March Networks Announces Fourth Quarter and Fiscal Year 2008 Financial Results

June 11, 2008

OTTAWA , June 11 /PRNewswire-FirstCall/ - 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 fourth quarter and fiscal year ended April 30, 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 fourth quarter of fiscal 2008 representing an increase of 6% as compared to revenue of $19.8 million in the fourth quarter of fiscal 2007 and was even as compared to the third quarter of fiscal 2008. Revenue of $94.4 million in the fiscal year ended April 30, 2008 represented an increase of 8% as compared to fiscal 2007.

The Company incurred a loss from continuing operations before income taxes in the fourth quarter of fiscal 2008 of $4.2 million as compared to a loss from continuing operations before income taxes of $0.7 million in the fourth quarter of fiscal 2007 and a loss of $2.9 million in the third quarter of fiscal 2008. Loss from continuing operations before income taxes in the fiscal year ended April 30, 2008 was $7.1 million as compared to earnings of $8.8 million in fiscal 2007. Earnings from continuing operations before income taxes in the fourth quarter and fiscal year ended reflected charges of $750,000 and $3.2 million in the fourth quarter and fiscal year ended April 30, 2008 , respectively, related to a retrofit program which the Company initiated in the second quarter of fiscal 2008 to proactively address design issues related to the Company's installed base of transit products. Earnings from continuing operations before income taxes in fiscal 2007 were negatively impacted by a $2.3 million lawsuit settlement.

The Company incurred a net loss from continuing operations in the fourth quarter of fiscal 2008 of $3.1 million or $0.18 per diluted share as compared to a net loss of $444,000 or $0.03 per diluted share in the fourth quarter of fiscal 2007 and a net loss of $3.1 million or $0.18 per share in the third quarter of fiscal 2008. The Company's net loss from continuing operations of $6.5 million or $0.38 per diluted share in fiscal 2008 compares to earnings of $4.8 million or $0.27 per diluted share in fiscal 2007.

"Fiscal 2008 was a year of investment and diversification for the Company that featured excellent revenue growth outside of our largest customer, the establishment of a strong European presence through the acquisition of Cieffe and enhancement of the Company's product portfolio through this acquisition and the Company's internal development initiatives. We expect 2009 to be an exciting year for the Company with a return to operating profitability, an industry leading product line and strong international growth" said Peter Strom , President and Chief Executive Officer.

Financial Highlights - Revenue excluding the Company's year to date largest customer was up 32% and 37% in the fourth quarter and fiscal 2008, respectively, from the comparable periods in fiscal 2007. - Fourth quarter 2008 revenue growth in the Banking market which grew by 36% as compared to the third quarter of fiscal 2008 and 19% as compared to the fourth quarter of fiscal 2007. - Fourth quarter 2008 gross margin as a percentage of revenue, excluding retrofit charge, was at its highest level since Q307 at 49.0%. - Acquisition of Cieffe for approximately $28.6 million including transaction costs. - Balance sheet remains strong with $63.4 million in cash and short term investments, a working capital ratio of 4:1 and no debt.

"The Company undertook some important initiatives in the fourth quarter of fiscal 2008 to put it on course for operating profitability and strong revenue growth in fiscal 2009 including trimming of the Company's cost structure and expansion of the Company's product line and market presence as a result of the acquisition of Cieffe." , said Ken Taylor , CFO of March Networks. "The Company's recently announced normal course issuer bid confirms that the Company's Management and Board of Directors believe in the prospects for the Company and that the market price for the Company's shares may be such that the purchase of common shares by the Company would be in the best interests of the Company and its shareholders."

Business Outlook

The Company's revenue expectations for the fiscal year ending April 30, 2009 are in the range of $100 million to $115 million.

The Company's expectations of operating earnings for fiscal 2009 are in the range of $0.5 million to $5 million. Operating earnings is a non-GAAP measure that the Company uses to evaluate its performance in order to emphasize cash flow impacting operating activities. The Company defines this measure as earnings before interest, taxes, amortization of acquired intangibles and stock based compensation expense. The Company's expectations of operating earnings for fiscal 2009 compare to preliminary results for fiscal 2008 which indicate a loss of approximately $7 million. This measure may not be comparable to similar measures used by other companies.

The Company will release its fourth quarter and fiscal year 2008 financial results on June 11, 2008 and will discuss the results on a conference call and webcast on June 12, 2008 at 8:30 a.m. EDT ( 1:30 p.m. BST ). The conference call may be accessed by dialing 1-800-732-0232 ( 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=2284920

A replay of the conference call will be available from June 12 at 10:30 a.m. EDT until June 19, 2008 at 11:59 p.m. EDT . The replay can be accessed at 1-877-289-8525 or 416-640-1917. The passcode for the replay is 21271057#

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.

