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Redline Communications Reports Solid Q2 2012 Financial Results
(Canada Newswire Via Acquire Media NewsEdge)
Strong Bookings and Growing Backlog Highlight a Solid Quarter
TORONTO, Aug. 14, 2012 /CNW/ - Redline Communications Group Inc. (TSX:
RDL) ("Redline" or the "Company"), a leading provider of ruggedized
wireless infrastructure systems, today reported financial results for
the three and six month periods ended June 30, 2012.
Financial Summary for the three months ended June 30, 2012
$12.1M Bookings², slightly ahead of strong Q1 2012 Bookings
$10.1M Shipments, up 16% over Q1 2012
$7.8M Order Backlog, up 25% over Q1 2012
$17.4M Revenue, up 37% over same period last year
$6.3M Operating Expenses, a 5% improvement over the same period last
year
$3.9M Adjusted EBITDA¹, up 168% over the same period last year
$7.8M Net Profit compared to $0.06M in the same period last year
EPS of $0.08 on a fully diluted basis
Financial Highlights for the three months ended June 30, 2012
Strong demand for the core Broadband Wireless Infrastructure ("BWI")
product line helped the Company secure record Bookings totaling $12.1
million in the quarter. These Bookings were driven primarily from sales
to the energy sector, including several large oil and gas projects in
North America and the Middle East.
The Company's flagship BWI product line accounted for 78% of new product
orders in the quarter as the Company continued to de-emphasize its
WiMAX™ business.
The Company finished the quarter with a Backlog of orders totalling
$7.75 million, an increase of 25% over the Backlog at March 31, 2012.
Gross margin in the first quarter improved to 57% from 52% reported in
the first quarter of 2012.
The Company continues to deliver on its plan to reduce operating
expenses, reporting a reduction of 5.1% to $6.35 million in the quarter
as compared to the same period in 2011.
Adjusted EBITDA, was $3.91 million, an increase of 168% from adjusted
EBITDA of $1.46 million for the same period in 2011.
Operating Highlights for the three months ended June 30, 2012
Redline received and shipped a $2-million order for its rugged
industrial wireless system to a major oil and gas company, providing
high-capacity, high-availability communications between the company's
US-based drilling rigs and centralized control offices.
Redline announced that their rugged industrial wireless products were
chosen to create a wireless infrastructure for a major oil field
operated by the Abu Dhabi Company for Onshore Oil Operations (ADCO) in
the United Arab Emirates. Redline's systems integrator Alcatel-Lucent
(ALU) will deliver the complete and integrated digital oil field
system.
Redline advanced in the Cisco Developer Network as a solution developer
within the wireless and mobility technology categories and Redline's RDL-3000 system has successfully completed interoperability testing with Cisco
Access Points.
The Company announced the availability of Enterprise, a new compact
carrier-grade wireless networking solution with the fastest
bi-directional wireless broadband capacity in the industry.
Subsequent to the end of the quarter, Redline completed a 1:4 share
consolidation effective July 13, 2012.
Financial Details
Strong demand for Redline's core Broadband Wireless Infrastructure
("BWI") product line helped the Company secure Bookings totaling $12.1
million for a second quarter in a row. These Bookings were driven
primarily from sales to the energy sector, including several large oil
and gas projects in the both the Middle East and North America. The
Company's flagship BWI product line accounted for 78% of new product
Bookings in the quarter as the Company continued to de-emphasize its
lower margin legacy RedMAX™ WiMAX business. The Company finished the
quarter with a Backlog of orders totaling $7.8 million, up 25% from
$6.2 million recorded at the end of the first quarter 2012.
"I am very pleased with this solid quarter. We had strong Bookings once
again, and our Backlog has grown to nearly $8 million." said Eric
Melka, President and CEO of Redline Communications. "We've been winning
larger deals with new and existing oil & gas customers. These typically
have longer roll-out periods, so our Backlog has increased along with
our Revenues. This increase in Backlog also provides better visibility
into future Revenue."
