Redline Communications Reports 2020 Second Quarter Results

TORONTO – August 10, 2020 – 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 second quarter ended June 30, 2020.

Key financial highlights for the three and six months ended June 30, 2020 (“Q2 2020”) include:


Note: CEWS benefit is NOT included in the Adjusted EBITDA results

Financial and Business Review

Revenue for the second quarter ended June 30, 2020 was $4.1 million, down 28% over Q2 2019, mainly the result of approximately $1.8 million of product shipments to a single customer that continues to be delayed due to the impact of COVID-19.

Order Bookings for Q2 2020 were $4.6 million, down 25% over Q2 2019. The decrease was primarily due a decrease in orders from telecom service providers. Orders from other markets remain largely flat.

“Redline’s backlog of orders continues to grow during the COVID-19 pandemic. We’re focused on mission critical applications in demanding industrial markets such as IoT. This strategy generates higher gross margins as we expand existing networks built with our Virtual Fiber technology,” stated Stephen Sorocky, Redline CEO. “The pandemic has impacted our shipments and revenues but we’re aggressively controlling expenses and continue the development of LTE/5G products.”

Gross margin for Q2 2020 was 58%, down a single percentage point over Q2 2019. The decrease was a result of a number of factors, primarily the result of the change in revenue mix year over year, with the 2020 Q2 having a greater percentage of sales from the lower margin, non-core verticals. This was partially offset by continued quarter-over-quarter growth in revenue from maintenance and support contracts, which, in addition to being recurring revenue, also have higher margins.

Overall operating expenses for Q2 2020 were $3.8 million, down 13% over Q2 2019, primarily a result of decreased sales and marketing costs, as COVID-19 prompted the suspension of all business travel and the cancelation of in-person marketing events.

In the quarter, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) in response to the COVID-19 pandemic. The Company has recognized $0.7 million of CEWS benefit as part of other income, covering periods up to end of June.

Net loss for Q2 2020 was $0.9 million, or ($0.05) per share, essentially unchanged from the net loss of $0.9 million, or ($0.05) per share, for Q2 2019.

Adjusted EBITDA loss for Q2 2020 was $1.1 million (excluding the CEWS benefit of $0.7 million), as compared to Adjusted EBITDA loss of $0.6 million for Q2 2019.

Conference Call and Webcast – August 11, 2020 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Tuesday August 11, 2020 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 7769062. A recording of the call will be available through August 18, 2020 on Redline’s website or by dialing 1-416-849-0833 and entering the same passcode.

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.

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Redline Contacts:

Stephen Sorocky
Chief Executive Officer
+1-905-479-8344
ssorocky@rdlcom.com

Philip Jones
Chief Financial Officer
+1 (905) 479-8344
pjones@rdlcom.com

 

NOTES:

1  To better assess the health and growth of the Redline’s business, the Company reports on non-IFRS metrics, including “Bookings”, “Order Backlog” 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 six months ended June 30, 2020 (“Q2 2020 MD&A”), copies of which are available on SEDAR at www.sedar.com. Further details on the three and six months ended June 30, 2020 can be found in the condensed consolidated interim statement of financial position, statement of comprehensive income (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 interim financial statements of the Company for the three and six months ended June 30, 2020 and the Q2 2020 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 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.