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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 concentration with any end user customer will not exceed 10% in fiscal 2009. - 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 as a percentage of revenue in fiscal 2009 will improve relative to fiscal 2008. - The Company will lower its operating cost structure as a percentage of revenue relative to fiscal 2008. - The prevailing exchange rate for US dollars and Euros to Canadian dollars will be US$1.00=CDN$1.00 and Euro 1=CDN $1.50. - 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:

- Higher than targeted product costs and/or higher than expected declines in market pricing for new products. - Delays in product development programs for new products and new product features which lead to cost overruns and /or missed customer opportunities. - Weaker than expected success versus competitors in new customer opportunities and/or loss of existing customers to competitors. - Revenue shortfalls due to delays in securing new customer opportunities and the lack of long term purchase commitments from customers. - Slower than expected customer adoption of the Company's new product and service offerings. - Product issues in the Company's installed base that result in increased costs to the Company and/or lost revenue opportunities. - Difficulties integrating acquired business operations and related diversion of management attention. - Shortages or long lead times in component supply that affect the Company's ability to meet customer demand. - Reduced customer spending associated with the impact of deteriorating economic conditions and increasing fuel prices.

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 ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS (CDN $) ------------------------------------------------------------------------- (In thousands, except share and per-share amounts) (Unaudited) ------------------------------------------------------------------------- Fiscal Quarter Ended Fiscal Year Ended ------------------------------------------------------------------------- April 30, April 30, April 30, April 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUE $21,052 $19,815 $94,410 $87,620 ------------------------------------------------------------------------- COST OF REVENUE 11,500 10,475 53,972 41,650 ------------------------------------------------------------------------- GROSS MARGIN 9,552 9,340 40,438 45,970 ------------------------------------------------------------------------- EXPENSES: ------------------------------------------------------------------------- Selling, marketing and support 5,479 4,140 17,402 16,134 ------------------------------------------------------------------------- Research and development 4,584 3,027 15,823 9,356 ------------------------------------------------------------------------- General and administrative 3,598 3,286 14,625 10,970 ------------------------------------------------------------------------- Stock based compensation 446 291 2,760 1,485 ------------------------------------------------------------------------- Amortization of acquired intangibles 399 136 810 439 ------------------------------------------------------------------------- Lawsuit settlement - - - 2,263 ------------------------------------------------------------------------- Total expenses 14,506 10,880 51,420 40,647 ------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE UNDERNOTED ITEMS (4,954) (1,540) (10,982) 5,323 ------------------------------------------------------------------------- Interest and other income, net 773 848 3,921 3,428 ------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (4,181) (692) (7,061) 8,751 ------------------------------------------------------------------------- Current income tax expense 68 30 93 330 ------------------------------------------------------------------------- Future income tax expense (1,125) (278) (639) 3,606 ------------------------------------------------------------------------- NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS (3,124) (444) (6,515) 4,815 ------------------------------------------------------------------------- Discontinued operations - 2 - 1,227 ------------------------------------------------------------------------- NET EARNINGS (LOSS) $(3,124) $ (442) $(6,515) $ 6,042 ------------------------------------------------------------------------- Net earnings (loss) per share: ------------------------------------------------------------------------- Basic - from continuing operations $ (0.18) $ (0.03) $ (0.38) $ 0.29 ------------------------------------------------------------------------- - from discontinued operations - - - 0.07 ------------------------------------------------------------------------- $ (0.18) $ (0.03) $ (0.38) $ 0.36 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted - from continuing operations $ (0.18) $ (0.03) $ (0.38) $ 0.27 ------------------------------------------------------------------------- - from discontinued operations - - - 0.07 ------------------------------------------------------------------------- $ (0.18) $ (0.03) $ (0.38) $ 0.34 ------------------------------------------------------------------------- Shares used in per-share calculation: ------------------------------------------------------------------------- Basic 17,633,233 16,848,071 17,194,161 16,714,709 ------------------------------------------------------------------------- Diluted 18,547,657 17,931,083 18,162,208 17,938,447 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (CDN $) ------------------------------------------------------------------------- (In thousands) (Unaudited) ------------------------------------------------------------------------- April 30, April 30, 2008 2007 ------------------------------------------------------------------------- ASSETS ------------------------------------------------------------------------- Current assets: ------------------------------------------------------------------------- Cash $ 4,187 $ 3,526 ------------------------------------------------------------------------- Short-term investments 59,209 82,305 ------------------------------------------------------------------------- Restricted cash 2,410 2,775 ------------------------------------------------------------------------- Accounts receivable 15,432 19,396 ------------------------------------------------------------------------- Inventories 