28 Feb 2008 07:00
Redline Reports Fourth Quarter and Full Year 2007 Results
/NOT FOR DISTRIBUTION IN THE UNITED STATES/ All figures in US Dollars unless specified - Company achieves 47% year on year revenue growth; increases WiMAX revenues by 85% -
TORONTO, Feb. 28 /CNW/ - Redline Communications Group Inc. ("Redline" or "the Company"), , a leading provider of WiMAX and wireless broadband solutions today announced its financial results for the fourth quarter and year ended December 31, 2007.
Financial Highlights: - 2007 revenue increased to $52.2 million, a 47% increase over 2006 - Q4 2007 revenue was $12.8 million, resulting in 2H revenue of $26.5 million and the Company's 11th consecutive six-month period of revenue growth - WiMAX Forum Certified(TM) RedMAX revenue of $29.2 million or 56% of total revenue in 2007, an increase of 85% over RedMAX revenues of $15.8 million in 2006 - $28.7 million in cash at year end compared to $18.0 million at close of 2006 Operational Highlights: - Successful listing on the Toronto Stock Exchange, raising CDN $27 million (net) - 30 RedMAX customers placed multiple or quarterly recurring equipment orders in 2007 - 49 RedMAX customers with live commercial, revenue-generating WiMAX Forum Certified(TM) product deployments, compared to 28 at the end of 2006 - More than 150 paid trials and deployments of WiMAX Forum Certified(TM) RedMAX at year end, compared to 100 at the end of 2006 - Launched RedMAX 4C(TM) family of Mobile WiMAX products - Formed new Broadband Wireless Infrastructure (BWI) business unit to increase product offerings under the RedCONNEX and RedACCESS brands - Continued growth of Redline's emerging market footprint, with deployments in 85+ countries - Introduced Redline Ecosystem Verification ('REV') program which augments WiMAX Forum testing and confirms interoperability of RedMAX, RedMAX 4C and BWI products with other telecommunications equipment, applications and tools
"We achieved strong growth in 2007 in terms of revenue, acquisition of new top-tier carrier customers in key markets, and expansion of both our WiMAX and broadband wireless infrastructure product lines," said Majed Sifri, President and Chief Executive Officer. "With our strategic focus on working with carriers in emerging markets to establish and expand RedMAX networks, we realized a 47% year on year revenue increase and an 85% increase in our WiMAX revenues. Concurrently, we have accelerated the development of our RedMAX 4C Mobile WiMAX platform and demonstrated our industry leadership with the introduction of our REV program for interoperability."
"In 2007, we increased the number of paid trials and deployments of our WiMAX products to more than 150. Our roster of 49 carrier customers operating commercial revenue-generating RedMAX networks now includes properties owned by major telecommunications companies such as TIM, Zain Group (formerly MTC Vodafone), MTN and Cable & Wireless, each of which is planning to expand their WiMAX deployments to additional properties in 2008."
Financial Review
In 2007, Redline's revenue reached $52.2 million, an increase of 47% from $35.5 million in 2006. The majority of the revenue growth for the year came from Redline's WiMAX Forum Certified RedMAX product line, which accounted for 56% of total revenue in 2007, versus 44% in 2006.
Redline's revenue was $12.8 million in Q4 2007, with $6.6 million generated by the Company's RedMAX business. Fourth-quarter revenue was partially affected by slower-than-expected rollouts of certain new product lines, which affected the Company's ability to reach the required volume production to fulfill customer orders during the quarter. These issues have since been resolved, and the Company expects to complete the orders over 2008. In addition, revenue was affected by orders that were received but not shipped due to customer delays in finalizing financing arrangements.
Gross margin for 2007 was 34.4%, and was affected by the decline in the Q4 2007 gross margin to 28.0%. The decline in margin in Q4 was due to one-time write downs of peripherals and the amortization of fixed costs over lower than expected revenues for the quarter. Gross margin was 37.0% and 40.5% for 2006 and Q4 2006 respectively. Net loss for 2007 was $15.7 million or $1.39 per share.
