Redline Communications Group Inc reports 24.5% revenue decline in FY2016 and 13.5 pp EBITDA Margin decline from -2.7% to -16.2%
06.03.2017 • About Redline Communications Group Inc (
$RDL) • By InTwits
Redline Communications Group Inc reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Redline Communications Group Inc is a company in decline: FY2016 revenue growth was -24.5%, 5 years revenue CAGR was -17.1%
- The company operates at negative EBITDA Margin: -16.2%
- Redline Communications Group Inc spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2012-FY2016 is 0.0%. Average EBITDA Margin for the same period was -3.2%0
- Redline Communications Group Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's a lot of higher than industry average of 24.1%.
- CAPEX is quite volatile: 0.20 in FY2016, 0.20 in FY2015, 0.40 in FY2014, 1.2 in FY2013, 0.16 in FY2012
- The company has unprofitable business model: ROIC is at -18.4%
- It operates with high leverage: Net Debt/EBITDA is 18.3x while industry average is 0.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Redline Communications Group Inc ($RDL) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 49.041 | 31.703 | 36.439 | 30.130 | 22.752 | -24.5% |
| Gross Profit | 27.668 | 19.375 | 20.454 | 16.861 | 12.589 | -25.3% |
| SG&A | | 18.505 | 14.160 | 13.980 | 13.284 | -5.0% |
| EBITDA | 2.793 | -6.280 | 2.608 | -0.827 | -3.685 | |
| Net Income | -9.502 | -4.117 | 2.480 | -1.751 | -4.785 | |
Balance Sheet
|
|---|
| Cash | 8.287 | 13.473 | 16.364 | 14.549 | 11.147 | -23.4% |
| Short Term Debt | 7.413 | 4.981 | 4.311 | 3.070 | 1.478 | -51.8% |
| Long Term Debt | 9.458 | 1.208 | 0.357 | 0.084 | 1.340 | 1,490.5% |
Cash flow
|
|---|
| Capex | 0.157 | 1.227 | 0.404 | 0.197 | 0.197 | -0.3% |
Ratios
|
|---|
| Revenue growth | -15.5% | -35.4% | 14.9% | -17.3% | -24.5% | |
| EBITDA growth | -55.9% | -324.9% | -141.5% | -131.7% | 345.9% | |
| Gross Margin | 56.4% | 61.1% | 56.1% | 56.0% | 55.3% | -0.6% |
| EBITDA Margin | 5.7% | -19.8% | 7.2% | -2.7% | -16.2% | -13.5% |
| Net Income Margin | -19.4% | -13.0% | 6.8% | -5.8% | -21.0% | -15.2% |
| SG&A, % of revenue | | 58.4% | 38.9% | 46.4% | 58.4% | 12.0% |
| CAPEX, % of revenue | 0.3% | 3.9% | 1.1% | 0.7% | 0.9% | 0.2% |
| ROIC | 14.3% | -26.1% | 7.1% | -5.7% | -18.4% | -12.7% |
| ROE | | -30.5% | 10.8% | -6.9% | -21.4% | -14.5% |
| Net Debt/EBITDA | 3.1x | | -4.5x | | | 0.0x |
Redline Communications Group Inc ($RDL) key quoterly financial indicators
| mln. $ | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 6 | 5 | 5 | 6 | -35.4% | -44.4% | -18.2% | 23.1% |
| EBITDA | -1 | -2 | -1 | 0 | -157.6% | -563.5% | | |
| Net Income | -1 | -3 | -1 | -0 | -187.3% | -974.4% | | |
Balance Sheet
|
|---|
| Cash | 13 | 11 | 11 | 11 | -15.4% | -31.5% | -18.0% | -23.4% |
| Short Term Debt | 1 | 1 | 1 | 1 | -81.2% | -82.4% | -80.3% | -51.8% |
| Long Term Debt | 2 | 2 | 2 | 1 | 545.4% | 1,730.3% | 2,076.2% | 1,490.5% |
Ratios
|
|---|
| Gross Margin | 59.0% | 49.3% | 55.7% | 56.2% | -2.0% | -8.7% | 8.7% | 2.0% |
| EBITDA Margin | -11.5% | -45.1% | -18.0% | 3.6% | -24.5% | -50.5% | 3.3% | 26.9% |
| Net Income Margin | -14.9% | -50.9% | -22.7% | -2.0% | -26.0% | -54.1% | 3.6% | 25.8% |
Revenue and profitability
The company's Revenue dropped on 24.5%. Annual revenue decline showed slowdown in FY16Q4 - revenue jumped on 23.1%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.83 pp from 1.0% to 1.9% in FY2016.
Gross Margin decreased slightly on 0.63 pp from 56.0% to 55.3% in FY2016. SG&A as a % of Revenue jumped on 12.0 pp from 46.4% to 58.4% in FY2016.
Net Income marign dropped on 15.2 pp from -5.8% to -21.0% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 the company had CAPEX/Revenue of 0.87%. The company showed decline in CAPEX/Revenue of 3.0 pp from 3.9% in FY2013 to 0.87% in FY2016. Average CAPEX/Revenue for the last three years was 0.88%.