22,220 11,577 ------------------------------------------------------------------------- Prepaid expenses and other current assets 2,982 1,778 ------------------------------------------------------------------------- Future tax assets 4,556 2,198 ------------------------------------------------------------------------- Total current assets 110,996 123,555 ------------------------------------------------------------------------- Restricted cash - 833 ------------------------------------------------------------------------- Capital assets 2,492 2,720 ------------------------------------------------------------------------- Intangible assets 16,377 3,088 ------------------------------------------------------------------------- Future tax assets 21,081 21,975 ------------------------------------------------------------------------- Goodwill 22,048 5,397 ------------------------------------------------------------------------- TOTAL ASSETS $172,994 $157,568 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------------------------------------------- Current liabilities: ------------------------------------------------------------------------- Accounts payable $11,576 $ 5,790 ------------------------------------------------------------------------- Accrued liabilities 10,236 4,337 ------------------------------------------------------------------------- Refundable royalty advance 2,410 2,775 ------------------------------------------------------------------------- Deferred revenue 3,329 7,560 ------------------------------------------------------------------------- Income taxes payable 422 467 ------------------------------------------------------------------------- Total current liabilities 27,973 20,929 ------------------------------------------------------------------------- Acquisition escrow - 833 ------------------------------------------------------------------------- Deferred revenue 9,048 5,881 ------------------------------------------------------------------------- Long term compensation 451 - ------------------------------------------------------------------------- Future tax liabilities 4,362 - ------------------------------------------------------------------------- Total liabilities 41,834 27,643 ------------------------------------------------------------------------- Shareholders' equity 131,160 129,925 ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $172,994 $157,568 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $) ------------------------------------------------------------------------- (In thousands) (Unaudited) ------------------------------------------------------------------------- Fiscal Year Ended ------------------------------------------------------------------------- April 30, April 30, 2008 2007 ------------------------------------------------------------------------- Cash flows from operating activities: ------------------------------------------------------------------------- Net earnings - continuing operations $(6,515) $4,815 ------------------------------------------------------------------------- Net earnings - discontinued operations - 1,227 ------------------------------------------------------------------------- Items not affecting cash: ------------------------------------------------------------------------- Amortization of capital assets 1,367 1,020 ------------------------------------------------------------------------- Amortization of acquired intangibles 810 439 ------------------------------------------------------------------------- Gain on sale of discontinued operations - (1,226) ------------------------------------------------------------------------- Stock based compensation 2,760 1,485 ------------------------------------------------------------------------- Unrealized foreign exchange (gain)/ loss (229) (137) ------------------------------------------------------------------------- Future income taxes and non-refundable investment tax credits (1,756) 3,879 ------------------------------------------------------------------------- Net change in non-cash items: ------------------------------------------------------------------------- Continuing operations 7,161 (7,536) ------------------------------------------------------------------------- Discontinued operations - (550) ------------------------------------------------------------------------- Net cash generated by operating activities 3,598 3,416 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows from investing activities: ------------------------------------------------------------------------- ------------------------------------------------------------------------- (Purchase) redemption of short-term investments 23,725 3,456 ------------------------------------------------------------------------- Purchase of capital assets (757) (2,493) ------------------------------------------------------------------------- Acquisition of business (26,078) (8,316) ------------------------------------------------------------------------- Proceeds from sale of discontinued operations - 1,226 ------------------------------------------------------------------------- Net cash consumed by investing activities (3,110) (6,127) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows from financing activities: ------------------------------------------------------------------------- Issuance of share capital, net 314 2,933 ------------------------------------------------------------------------- Net cash generated by financing activities 314 2,933 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Increase in cash - continuing operations 802 (455) ------------------------------------------------------------------------- Decrease in cash - discontinued operations - 677 ------------------------------------------------------------------------- Net increase (decrease) in cash 802 222 ------------------------------------------------------------------------- Foreign exchange loss on foreign cash held (141) 12 ------------------------------------------------------------------------- Cash, beginning of period 3,526 3,292 ------------------------------------------------------------------------- Cash, end of period $4,187 $3,526 ------------------------------------------------------------------------- -------------------------------------------------------------------------

SOURCE MARCH NETWORKS CORPORATION

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