Canadian WiMAX and wireless broadband provider Redline Communications Group, Inc. (RDL.TO, RDL.L) Tuesday morning reported a wider loss for the fourth quarter, hurt by restructuring charges as well as a decline in quarterly revenues. Looking ahead, the company has currently undergone organizational realignment and anticipates achieving profitability in the fourth quarter of fiscal 2009.
Redline Communications manufactures broadband wireless access and backhaul solutions that enable the delivery of high-speed wireless voice, data, and video services by network operators to their customers. The company's WiMAX Forum Certified WiMAX products have been trialed or deployed by more than 160 operators in 85 countries.
Fourth Quarter Results
The Markham, Ontario-based company reported a net loss of US$9.10 million or US$0.44 per share for the fourth quarter, wider than US$6.24 million or US$0.35 per share in the prior-year quarter.
Revenue for the quarter declined to US$10.60 million from US$12.82 million in the same quarter last year.
Product revenues for the fourth quarter were US$10.52 million and maintenance revenues were US$73.99 million. Product-wise, Broadband Wireless Infrastructure, or BWI, revenues increased to US$7.2 million from US$6.1 million in the prior-year quarter, due primarily to an increased focus on the business and a large order from an OEM partner. WiMAX revenues decreased to US$3.4 million from US$6.7 million in the year-ago quarter.
Gross margin for the quarter was US$2.1 million or 19.8% of revenues, lower than US$3.59 million in the comparable quarter a year ago. Excluding US$4.8 million of inventory adjustments, gross margin for the latest quarter would have been 49.1%.
Total expenses for the quarter was US$10.61 million, up from US$9.12 million in the year-ago quarter. Expenses included finance and administration expenses of US$2.49 million, higher than US$1.54 million in the year-ago quarter, and research and development expenses of US$2.62 million, down from US$3.12 million in the prior-year quarter. The company also incurred restructuring expenses of US$0.94 million in the latest quarter.
The company ended the fourth quarter with cash and cash equivalents of US$4.36 million compared to US$28.71 million at the end of the prior-year quarter.
In other developments, Redline has signed a term sheet for a funding arrangement with the Ministry of Economic Development for C$10 million, subject to negotiation of a final legal agreement, and is expected to commence in the second quarter of fiscal 2009.
The company also expects annual cost savings of US$12 million in fiscal 2009 related to the organizational realignment announced in December 2008 in combination with cost controls.
The restructuring was undertaken in order to align the company's operations and growth strategy to the current economic environment. The restructuring has resulted in a lower cost structure as well as a more focused product offering and sales expansion plan.
The company also appointed David Andrews as chief financial officer and strengthened its management team as well as board of directors in January. Most recently, Andrews served as the chief financial officer of Sun Microsystems of Canada, Inc. and is currently a board member of Microplanet Technology Corp. (MP.V, MCTYF.PK)
For fiscal 2008, the company reported a wider net loss of US$24.77 million or US$1.18 per share from US$15.75 million or US$1.24 per share in fiscal 2007.
Revenue for the full-year 2008 declined 17% to US$43.53 million from US$52.25 million in the previous year.
For fiscal 2009, Redline anticipates revenue levels to be similar to fiscal 2008, with a 30% reduction in operating expenses compared to last year.
Looking ahead, the company anticipates government-funded broadband network deployments to commence in key markets as the global economic picture becomes clearer.
In a statement, president and chief executive officer, Majed Sifri said, Looking ahead, we see resurgence in interest in our broadband wireless solutions as broadband networks have been identified as a key area for governments to stimulate economic growth. In the United States alone, US$7.2 billion is currently available through federal programs to fund the rollout of broadband networks. Redline is well positioned to benefit from these programs, as the Company's products meet the Buy American requirements.
RDL.TO closed Monday's regular trading session on the Toronto Stock Exchange at C$0.24, up C$0.01 on a volume of 93,500 shares, sharply higher than the three-month average volume of 26,900 shares.
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