EarningsTORONTO, May 9 /CNW/ - Redline Communications Group Inc. ("Redline" or "the Company"), (TSX/AIM: RDL), a leading provider of WiMAX and wireless broadband solutions, today announced its financial results for the three months ended March 31, 2008.
<< Financial Highlights: - Revenue of $13.8 million, up 19% compared to Q1 2007 and up 8% sequentially - WiMAX Forum Certified(TM) RedMAX revenue rose 33% year-over-year to $7.6 million and 15% sequentially - Broadband wireless infrastructure (BWI) revenue increased 5% versus Q1 2007 to $6.2 million - Gross margin was 40%, a significant increase from 28% in Q4 2007 - Net loss of $4.2 million, or $0.20 per share, compared to $6.2 million, or $0.48 per share, in Q4 2007 - Net cash at quarter end was $20.8 million versus $28.7 million at the close of 2007 Operational Highlights: - 40 RedMAX customers placed multiple or recurring equipment orders as of the end of Q1 2008 - 58 RedMAX customers with live commercial, revenue-generating WiMAX Forum Certified(TM) product deployments, compared to 49 at the end of 2007 - More than 160 paid trials and deployments of WiMAX Forum Certified(TM) RedMAX systems - Began shipments of 3.65 GHz WiMAX products to service providers in the United States - Shipped RedMAX 4C(TM) Mobile WiMAX products to the WiMAX Forum for certification - Unveiled new RedCONNEX(TM) and RedACCESS(TM) products for the 4.9 GHz band, designed for public safety and military communications networks. >>
"We are pleased with the solid revenue growth achieved in the first quarter from both of Redline's key product lines," said Majed Sifri, President and Chief Executive Officer. "On the WiMAX front, we continue to convert trials into full deployments. The number of commercial RedMAX customers increased by nine, highlighted by major regional telecom companies such as Divona Telecom, UUNET Kenya and CityLink in Cambodia. We have gained traction in the United States with the adoption of our 3.65 GHz products by companies such as Rapid Link and Azulstar. In mobile WiMAX, we continue to trial RedMAX 4C products with customers and have shipped products to the WiMAX Forum for certification. The improved results from BWI show that our renewed focus on our backhaul products is paying off. With a strong start to the year, we believe we are on target to deliver revenue growth of 40% year-over-year and to achieve positive EBITDA in the fourth quarter."
Financial Review
In the first quarter of 2008, Redline's revenue rose 19% to $13.8 million, compared with $11.6 million in the first quarter of 2007. Both of Redline product lines saw strong revenue increases, with WiMAX Forum Certified(TM) revenue rising 33% to $7.6 million and BWI revenue increasing 5% to $6.2 million. The growth in Redline's RedMAX products reflects the rollout of existing deployments, as well as new paid trials and deployments. The growth in the BWI division reflects the rollout of a new product, as well as the Company's renewed focus on the RedCONNEX(TM) and RedACCESS(TM) product line.
Gross margin for the first quarter of 2008 increased to 40%, compared with 39% in Q1 2007 and 28% in Q4 2007. Operating expenses increased by $2 million to $9.4 million in Q1 2008 compared to Q1 2007. More than 60% of this change was due to the increase in the value of the Canadian dollar relative to the U.S. dollar. Net loss for the first quarter of 2008 was $4.2 million or $0.20 per share, compared with a net loss of $2.9 million, or $0.27 per share, in Q1 2007, and a net loss of $6.2 million, or $0.48 per share, in Q4 2007.
As at March 31, 2008, the Company had $20.8 million of cash, cash equivalents and restricted cash, compared with $28.7 million at December, 31, 2007. The decrease in cash in the first quarter of 2008 reflects losses of $4.2 million and an increase in accounts receivables of $2.3 million. Since the end of March, Redline has collected over half of its overdue receivables.
Chief Executive Officer Review
In the first quarter of 2008, Redline continued to deliver on its key strategic initiatives:
Converting RedMAX trials into commercial deployments:
Redline has increased the number of trials and deployments to more than
160 in Q1 2008, compared to 150 at the end of 2007. Of these, 58 carriers
have converted to commercial revenue-generating RedMAX deployments,
compared with 49 at the end of 2007. More than 40 RedMAX network
operators have placed multiple or recurring equipment orders to expand
their network and subscriber base.
Expanding Redline's global reach:
Redline has over 170 global reseller and deployment partners including
global systems integrators, as well as a growing roster of companies with
expertise in planning and installing wireless networks in key regional
and vertical markets including oil and gas, transportation, public safety
and military.
Broadening customer base:
Redline has increased its presence in key high-growth international
markets. The Company has built a strong customer base in both Latin
America and the Middle East, and has also seen strong growth recently
from Africa and Asia. Redline also made significant inroads in the U.S.
with over 15 customer wins in the quarter relating to its 3.65 GHz WiMAX
products, which management believe reflects pent-up demand for fixed and
nomadic WiMAX networks in developed markets.
Maintaining technology leadership:
Redline maintained its technology leadership in both its WiMAX and BWI
business units. The RedMAX product family continues to offer the highest
capacity in the market, highest scalability and open architecture, which
translates into an easy to deploy network with a rapid return on
investment for its customers. As part of the Redline Ecosystem
Verification (REV) program, Redline completed interoperability testing
with Patapsco Communications to verify that service providers can extend
the reach of traditional TDM service offerings via Redline's WiMAX
networks.
In addition, Redline unveiled its new RedCONNEX(TM) and RedACCESS(TM)
products for the 4.9GHz band, designed for used in public safety and
military communications networks in the United States as well as
international markets.
