Q2 2021 Revenue grows by 27% sequentially
with gross margin of 61%
TORONTO, Aug. 12, 2021 /CNW/ - Redline Communications
(www.rdlcom.com) Group Inc. (TSX: RDL), the creator of powerful
wireless data infrastructure for mission-critical applications in
challenging locations, today announced operating results (in US
dollars unless otherwise noted) for the second quarter ended
June 30, 2021.
Revenue for the second quarter ended June
30, 2021 ("Q2 2021") was $4.7
million, up 15% from Q2 2020 and up 27% from Q1 2021. Order
Bookings1 for Q2 2021 were $5.3
million, up 15% compared to same quarter in the previous
period and up 60% quarter over quarter. Order Backlog1
for the quarter ended June 30, 2021
was $11.8 million, up 4% from Q1
2021.
"In Q2 20201, Redline saw an increase in orders from customers
across all core vertical markets" stated Ronan McGrath, Redline's acting CEO and member
of the Board of Directors. "Pent up demand from ongoing sales
efforts during COVID-19 restrictions is now being turned into
orders and shipments as the impact of the global pandemic
diminishes" he added. "The Middle
East and South America,
both key markets for Redline, were especially active in the quarter
with orders coming from a broad range of customers. I am
pleased with the continued success of our strategy of driving
revenue through our distribution channels since 2019, when it was
14% of revenues, increasing to 25% in 2020 and now at 30% year to
date. Driving sales through our distribution channels is also
key in reducing the amount of inventory on hand."
Key financial highlights for the three months ended
June 30, 2021 ("Q2 2021")
include:
|
Q2
2021
|
Q2
2020
|
Increase
(decrease)
|
%
Change
|
|
Revenue
|
$4.7 M
|
$4.1 M
|
$0.6 M
|
15%
|
|
Gross profit margin
%
|
61%
|
58%
|
3%
|
|
|
Operating
expenses
|
$3.9 M
|
$3.8 M
|
$0.1 M
|
2%
|
|
Net loss
|
$0.7 M
|
$0.9 M
|
$0.2 M
|
18%
|
|
Adjusted EBITDA
loss1
|
$0.7 M
|
$1.1 M
|
$0.4 M
|
40%
|
|
CEWS
benefit
|
$0.4 M
|
$0.7 M
|
($0.3 M)
|
(47%)
|
|
Bookings1
|
$5.3 M
|
$4.6 M
|
$0.7 M
|
15%
|
|
|
|
|
|
|
June 30,
2021
|
March 31,
2021
|
Increase
(decrease)
|
%
Change
|
|
Cash
|
$2.7 M
|
$4.3 M
|
($1.6 M)
|
(37%)
|
|
Inventory
|
$5.1 M
|
$6.0 M
|
($0.9 M)
|
(15%)
|
|
Order
Backlog1
|
$11.8 M
|
$11.3 M
|
$0.5 M
|
4%
|
Key financial highlights for the six months ended
June 30, 2021 include:
|
2021-06
YTD
|
2020-06
YTD
|
Increase
(decrease)
|
%
Change
|
|
Revenue
|
$8.5 M
|
$8.6 M
|
($0.1 M)
|
(1%)
|
|
Gross profit margin
%
|
64%
|
60%
|
4%
|
|
|
Operating
expenses
|
$7.8 M
|
$7.9 M
|
($0.1 M)
|
(2%)
|
|
Net loss
|
$1.9 M
|
$1.9 M
|
Unchanged
|
|
|
Adjusted EBITDA
loss1
|
$1.7 M
|
$2.1 M
|
$0.4 M
|
16%
|
|
CEWS
benefit
|
$0.67 M
|
$0.71 M
|
($0.04 M)
|
(5%)
|
|
Bookings1
|
$8.6M
|
$10.5 M
|
($1.9 M)
|
(18%)
|
|
|
|
|
|
|
June 30,
2021
|
December 31,
2020
|
Increase
(decrease)
|
%
Change
|
|
Cash
|
$2.7 M
|
$5.3 M
|
($2.6 M)
|
(49%)
|
|
Inventory
|
$5.1 M
|
$5.5 M
|
($0.4 M)
|
(8%)
|
|
Order
Backlog1
|
$11.8 M
|
$11.8 M
|
Unchanged
|
|
|
1 See Definitions of
non-GAAP measures below
|
Financial and Business Review
Due to consistent sequential build of higher margin from
recurring revenue streams over the previous ten quarters, the
company achieved gross margins of 61% in the quarter, an increase
of 3 percentage points compared to Q2 2021.
