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TORONTO, March 31 /CNW/ - Redline Communications Group Inc. ("Redline" or "the Company"), (TSX: RDL), a leading provider of WiMAX and wireless broadband solutions, today announced its financial results for the fourth quarter and year ended December 31, 2008.
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Financial Highlights:
- Total revenue was in line with second half guidance at $43.5 million
compared to $52.2 million in 2007
- Broadband Wireless Infrastructure (BWI) revenue was $27.1 million
(62% of total revenue), compared to $23.0 million (44%) in 2007
- WiMAX revenue was $16.4 million (38% of total revenue), compared to
$29.2 million (56%) in 2007
- Q4 2008 revenue was $10.6 million, compared to $12.8 million in 2007
and $9.6 million in Q3 2008
- Cash balance was $4.4 million at year end; current balance is
approximately $4.5 million
- Redline has signed a term sheet for a funding arrangement with the
Ministry of Economic Development for CDN$10 million, subject to
negotiation of a final legal agreement satisfactory to Ontario
Operational Highlights:
- Organizational realignment announced in December 2008 combined with
cost controls expected to result in savings of more than $12 million
in 2009
- Increased commercial, revenue-generating WiMAX networks to 70 versus
49 at the end of 2007
- Strengthened Management Team and Board of Directors with addition of
David W. Andrews as Chief Financial Officer, and Nancy Orr and
Eric Melka as Directors
- Launched and received WiMAX Forum Certification for RedMAX 4C(TM)
Mobile WiMAX products
- Introduced industry-leading Mobile WiMAX Remote Radio Head
- Received FCC-approval and Buy American status for WiMAX and BWI
products for the 3.65 GHz spectrum, qualifying Redline products for
the $7.2 billion in U.S. government funding for broadband projects
- Granted Best of WiMAX World EMEA "Industry Choice", Branham 300,
Profit 100 and Frost and Sullivan Innovation Awards
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"Revenue for the second half of 2008 was in line with guidance due to strong sales from our BWI business unit," said Majed Sifri, president and chief executive officer, Redline Communications. "Our renewed focus on BWI is paying off as we expand our product line, strengthen our sales teams, and build our sales and distribution channels for these products. Although market demand for backhaul products remains healthy and the need for broadband remains strong in our key markets, WiMAX sales were affected by delayed rollouts and network expansions as operators evaluated alternative technologies and were slower to secure financing."
"The government financing, which is expected to commence in Q2, supports Redline's business plan in the global broadband wireless industry and strengthens our growth plans," added Mr. Sifri. "Looking ahead, we see resurgence in interest in our broadband wireless solutions as broadband networks have been identified as a key area for governments to stimulate economic growth. In the United States alone, $7.2 billion is currently available through federal programs to fund the rollout of broadband networks. Redline is well positioned to benefit from these programs, as the Company's products meet the Buy American requirements."
"As previously announced, Redline initiated significant changes to its operations and growth strategy to adjust to the new economic environment," said David W. Andrews, chief financial officer, Redline Communications. "This has resulted in a lower cost structure as well as a more focused product offering and sales expansion plan. Cash generation, cash preservation and cash infusion remains a high priority for the Company and we are seeing positive results of our efforts in 2009 as evidenced by a stable cash balance of approximately $4.5 million. The government of Ontario funding, combined with our cost controls and focus on receivables and inventory management, is expected to strengthen our financial position in 2009 and provide us with the resources to execute on our growth plans."
Financial Review
In 2008, revenue was $43.5 million, a decrease of $8.7 million, or 17%, compared with $52.2 million in 2007. The decrease related to a decline in WiMAX revenues. Global market conditions made it more difficult for carriers to obtain or justify financing for new network rollouts. Customers also delayed rollouts to assess Mobile WiMAX products and other competing 4G technologies.
Gross margin was 33.8% or $14.7 million, compared to 34.4% or $18.0 million in 2007. The gross margin reflects inventory adjustments of $4.8 million reported in Q3 and Q4 2008. Excluding these adjustments, the Company's gross margin in 2008 would have been approximately 44.8%. Net loss was $24.8 million or $1.18 per share compared to a loss of $15.7 million or $1.24 per share in 2007.