Shipments for the second quarter were $10.1 million, up 16% over the
$8.7 million reported in the first quarter 2012. BWI product accounted
for 87% of total product shipments compared with 77% for the first
quarter 2012. The portion of BWI product shipped to customers within
the Energy sector increased to approximately 50% from approximately 40%
for the first quarter of 2012.
Total revenue for the second quarter 2012 was $17.4 million, an increase
of 37% from $12.7 million in the same period in 2011. Revenue from BWI
product and services was $7.8 million, an increase of 25% from $6.3
million in the same period in 2011. Revenue from RedMAX product and
services was $9.6 million of which $1.3 million was new RedMAX revenue
and the balance was Amortized Deferred revenue¹. The second quarter of
2012 is the final amortization period for RedMAX deferred revenue. The
amortized amounts will remain in prior reported revenues for
comparative purposes however there will be no such ongoing amortization
as the revenue has now been fully amortized. Further detail can be
found in the Company's MD&A filed with SEDAR.
Overall Gross Margins on Revenue were 56.8% for the second quarter 2012,
up 4.9 points from the first quarter of 2012, and down 2.8 points from
the same period last year as a result of expected fluctuations in
revenue mix. Gross margins on core BWI product revenue remained very
strong at 67% for the second quarter 2012.
Operating expenses for the second quarter of 2012 were $6.4 million,
down 5% from $6.7 million reported in the second quarter of 2011.
Reductions in legal and accounting expenses related to the now-settled
class action lawsuit and the completion of the Company's conversion to
IFRS accounted for the majority of the savings.
Higher revenues and lower operating costs have resulted in increases in
adjusted EBITDA¹, for both the three and six months ended June 30,
2012. Adjusted EBITDA for second quarter 2012 was $3.9 million, a 168%
increase over adjusted EBITDA of $1.5 million for the same period in
2011.
Redline reported a non-cash gain of $4.0 million for the second quarter,
related to the June 30, 2012 fair market valuation of the debenture
and warrants associated with the private placement completed in June
2011. This compares to a non-cash charge of $0.6 million in the second
quarter 2011, also related to the fair market value calculation of the
debenture. Redline realized a Net Profit of $7.8 million for the second
quarter of 2012, compared to $0.06 million in the same period last
year.
"We continue to focus on cost management, positive earnings and cash
generation." said Melka. "Our costs continue to decrease, we reported
an EBITDA of 22% of revenue, and we generated cash from earnings which
has been used for working capital to accommodate our growing revenues.
We are currently exploring with our financial partners how to best
leverage this working capital."
At June 30, 2012, Redline held cash and short-term investments of
approximately $2.3 million compared to $4.7 million at December 31,
2011.
Conference Call and Webcast -10:00 a.m. EDT
A conference call and webcast to discuss the results will be held August
15, 2012, at 10:00 a.m. EDT. To participate in the conference call,
please dial 1-647-427-7450 or 1-888-231-8191 approximately 10 minutes
before the conference call, and provide passcode 14614310.
A recording of the call will be available through August 22, 2012.
Please dial 1-416-849-0833 or 1-855-859-2056 and enter passcode
14614310 to listen to the rebroadcast. 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 innovator of Virtual
Fiber™, a rugged broadband wireless solution used to cost-effectively
deploy and extend secure networks, enable machine-to-machine (M2M)
applications, connect digital oil fields and smart grids, facilitate
and enhance public safety networks, and bring Internet access wherever
and whenever it's needed - regardless of terrain or remote location.
For more than a decade Redline has delivered powerful, versatile and
reliable wireless systems to governments, militaries, oil and gas
companies and telecom service providers through its global network of
certified partners.