Chief Executive Officer Review
In 2007, Redline continued to make significant progress in the following key areas:
Converting RedMAX trials into commercial deployments:
Redline has increased the number of trials and deployments to more than 150 in 2007, compared to 100 at the end of 2006. Of these, 49 carriers have converted to commercial revenue-generating RedMAX deployments, compared with 28 at the end of 2006. More than 30 of these WiMAX network operators have placed multiple or quarterly recurring equipment orders to expand their network and subscriber base.
Increasing resources to support customer deployments of RedMAX and
broadband wireless solutions:
Redline has increased the number of global reseller and deployment partners to 170 at the end of 2007 compared to 100 in 2006. Redline's deployment partners include 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.
Continued focus on emerging markets:
Redline has increased its presence in key high-growth International markets. Redline has built a strong customer base in both Latin America and the Middle East, with the Americas region now generating 44% of overall revenues, driven by major RedMAX network deployments in Paraguay and Brazil. Approximately 35% of Redline's revenues are generated in the Middle East. Redline also continues to expand to new markets in Europe, Africa and the Asia Pacific region, working with operators in more than 85 countries.
Maintaining technology leadership:
Redline maintained its technology leadership in both its WiMAX and BWI business units. Advances in its RedMAX product family include:
- Proven high-capacity RedMAX AN-100U micro base station, which currently supports 512 users per base station radio - High-powered AN-100UX macro base station that offers increased coverage - Award-winning Redline Management Suite, with a carrier-class provisioning server, enabling customer premise equipment to be installed by the end-user, and eliminating the need for professional installations - FCC (Federal Communications Commission) approval for 3.65 GHz RedMAX products for the United States.
Redline's Mobile WiMAX leadership was demonstrated in six live public product demonstrations at major industry events and WiMAX Forum PlugFests, and is among the first products submitted for the WiMAX Forum's certification program for Mobile WiMAX. Redline's RedMAX 4C chassis base station and indoor subscriber units have also been shipped to selected customers for initial trials.
In addition, Redline expanded its families of Broadband Wireless Infrastructure products with the launch of the RedCONNEX and RedACCESS AN-80i products for the 5.4 GHz license-exempt frequency bands.
Outlook
Redline expects to continue to increase the number and size of its customers' WiMAX deployments. In addition, the Company plans to accelerate the development and market introduction of its RedMAX 4C Mobile WiMAX products to position the Company for continued long-term growth. In 2008, Redline expects revenue growth of 40% year-over-year and to achieve profitability in the fourth quarter.
Investor Conference Call
Redline's Q4 and FY 2007 conference call is on Thursday, February 28, 2008 at 8:30 am EST (1:30 pm GMT). Conference call dial in numbers are 416-644-3425 or 1-800-591-7539 (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.
