March Networks Announces Financial Results for Third Quarter and First Nine
Months and Revised Guidance for Fiscal 2008
Summary Operating Results:
-------------------------------------------------------------------------
$Cdn millions Q1-Q3 Q1-Q3
except EPS data Q3 '08 Q3 '07 '08(x) '07(x)(x)
-------------------------------------------------------------------------
Revenue $21.1 $18.7 $73.4 $67.8
-------------------------------------------------------------------------
Earnings (loss) from
continuing operations
before income taxes (2.9) 1.9 (2.9) 9.4
-------------------------------------------------------------------------
Net earnings (loss)
from continuing
operations $ (3.1) $ 1.0 $ (3.4) $ 5.3
-------------------------------------------------------------------------
Diluted earnings
(loss) per share
from continuing
operations $(0.18) $0.06 $(0.20) $0.29
-------------------------------------------------------------------------
(x) Earnings include the impact of a $2.4 million charge in Q2'08 for
retrofit costs.
(xx) Earnings include the impact of a $2.3 million charge in Q2'07 for
patent litigation settlement.
OTTAWA, Feb. 27 /CNW Telbec/ - March Networks(TM) (TSX:MN; AIM:MNW), a
leading provider of innovative video and data applications used for security
surveillance, monitoring, analysis and business optimization, today announced
financial results for the third quarter and nine months of fiscal 2008 ended
January 31, 2008. All figures in Canadian dollars and in accordance with
Canadian GAAP unless otherwise specified.
The Company recorded revenue of $21.1 million in the third quarter of
fiscal 2008 representing an increase of 13% as compared with revenue of
$18.7 million in the third quarter of fiscal 2007 and a decline of 24% from
the second quarter of fiscal 2008. Revenue of $73.4 million in the first
nine months of fiscal 2008 represented an increase of 8% as compared to the
first nine months of fiscal 2007.
The Company incurred a loss from continuing operations before income
taxes in the third quarter of fiscal 2008 of $2.9 million as compared to
earnings from continuing operations before income taxes of $1.9 million in the
third quarter of fiscal 2007 and a loss of $872,000 in the second quarter of
fiscal 2008. Loss from continuing operations before income taxes in the first
nine months of fiscal 2008 was $2.9 million as compared to earnings of
$9.4 million in the first nine months of fiscal 2007. Earnings from continuing
operations before income taxes in the first nine months of fiscal 2008
reflected a one time $2.4 million charge related to a retrofit program which
the Company initiated to proactively address design issues related to the
Company's installed base of transit products. Earnings from continuing
operations before income taxes in the first nine months of fiscal 2007 were
negatively impacted by a $2.3 million lawsuit settlement.
The Company incurred a net loss from continuing operations in the third
quarter of fiscal 2008 of $3.1 million or $0.18 per diluted share as compared
to net earnings of $1.0 million or $0.06 per diluted share in the third
quarter of fiscal 2007 and a net loss of $666,000 or $0.04 per share in the
second quarter of fiscal 2008. The Company's net loss from continuing
operations of $3.4 million or $0.20 per diluted share in the first nine months
of fiscal 2008 compares to earnings of $5.3 million or $0.29 per share in the
first nine months of fiscal 2007.
"I am pleased with the continued diversification of revenue outside our
largest customer. We have aggressively invested in R&D and look forward to the
release of our next generation IP products and growing our European business
with the acquisition of Cieffe", said Peter Strom, President and CEO,
March Networks.
Financial Highlights
- Revenue excluding the Company's year to date largest customer was up
66% and 39% in the third quarter and first nine months of fiscal 2008,
respectively, from the comparable periods in fiscal 2007.
- Achieved record Transportation revenues of $8.9 million in the third
quarter of fiscal 2008.
- Generated $11.8 million of cash flow from operating activities in the
first nine months of fiscal 2008. Cash resources at January 31, 2008
were $97.2 million.
"The Company continued to grow and diversify its customer base in the
seasonally slow third quarter and will continue to evaluate strategic
investment opportunities to complement organic growth. The costs of developing
a new product portfolio are significantly impacting the Company's
profitability however these costs are expected to decline as these products
are introduced over the next four to six months", said Ken Taylor, CFO of
March Networks.