NOTES:
1
The term Adjusted EBITDA refers to Profit before deducting share-based
payment expense, finance expense, foreign exchange gain (loss), FMV
gain (loss) on debenture, depreciation and income taxes. Adjusted
EBITDA margin refers to the percentage that Adjusted EBITDA for any
period represents as a portion of total revenue for that period. We
believe that Adjusted EBITDA and Adjusted EBITDA margin are useful
supplemental information as they provide an indication of the results
generated by the Company's main business activities prior to taking
into consideration how those activities are financed and taxed and also
prior to taking into consideration share-based payment expense and the
other items listed above. Accordingly, we believe that these measures
may also be useful to investors in enhancing their understanding of the
Company's operating performance. See ?Results of Operations - Adjusted
EBITDA.
2
All amounts reported in this press release are in US dollars unless
otherwise stated. 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" 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 and six months ended
June 30, 2012 ("Q2 and First Half 2012 MD&A"), copies of which are
available on SEDAR at www.sedar.com. Further details on the three and six month results ended June 30, 2012
can be found in the condensed consolidated interim statement of
financial position, condensed consolidated interim statement of
comprehensive income, 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
and six months ended June 30, 2012 and the Q2 and First Half 2012
MD&A.
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)
June 30,2012
December 31,
2011
ASSETS
Current assets:
Cash
$2,279,577
$
4,651,284
Short-term investment
-
92,144
Restricted short-term investments
33,003
33,003
Trade receivables
11,288,757
9,913,208
Other receivables
165,234
340,499
Inventories
7,176,821
7,851,884
Deferred WiMAX cost of revenue
-
7,484,581
Deferred cost of revenue
1,766,120
333,287
Prepaid expenses and other deposits
838,521
2,214,309
23,548,033
32,914,199
Non-current assets:
Property, plant and equipment
940,513
1,026,480
Intangible assets
151,680
158,239
Other assets
97,240
97,365
1,189,433
1,282,084
Total Assets
$24,737,466
$
34,196,283
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Trade and other payables
$6,892,563
$
9,081,197
Income tax payable
292,927
292,927
Deferred WiMAX revenue
-
14,213,501
Deferred revenue
4,889,357
2,285,406
Current portion of borrowings
6,292,241
6,182,398
18,367,088
32,055,429
Non-current liabilities
Convertible debenture (principal and interest)
1,335,811
1,344,095
Fair market value adjustment on convertible debenture
5,306,982
2,918,446
Convertible debenture at fair market value
6,642,793
4,262,541
Total Liabilities
25,009,881
36,317,970
SHAREHOLDERS' DEFICIENCY
Share capital
134,485,251
134,336,023
Share purchase loan
(365,780)
(365,780)
Warrant
310,000
310,000
Contributed surplus
8,078,738
7,635,506
Deficit
(142,780,624)
(144,037,436)
(272,415)
(2,121,687)
Total liabilities and equity
$24,737,466
$
34,196,283
REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(Unaudited, expressed in U.S. dollars)
Three months ended June 30,Six months ended June 30,
2012
2011
2012
2011
Revenue
$17,381,474
$
12,710,559
$29,887,934
$
26,171,076
Cost of revenue
7,506,207
5,130,994
13,524,633
10,276,472
Gross profit
9,875,267
7,579,565
16,363,301
15,894,604
Expenses:
Research and development
1,609,159
1,109,947
3,151,013
2,592,642
Finance and administration
1,929,272
2,710,307
3,556,328
5,130,433
Sales and marketing
2,331,816
2,254,133
4,805,751
4,419,087
Operations and customer support
476,426
613,468
