Redline Communications Reports Third Quarter 2009 Results and Announces
Management Changes

All figures in US Dollars unless otherwise specified

TORONTO, Nov. 16 /CNW/ - Redline Communications Group Inc. ("Redline" or the "Company"), (TSX: RDL), a leading provider of WiMAX and wireless broadband solutions, today announced its financial and operational results for the three- and nine-month periods ended September 30, 2009.

    
    Q3 2009 Financial Highlights:

    -   Revenue of $9.1 million, compared to $10.4 million in Q2 2009 and
        $9.6 million in Q3 2008
    -   Gross margin was 42.6% (53% excluding inventory provisions), compared
        to 37.7% (41.3% excluding inventory provision) in Q2 2009 and 37.7%
        in Q3 2008 (51.1% excluding inventory provision)
    -   Net loss of $2.4 million, or $0.11 per share, compared to $2.6
        million, or $0.12 per share in Q2, 2009 and $6.2 million, or $0.29
        per share, in Q3 2008
    -   Cash and short-term investments at quarter end was $5.1 million,
        compared to $4.2 million on June 30, 2009 and $4.4 million as at
        December 31, 2008

    Q3 2009 Operational Highlights:

    -   Launched RedMAX 4C SC-100e Mobile WiMAX base station designed to meet
        specific technical requirements for vertical market applications such
        as Smart Grid networks
    -   Continued customer outreach and support programs to assist customers
        that have been short-listed for American Recovery and Reinvestment
        Act (ARRA) stimulus funding
    -   Selected as WiMAX vendor for several projects in Latin America that
        will be funded by government stimulus programs
    -   Added new leadership to Product Management team to focus on delivery
        of new products for key industry verticals and applications
    

"As expected, Q3 was our slowest quarter in 2009, and this was largely reflected in our WiMAX revenues," said Majed Sifri, President and Chief Executive Officer, Redline Communications Group. "However, this was partially offset by stronger sales of our Backhaul BWI products, as many of our existing customers are upgrading their networks in response to the increasing demand for more bandwidth to support voice, video and data applications."

Mr. Sifri continued: "Looking ahead, we are optimistic about our results for the coming quarter. Q4 tends to be our seasonally strongest quarter, and our near-term sales pipeline is robust. We expect to secure sizable orders from two key customers and also expect to deliver on other sales that we had originally anticipated to close in Q3. As a result, we believe we are on track to meet our 2009 guidance."

Q3 2009 Financial Review

Redline's revenue for the three months ended September 30, 2009 was $9.1 million, compared to $10.4 million in Q2 2009 and $9.6 million for the three months ended September 30, 2008.

WiMAX product revenue was $2.6 million (31.0% of product revenue), compared to $5.3 million (54.6% of product revenue) in Q2 and $2.1 million (23.6% of product revenue) in Q3 2008. Broadband Wireless Infrastructure (BWI) product revenue was $5.8 million (69.0% of product revenue), compared to $4.4 million (45.4% of product revenue) in Q2 and $6.8 million (76.4% of product revenue) in Q3 2008. Redline continued to manage inventory levels, with product inventory at $7.7 million at the end of Q3, 2009, down from $9.8 million as at June 30, 2009, and $11.7 million as at March 31, 2008.

Gross margin for Q32009 was 42.6% (53% excluding inventory provisions) as compared to 37.7% in Q2 2009 (41.3% excluding inventory provision) and 37.7% for the three months ended September 30, 2008 (51.1% excluding inventory provision). The increase in gross margin was largely due to product mix, as a greater proportion of revenue was generated from the sale of Redline's higher margin BWI hardware and software products.

In addition, when comparing Q3 2009 gross margin to the same period last year, Redline recorded a lower net write-down of inventory, which totaled $0.9 million in Q3 2009, compared to $1.3 million in Q3 2008. In Q2 2009, the Company recorded a net write-down of inventory of $0.4 million. Redline remains focused on effectively managing its production costs and inventory levels and expects to continue to achieve gross margins in the 40% range going forward.

Prior to amortization and stock based compensation, operating expenses were $5.8 million, down 1.0% from $5.9 million in Q2 2009 and down 34% from $8.8 million in the three months ended September 30, 2008, reflecting the continued success of the Company's ongoing cost control initiatives.

EBITDA(1) loss for Q3 2009 was $2.0 million. Excluding the inventory provision, EBITDA loss for the quarter was $1.1 million, an improvement in EBITDA (excluding inventory provisions) for the third consecutive quarter. For Q2 2009, EBITDA loss was $2.2 million and was $1.8 million excluding the inventory provision. For Q3 2008, EBITDA loss was $5.4 million, or $4.1 million excluding the inventory provision.