In Q4 2008, revenue was $10.6 million, compared to $12.8 million in Q4 2007. BWI revenue increased to $7.2 million from $6.1 million in the fourth quarter of 2007 as a result of an increased focus on the business and a large order from an OEM partner. WiMAX revenue decreased to $3.4 million compared to $6.7 million in Q4 2007. Gross margin was 19.8% or $2.1 million, but would have been 49.1% excluding the Q4 inventory adjustments mentioned above. Net loss was $9.1 million or $0.44 per share compared to a loss of $6.2 million or $0.35 per share in Q4 2007.
Outlook
For fiscal 2009, Redline anticipates revenue levels to be similar to 2008, however, the company expects a 30% reduction in operating expenses compared with last year. This will help the company achieve its target to be EBITDA and cash flow positive in the fourth quarter of 2009. Redline also anticipates that its customer base, which includes properties owned by major telecommunications companies such as TIM, Zain Group, OTE, Saudi Telecom Company and MTN, will resume network expansions and new network deployments as the global economic picture becomes more clear and government-funded broadband network deployments commence in key markets.
Investor Conference Call
Redline's Q4 and FY 2008 conference call will take place on Tuesday, March 31, 2009 at 8:30 am EDT. Conference call dial in numbers are 416-644-3419 or 1-800-731-5319. The live webcast of the conference call and a copy of this news release and financial statements, is available on the 'Investors' section of Redline's website www.redlinecommunications.com and at www.newswire.ca.
About Redline Communications
Redline Communications (www.redlinecommunications.com) is the leading provider of fixed and mobile standards-based wireless broadband solutions. Redline's RedMAX(TM) WiMAX Forum Certified(TM) system, RedMAX 4C Mobile WiMAX(TM) products, and its award-winning broadband wireless infrastructure family of products - RedCONNEX(TM) and RedACCESS(TM) - enable service providers and other network operators to cost-effectively deliver high-bandwidth services, including voice, video and data communications. Redline is committed to maintaining its wireless industry leadership with the continued development of WiMAX and other advanced wireless broadband products. With more than 100,000 installations in 85 countries, and a global network of over 140 partners, Redline's experience and expertise helps service providers, enterprises and government organizations roll out wireless broadband networks to support advanced communications.
Forward-Looking Statements
Certain statements in this release, including the guidance provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws and are made pursuant to the "safe harbour" provisions of such laws. These statements are subject to certain assumptions, risks and uncertainties. Readers are cautioned not to place undue reliance on such statements. Risk factors that may cause the actual results, performance, achievements or developments of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements can be found in the public documents filed by the Company from time to time with Canadian securities regulatory authorities. In particular, actual results could differ materially from those expressed in any forward-looking statements. Downturns in the economy or geopolitical uncertainties may cause customers to delay or cancel projects. For a more complete list of risk factors, please refer to Redline's Annual Information Form dated March 31, 2009. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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NOTE: All registered and unregistered trademarks mentioned in this
release are the property of their respective owners.
