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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 first quarter ended March 31, 2009.
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Financial Highlights:
- Revenue of $9.6 million, compared to $13.8 million in Q1 2008
- Broadband Wireless Infrastructure (BWI) revenue was $4.6 million
(48% of total revenue), compared to $7.6 million (55% of total
revenue) in Q1 2008
- WiMAX revenue was $5.0 million (52% of total revenue), compared to
$6.2 million (45% of total revenue) in Q1 2008
- Gross margin was 43.9% up from 39.5% in Q1 2008
- Net cash at quarter end was $5.8 million, compared to $4.4 million as
at December 31, 2008
- Net loss of $2.0 million, or $0.10 per share, compared to
$4.2 million, or $0.20 per share, in Q1 2008
- 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:
- Completed organizational realignment initiated in December 2008 and
reduced operational costs by 36%
- Finalized agreement with HydroOne in Ontario for development and
delivery of RedMAX 4C products for Smart Grid applications
- Selected by I-NetLink Wireless to deploy RedMAX WiMAX Forum
Certified(R) products as part of its WiMAX network roll-out across
150 communities in rural Manitoba
- Strengthened ability to address key vertical markets in the
United States with the addition of TESSCO Technologies as a Value
Added Distributor
- Received recurring orders from more than 20 key RedMAX customers
worldwide
- Major operator in the Middle East achieved milestone of more than
20,000 subscribers on its RedMAX network in Q1 2009
- Strengthened the executive team with the addition of Dave Andrews,
Chief Financial Officer
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"We are pleased with the progress we made in the first quarter to strengthen our financial position, while making significant advances in our go-to-market strategies for both our WiMAX and BWI businesses," said Majed Sifri, President and Chief Executive Officer, Redline Communications. "Our organizational realignment and continued focus on improving our balance sheet enabled us to achieve positive cash flow for the first quarter of 2009. While our customers are still exercising some caution due to the ongoing challenging global economic conditions, during the quarter we saw renewed expansion of our customers' existing RedMAX networks, and established traction with key partners for our RedMAX 4C products. Our BWI business continues to perform to our expectations and we remain optimistic about the long-term growth of this business."
"Having WiMAX and BWI in our product mix provides us with a balanced growth profile that enables us to effectively capitalize on the demand in the overall broadband solutions market," added Sifri. "We believe that the introduction of more than $7.2 billion in federal funding of broadband programs in the United States, expected for later this year, will help our customers in this market accelerate their plans for installing and expanding broadband wireless networks. We will continue to work via our sales teams, partners and distribution channels to enhance our ability to meet continuing demand in our target industry verticals - government, energy, telecommunication service providers and transportation."
Financial Review
In the first quarter of 2009, Redline's revenue was $9.6 million, compared to $13.8 million in the first quarter of 2008. The year-over-year decrease relates to the softening of the telecommunications market and the overall economy worldwide that has continued into 2009, and, to a lesser degree, a slowdown in demand for fixed WiMAX products due to industry announcements regarding the availability of mobile WiMAX products.
Gross margin for the first quarter of 2009 increased to 43.9%, compared with 39.5% in Q1 2008. Despite the worldwide economic slowdown, the Company has been able to maintain its margin on sales as it continues to effectively manage its production costs and inventory levels.
Operating expenses decreased to $6.1 million in Q1 2009 from $9.6 million in Q1 2008, reflecting the benefits of the cost saving initiatives the Company implemented in December 2008.
EBITDA loss for Q1 2009 was $1.6 million, compared with a loss of $4.0 million in Q1 2008. Net loss for the first quarter of 2009 was $2.0 million, or $0.10 per share, compared with a net loss of $4.2 million, or $0.20 per share, in Q1 2008.
As of March 31, 2009 the Company had $5.8 million of cash, compared to $4.4 million as at December 31, 2008. The increase in cash from December 31, 2008, to March 31, 2009, is primarily due to an improvement in working capital of $3.6 million. This working capital improvement reflects the Company's aggressive focus on collecting accounts receivables and reducing inventory levels, which was partially offset by the operating loss for the three months ended March 31, 2009, of $2.0 million and the repayment of loans and capital leases of $0.5 million.
Outlook
For fiscal 2009, Redline anticipates revenue levels to be similar to 2008, with a 30% reduction in operating expenses compared with last year. The Company expects to achieve sustainable positive EBITDA and cash flow beginning in the fourth quarter of 2009. Several of Redline customers in key international markets are beginning to resume network expansions and new network deployments. As such, the Company expects that as the global economic picture becomes clearer, and government-funded broadband network deployments commence in key markets, more of its customers will begin to place recurring orders for both WiMAX and BWI products. The Company further expects that with its intensified focus on addressing key vertical markets, it will begin to see revenue growth from the government, energy, transportation, and telecommunication service provider markets.
Investor Conference Call
Redline's Q1 2009 conference call will take place on Wednesday, May 13, 2009 at 8:30 am EDT. Conference call dial in numbers are 416-644-3428 or 1-800-589-8577. The live webcast of the conference call and a copy of this news release and financial statements are available at 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 150,000 installations in 85 countries, and a global network of over 160 partners, Redline's experience and expertise helps service providers, enterprises and government organizations roll out wireless broadband networks to support advanced communications.
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REDLINE COMMUNICATIONS GROUP INC.