934,689
1,341,545
Gain on disposal of assets
-
-
-
(1,519)
6,346,673
6,687,855
12,447,781
13,482,188
Income before non-operating items
3,528,594
891,710
3,915,520
2,412,416
Other expenses
Finance expense
77,247
109,836
173,491
215,236
(Gain) loss on fair market value of Debenture
(3,962,940)
582,791
2,648,217
582,791
Foreign exchange (gain) loss
(399,123)
135,657
(163,000)
423,076
(4,284,816)
828,284
2,658,708
1,221,103
Profit before income taxes
7,813,410
63,426
1,256,812
1,191,313
Income tax expense
-
-
-
-
Net profit and total comprehensive income
$7,813,410
$
63,426
$1,256,812
$
1,191,313
Earnings per share (1)
Basic
$0.21
$
-
$0.03
$
0.05
Diluted
$0.08
$
-
$0.08
$
0.05
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, 2010
$
128,532,124
$
(365,780)
$
310,000
$
6,387,487
$
(148,099,590)
$
(13,235,759)
Net profit
-
-
-
-
1,191,313
1,191,313
Share-based payments
-
-
-
735,688
-
735,688
Exercise of options
67,354
-
-
(31,602)
-
35,752
Balance at
June 30, 2011
$
128,599,478
$
(365,780)
$
310,000
$
7,091,573
$
(146,908,277)
$
(11,273,006)
Balance at
December 31, 2011
$
134,336,023
$
(365,780)
$
310,000
$
7,635,506
$
(144,037,436)
$
(2,121,687)
Net profit
-
-
-
-
1,256,812
1,256,812
Shares issued on
conversion of debenture
115,726
-
-
-
-
115,726
Exercise of options
33,502
-
-
(14,546)
-
18,956
Share-based payments
-
-
-
457,778
-
457,778
Balance at
June 30, 2012
$
134,485,251
$
(365,780)
$
310,000
$
8,078,738
$
(142,780,624)
$
(272,415)
REDLINE COMMUNICATIONS GROUP INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, expressed in U.S. dollars)
Three months ended June 30,Six months ended June 30,
2012
2011
2012
2011
Cash flows from operating activities:
Net profit
$7,813,410
$
63,426
$1,256,812
$
1,191,313
Adjustments to reconcile profit before taxes to net cash from
operating activities
Finance expense
77,247
109,836
173,491
215,236
Depreciation and amortization of non-current assets
101,032
89,224
206,888
210,868
Recognition of share based payments
282,742
478,113
457,778
735,688
Foreign exchange loss (gain) on cash held in foreign currency
-
-
1,501
(1,167)
Foreign exchange (gain) loss on borrowings
(406,615)
120,016
(207,461)
278,878
Loss on fair market value of Debenture
(3,962,940)
582,791
2,648,217
582,791
3,904,876
1,443,406
4,537,226
3,213,607
Change in non-cash operating assets and liabilities
Decrease in deferred cost of revenue
3,797,561
1,725,207
6,051,748
4,085,428
Decrease in deferred revenue
(7,370,148)
(2,757,789)
(11,609,550)
(8,548,386)
Change in other non-cash operating assets and liabilities
(1,444,032)
(4,344,261)
(1,337,942)
(5,938,740)
Cash used in operating activities
(1,111,743)
(3,933,437)
(2,358,518)
(7,188,091)
Cash flows from investing activities:
Acquisition of property, plant and equipment
(19,361)
(7,509)
(64,286)
(65,408)
Acquisition of intangible assets
(18,963)
(140,095)
(50,076)
(228,226)
Redemption (purchase) of investments
-
(5,184,033)
92,144
(5,284,033)
Cash (used in) investing activities
(38,324)
(5,331,637)
(22,218)
(5,577,667)
Cash flows from financing activities:
Finance costs paid
(770)
(371)
(8,426)
(45,102)
Proceeds from exercise of options
18,956
35,752
18,956
35,752
Proceeds of borrowings
-
8,516,687
-
8,516,687
Repayment of borrowings
-
(19,577)
-
(78,400)
Cash from financing activities
18,186
8,532,491
10,530
8,428,937
Foreign exchange (loss) gain on cash held in foreign currency
-
-
(1,501)
1,167
Decrease in cash
(1,131,881)
(732,583)
(2,371,707)
(4,335,654)
Cash, beginning of the period
3,411,458
2,419,999
4,651,284
6,023,070
Cash, end of the period
$2,279,577
$
1,687,416
$2,279,577
$
1,687,416
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