Strong Bookings and Growing Backlog Highlight a Solid Quarter
TORONTO – MobilityWire® – August 15, 2012
Redline Communications Group Inc. (TSX: RDL), 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.
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.
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Chief Financial Officer
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.