Operating expenses for Q2 2021 were $3.9
million, down 2% over Q2 2020. The decline year-over-year
was mainly driven by lower severance costs incurred in the current
year, compared to the same period in the prior year, combined with
government grants in support of R&D activities. These
decreases are partially offset by increases in the Research and
Development and Operations functions as the company moves forward
with new product development and new product launches.
In the quarter, the Company continued to participate in the
Canada Emergency Wage Subsidy
("CEWS") program recognizing a benefit of $0.4 million which is recorded within other
income.
Net loss for Q2 2021 was $0.7
million, an improvement of $0.2
million over Q2 2020. Adjusted EBITDA loss for Q2 2021
was $0.7 million, as compared to a
loss of $1.1 million in Q2, 2020.
Cash Balance, at the end of Q2 2021 was $2.7 million, a decrease of $2.6 million compared to Q4 2020. The decline is
cash balances is the result of operating losses and increases in
working capital. As at August 5,
2021 the cash balance is in excess of $3.0 million
On March 31, 2021 Redline
announced that the Canadian Government had approved an investment
into Redline via their Strategic Innovation Fund (SIF). This
investment brings up to CDN $14
million into the Company, earmarked for the development of
an innovative industrial 5G network solution. Under the terms
of the agreement, the fund will reimburse 41.52% of eligible
R&D costs (labor, equipment and materials) incurred by Redline.
The first investment submission of approximately USD$460K for the period between August 2020 and March 31,
2021 received by Redline in Q2 2021 and going forward,
payments to Redline from the fund will be made quarterly.
Conference Call and Webcast – August
12, 2021 at 10:00 a.m.
ET
A conference call and webcast to discuss the results has been
scheduled for Thursday, August 12,
2021 at 10:00 a.m. Eastern
Time. To participate, please dial 1-416-764-8659
approximately 10 minutes before the conference call and provide
passcode 90193733. A recording of the call will be available
through August 19, 2021 on Redline's
website or by dialing 1-416-764-8677 and entering the passcode
193733.
About Redline Communications
Redline Communications (TSX:RDL) designs and manufactures
powerful wide-area wireless networks for mission-critical
applications in challenging locations. Redline networks are used by
oil & gas companies onshore and offshore, mining companies on
surface and underground operations, by municipalities to remotely
monitor infrastructure, and by specialized 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 IoT, 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
certain non-IFRS metrics, including "Bookings", "Order
Backlog","Adjusted EBITDA" and "Adjusted EBITDA Margin". Further
information including definitions of these measures and a
reconciliation to their closest IFRS measure, if applicable, can be
found in the Company's Management Discussion and Analysis for the
three and six months ended June 30, 2021 ("Q2 2021
MD&A"), copies of which are available on SEDAR at
www.sedar.com. Further details on the three and six months ended
June 30, 2021 can be found in the condensed consolidated
statement of financial position, statement of comprehensive
loss, statement of changes in equity and 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
financial statements of the Company for the three and six
months ended June 30, 2021 and the Q2 2021
MD&A.
|
|
Adjusted EBITDA
(Loss)
|
|
|
|
(Unaudited, Expressed
in thousands of U.S. dollars)
|
|
|
The table below
reconciles Adjusted EBITDA (loss) to net profit (loss):
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
(unaudited)
|
|
(in
thousands)
|
2021
|
2020
|
|
Revenue
|
$
|
4,754
|
$
|
4,123
|
|
Net profit
(loss)
|
(704)
|
(857)
|
|
Add back:
|
|
|
|
Share based
payments
|
49
|
40
|
|
Depreciation and
amortization
|
255
|
268
|
|
Canada Emergency Wage
Subsidy
|
(376)
|
(706)
|
|
Finance (income)
expense
|
8
|
8
|
|
(Gain) loss on fair
market value
of financial instruments
|
46
|
45
|
|
Foreign exchange
(gain) loss
|
16
|
64
|
|
Income tax
expense
|
38
|
26
|
|
Total
|
36
|
(255)
|
|
|
|
|
|
Adjusted EBITDA
(loss)
|
$
|
(668)
|
$
|
(1,112)
|
|
|
|
|
|
Adjusted EBITDA
margin
|
-14%
|
-27%
|
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.
