






Finance (income) expense

6,793

22,962

24,822

(155,884)


Restructuring costs

-

242,632

-

242,632


Loss on fair market value of financial instruments

-

-

-

16,314


Foreign exchange (gain) loss

(38,059)

(55,074)

87,184

53,239



(31,266)

210,520

112,006

156,301

Profit (loss) before income taxes

781,458

(232,442)

(1,580,239)

(4,860,015)

Income tax expense (recovery)

(3,647)

(103,005)

15,685

(74,577)

Net profit (loss) and total comprehensive income (loss)

$

785,105

$

(129,437)

$

(1,595,924)

$

(4,785,438)













Earnings (loss) per share






Basic and diluted

$

0.05

$

(0.01)

$

(0.09)

$

(0.28)

 

REDLINE COMMUNICATIONS GROUP INC.





Consolidated Statements of Changes in Equity





(Expressed in U.S. dollars)















Share
capital

Warrant

Contributed
surplus

Deficit

Total

Balance at
January 1, 2016

$

172,662,177

$

310,000

$

8,457,415

$

(156,926,961)

$

24,502,631


Net loss

-

-

-

(4,785,438)

(4,785,438)


Conversion of debenture

267,164

-

-

-

267,164


Expiry of warrants

-

(310,000)

310,000

-

-


Stock option expense

-

-

230,830

-

230,830

Balance at
December 31, 2016

$

172,929,341

$

-

$

8,998,245

$

(161,712,399)

$

20,215,187


Net loss

-

-

-

(1,595,924)

(1,595,924)


Stock option expense

-

-

157,553

-

157,553

Balance at
December 31, 2017

$

172,929,341

$

-

$

9,155,798

$

(163,308,323)

$

18,776,816

 

REDLINE COMMUNICATIONS GROUP INC.






Consolidated Statements of Cash Flows






(Expressed in U.S. dollars)
















Three months ended December 31,

Year ended December 31,



2017

2016

2017

2016







Cash flows from operating activities:







Net profit (loss)


$

785,105

$

(129,437)

$

(1,595,924)

$

(4,785,438)


Adjustments to reconcile net profit (loss) to cash from operating activities:








Finance (income) expense


6,793

22,962

24,822

(155,884)



Depreciation and amortization of non-current assets


154,449

246,303

721,068

1,018,272



Gain on disposal of assets


-

-

-

(10,213)



Stock option expense


31,473

47,510

157,553

230,830



Foreign exchange (gain) loss on cash held in foreign currency


2,974

26,947

(83,917)

(62,850)



Foreign exchange (gain) loss on borrowings


(11,079)

(65,960)

160,861

106,624



Loss on fair market value of financial instruments


-

-

-

16,314





969,715

148,325

(615,537)

(3,642,345)


Change in non-cash operating assets and liabilities: 








Increase (decrease) in deferred revenue


252,476

140,748

315,400

(574,256)



Change in other non-cash operating assets and liabilities 


(285,142)

326,445

1,913,102

961,456

Cash from (used in) operating activities


937,049

615,518

1,612,965

(3,255,145)

Cash flows used in investing activities:







Acquisition of property, plant and equipment


(3,589)

-

(54,864)

(196,816)


Proceeds on sale of property, plant and equipment


-

-

-

20,300


Acquisition of intangible assets


(24,404)

-

(51,364)

(81,437)

Cash used in investing activities


(27,993)

-

(106,228)

(257,953)

Cash flows from financing activities:







Finance income


15,313

5,085

66,881

48,529


Repayment of borrowings


-

-

(844,708)

-

Cash from (used in) financing activities


15,313

5,085

(777,827)

48,529

Foreign exchange gain (loss) on cash held in foreign currency


(2,974)

(26,947)

83,917

62,850

Increase (decrease) in cash


921,395

593,656

812,827

(3,401,719)

Cash, beginning of the period


11,038,667

10,553,579

11,147,235

14,548,954

Cash, end of the period


$

11,960,062

$

11,147,235

$

11,960,062

$

11,147,235

 

SOURCE Redline Communications Group Inc.


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