RDL.L Regulatory News (RDL)

13 Nov 2007 12:00

Redline Communications Group Inc.13 November 2007 Immediate release 13 November 2007 NOT FOR DISTRIBUTION IN THE UNITED STATES All figures in U.S. Dollars unless specified Redline Reports Continued WiMAX Revenue Growth in Q3 2007 Company records 85% year-on-year growth of its WiMAX and broadband wireless sales TORONTO, ON - November 13, 2007 - Redline Communications Group Inc. ("RCG") (TSXand AIM: RDL), a leading provider of WiMAX and wireless broadband solutions,today announced results for Redline Communications, Inc. ("RCI"), for the three-and nine- month periods ended September 30, 2007. As a result of Redline's corporate reorganization, RCG became the parent companyof the AIM-listed RCI. The reorganization was completed immediately prior to thelisting of RCG on the Toronto Stock Exchange and the AIM market of the LondonStock Exchange plc on October 25, 2007. Financial Highlights •Revenue of $13.7 million in Q3 2007, an increase of 85% over Q3 2006 revenue of $7.4 million •WiMAX Forum CertifiedTM RedMAXTM product revenue of $7.8 million or 57% of total revenue for the quarter, an increase of 310% over Q3 2006 RedMAX revenue of $1.9 million •Gross margin of 37% or $5.1 million, compared to 29% or $2.1 million for the same period last year, an increase of approximately 139% in gross margin dollars year over year Operational Highlights • Successfully completed public offering on the Toronto Stock Exchange on October 25, 2007, raising $30 million (CDN) from treasury • Increased to 44 commercial, revenue-generating WiMAX networks from 38 at the end of Q2 2007 and 18 at the end of Q3 2006 •Recognized among the Best of WiMAX World award recipients for technology leadership for Redline Management Suite software •Completed several live public demonstrations of our RedMAX 4C at major industry events including Gitex in Dubai, WiMAX World in Chicago, as well as the recent WiMAX PlugFest and WiMAX Showcase in Taipei •Generated repeat orders from 17 existing RedMAX customers in Q3 to support WiMAX network expansions •Ranked among the fastest growing companies in the Deloitte Canadian Technology Fast 50, Deloitte North American Technology Fast 500 and the inaugural Deloitte Wireless Fast 50 awards program •Expanded the Redline Ecosystem Verification ('REV') program to include interoperability testing with Siemens WiMAX devices as well as with Wichorus on its ASN gateway development activities "We have made solid progress in Q3, including strong revenue growth, grossmargin improvement and the successful offering on the Toronto Stock Exchange.With the proceeds accelerating the development and launch of our Mobile WiMAXplatform coupled with excellent new business momentum, we believe we are ontrack with our guidance for 2007," said Majed Sifri, President and ChiefExecutive Officer."We are also maintaining momentum with our customers, increasing to more than130 paid trials and deployments of our RedMAX products, with 44 of our carriercustomers now delivering revenue generating services and placing additionalorders expanding their RedMAX systems," added Sifri. "This is significant inthat it has increased the pool of customers from which we generate consistentrecurring revenues." Financial ReviewIn the third quarter of 2007, Redline's revenue reached $13.7 million, anincrease of 85% from $7.4 million in Q3 2006 and in line with Q2 2007 revenue of$14.1 million. The majority of the revenue growth came from Redline's WiMAXproduct line, RedMAXTM, which now accounts for 57% of total revenue versus 26%in Q3 2006. -more- Gross margins improved to 37%, compared to 33% in Q2 2007 and 29% in Q3 2006,due to the significant growth in revenue and improved operational andmanufacturing efficiencies. Higher revenues also led to a decrease in the netloss which was $3.8 million in Q3 2007 versus $5.0 million in Q3 2006. Chief Executive Officer ReviewRedline is maintaining a leading position in the rapidly growing WiMAXmarketplace. The Company is focused on building a profitable business thatdelivers wireless broadband products that enable carriers and individuals tomeet their communications requirements. Redline continues to increase itspresence in key emerging markets, including the Middle East and Latin Americaand today counts among its customers more than 20 of the world's top 100telecommunications service providers. During the third quarter of 