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Ceragon - High Capacity Wireless Backhaul Solutions
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Redline Communications Reports Third Quarter 2009 Results and Announces Management Changes

11/17/09 - Redline Communications Group Inc. (TSX: RDL) 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.

By Robert Hoskins

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