------------------------------------------------------------------------- December 31, December 31, 2007 2006 ------------------------------------------------------------------------- (Unaudited) Assets Current assets: Cash $ 28,713,405 $ 17,985,391 Restricted cash 8,033 8,033 Accounts receivable 17,423,119 12,359,585 Other receivables 360,855 468,028 Inventories 9,028,620 9,087,367 Prepaid expenses 576,741 352,358 ----------------------------------------------------------------------- 56,110,773 40,260,762 Property, plant and equipment 1,339,721 1,166,377 Other assets 94,054 105,842 ------------------------------------------------------------------------- $ 57,544,548 $ 41,532,981 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 9,657,119 $ 9,221,150 Deferred revenue 2,706,656 2,362,612 Current portion of capital lease obligations 229,322 215,639 Current portion of loan payable 1,776,633 1,244,528 ----------------------------------------------------------------------- 14,369,730 13,043,929 Loan payable 1,375,424 3,255,472 Capital lease obligations 60,462 151,653 Shareholders' equity: Share capital 133,134,202 100,728,685 Deficit (91,706,738) (75,958,226) Accumulated other comprehensive income 311,468 311,468 ----------------------------------------------------------------------- 41,738,932 25,081,927 ------------------------------------------------------------------------- $ 57,544,548 $ 41,532,981 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 ------------------------------------------------------------------------- (Unaudited) (Unaudited) Revenue: Product $ 11,762,381 $ 11,043,928 $ 48,406,755 $ 32,905,403 Maintenance 1,057,646 681,101 3,841,025 2,580,903 ----------------------------------------------------------------------- 12,820,027 11,732,029 52,247,780 35,486,306 Cost of revenue(1) 9,226,968 6,976,725 34,285,949 22,371,398 ------------------------------------------------------------------------- Gross margin 3,593,059 4,755,304 17,961,831 13,114,908 Expenses: Research and development(1) 3,115,371 2,285,979 10,114,802 9,126,903 Finance and administration(1) 1,544,450 1,017,656 5,961,839 4,180,955 Sales and marketing(1) 3,945,932 3,443,947 14,953,682 13,332,240 ----------------------------------------------------------------------- 8,605,753 6,747,582 31,030,323 26,640,098 ------------------------------------------------------------------------- Loss before the undernoted (5,012,694) (1,992,278) (13,068,492) (13,525,190) Other expenses 1,232,268 704,672 2,622,353 1,496,823 Loss before income taxes (6,244,962) (2,696,950) (15,690,845) (15,022,013) Income taxes - 78,146 57,667 152,284 ------------------------------------------------------------------------- Loss for the period (6,244,962) (2,775,096) (15,748,512) (15,174,297) Deficit, beginning of period (85,461,776) (73,183,130) (75,958,226) (60,783,929) ------------------------------------------------------------------------- Deficit, end of period $(91,706,738) $(75,958,226) $(91,706,738) $(75,958,226) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss per share: Basic and diluted $ (0.48) $ (0.90) $ (1.39) $ (16.02) ------------------------------------------------------------------------- Weighted average number of common shares used in basic and diluted loss per share 12,979,033 3,079,315 11,343,577 947,326 ------------------------------------------------------------------------- (1)Includes stock-based compensation expense as follows: Cost of revenue $ 9,674 $ (52,051) $ 104,348 $ 135,785 Expenses: Research and development 53,547 205,963 388,048 554,319 Finance and administration 29,561 272,011 298,200 865,787 Sales and marketing 131,409 29,096 604,652 557,587 ------------------------------------------------------------------------- Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 ------------------------------------------------------------------------- (Unaudited) (Unaudited) Cash provided by (used in): Operating activities: Loss for the period $ (6,244,962) $ (2,775,096) $(15,748,512) $(15,174,297) Items not affecting cash: Amortization of property, plant and equipment 516,896 423,198 1,396,795 1,152,582 Stock-based compensation expense 224,191 455,019 1,395,248 2,113,478 Accretion of interest 125,732 - 125,732 - Foreign exchange gain (953,851) - (953,851) - Change in non-cash operating working capital 1,994,217 (5,945,760) (4,330,196) (8,466,983) ----------------------------------------------------------------------- (4,337,777) (7,842,638) (18,114,784) (20,375,220) Financing activities: Issuance of share capital, net of issuance costs 28,198,898 20,908,182 30,652,641 27,445,081 Share purchase loan 47,628 - 47,628 - Loan payable (331,135) 4,500,000 (1,163,675) 4,500,000 Principal payment of capital lease obligations (49,327) (124,833) (265,559) (180,896) ----------------------------------------------------------------------- 27,866,064 25,533,015 29,271,035 31,764,185 Investing activities: Purchase of property, plant and equipment (458,285) (385,886) (1,382,088) (985,171) Decrease in restricted cash - - - 85,601 ----------------------------------------------------------------------- (458,285) (385,886) (1,382,088) (899,570) ------------------------------------------------------------------------- Foreign exchange gain on cash held in foreign currency 953,851 - 953,851 - Increase in cash 24,023,853 17,304,490 10,728,014 10,489,395 Cash, beginning of period 4,689,552 680,901 17,985,391 7,495,996 ------------------------------------------------------------------------- Cash, end of period $ 28,713,405 $ 17,985,391 $ 28,713,405 $ 17,985,996 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 363,579 $ 12,655 $ 494,611 $ 145,512 Income taxes paid 57,667 25,649 57,667 25,649 Supplemental disclosures relating to non-cash financing and investing activities: Purchase of property, plant and equipment under capital leases - 193,717 188,051 219,712 Warrants 310,000 - 310,000 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Forward-Looking Statements
Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates", "targets", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities legislation. These statements are based on Redline's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Redline operates. These statements are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different. Redline has made various assumptions in the preparation of its financial outlook in this press release, including the following company specific assumptions: An ability to ramp sales in new WiMAX product lines and in a private label product line in its RedCONNEX business; the continued network and deployment expansion by its largest customers, especially in the Middle East and the Americas; the continued ability to have more WiMAX customers convert to commercial networks, and the ability to add new WiMAX customers, using both its 802.16-2004 and 802.16-2005 solutions; improvement in Redline's product costs due to favorable supplier pricing, offset by higher costs associated with initial customer deployments in emerging markets; increased employee costs relative to expected cost of living adjustments and employee bonuses; and the effective execution of Redline's strategy, including the execution of Redline's supply chain strategy. Redline has also made certain macroeconomic and general industry assumptions in the preparation of its financial guidance including: a modest decrease in the growth rate of the gross domestic product of global economies which is lower than the growth rate in 2007; global service provider capital expenditures in 2008 reflecting mid to high single digit growth as compared to high single digit growth in 2007; global growth rate to remain stable with investments in next generation products and services to offset declines in purchases of legacy equipment; and a moderate impact as a result of expected industry consolidation among service providers in various geographic regions, particularly in emerging markets; and the impact of the rise in the Canadian dollar in 2007 and 2008 compared to the US dollar and other world currencies. The above assumptions, although considered reasonable by Redline at the date of this press release, may prove to be inaccurate and consequently Redline's actual results could differ materially from its expectations set out in this press release.
Further, actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following (i) risks and uncertainties relating to Redline's business including: significant competition, competitive pricing practice, cautious capital spending by customers, industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and 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 our 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; Redline's potential inability to attract or retain the personnel necessary to achieve its business objectives or to maintain an effective risk management strategy; (ii) risks and uncertainties relating to Redline's liquidity, financing arrangements and capital including: any inability of Redline to manage cash flow fluctuations to fund working capital requirements or achieve its business objectives in a timely manner or obtain additional sources of funding; or any negative impact on Redline's ability to make future acquisitions, raise capital, issue debt and retain employees arising from stock price volatility and any declines in the market price of Redline's publicly traded securities. For additional information with respect to certain of these and other factors, see Redline's final prospectus (at page 83 under the heading "Risk Factor") which is available on Redline's website at www.redlinecommunications.com or through www.SEDAR.com. Unless otherwise required by applicable securities laws, Redline disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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 10,000 installations in 85 countries, and a global network of over 170 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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For further information: Redline Communications, Tom Hearne, CarolynAnderson, thearne(at)redlinecommunications.com,canderson(at)redlinecommunications.com, Tel: (905) 479-8344; Equicom Group,Craig Armitage, Vanessa Beresford, carmitage(at)equicomgroup.com,vberesford(at)equicomgroup.com, Tel: (416) 815-0700; Canaccord Adams, ChrisBowman, Tel: +44 (0)20 7050 6500(RDL)
REDLINE COMMUNICATIONS GROUP INC