2007, Redline made significant progress in thefollowing key areas: Converting RedMAX trials into commercial deployments:Building on strong WiMAX returns on investment, there are now 44 carriersgenerating revenue from their RedMAX deployments, compared with 38 at the end ofQ2 2007, and 18 at the end of Q3 2006. Many of these carriers are now alsobeginning to aggressively expand their networks to potentially target moresubscribers, resulting in consistent recurring revenue from our growing customerbase. Scaling resources to support the increased number of deployments of its WiMAXand broadband wireless solutions:Redline has increased the number of global reseller and deployment partners to140 from 100 in December 2006. Redline's deployment partners now include severalglobal systems integrators with established track records of planning,installing and managing carrier networks Continued focus on emerging markets:Redline has maintained its presence in high-growth international markets. In Q3,Redline added new RedMAX deployments and expansions in each of its regionalmarkets, including major new networks as well as network expansions in Paraguay,Brazil, Egypt, Lebanon, and Gabon. Maintaining technology leadership:Redline is among the leaders in the development of Mobile WiMAX products, asrecently demonstrated by its successful participation at the recent WiMAX ForumPlugfest in Taiwan. The company expects to be among the first to complete WiMAXForum Certification for the 802.16e-2005 profile for Mobile WiMAX. Successful dual listing on TSXRedline successfully completed a public offering on the Toronto Stock Exchangeraising CDN$30 million from treasury. The issue was oversubscribed and attractedstrong demand from both North American and European institutions. Redline willuse the proceeds of the offer towards its geographical expansion and maintaininga leading position within the WiMAX arena. OutlookRedline remains well positioned for continued growth on two key fronts. Newcustomers have begun aggressively rolling out commercially-operating RedMAXnetworks, whilst our existing customer base continues to upgrade their networksto meet consumer demands for WiMAX services. The Company expects to begin earlydeployments of its RedMAX 4C family of Mobile WiMAX products this year, whichwill enable Redline to serve more carriers in more global markets. Due to thispositive momentum, the Company believes it remains on track to meet revenueguidance of between $31 million and $33 million for the second half of 2007 andattain revenue growth in excess of 50% during 2008. Investor Conference CallRedline's Q3 2007 conference call will be held on Tuesday, November 13 at 8:30am EST (1:30 pm GMT). Participants can join the conference call by dialing:416-644-3428, 1-800-591-7539 (Canada) or 00 800 2288 3501 (U.K.). To access thelive webcast of the Redline conference call, visit the 'Investors' section ofRedline's website www.redlinecommunications.com or www.newswire.ca (WindowsMediaPlayer(R) required). The conference call will be archived for replay bytelephone until November 20, 2007 at 416-640-1917 or 1-877-289-8525 (code21252817#) and by webcast for one year at www.redlinecommunications.com. REDLINE COMMUNICATIONS, INC.Interim Consolidated Balance Sheets(Expressed in U.S. dollars) September 30, December 31, 2007 2006 (Unaudited)Assets Current assets:Cash $4,689,552 $17,985,391Restricted cash 8,033 8,033Accounts receivable 18,107,269 12,359,585Other receivables 553,465 468,028Inventories 9,700,669 9,087,367Prepaid expenses 626,937 352,358 33,685,925 40,260,762 Property, plant and equipment 1,398,332 1,166,377 Other assets 105,083 105,842 $35,189,340 $41,532,981 Liabilities and Shareholders' Equity Current liabilities:Accounts payable and accrued liabilities $8,776,308 $9,221,150Deferred revenue 3,072,704 2,362,612Current portion of capital lease obligations 245,673 215,639Current portion of loan payable 1,724,382 1,244,528 13,819,067 13,043,929 Loan payable 1,943,078 3,255,472 Capital lease obligations 93,438 151,653 Shareholders' equity:Share capital 100,331,156 97,746,833Share purchase loan (413,408) (413,408)Contributed surplus 4,566,317 3,395,260Deficit (85,461,776) (75,958,226)Accumulated other comprehensive income 311,468 311,468 19,333,757 25,081,927 $35,189,340 $41,532,981 REDLINECOMMUNICATIONS,INC.InterimConsolidatedStatements ofOperations andDeficit(Expressed in U.S.dollars) Three