Business Outlook
March Networks maintains its focus on long-term growth objectives and
will continue to provide only full year guidance. The Company is maintaining
its annual revenue guidance but revising its earnings guidance from that which
was last published in the Company's second quarter results released on
November 28, 2007. The Company is revising its earnings guidance to reflect a
lower gross margin and higher operating expenses than were previously
anticipated. The Company's gross margin is expected to be negatively impacted
by a higher anticipated mix of low margin Transportation revenue and the lower
expected value of the US dollar relative to the Canadian dollar. Operating
expenses are expected to be higher than previously anticipated primarily as a
result of cost overruns on product development.
The Company's revenue expectations for the fiscal year ending April 30,
2008 are in the range of $94 million to $103 million.
The Company's expectations of net loss before income taxes for the fiscal
year ending April 30, 2008 are in the range of $3 million to $5 million.
The Company will discuss the results on a conference call and webcast on
February 28, 2008 at 8:30 a.m. EST (1:30 p.m. GMT). The conference call may be
accessed by dialing 1-800-732-6179 (North America) or 00 800 2288 3501
(Europe).
The conference call webcast can be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2164360
A replay of the conference call will be available from February 28, 2008
at 10:30 a.m. EST until March 6, 2008 at 11:59 p.m. EST. The replay can be
accessed at 1-877-289-8525 or 416-640-1917. The passcode for the replay is
21260468(number sign).
About March Networks
March Networks(TM) (TSX:MN; AIM:MNW) is a leading provider of intelligent
IP video and business analysis applications that enable organizations to
reduce losses, mitigate risks and improve security and operational efficiency.
The Company's advanced software suite includes enterprise-class video
management, powerful analytics and comprehensive managed and professional
services. Our software and systems are used by leading financial institutions,
retailers, transportation authorities and other organizations in more than
50 countries. For more information, please visit www.marchnetworks.com.
Forward-Looking Statements
-------------------------------------------------------------------------
Certain statements included in this release constitute forward-looking
statements, including those identified by the expressions "anticipate",
"believe", "plan", "estimate", "expect", "intend" and similar expressions
to the extent they relate to the Company or its management. The forward-
looking statements are not historical facts but reflect the Company's
current assumptions and expectations regarding future results or events.
These forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results or events to differ
materially from current assumptions and expectations.
Assumptions made in preparing the forward-looking statements and
financial guidance contained in this release include, but are not limited
to, the following:
- The market for the Company's products will grow by greater than
10% annually.
- The Company's revenue outside of its current largest customer will grow
by at least 30% from the level generated in fiscal 2007.
- The Company will develop and deliver new products on time in order to
satisfy the demands of current and potential customers.
- The Company will have adequate component supply to meet customer
demand.
- The Company's gross margin in fiscal 2008 will decline relative to
fiscal 2007 as a result of competitive pricing strategies and sales
mix.
- The Company's investments in sales and marketing and in research and
development will result in increased revenues and expanded addressable
markets.
- The prevailing exchange rate for US dollars to Canadian dollars will be
US$1.00(equal sign)CDN$1.00.
- The Company will continue to demonstrate its potential to generate
sufficient profits in future fiscal years to realize the value of its
future tax assets.
Factors that could cause actual results to differ materially from
expected results include, but are not limited to, the following:
- Delays in product development programs for new products and new product
features which lead to cost overruns and /or missed customer
opportunities.
- Increasing competition from larger entities resulting from the
consolidation of competitors and from larger entrants from other
industries.
- Shortages or long lead times in component supply that affect the
Company's ability to meet customer demand.
- Weaker than expected success versus competitors in new customer
opportunities and/or loss of existing customers to competitors.
- Product issues in the Company's installed base that result in increased
costs to the Company and/or lost revenue opportunities.
- Inability to attract and retain key employees.
- Higher than targeted product costs and/or higher than expected declines
in market pricing for new products.
- Revenue shortfalls due to delays in securing new customer opportunities
and the lack of long term purchase commitments from customers.