Outlook
In 2008, Redline expects revenue growth of 40% year-over-year and to achieve positive EBITDA in the fourth quarter. Revenue growth is expected to come from an increase in the number and size of WiMAX deployments and from increased sales of the Company's BWI products. In addition, the Company continues to position itself for long-term growth with the development and market introduction of RedMAX 4C Mobile WiMAX products.
Investor Conference Call
Redline's Q1 2008 conference call is on Friday, May 9, 2008 at 8:30 am ET (1:30 pm GMT). Conference call dial in numbers are 416-644-3423 or 1-800-590-1508 (Canada) or 00-800-2288-3501 (UK). 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 or at www.newswire.ca.
<< REDLINE COMMUNICATIONS GROUP INC. Interim Consolidated Balance Sheets (Expressed in U.S. dollars) ------------------------------------------------------------------------- March 31, December 31, 2008 2007 ------------------------------------------------------------------------- (Unaudited) Assets Current assets: Cash $ 20,752,352 $ 28,713,405 Restricted cash 8,033 8,033 Accounts receivable 19,723,736 17,423,119 Other receivables 245,699 360,855 Inventories 9,137,755 9,028,620 Prepaid expenses 1,016,869 576,741 ----------------------------------------------------------------------- 50,884,444 56,110,773 Property, plant and equipment 1,249,916 1,339,721 Other assets 93,974 94,054 ------------------------------------------------------------------------- $ 52,228,334 $ 57,544,548 ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 9,331,936 $ 9,657,119 Deferred revenue 1,902,640 2,706,656 Current portion of capital lease obligations 181,595 229,322 Current portion of loan payable 1,830,467 1,776,633 ----------------------------------------------------------------------- 13,246,638 14,369,730 Loan payable 938,322 1,375,424 Capital lease obligations 47,275 60,462 Shareholders' equity: Share capital 133,405,847 133,134,202 Deficit (95,721,216) (91,706,738) Accumulated other comprehensive income 311,468 311,468 ----------------------------------------------------------------------- 37,996,099 41,738,932 ------------------------------------------------------------------------- $ 52,228,334 $ 57,544,548 ------------------------------------------------------------------------- ------------------------------------------------------------------------- REDLINE COMMUNICATIONS GROUP INC. Interim Consolidated Statements of Operations and Deficit (Expressed in U.S. dollars) ------------------------------------------------------------------------- Three months ended March 31, 2008 2007 ------------------------------------------------------------------------- (Unaudited) Revenue: Product $ 12,641,124 $ 10,804,333 Maintenance 1,156,955 827,412 ----------------------------------------------------------------------- 13,798,079 11,631,745 Cost of revenue(1) 8,347,459 7,084,998 ------------------------------------------------------------------------- Gross margin 5,450,620 4,546,747 Expenses: Research and development(1) 3,415,565 2,609,018 Finance and administration(1) 1,572,630 1,102,074 Sales and marketing(1) 4,444,971 3,685,475 ----------------------------------------------------------------------- 9,433,166 7,396,567 ------------------------------------------------------------------------- Loss before the undernoted (3,982,546) (2,849,820) Other expenses 231,616 68,564 Loss before income taxes (4,214,162) (2,918,384) Income taxes 30,842 - ------------------------------------------------------------------------- Loss for the period and other comprehensive loss (4,245,004) (2,918,384) Deficit, beginning of period as previously reported (91,706,738) (75,958,226) Change in accounting policy 230,526 - ------------------------------------------------------------------------- Deficit, beginning of period as revised (91,476,212) (75,958,226) ------------------------------------------------------------------------- Deficit, end of period $(95,721,216) $(78,876,610) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss per share: Basic and diluted $ (0.20) $ (0.27) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares used in basic and diluted loss per share 21,047,900 10,759,293 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Includes stock-based compensation expense as follows: Cost of revenue $ 30,860 $ 33,449 Expenses: Research and development 145,183 144,089 Finance and administration 82,816 95,202 Sales and marketing 202,939 159,528 ------------------------------------------------------------------------- ------------------------------------------------------------------------- REDLINE COMMUNICATIONS GROUP INC. Interim Consolidated Statements of Cash Flows (Expressed in U.S. dollars) ------------------------------------------------------------------------- Three months ended March 31, 2008 2007 ------------------------------------------------------------------------- (Unaudited) Cash provided by (used in): Operating activities: Loss for the period $ (4,245,004) $ (2,918,384) Items not affecting cash: Amortization of property, plant and equipment 187,203 219,684 Gain on disposal of assets (70,296) - Stock-based compensation expense 461,798 432,268 Accretion of debt 26,324 - Foreign exchange loss (gain) 466,429 (92,123) Change in non-cash operating working capital (3,633,317) (5,810,976) ----------------------------------------------------------------------- (6,806,863) (8,169,531) Financing activities: Issuance of share capital, net of issuance costs (41,777) 2,595,434 Repayment of loan (409,592) - Principal payment of capital lease obligations (60,914) (95,837) ----------------------------------------------------------------------- (512,283) 2,499,597 Investing activities: Purchase of property, plant and equipment (175,478) (256,158) Foreign exchange gain (loss) on cash held in foreign currency (466,429) 92,123 ------------------------------------------------------------------------- Decrease in cash (7,961,053) (5,833,969) Cash, beginning of period 28,713,405 17,985,391 ------------------------------------------------------------------------- Cash, end of period $ 20,752,352 $ 12,151,422 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 103,074 $ 143,069 Supplemental disclosures relating to non-cash financing and investing activities: Purchase of property, plant and equipment under capital leases - 111,650 Change in accounting policy 230,526 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- >>
Forward-Looking Statements