Redline Communications : Reports Q4 2015 Results

TORONTO - March 7, 2016 - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL) a leading provider of mission-critical wireless networks, today announced operating results¹ for the three months (fourth quarter) and the fiscal year ended December 31, 2015.

Financial highlights for the fiscal year ended December 31, 2015 include:

• Cash of $14.5 million as of December 31, 2015, down $1.8 million over 2014
• Order Bookings² were $31.8 million, down 22% over 2014
• Revenues were $30.1 million, down 17% over 2014
• $17.8 million Order Backlog² at December 31, 2015, up 2% over 2014
• 56% overall gross margin, unchanged from 2014
• Operating expenses were $18.5 million, up 1% over 2014
• Adjusted EBITDA loss² of $0.5 million, a decrease of $3.5 million over 2014
• EPS of ($0.10) compared to EPS of $0.15 in 2014

Financial Review
Order Bookings for the fourth quarter and year ended December 31, 2015 were $7.3 million and $31.8 million respectively, down 39% and 22% over the same periods in 2014. Total recognized revenue for the fourth quarter and year ended December 31, 2015 was $5.1 million and $30.1 million, down 56% and 17% over the same periods in 2014. The decreases in Order Bookings and total recognized revenue can be largely attributed to reduced spending from energy sector clients as a result of lower oil prices.

'Redline is continuing to develop business from non-energy sector clients. With the recent hiring of an experienced vice president of sales and marketing, the repositioning of our products to be more attractive to the telecom service provider market and the upcoming introduction of a new LTE-based product line, we are confident that our revenues should grow,' stated Rob Williams, Redline CEO. 'We are already seeing a shift in market mix with approximately 62% of 2015 order bookings coming from the non-energy sector compared with 50% in 2014.'

Overall gross margin for the fourth quarter and year ended December 31, 2015 was 54% and 56% respectively, up one percentage point and unchanged over the same periods in 2014.

Overall operating expenses for the fourth quarter and year ended December 31, 2015, were $4.2 million and $18.5 million, an improvement of 15% and an increase of 1% respectively over the same periods in 2014.

Adjusted EBITDA loss for the fourth quarter and year ended December 31, 2015 was $1.1 million and $0.5 million respectively, a decrease of $2.5 million and $3.5 million over the corresponding periods in 2014, directly tied to lower revenues.

Net Loss for the fourth quarter of 2015 was $1.4 million, or ($0.08) per share as compared to a Net Profit of $1.4 million, or $0.08 per share in the fourth quarter of 2014. For the full year 2015, Redline reported a Net Loss of $1.8 million, or ($0.10) per share, as compared to a Net Profit of $2.5 million, $0.15 per share in 2014.

At December 31st, 2015, Redline held cash of $14.5 million, down $1.8 million from the cash of approximately $16.4 million at December 31, 2014.

Changes in Directors
Redline announced today that Mr. Philippe deGaspé Beaubien III, a founder and current chairman of the Company, will not be seeking re-election at the upcoming annual general and special meeting of the Company, which is expected to be held in June 2016 (the '2016 AGM').

In light of Mr. deGaspé Beaubien's departure, Redline announced that Mr. David J. Roberts was appointed today to its board of directors. In addition, the Company reached an agreement with a group of shareholders holding approximately 46% of Redline's outstanding common shares, pursuant to which Mr. Roberts will also be nominated at the 2016 AGM, together with the current directors, other than Mr. deGaspé Beaubien.

Mr. Roberts is currently Chief Investment Officer of Pender Financial Group Corporation and has over 30 years of senior operational and investment experience in the venture capital, information technology, communications and life sciences sectors. He has held various directorships in public and private companies since 1983. He is currently Chairman of ActiveState Software Inc. and a director of RDM Corporation (TSX: RC). Previously, Mr. Roberts also served as Chairman, President and CEO of BasicGov Systems, Inc., President & CEO and director of Santa Rosa Resources Corp., a director of Pender Growth Fund (VCC) Inc., Chairman of Icron Technologies Corporation, and President & CEO of PenderFund Capital Management Ltd. Mr. Roberts is a graduate of University College London (B.Sc.).