Consolidated Balance Sheets
(expressed in U.S. dollars)
-------------------------------------------------------------------------
March 31, December 31,
2009 2008
(unaudited)
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 5,686,832 $ 4,355,254
Restricted cash and cash equivalents 92,129 -
Accounts receivable 8,513,679 11,627,388
Other receivables 137,135 230,563
Inventories 11,650,040 12,896,286
Prepaid expenses 640,178 457,437
-------------------------------------------------------------------------
26,719,993 29,566,928
Capital assets:
Property, plant and equipment 1,180,908 1,291,597
Intangible assets subject to amortization 437,368 496,092
Other assets 46,073 194,002
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$ 28,384,342 $ 31,548,619
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 9,038,620 $ 9,905,615
Deferred revenue 1,319,749 1,267,498
Current portion of capital lease
obligations 39,050 50,898
Current portion of loans payable 1,247,816 1,675,741
-------------------------------------------------------------------------
11,645,235 12,899,752
Loans payable 197,308 250,313
Capital lease obligations 20,562 27,600
Shareholders' equity:
Share capital 128,444,175 128,444,175
Share purchase loan (365,780) (365,780)
Warrant 310,000 310,000
Contributed surplus 6,097,743 5,917,460
Deficit (118,276,369) (116,246,369)
Accumulated other comprehensive income 311,468 311,468
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16,521,237 18,370,954
Going concern
Contingency
-------------------------------------------------------------------------
$ 28,384,342 $ 31,548,619
-------------------------------------------------------------------------
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REDLINE COMMUNICATIONS GROUP INC.
Consolidated Statement of Operations and Deficit
(expressed in U.S. dollars)
-------------------------------------------------------------------------
Three months ended
March 31
2009 2008
-------------------------------------------------------------------------
(unaudited)
Revenue:
Product $ 9,200,777 $ 12,641,124
Maintenance 377,801 1,156,955
-----------------------------------------------------------------------
9,578,578 13,798,079
Cost of revenue(1) 5,373,414 8,347,459
-------------------------------------------------------------------------
Gross Margin 4,205,164 5,450,620
Expenses:
Research and development(1) 2,289,019 3,415,565
Finance and administration(1) 911,519 1,572,630
Sales and marketing(1) 2,629,206 4,444,971
Amortization of property, plant and
equipment 228,630 187,203
Restructuring costs - -
-----------------------------------------------------------------------
6,058,374 9,620,369
-------------------------------------------------------------------------
Loss before the undernoted (1,853,210) (4,169,749)
Other expenses/(income):
Interest and other 105,767 (35,377)
Gain on disposal of assets - (70,296)
Foreign exchange 64,135 150,086
-----------------------------------------------------------------------
169,902 44,413
-------------------------------------------------------------------------
Loss before income taxes (2,023,112) (4,214,162)
Income taxes 6,888 30,842
-------------------------------------------------------------------------
Loss and comprehensive loss (2,030,000) (4,245,004)
Deficit, beginning of the period (116,246,369) (91,706,738)
Effect of change in accounting policy - 230,526
-------------------------------------------------------------------------
Deficit, end of period $(118,276,369) $ (95,721,216)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Loss per share - basic and diluted $ (0.10) $ (0.20)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of common shares
used in basic and diluted loss per share 21,048,930 21,047,900
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes stock-based compensation
expense as follows:
Cost of revenue $ 9,374 $ 30,860
Expenses:
Research and development 61,662 145,183
Finance and administration 27,668 82,816
Sales and marketing 81,579 202,939
-------------------------------------------------------------------------
Total $ 180,283 $ 461,798
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REDLINE COMMUNICATIONS GROUP INC.
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
-------------------------------------------------------------------------
Three months ended
March 31
2009 2008
-------------------------------------------------------------------------
(unaudited)
Cash provided by (used in):
Loss for the period: $ (2,030,000) $ (4,245,004)
Items not affecting cash:
Amortization of property, plant and
equipment 228,630 187,203
Stock-based compensation expense 180,283 461,798
Accretion of debt 26,324 26,324
Gain on disposal of assets - (70,296)
Foreign exchange 35,477 466,429
Change in non-cash working capital 3,603,827 (3,633,317)
-----------------------------------------------------------------------
2,044,541 (6,806,863)
Financing activities:
Issuance of share capital, net of
issuance costs - (41,777)
Share purchase loan - -
Repayment of loans (507,254) (409,592)
Principal payment of capital lease
obligations (18,886) (60,914)
-----------------------------------------------------------------------
(526,140) (512,283)
Investing activities:
Purchase of capital assets (59,217) (175,478)
Increase in restricted cash and cash
equivalents (92,129) -
-------------------------------------------------------------------------
(151,346) (175,478)
Foreign exchange (35,477) (466,429)
Increase (decrease) in cash and cash
equivalents 1,331,578 (7,961,053)
Cash and cash equivalents, beginning of
period 4,355,254 28,713,405
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,686,832 $ 20,752,352
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $ 84,211 $ 103,074
Income taxes paid 6,888 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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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.
NOTE: All registered and unregistered trademarks mentioned in this release are the property of their respective owners.
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, Kristen Dickson, carmitage@equicomgroup.com, kdickson@equicomgroup.com, Tel: (416) 815-0700
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