Net loss for Q3 2009 was $2.4 million, or $0.11 per share, compared to $2.6 million, or $0.12 per share, in Q2 2009, and $6.2 million, or $0.29 per share, in Q3 2008.

As of September 30, 2009, the Company had cash and cash equivalents of $5.1 million, compared to $4.2 million as at June 30, 2009 and $4.4 million as at December 31, 2008.

    
    2009 Nine Month Financial Summary:

    -   Revenue of $29.0 million, compared with $32.9 million for the same
        period of 2008
    -   WiMAX product revenue was $12.6 million (46.3% of product revenue),
        compared to $11.8 million (38.9% of product revenue) for the same
        period of 2008
    -   BWI product revenue was $14.6 million (53.7% of product revenue),
        compared to $18.6 million (61.1% of product revenue) for the same
        period of 2008
    -   Gross margin was 41.3%, compared with 38.3% for the same period of
        2008
    -   Net loss of $7.0 million, or $0.33 per share, compared to $15.7
        million, or $0.74 per share, for the same period of 2008
    

2009 Outlook

Redline believes it remains on track to achieve its 2009 guidance of revenue levels similar to 2008, with an approximate 30% reduction in operating expenses compared with last year. The revenue outlook for Q4 2009 is strong, as the Company expects higher-than-normal sales and margins resulting from the delivery of product to fulfill certain large contracts; therefore, the Company also expects to achieve positive EBITDA and cash flow in the fourth quarter of 2009.

Management Changes

Redline today also announced changes to its senior management team. Effective immediately, Majed Sifri has been appointed Vice-Chairman of Redline's Board of Directors, and will no longer serve as President and Chief Executive Officer of the Company. Eric Melka, a Director of the Company, will assume the role of acting Chief Executive Officer, working closely with the Board of Directors. Mr. Melka has extensive experience in managing technology companies, and is currently the President of Telemedia Ventures, as well as past President of several corporations including GotCorporation, Forbes Alliance and Compare Corporation.

In addition, David Andrews will be leaving Redline to pursue other interests. Under his tenure, David played a significant role in cost reduction and restructuring initiatives, as well as the implementation of new policies and procedures that will position the Company for its next stage of growth. Until a successor is named, Mr. Andrews will continue to serve as the Company's Chief Financial Officer. The Board has commenced the search process for a new Chief Executive Officer and Chief Financial Officer.

"Over the past eight years, Majed has been instrumental in Redline's development into a leading provider of wireless broadband solutions, in particular by establishing international partnerships and extending the Company's global reach to serve customers in more than 100 countries," said Philippe de Gaspé Beaubien III, Chairman of the Board of Directors. "With Majed as Vice-Chairman of the Board, focusing on international partnerships, we will benefit from his extensive industry knowledge and relationships."

Mr. de Gaspé Beaubien continued: "We would also like to acknowledge David Andrews' contributions to the Company during the past few quarters, in which we have reported improvements in our financial processes and wish him the best of luck in his future endeavours."

    
    (1) Earnings Before Interest, Taxes, Depreciation and Amortization.

    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 130 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.

Forward-Looking Statements

Certain statements in this release, including the estimate of future revenues, sales, margins, EBITDA and cash flow provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking statements can be identified by terms such as "could", "expect", "may", "will", "anticipate", "believe", "intend", "estimate", "plan", "potential", "project" or other expressions concerning matters that are not historical facts. Readers are cautioned not to place undue reliance upon any such forward-looking statements.

Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Redline to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements, by their nature, are based on certain assumptions regarding expected growth, management's current plans, estimates, projections, beliefs, opinions and business prospects and opportunities (collectively, the "Assumptions"). While the Company considers these Assumptions to be reasonable, based on the information currently available, they may prove to be incorrect.

Many risks, uncertainties and other factors could cause the actual results of Redline to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include but are not limited to the following: significant competition, competitive pricing practices, cautious capital spending by customers, industry consolidations, rapidly changing technologies, evolving industry standards, frequent new product introductions, short product life cycles and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Redline's performance if its expectations regarding market demand for particular products prove to be wrong; any negative developments associated with Redline's suppliers and contract manufacturing agreements including the Company's reliance on certain suppliers for key components; potential penalties, damages or cancelled customer contracts from failure to meet delivery and installation deadlines and any defects or errors in Redline's current or planned products; fluctuations in foreign currency exchange rates; potential higher operational and financial risks associated with Redline's efforts to expand internationally; a failure to protect Redline's intellectual property rights, or any adverse judgments or settlements arising out of disputes regarding intellectual property; changes in regulation of the wireless industry or other aspects of the industry; any failure to successfully operate or integrate strategic acquisitions, or failure to consummate or succeed with strategic alliances; and Redline's potential inability to attract or retain the personnel necessary to achieve its business objectives or to maintain an effective risk management strategy (collectively, the "Risks"). For additional information on these Risks, see Redline's most recently filed Annual Information Form ("AIF") and 2008 Annual MD&A, which are available on SEDAR at www.sedar.com and on the Company's website at www.redlinecommunications.com. Redline assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law. All forward looking statements contained in this release are expressly qualified in their entirety by this cautionary statement.

