Redline Communications Reports First Quarter 2009 Results



    
    -- Company achieves positive cash flow and builds momentum behind its
    WiMAX and Broadband Wireless Infrastructure market strategies --

    All figures in US Dollars unless specified
    

    TORONTO, May 13 /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 first quarter ended
March 31, 2009.

    
    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
    

    "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.


    
    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

    -------------------------------------------------------------------------
                                               $  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
    -------------------------------------------------------------------------
                                                  16,521,237      18,370,954
    Going concern
    Contingency

    -------------------------------------------------------------------------
                                               $  28,384,342   $  31,548,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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               -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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.





For further information:

For further information: 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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