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December 31, December 31,
2008 2007
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,355,254 $ 28,713,405
Restricted cash - 8,033
Accounts receivable 11,627,388 17,423,119
Other receivables 230,563 360,855
Inventories 12,896,286 9,028,620
Prepaid expenses 457,437 576,741
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29,566,928 56,110,773
Property, plant and equipment 1,787,689 1,339,721
Other assets 194,002 94,054
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$ 31,548,619 $ 57,544,548
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities $ 9,905,615 $ 9,657,119
Deferred revenue 1,267,498 2,706,656
Current portion of capital
lease obligations 50,898 229,322
Current portion of loans payable 1,675,741 1,776,633
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12,899,752 14,369,730
Loans payable 250,313 1,375,424
Capital lease obligations 27,600 60,462
Shareholders' equity:
Share capital 128,444,175 128,538,474
Share purchase loan (365,780) (365,780)
Warrant 310,000 310,000
Contributed surplus 5,917,460 4,651,508
Deficit (116,246,369) (91,706,738)
Accumulated other
comprehensive income 311,468 311,468
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18,370,954 41,738,932
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$ 31,548,619 $ 57,544,548
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Three months ended Year ended
December 31, December 31,
2008 2007 2008 2007
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(Unaudited) (Unaudited)
Revenue:
Product $ 10,522,498 $ 11,762,381 $ 40,899,196 $ 48,406,755
Maintenance 73,993 1,057,646 2,628,324 3,841,025
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10,596,491 12,820,027 43,527,520 52,247,780
Cost of revenue 8,515,310 9,226,969 28,825,033 34,285,949
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Gross margin 2,081,181 3,593,058 14,702,487 17,961,831
Expenses:
Research and
development 2,619,654 3,118,751 13,166,476 10,114,802
Finance and
administration 2,494,018 1,544,461 6,630,614 5,961,839
Sales and
marketing 4,148,421 3,945,918 16,586,579 14,953,682
Amortization
of property,
plant and
equipment 410,190 513,518 1,307,733 1,396,795
Restructuring
costs 935,984 - 935,984 -
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10,608,267 9,122,648 38,627,386 32,427,118
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Loss before the
undernoted (8,527,086) (5,529,590) (23,924,899) (14,465,287)
Other expenses 590,514 715,372 812,315 1,225,558
Loss before
income taxes (9,117,600) (6,244,962) (24,737,214) (15,690,845)
Income taxes (14,906) - 32,943 57,667
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Loss for the
period (9,102,694) (6,244,962) (24,770,157) (15,748,512)
Deficit,
beginning
of period (107,143,675) (85,461,776) (91,706,738) (75,958,226)
Effect of
change in
accounting
policy - - 230,526 -
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Deficit, end
of period $(116,246,369) $ (91,706,738) $(116,246,369) $ (91,706,738)
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Loss per share:
Basic and
diluted $ (0.44) $ (0.35) $ (1.18) $ (1.24)
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Weighted average
number of
common shares
used in basic
and diluted
loss per share 21,048,930 18,257,011 21,048,731 12,688,451
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Three months ended Year ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
Cash provided
by (used in):
Operating
activities:
Loss for the
period $ (9,102,694) $ (6,244,962) $ (24,770,157) $ (15,748,512)
Items not
affecting
cash:
Amortization
of property,
plant and
equipment 410,190 513,518 1,307,733 1,396,795
Stock-based
compensation
expense 251,712 224,191 1,414,328 1,395,248
Accretion
of interest 26,324 125,732 105,296 125,732
Gain on
disposal
of assets (6,289) - (76,585) -
Foreign
exchange
loss (gain) (117,794) (954,060) 240,325 (953,851)
Change in
non-cash
operating
working
capital 4,773,612 2,124,797 1,142,772 (4,330,196)
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(3,764,939) (4,210,784) (20,636,288) (18,114,784)
Financing
activities:
Issuance of
share capital,
net of
issuance costs - 28,068,318 (94,299) 30,652,641
Share purchase
loan - 47,628 - 47,628
Repayment
of loans (589,239) (331,136) (1,900,720) (1,163,675)
Principal
payment of
capital lease
obligations (63,068) (49,326) (248,536) (265,559)
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(652,307) 27,735,484 (2,243,555) 29,271,035
Investing
activities:
Purchase of
property, plant
and equipment (184,439) (454,907) (1,246,016) (1,382,088)
Decrease in
restricted cash 8,033 - 8,033 -
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(176,406) (454,907) (1,237,983) (1,382,088)
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Foreign exchange
gain (loss) on
cash held in
foreign currency 117,794 954,060 (240,325) 953,851
(Decrease)
increase in
cash and cash
equivalents (4,475,858) 24,023,853 (24,358,151) 10,728,014
Cash and cash
equivalents,
beginning
of period 8,831,112 4,689,552 28,713,405 17,985,391
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Cash and cash
equivalents,
end of
period $ 4,355,254 $ 28,713,405 $ 4,355,254 $ 28,713,405
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SOURCE: Redline Communications Group Inc.
Redline Communications, David Andrews, Carolyn Anderson, dandrews@redlinecommunications.com, canderson@redlinecommunications.com, Tel: (905) 479-8344; Equicom Group, Craig Armitage, Vanessa Beresford, carmitage@equicomgroup.com, vberesford@equicomgroup.com, Tel: (416) 815-0700
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