|
|
|
|
|
|
|
|
Condensed
Consolidated Interim Statements of Financial Position
|
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
June 30,
2021
|
|
December 31,
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
2,705,065
|
$
|
5,334,486
|
|
Trade
receivables
|
|
3
|
|
5,208,533
|
|
4,237,183
|
|
Other
receivables
|
|
|
|
270,559
|
|
180,881
|
|
Inventories
|
|
4
|
|
5,071,875
|
|
5,492,931
|
|
Deferred cost of
revenue
|
|
11
|
|
25
|
|
498
|
|
Prepaid expenses and
other deposits
|
|
|
|
480,033
|
|
431,559
|
|
|
|
|
|
13,736,090
|
|
15,677,538
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
5
|
|
779,155
|
|
901,234
|
|
Intangible
assets
|
|
6
|
|
973,109
|
|
1,148,050
|
|
Right of use
assets
|
|
7
|
|
465,124
|
|
565,213
|
|
Other
assets
|
|
|
|
87,108
|
|
65,223
|
|
|
|
|
|
2,304,496
|
|
2,679,720
|
|
Total
Assets
|
|
|
$
|
16,040,586
|
$
|
18,357,258
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Trade and other
payables
|
|
10
|
$
|
3,472,858
|
$
|
3,944,374
|
|
Income tax
payable
|
|
|
|
29,459
|
|
29,459
|
|
Deferred
revenue
|
|
11
|
|
1,697,196
|
|
2,057,944
|
|
Lease
liabilities
|
|
12
|
|
258,819
|
|
250,068
|
|
Borrowings
|
|
13
|
|
-
|
|
-
|
|
|
|
|
|
5,458,332
|
|
6,281,845
|
|
Non-current
liabilities:
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
11
|
|
354,901
|
|
364,391
|
|
Lease
liabilities
|
|
12
|
|
413,339
|
|
554,396
|
|
Other financial
liabilties - SIF Loan
|
|
13
|
|
172,161
|
|
-
|
|
Deferred Grant Income
- SIF Loan
|
|
13
|
|
281,389
|
|
-
|
|
|
|
|
|
1,221,790
|
|
918,787
|
|
Total
Liabilities
|
|
|
|
6,680,122
|
|
7,200,632
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Share
capital
|
|
8
|
|
172,929,341
|
|
172,929,341
|
|
Contributed
surplus
|
|
|
|
9,790,889
|
|
9,704,769
|
|
Deficit
|
|
|
|
(173,359,766)
|
|
(171,477,484)
|
|
|
|
|
|
9,360,464
|
|
11,156,626
|
|
Total Liabilities
and Equity
|
|
|
$
|
16,040,586
|
$
|
18,357,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to the interim condensed consolidated financial
statements
|
|
|
REDLINE
COMMUNICATIONS GROUP INC.
|
|
|
|
Condensed
Consolidated Interim Statements of Comprehensive Loss
|
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
|
2021
|
|
2020
|
|
Revenue
|
|
15
|
$
|
4,754,178
|
$
|
4,123,330
|
|
Cost of
revenue
|
|
|
|
1,864,883
|
|
1,752,201
|
|
Gross
profit
|
|
|
|
2,889,295
|
|
2,371,129
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Research and
development
|
|
|
|
1,216,628
|
|
1,045,544
|
|
General and
administrative
|
|
|
|
1,167,926
|
|
1,140,250
|
|
Sales and
marketing
|
|
|
|
1,175,946
|
|
1,397,867
|
|
Operations and
customer support
|
|
|
|
300,511
|
|
207,702
|
|
|
|
|
|
3,861,011
|
|
3,791,363
|
|
Loss before
undernoted items
|
|
|
|
(971,716)
|
|
(1,420,234)
|
|
|
|
|
|
|
|
|
|
Other (income)
expenses:
|
|
|
|
|
|
|
|
Canada Emergency Wage
Subsidy
|
|
|
|
(375,584)
|
|
(705,954)
|
|
Finance (income)
expense
|
|
16
|
|
7,831
|
|
7,730
|
|
Loss (Gain) on
fair market value of financial instruments
|
|
|
45,963
|
|
44,868
|
|
Foreign exchange loss
(gain)
|
|
|
|
16,360
|
|
63,938
|
|
|
|
|
|
(305,430)
|
|
(589,418)
|
|
Loss before income
taxes
|
|
|
|
(666,286)
|
|
(830,816)
|
|
Income tax
expense
|
|
|
|
37,993
|
|
26,246
|
|
Net loss and total
comprehensive loss
|
|
|
$
|
(704,279)
|
$
|
(857,062)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
9
|
$
|
(0.04)
|
$
|
(0.05)
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to the interim condensed consolidated financial
statements
|
|
REDLINE
COMMUNICATIONS GROUP INC.