    
    REDLINE COMMUNICATIONS GROUP INC.

    Consolidated Balance Sheets
    (expressed in U.S. dollars)

    -------------------------------------------------------------------------
                                                September 30,    December 31,
                                                        2009            2008
    -------------------------------------------------------------------------
                                                  (unaudited)       (audited)
      Assets

    Current assets:
      Cash and cash equivalents                $   5,047,118   $   4,355,254
      Restricted short-term investments               93,373               -
      Accounts receivable                          9,440,973      11,627,388
      Other receivables                              206,617         230,563
      Inventories                                  7,658,846      12,896,286
      Prepaid expenses                               428,650         457,437
      -----------------------------------------------------------------------
                                                  22,875,577      29,566,928

    Capital assets:
      Property, plant and equipment                1,043,065       1,291,597
      Intangible assets subject to amortization      322,415         496,092

    Other assets                                      69,020         194,002

    -------------------------------------------------------------------------
                                               $  24,310,077   $  31,548,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and
       accrued liabilities                     $   7,177,764   $   9,905,615
      Deferred revenue                             1,196,533       1,267,498
      Current portion of capital
       lease obligations                              23,276          50,898
      Current portion of loans payable             3,828,554       1,675,741
    -------------------------------------------------------------------------
                                                  12,226,127      12,899,752

    Loans payable                                    126,371         250,313

    Capital lease obligations                         18,124          27,600

    Shareholders' equity:
      Share capital                              128,503,724     128,444,175
      Share purchase loan                           (365,780)       (365,780)
      Warrant                                        310,000         310,000
      Contributed surplus                          6,467,166       5,917,460
      Deficit                                   (123,287,123)   (116,246,369)
      Accumulated other comprehensive income         311,468         311,468
    -------------------------------------------------------------------------
                                                  11,939,455      18,370,954

    -------------------------------------------------------------------------
                                               $  24,310,077   $  31,548,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    REDLINE COMMUNICATIONS GROUP INC.

    Consolidated Statement of Operations and Deficit
    (expressed in U.S. dollars)

                   ----------------------------------------------------------
                       Three months ended              Nine months ended
                          September 30                    September 30
                      2009           2008             2009          2008
    -------------------------------------------------------------------------
                             (unaudited)                     (unaudited)
    Revenue:
      Product  $   8,365,951   $   8,939,115   $  27,238,218   $  30,376,698
      Maintenance    726,391         668,653       1,804,637       2,554,331
      -----------------------------------------------------------------------
                   9,092,342       9,607,768      29,042,855      32,931,029

    Cost of
     revenue(1)    5,214,998       5,985,250      17,051,473      20,309,723
    -------------------------------------------------------------------------

    Gross Margin   3,877,344       3,622,518      11,991,382      12,621,306

    Expenses:
      Sales and
       marke-
       ting(1)     2,710,111       3,947,131       7,995,196      12,438,158
      Research
       and develo-
       pment(1)    2,273,655       4,014,980       7,010,326      10,546,822
      Finance
       and admini-
       stration(1)   921,653       1,092,467       2,821,396       4,136,596
      Amortization
       of property,
       plant &
       equipment     261,786         461,861         736,894         897,543
      -----------------------------------------------------------------------
                   6,167,205       9,516,439      18,563,812      28,019,119
    -------------------------------------------------------------------------

    Loss before
     the under-
     noted        (2,289,861)     (5,893,921)     (6,572,430)    (15,397,813)

    Other expenses
     /(income):
      Interest
       and other      70,084          68,943         260,981         201,222
      Gain on
       disposal
       of assets           -               -               -         (70,296)
      Foreign
       exchange       88,256         200,996         199,241          90,875
    -------------------------------------------------------------------------
                     158,340         269,939         460,222         221,801
    -------------------------------------------------------------------------

    Loss before
     income
     taxes        (2,448,201)     (6,163,860)     (7,032,652)    (15,619,614)

    Income taxes      (1,498)          8,088           8,102          47,849
    -------------------------------------------------------------------------