- Revenue declines associated with the weakening US economy including
spending prevailing exchange rate for US dollars to Canadian dollars
may be below the Company's expected level for fiscal 2007.
- Difficulties integrating acquired business operations and related
diversion of management attention.
Additional risks are discussed herein and under "Risk Factors" in the
Company's Annual Information Form available online at www.sedar.com.
-------------------------------------------------------------------------
(x) MARCH NETWORKS and the MARCH NETWORKS logo are trademarks of March
Networks Corporation. All other trademarks are the property of their
respective owners.
March Networks Corporation
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CONSOLIDATED STATEMENTS OF OPERATIONS (CDN $)
-------------------------------------------------------------------------
(In thousands, except share and per-share amounts)
(Unaudited)
-------------------------------------------------------------------------
Fiscal Quarter Ended Nine Months Ended
-------------------------------------------------------------------------
January 31, January 31, January 31, January 31,
2008 2007 2008 2007
-------------------------------------------------------------------------
-------------------------------------------------------------------------
REVENUE $ 21,099 $ 18,678 $ 73,358 $ 67,805
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COST OF REVENUE 12,189 9,516 42,472 31,175
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GROSS MARGIN 8,910 9,162 30,886 36,630
-------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------
Selling, marketing
and support 3,952 3,944 11,923 11,994
-------------------------------------------------------------------------
Research and
development 4,570 1,693 11,239 6,329
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General and
administrative 3,633 1,950 11,027 7,684
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Stock based
compensation 704 411 2,314 1,194
-------------------------------------------------------------------------
Amortization of
acquired intangibles 137 137 411 303
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Lawsuit settlement - - - 2,263
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Total expenses 12,996 8,135 36,914 29,767
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EARNINGS (LOSS)
BEFORE UNDERNOTED
ITEMS (4,086) 1,027 (6,028) 6,863
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Interest and other
income, net 1,148 915 3,148 2,580
-------------------------------------------------------------------------
EARNINGS (LOSS)
BEFORE INCOME TAXES
AND DISCONTINUED
OPERATIONS (2,938) 1,942 (2,880) 9,443
-------------------------------------------------------------------------
Current income
tax expense 4 100 26 300
-------------------------------------------------------------------------
Future income tax
expense 157 796 485 3,884
-------------------------------------------------------------------------
NET EARNINGS (LOSS)
FROM CONTINUING
OPERATIONS (3,099) 1,046 (3,391) 5,259
-------------------------------------------------------------------------
Discontinued
operations - 1,140 - 1,225
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NET EARNINGS (LOSS) $ (3,099) $ 2,186 $ (3,391) $ 6,484
-------------------------------------------------------------------------
Net earnings (loss)
per share:
-------------------------------------------------------------------------
Basic
- from continuing
operations $ (0.18) $ 0.06 $ (0.20) $ 0.32
-------------------------------------------------------------------------
- from discontinued
operations - 0.07 - 0.07
-------------------------------------------------------------------------
$ (0.18) $ 0.13 $ (0.20) $ 0.39
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted
- from continuing
operations $ (0.18) $ 0.06 $ (0.20) $ 0.29
-------------------------------------------------------------------------
- from discontinued
operations - 0.06 - 0.07
-------------------------------------------------------------------------
$ (0.18) $ 0.12 $ (0.20) $ 0.36
-------------------------------------------------------------------------
Shares used in
per-share
calculation:
-------------------------------------------------------------------------
Basic 17,021,047 16,749,515 16,948,366 16,675,771
-------------------------------------------------------------------------
Diluted 17,979,730 17,977,179 17,971,829 17,971,095
-------------------------------------------------------------------------
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March Networks Corporation
-------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS (CDN $)
-------------------------------------------------------------------------
(In thousands)
(Unaudited)
-------------------------------------------------------------------------
January 31, April 30,
2008 2007
-------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------
Current assets:
-------------------------------------------------------------------------
Cash and cash equivalents $ 4,216 $ 3,526
-------------------------------------------------------------------------
Short-term investments 93,010 82,305
-------------------------------------------------------------------------
Restricted cash 3,262 2,775
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Accounts receivable 14,961 19,396
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Inventories 12,684 11,577
-------------------------------------------------------------------------
Prepaid expenses and other current assets 2,467 1,778
-------------------------------------------------------------------------
Future tax assets 4,026 2,198
-------------------------------------------------------------------------
Total current assets 134,626 123,555
-------------------------------------------------------------------------
Restricted cash - 833
-------------------------------------------------------------------------
Capital assets 2,211 2,720