months ended Nine months ended September 30, September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Revenue:Product $12,615,596 $6,700,759 $36,644,374 $21,861,475Maintenance 1,046,205 681,458 2,783,379 1,892,802 13,661,801 7,382,217 39,427,753 23,754,277 Cost ofrevenue(1) 8,554,735 5,242,842 25,058,980 15,394,673 Gross margin 5,107,066 2,139,375 14,368,773 8,359,604 Expenses:Research anddevelopment(1) 2,471,877 2,503,425 6,996,051 6,840,924Finance andadministration(1) 2,036,762 981,415 4,417,378 3,163,299Sales andmarketing(1) 3,740,085 3,307,304 11,007,764 9,888,293 8,248,724 6,792,144 22,421,193 19,892,516 Loss beforethe undernoted (3,141,658) (4,652,769) (8,052,420) (11,532,912) Other expenses(income):Interest andother 101,001 (13) 216,401 (23,590)Foreignexchange loss(gain) 121,540 (2,989) 293,786 86,357Amortization ofproperty, plantand equipment 392,779 304,069 883,277 729,384 615,320 301,067 1,393,464 792,151 Loss beforeincome taxes (3,756,978) (4,953,836) (9,445,884) (12,325,063) Income taxes 6,784 18,482 57,666 74,138 Loss for theperiod (3,763,762) (4,972,318) (9,503,550) (12,399,201) Deficit,beginning ofperiod (81,698,014) (68,210,812) (75,958,226) (60,783,929) Deficit, endof period $ (85,461,776) $(73,183,130) $(85,461,776) $(73,183,130) Loss per share:Basic anddiluted $ (0.09) $(2.96) $(0.22) (10.13) Weighted averagenumber ofcommon shares usedin basic anddiluted lossper share 43,295,760 1,681,500 43,169,740 1,224,357 (1)Includesstock-basedcompensationexpense asfollows: Cost ofrevenue $31,548 $46,556 $94,674 $187,836 Expenses: Research anddevelopment 117,838 86,341 334,501 348,356 Finance andadministration 90,083 34,358 268,639 593,776 Sales andmarketing 176,984 130,990 473,243 528,491 Non-GAAP financial measuresThis press release contains non-GAAP financial measures, including net incomeand earnings per share for the first half of fiscal 2007 excluding the impact ofstock compensation charges. Redline management believes that these non-GAAPfinancial measures, when considered together with the GAAP financial measures,provide information that is useful to investors in understandingperiod-over-period operating results separate and apart from items that may, orcould, have a disproportionate impact on results in any particular period.Management also believes that these non-GAAP financial measures enhance theability of investors to analyze Redline business trends and to better understandthe company's performance. In addition, Redline may utilize non-GAAP financialmeasures as a guide in its forecasting, budgeting, and long-term planningprocess and to measure operating performance for some management compensationpurposes. Any analysis of non-GAAP financial measures should be used only inconjunction with results presented in accordance with GAAP. Three months ended September 30, 2007 Three months ended September 30, 2006 GAAP Adjustment Non GAAP GAAP Adjustment Non GAAP (unaudited) (unaudited) RevenueProduct 12,615,596 12,615,596 6,700,759 6,700,759Maintenance 1,046,205 1,046,205 681,458 681,458 ------- -------- ------- -------- 13,661,801 13,661,801 7,382,217 7,382,217 Cost ofrevenue 8,554,735 (31,548) (a) 8,523,187 5,242,842 (46,556) (a) 5,196,286 Gross Margin 5,107,066 31,548 5,138,614 2,139,375 46,556 2,185,931 ExpensesResearch anddevelopment 2,471,877 (117,838) (a) 2,354,039 2,503,425 (86,341) (a) 2,417,084 Finance andadministration 2,036,762 (90,083) (a) 1,946,679 981,415 (34,358) (a) 947,057 Sales andmarketing 3,740,085 (176,984) (a) 3,563,101 3,307,304 (130,990) (a) 3,176,314 ------- ------- -------- ------- ------- -------- ---- ---- 8,248,724 (384,905) 7,863,819 6,792,144 (251,689) 6,540,455 Loss beforeundernoted (3,141,658) 416,453 (2,725,205) (4,652,769) 298,245 (4,354,524) Other expenses(income)Interest andother 101,001 101,001 (13) (13)Foreignexchange loss(gain) 121,540 121,540 (2,989) (2,989) ------- -------- ------- --------Amortizationof property,plant 392,779 392,779 304,069 304,069andequipment ------- -------- ------- -------- 615,320 615,320 301,067 301,067 Loss beforeincome taxes (3,756,978) 416,453 (3,340,525) (4,953,836) 298,245 (4,655,591) Income taxes 6,784 6,784 18,482 18,482 ------- ------- ---- -------- ------- ------- ---- -------- Loss for theperiod (3,763,762) 416,453 (3,347,309) (4,972,318) 298,245 (4,674,073) Basic anddiluted lossper share (0.09) (0.08) (2.96) (2.78) Weightedaverage numberof commonshares 43,295,760 43,295,760 