'The demands of my other business interests require me to step aside at this point in time. As one of the founders and largest shareholder, I am confident in the remaining board members' ability to direct the company and capitalize on the significant opportunities that lie ahead for Redline', said Mr. Philippe deGaspé Beaubien III.

The nominees for directors at the 2016 AGM will consist of Messrs. Eric Demirian, Nizar Jaffer Somji, Robert Williams, John Wilson and David J. Roberts.

Adoption of Rights Plan
The Company also announced that its board of directors has approved the adoption of a shareholder rights plan (the 'Rights Plan'), effective March 7, 2016. The Rights Plan is subject to TSX acceptance. Although effective as of today, the Rights Plan is subject to ratification by Redline's shareholders within six months. Such approval will be sought at the 2016 AGM. If the shareholders do not ratify the Rights Plan at the 2016 AGM, the Rights Plan and all of the rights outstanding at the time will terminate.

The primary objectives of the Rights Plan are to ensure that, in the context of a bid for control of the Company through an acquisition of shares of the Company, all shareholders have an equal opportunity to participate in the bid and are given adequate time to assess the bid. The Rights Plan is not intended to prevent take-over bids that treat shareholders fairly and offer fair value, and permits bids that meet certain requirements intended to protect the interests of all shareholders.

Redline is not aware of any specific take-over bid for the Company that has been made or is contemplated. The Rights Plan is similar to plans adopted by other Canadian companies, with such amendments to take into consideration National Instrument 62-104 Take-Over Bids and Issuer Bids, which is expected to come into force in Ontario in May of 2016.

Under the terms of the Rights Plan, one right (a 'Right') will be issued by the Company in respect of each outstanding share. The Rights issued under the Rights Plan become exercisable only if a person acquires 20% or more of the shares of the Company without complying with the 'permitted bid' provisions of the Rights Plan or without the approval of the Company's board. In this event, Rights holders (other than the offeror, its affiliates, associates and joint actors) can purchase shares of the Company at a substantial discount to the prevailing market price at the time that the Rights become exercisable.

'Permitted bids' under the Rights Plan must be made to all holders of the Company's shares and must be open for acceptance for a minimum of 105 days (which period may be reduced in certain circumstances). If at the end of 105 days at least 50% of the outstanding shares (other than those owned by the offeror, its affiliates, associates and joint actors) have been tendered and not withdrawn, the offeror may take up and pay for the shares but must extend the bid for a further 10 days to allow other shareholders to tender to the bid.
The description of the Rights Plan in this news release is qualified in its entirety by the full text of the Rights Plan, a copy of which is available under Redline's profile on SEDAR at www.sedar.com.

Conference Call and Webcast - March 8th, 2016 at 10:00 a.m. ET
A conference call and webcast to discuss the results has been scheduled for Tuesday March 8, 2016 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 50821851. A recording of the call will be available through April 30, 2016 on Redline's website.

About Redline Communications

Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for the most challenging applications and locations. Used by oil and gas companies to manage their assets, militaries for secure battlefield communications, municipalities to remotely monitor highways, utilities and other infrastructures, and telecom service providers to deliver premium services, Redline's powerful and versatile networks reliably and securely deliver voice, data, M2M and video communications for mission-critical applications. For more information visit www.rdlcom.com.

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Redline Contact

George Kypreos
Chief Financial Officer
+1.905.479.8344
[e-mail]

Cory Pala
Investor Relations
+1.416.657.2400
[e-mail]

Twitter: @rdlcom

NOTES:

1. 1. All amounts reported in this press release are in US dollars unless otherwise stated.
2. 2. To better assess the health and growth of Redline's business, the Company reports on several key metrics and non-IFRS measures, including 'Orders or Bookings', 'Backlog', 'EBITDA' and 'Adjusted EBITDA'. Further information including definitions of these categories and a reconciliation to their closest IFRS measures, when applicable, can be found in the Company's Management Discussion and Analysis for the three and nine months ended September 30, 2015 ('Q3 2015 MD&A'), copies of which are available on SEDAR at www.sedar.com. Further details on the three month results ended September 30, 2015 can be found in the condensed consolidated interim statement of financial position, condensed consolidated interim statement of comprehensive loss, 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 months ended September 30, 2015 and the Q3 2015 MD&A.