Return on investment
The company operates at negative ROIC (-18.44%) and ROE (-21.40%). ROIC dropped on 12.7 pp from -5.7% to -18.4% in FY2016. ROE dropped on 14.5 pp from -6.9% to -21.4% in FY2016.
Leverage (Debt)
Debt level is 18.3x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in FY2016. Debt dropped on 10.6% while cash dropped on 23.4%.
Appendix 1: Peers in Communications
Below you can find Redline Communications Group Inc benchmarking vs. other companies in Communications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| AcuityAds Holding Inc ($AT) | | | | 51.6% | 91.4% |
| Shopify Inc ($SH) | | 111.9% | 109.0% | 95.4% | 89.7% |
| Gaming Nation Inc ($FAN) | | | | | 46.6% |
| Tucows Inc ($TC) | | 13.3% | 13.6% | 17.1% | 9.8% |
| Points International Ltd ($PTS) | | 45.1% | 26.0% | 16.2% | 8.6% |
| |
|---|
| Median (25 companies) | 13.1% | 4.4% | 1.1% | 4.3% | 2.4% |
|---|
| Redline Communications Group Inc ($RDL) | | -35.4% | 14.9% | -17.3% | -24.5% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Wanted Technologies Corp ($WAN) | 90.5% | 93.2% | 94.3% | 95.6% | |
| NeuLion Inc ($NLN) | 53.6% | 63.8% | 70.2% | 81.1% | 81.6% |
| TeraGo Inc ($TGO) | 62.9% | 61.8% | 59.8% | 77.2% | 77.2% |
| ICTV Brands Inc ($ITV) | 67.4% | 71.9% | 69.6% | 68.1% | |
| Platinum Communications Corp ($PCS) | 67.4% | 67.1% | 60.2% | 60.5% | |
| |
|---|
| Median (22 companies) | 43.5% | 41.2% | 43.6% | 43.5% | 40.1% |
|---|
| Redline Communications Group Inc ($RDL) | 56.4% | 61.1% | 56.1% | 56.0% | 55.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| BCE Inc ($BCE) | 38.8% | 37.7% | 38.4% | 37.7% | 39.8% |
| Rogers Communications Inc ($RCI.A) | 37.3% | 38.4% | 37.9% | 36.9% | 32.5% |
| Quebecor Inc ($QBR.B) | 27.5% | 36.3% | 35.5% | 34.2% | 35.5% |
| TELUS Corp ($T) | 35.3% | 35.2% | 35.1% | 34.1% | 33.0% |
| ZoomerMedia Ltd ($ZUM) | 32.6% | 33.8% | 29.3% | 29.1% | 27.1% |
| |
|---|
| Median (29 companies) | 19.1% | 13.7% | 11.0% | 10.4% | 8.2% |
|---|
| Redline Communications Group Inc ($RDL) | 5.7% | -19.8% | 7.2% | -2.7% | -16.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| TELUS Corp ($T) | 17.9% | 17.8% | 19.8% | 20.2% | 21.5% |
| Rogers Communications Inc ($RCI.A) | 17.2% | 17.6% | 18.4% | 18.2% | 17.2% |
| Quebecor Inc ($QBR.B) | 16.7% | 15.4% | 17.9% | 17.5% | 17.6% |
| BCE Inc ($BCE) | 17.6% | 17.5% | 17.7% | 16.9% | 17.4% |
| TeraGo Inc ($TGO) | 20.9% | 21.5% | 23.1% | 14.8% | 13.0% |
| |
|---|
| Median (28 companies) | 2.8% | 2.8% | 2.4% | 3.1% | 3.6% |
|---|
| Redline Communications Group Inc ($RDL) | 0.3% | 3.9% | 1.1% | 0.7% | 0.9% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Tucows Inc ($TC) | 17.7% | 22.5% | 35.4% | 51.4% | 58.4% |
| BCE Inc ($BCE) | 14.1% | 12.6% | 12.6% | 12.3% | 12.6% |
| Quebecor Inc ($QBR.B) | 7.9% | 9.6% | 8.4% | 8.4% | 10.1% |
| MDC Partners Inc ($MDZ.A) | -3.1% | -6.3% | 14.2% | 13.7% | 10.1% |
| TELUS Corp ($T) | 12.4% | 13.0% | 13.0% | 11.5% | 9.6% |
| |
|---|
| Median (28 companies) | 8.0% | 8.2% | 7.5% | 3.1% | 2.2% |
|---|
| Redline Communications Group Inc ($RDL) | 14.3% | -26.1% | 7.1% | -5.7% | -18.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Intertain Group Ltd/The ($IT) | | | | 9.4x | |
| MDC Partners Inc ($MDZ.A) | 12.4x | 112.6x | 4.6x | 5.5x | 9.6x |
| Quebecor Inc ($QBR.B) | 3.7x | 3.9x | 4.2x | 4.8x | 4.3x |
| Rogers Communications Inc ($RCI.A) | 2.3x | 2.4x | 3.2x | 3.6x | 3.8x |
| Newfoundland Capital Corp Ltd ($NCC.B) | 1.4x | 1.3x | 3.3x | 3.2x | |
| |
|---|
| Median (21 companies) | 1.4x | 1.3x | 1.5x | 1.6x | 1.7x |
|---|