-------------------------------------------------------------------------
Intangible assets 2,677 3,088
-------------------------------------------------------------------------
Future income taxes 20,161 21,975
-------------------------------------------------------------------------
Goodwill 5,397 5,397
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TOTAL ASSETS $ 165,072 $ 157,568
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LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Current liabilities:
-------------------------------------------------------------------------
Accounts payable $ 10,740 $ 5,790
-------------------------------------------------------------------------
Accrued liabilities 8,774 4,337
-------------------------------------------------------------------------
Refundable royalty advance 2,509 2,775
-------------------------------------------------------------------------
Acquisition escrow 753 -
-------------------------------------------------------------------------
Deferred revenue 3,891 7,560
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Income taxes payable 447 467
-------------------------------------------------------------------------
Total current liabilities 27,114 20,929
-------------------------------------------------------------------------
Acquisition escrow - 833
-------------------------------------------------------------------------
Deferred revenue 8,877 5,881
-------------------------------------------------------------------------
Long term compensation 250 -
-------------------------------------------------------------------------
Total liabilities 36,241 27,643
-------------------------------------------------------------------------
Shareholders' equity 128,831 129,925
-------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 165,072 $ 157,568
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March Networks Corporation
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
-------------------------------------------------------------------------
(In thousands)
(Unaudited)
-------------------------------------------------------------------------
Nine Months Ended
-------------------------------------------------------------------------
January 31, January 31,
2008 2007
-------------------------------------------------------------------------
Cash flows from operating activities:
-------------------------------------------------------------------------
Net earnings - continuing operations $ (3,391) $ 5,259
-------------------------------------------------------------------------
Net earnings - discontinued operations - 1,225
-------------------------------------------------------------------------
Items not affecting cash:
-------------------------------------------------------------------------
Amortization of capital assets 1,003 651
-------------------------------------------------------------------------
Amortization of acquired intangibles 411 303
-------------------------------------------------------------------------
Gain on sale of discontinued operations - (1,221)
-------------------------------------------------------------------------
Stock based compensation 2,314 1,194
-------------------------------------------------------------------------
Unrealized foreign exchange (gain)/ loss (381) 50
-------------------------------------------------------------------------
Future income taxes and non-refundable
investment tax credits (236) 3,935
-------------------------------------------------------------------------
Net change in non-cash items:
-------------------------------------------------------------------------
Continuing operations 12,094 (5,408)
-------------------------------------------------------------------------
Discontinued operations - (489)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net cash generated by operating activities 11,814 5,499
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Cash flows from investing activities:
-------------------------------------------------------------------------
(Purchase) redemption of short-term investments (10,717) 1,026
-------------------------------------------------------------------------
Purchase of capital assets (494) (2,073)
-------------------------------------------------------------------------
Acquisition of business - (8,316)
-------------------------------------------------------------------------
Proceeds from sale of discontinued operations - 1,221
-------------------------------------------------------------------------
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Net cash consumed by investing activities (11,211) (8,142)
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Cash flows from financing activities:
-------------------------------------------------------------------------
Issuance of share capital, net 173 2,681
-------------------------------------------------------------------------
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Net cash generated by financing activities 173 2,681
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Increase in cash and cash equivalents -
continuing operations 776 (698)
-------------------------------------------------------------------------
Decrease in cash and cash equivalents -
discontinued operations - 736
-------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 776 38
-------------------------------------------------------------------------
Foreign exchange loss on foreign cash and
cash equivalents held (86) 18
-------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 3,526 3,292
-------------------------------------------------------------------------
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Cash and cash equivalents, end of period $ 4,216 $ 3,348
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For further information: Peter Wilenius, VP Corporate Development, March
Networks Corporation, (613) 591-8181, pwilenius(at)marchnetworks.com
(MN.)
END
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