    Loss and
     comprehensive
     loss         (2,446,703)     (6,171,948)     (7,040,754)    (15,667,463)

    Deficit,
     beginning of
     the period (120,840,420)   (100,971,727)   (116,246,369)    (91,706,738)

    Effect of
     change in
     accounting
     policy                -               -               -         230,526
    -------------------------------------------------------------------------
    Deficit,
     end of
     period    $(123,287,123)  $(107,143,675)  $(123,287,123)  $(107,143,675)
    -------------------------------------------------------------------------

    Loss per
     share -
     basic and
     diluted   $       (0.11)  $       (0.29)  $       (0.33)  $       (0.74)
    -------------------------------------------------------------------------

    Weighted
     average
     number of
     common shares
     used in basic
     and diluted
     loss per
     share        21,272,764      21,048,635      21,142,121      21,048,385
    -------------------------------------------------------------------------

    (1)Includes
     stock-based
     compensation
     expense as
     follows:
    Cost of
     revenue   $       5,432   $      24,572   $      30,407   $      83,694
    Expenses:
      Sales and
       marketing      66,041           7,139         237,318         388,853
      Research and
       development    32,078         175,905         172,580         461,095
      Finance and
       adminis-
       tration        13,277          73,936         109,401         228,974
    -------------------------------------------------------------------------
    Total      $     116,828   $     281,552   $     549,706   $   1,162,616
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    REDLINE COMMUNICATIONS GROUP INC.

    Consolidated Statements of Cash Flows
    (expressed in U.S. dollars)

    -------------------------------------------------------------------------
                       Three months ended              Nine months ended
                          September 30                    September 30
                      2009           2008             2009          2008
    -------------------------------------------------------------------------
                             (unaudited)                     (unaudited)
    Cash provided by (used in):

    Loss for the
     period    $  (2,446,703)  $  (6,171,948)  $  (7,040,754)  $ (15,667,463)
    Items not
     affecting cash:
      Amortization
       of property,
       plant and
       equipment     261,786         461,861         736,894         897,543
      Stock-based
       compensation
       expense       116,828         281,552         549,706       1,162,616
      Accretion
       of debt        26,324          26,324          78,972          78,972
      Gain on
       disposal
       of assets           -               -               -         (70,296)
      Foreign
       exchange     (219,763)        125,248        (226,003)        358,119
      Change in
       non-cash
       working
       capital     2,045,045          11,233       4,802,754      (3,630,840)
    -------------------------------------------------------------------------
                    (216,483)     (5,265,730)     (1,098,431)    (16,871,349)

    Financing
     activities:
      Issuance of
       share capital,
       net of
       issuance
       costs          14,592               -          59,549         (94,299)
      Government
       of Ontario
       loan        1,761,851               -       3,618,307               -
      Repayment
       of loans     (678,981)       (456,457)     (1,668,408)     (1,311,481)
      Principal
       payment of
       capital lease
       obligations    (8,227)        (88,409)        (37,098)       (185,468)
    -------------------------------------------------------------------------
                   1,089,235        (544,866)      1,972,350      (1,591,248)

    Investing
     activities:
      Purchase
       of capital
       assets       (116,375)       (727,079)       (314,685)     (1,061,577)
      Increase in
       restricted
       short-term
       investments      (366)              -         (93,373)              -
    -------------------------------------------------------------------------
                    (116,741)       (727,079)       (408,058)     (1,061,577)

    Foreign
     exchange
     gain (loss)
     on cash held
     in foreign
     currency        219,763        (125,248)        226,003        (358,119)

    Increase
     (decrease)
     in cash &
     cash
     equivalents     975,774      (6,662,923)        691,864     (19,882,293)

    Cash and
     cash
     equivalents,
     beginning
     of period     4,071,344      15,494,035       4,355,254      28,713,405

    -------------------------------------------------------------------------
    Cash and
     cash
     equivalents,
     end of
     period    $   5,047,118   $   8,831,112   $   5,047,118   $   8,831,112
    -------------------------------------------------------------------------

    Supplemental
     cash flow
     information:
      Interest
       paid    $      40,734   $      77,688   $     192,762   $     284,328
      Income
       taxes paid     (1,498)          8,088           8,102          47,849
    Supplemental
     disclosures
     relating to
     non-cash
     financing and
     investing
     activities:
      Purchase of
       property,
       plant &
       equipment
       under capital
       leases              -               -               -          32,243
      Purchase of
       property,
       plant &
       equipment
       under loan          -               -               -         544,226
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Redline Communications Group Inc.

For further information: For further information: Redline Communications, Carolyn Anderson, 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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