1,681,500 1,681,500 (a) The effectof stock basedcompensation REDLINECOMMUNICATIONS,INC.InterimConsolidatedStatements of CashFlows(Expressed in U.S.dollars) Three months ended Nine months ended September 30, September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Cash provided by(used in): Operatingactivities:Loss for theperiod $ (3,763,762) $(4,972,318) $(9,503,550) $(12,399,201)Items not affectingcash:Amortization ofproperty, plantand equipment 392,779 304,069 883,277 729,384 Stock-basedcompensationexpense 416,453 298,245 1,171,057 1,658,459 Change in non-cashoperatingworking capital 727,954 (360,981) (6,454,993) (2,521,225) (2,226,576) (4,730,985) (13,904,209) (12,532,583) Financingactivities: Issuance of sharecapital,net of issuancecosts 38,225 306,070 2,584,323 6,536,899 Loan payable (399,872) - (832,539) -Principal paymentof capitalleaseobligations (50,695) (44,326) (216,233) (116,011) (412,342) 261,744 1,535,551 6,420,888 Investingactivities:Purchase ofproperty, plantandequipment (375,568) (287,659) (927,181) (789,002) Decrease inrestricted cash - - - 85,601 (375,568) (287,659) (927,181) (703,401) Decrease in cash (3,014,486) (4,756,900) (13,295,839) (6,815,096) Cash, beginningof period 7,704,038 5,437,800 17,985,391 7,495,996 Cash, end ofperiod $4,689,552 $680,900 $4,689,552 $680,900 Supplemental cashflow information:Interest paid $131,032 $12,655 $376,803 $38,052 Supplementaldisclosuresrelating tonon-cash financingand investingactivities: Purchase ofproperty, plantand equipment undercapital leases 42,258 - 188,051 25,995 Forward-Looking Statements Certain statements in this release constitute forward-looking statements orforward-looking information within the meaning of applicable securities laws andare made pursuant to the "safe harbour" provisions of such laws. Statementsrelated to potential benefits of, and demand for, Redline's products includingstatements with respect to the features and benefits that may be achievedthrough the use of Redline's products and the relative position of theseproducts vis-a-vis competitive offerings in the industry are forward-lookingstatements which are subject to certain assumptions, risks and uncertainties.These risks and uncertainties include such factors as rapid technologicalchanges, long uncertain sales cycles, demand for our products, the introductionof competing technologies, meeting industry standards, regulatory risk,dependence on key partners and resellers and other similar factors that maycause the actual results, performance or achievements of Redline to differmaterially from the results, performance, achievements or developments expressedor implied by such forward-looking statements. Readers are cautioned not toplace undue reliance on such statements. Redline assumes no obligation to updateor revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. About Redline Communications Redline Communications is the leading provider of standards-based wirelessbroadband solutions. Redline's RedMAXTM WiMAX Forum CertifiedTM systems andaward-winning RedCONNEXTM family of broadband wireless infrastructure productsenable service providers and other network operators to cost-effectively deliverhigh-bandwidth services including voice, video and data communications. Redlineis committed to maintaining its wireless industry leadership with the continueddevelopment of WiMAX and other advanced wireless broadband products. With morethan 75,000 installations in 80 countries, and a global network of over 140partners, Redline's experience and expertise helps service providers,enterprises and government organizations roll out the services and applicationsthat drive their business forward. For more information, visitwww.redlinecommunications.com. - 30 - NOTE: All registered and unregistered trademarks mentioned in this release arethe property of their respective owners. For further detailsRedline Communications Equicom GroupTom Hearne, Chief Financial Craig Armitage / Vanessa BeresfordOfficerCarolyn Anderson, Communications carmitage@equicomgroup.com /Director vberesford@equicomgroup.comcanderson@redlinecommunications.com +1 416 815 0700Tel: + 1 905 479 8344Canaccord Adams Buchanan CommunicationsChris Bowman Jeremy Garcia / James StrongTel: +44 (0)20 7050 6500 jeremyg@buchanan.uk.com / jamess@buchanan.uk.com Tel: +44 (0)20 7466 5000 . This information is provided by RNS The company news service from the London Stock Exchange