|
|
Condensed
Consolidated Interim Statements of Changes in Equity
|
|
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
Contributed
surplus
|
Deficit
|
Total
|
|
Balance at
January 1, 2020
|
$
|
172,929,341
|
$
|
9,525,694
|
$
|
(167,577,777)
|
|
14,877,258
|
|
Net loss
|
|
-
|
|
-
|
|
(1,901,186)
|
|
(1,901,186)
|
|
Stock option
expense
|
|
-
|
|
87,008
|
|
-
|
|
87,008
|
|
Balance at
June 30, 2020
|
$
|
172,929,341
|
$
|
9,612,702
|
$
|
(169,478,963)
|
$
|
13,063,080
|
|
Balance at
January 1, 2021
|
$
|
172,929,341
|
$
|
9,704,769
|
$
|
(171,477,484)
|
$
|
11,156,626
|
|
Net loss
|
|
-
|
|
-
|
|
(1,882,282)
|
|
(1,882,282)
|
|
Stock option
expense
|
|
-
|
|
86,120
|
|
-
|
|
86,120
|
|
Balance at
June 30, 2021
|
$
|
172,929,341
|
$
|
9,790,889
|
$
|
(173,359,766)
|
$
|
9,360,464
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to the interim condensed consolidated financial
statements
|
|
REDLINE
COMMUNICATIONS GROUP INC.
|
|
Condensed
Consolidated Interim Statements of Cash Flows
|
|
(Unaudited, Expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Note
|
|
2021
|
|
2020
|
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(704,279)
|
$
|
(857,062)
|
|
Adjustments to
reconcile net loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
Finance
expense
|
|
|
7,831
|
|
7,730
|
|
|
Depreciation and
Amortization
|
|
|
255,620
|
|
268,072
|
|
|
Stock option
expense
|
|
|
49,230
|
|
40,070
|
|
|
Foreign exchange
(gain) loss on cash held in foreign currency
|
|
|
(6,516)
|
|
(10,627)
|
|
|
Foreign exchange loss
(gain) on borrowings and lease liabilities
|
|
|
11,217
|
|
34,670
|
|
|
Loss on disposal of
assets
|
|
|
-
|
|
5,668
|
|
|
IFRS 15 transition
adjustment
|
|
|
-
|
|
|
|
|
Deferred income
tax
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(386,897)
|
|
(511,479)
|
|
Change in non-cash
operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease in deferred
cost of revenue
|
|
|
131
|
|
1,622
|
|
|
(Increase) in
deferred revenue
|
|
|
(24,492)
|
|
(386,801)
|
|
|
Change in other
non-cash operating assets and liabilities
|
17
|
|
(1,519,374)
|
|
(676,152)
|
|
Cash (used in)
operating activities
|
|
|
(1,930,632)
|
|
(1,572,810)
|
|
Cash flows from (used
in) investing activities:
|
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
5
|
|
(34,974)
|
|
(57,061)
|
|
Proceeds on sale of
property, plant and equipment
|
|
|
4,600
|
|
|
|
Acquisition of
intangible assets
|
6
|
|
(8,455)
|
|
(48,423)
|
|
Cash (used in)
investing activities
|
|
|
(38,829)
|
|
(105,484)
|
|
Cash flows from (used
in) financing activities:
|
|
|
|
|
|
|
Interest
income
|
|
|
1,426
|
|
3,244
|
|
Interest
expense
|
|
|
(8,584)
|
|
(10,974)
|
|
Government Loan (SIF)
including Deferred Grant Income
|
13
|
|
452,876
|
|
-
|
|
Proceeds from
exercise of options
|
|
|
-
|
|
-
|
|
Repayment of
borrowings
|
|
|
-
|
|
-
|
|
Repayment of lease
liabilities
|
|
|
(77,017)
|
|
(80,813)
|
|
Cash generated from
(used in) financing activities
|
|
|
368,702
|
|
(88,543)
|
|
Foreign exchange gain
(loss) on cash held in foreign currency
|
|
|
6,516
|
|
10,627
|
|
Decrease in
cash
|
|
|
(1,594,243)
|
|
(1,756,210)
|
|
Cash, beginning of
the period
|
|
|
4,299,308
|
|
6,838,831
|
|
Cash, end of the
period
|
|
$
|
2,705,065
|
$
|
5,082,621
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to the interim condensed consolidated financial
statements
|
SOURCE Redline Communications Group Inc.