Summary Operating Results:
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$Cdn millions Q1-Q2 Q1-Q2
except EPS data Q2 2009 Q2 2008 2009 2008
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Revenue $28.3 $27.7 $56.1 $52.3
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Operating
earnings* 1.0 (1.0)** (0.2)** (0.1)**
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Net loss $(1.0) $(0.7) $(3.5) $(0.3)
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Loss per share $(0.06) $(0.04) $(0.20) $(0.02)
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* Non-GAAP measure: earnings (loss) before stock based compensation,
amortization of acquired intangibles, restructuring costs, interest
and income taxes. This measure may not be comparable to similar
measures used by other companies.
** Includes provisions of $1.2 million for potential contract losses in
Q1'2009 and $2.4 million for retrofit costs in Q2'2008.
OTTAWA, Nov. 26 /PRNewswire-FirstCall/ - March Networks(TM) (TSX:MN), a leading provider of innovative video and data applications used for security surveillance, monitoring, analysis and business optimization, today announced financial results for the second quarter and six months ended October 31, 2008 . All figures in Canadian dollars and in accordance with Canadian GAAP unless otherwise specified.
The Company achieved record revenue of
The Company recorded non-GAAP operating earnings of
The Company incurred a net loss in the second quarter of fiscal 2009 of
"Q2 was a solid quarter for the Company highlighted by record revenues in a challenging economic environment", said Peter Strom , President and Chief Executive Officer. "Our expanded product line, new vertical markets and growing international business are key contributors to these results."
Financial Highlights - Record level of quarterly and first half revenues. - Revenue excluding Wal-Mart and Cieffe increased by 40% and 33% in the second quarter and first six months of fiscal 2009, respectively, as compared to the same periods of fiscal 2008. - Recorded positive operating earnings for the first time in five quarters. - Completed Normal Course Issuer Bid for one million shares at a cost of $4.6 million ($2.6 million in the second quarter of fiscal 2009). "Staff reductions carried out in the second quarter of fiscal 2009 are part of continuing restructuring efforts to reduce costs in order to improve profitability and mitigate the risks associated with uncertain global economic conditions", said Ken Taylor, CFO of March Networks. "While economic instability may affect our second half results, the Company's second quarter and first half results indicate that the Company is on track to achieving its revenue and operating profitability objectives for fiscal 2009." Business Outlook The Company is maintaining its fiscal 2009 annual revenue and earnings guidance which was last published in the Company's first quarter fiscal 2009 results released on August 27th, 2008. 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 on-going cash flow impacting operating activities. The Company defines this measure as earnings before interest, taxes, amortization of acquired intangibles, restructuring costs and stock based compensation expense. This measure may not be comparable to similar measures used by other companies. The Company will discuss the results on a conference call and webcast on Thursday, November 27, 2008 at 8:30 a.m. EST (1:30 p.m. GMT). The conference call may be accessed by dialing 1-800-733-7571 (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=2471260 A replay of the conference call will be available from November 27, 2008 at 11:30 a.m. EST until December 4, 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 21288618#. About March Networks March Networks(TM) (TSX:MN) 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. ------------------------------------------------------------------------- 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 Company's restructuring efforts to address deteriorating economic conditions will achieve expected cost reductions without significantly impacting the Company's business. - The prevailing exchange rate for US dollars and Euros to Canadian dollars will be US$1.00=CDN$1.20 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: - The influence of deteriorating economic conditions on the Company and its customers and target markets which may impair the Company's ability to achieve its revenue and profitability objectives and negatively impact cash flow. - Weaker than expected success versus competitors in new customer and vertical market 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. - Higher than targeted product costs and/or higher than expected declines in market pricing for the Company's products. - Product issues that result in increased costs to the Company and/or lost revenue opportunities. - Delays in product development programs for new products and new product features which lead to cost overruns and /or missed customer opportunities. - Changes in the mix of revenues between fixed and mobile transportation solutions. - Shifts in value of the Canadian dollar relative to billing currencies. - 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. ------------------------------------------------------------------------- * 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 ------------------------------------------------------------------------- (Canadian dollars, amounts in thousands, except share and per-share data) (Unaudited) ------------------------------------------------------------------------- Three Months Ended Six Months Ended ------------------------------------------------------------------------- October 31, October 31, October 31, October 31, 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUE $28,276 $27,713 $56,080 $52,259 ------------------------------------------------------------------------- COST OF REVENUE 16,041 14,527 30,926 27,844 ------------------------------------------------------------------------- CONTRACT LOSSES AND RETROFIT - 2,439 1,187 2,439 ------------------------------------------------------------------------- GROSS MARGIN 12,235 10,747 23,967 21,976 ------------------------------------------------------------------------- EXPENSES: ------------------------------------------------------------------------- Selling, marketing and support 5,063 3,949 9,917 7,971 ------------------------------------------------------------------------- Research and development 3,509 3,705 7,552 6,669 ------------------------------------------------------------------------- General and administrative 2,663 4,096 6,666 7,394 ------------------------------------------------------------------------- Stock based compensation 279 805 763 1,610 ------------------------------------------------------------------------- Amortization of acquired intangibles 933 137 1,859 274 ------------------------------------------------------------------------- Restructuring costs 1,419 - 1,419 - ------------------------------------------------------------------------- Total expenses 13,866 12,692 28,176 23,918 ------------------------------------------------------------------------- LOSS BEFORE UNDERNOTED ITEMS (1,631) (1,945) (4,209) (1,942) ------------------------------------------------------------------------- Interest and other income, net 310 1,073 704 2,000 ------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES (1,321) (872) (3,505) 58 ------------------------------------------------------------------------- Current income tax expense (320) 22 (7) 22 ------------------------------------------------------------------------- Future income tax expense 20 (228) (29) 328 ------------------------------------------------------------------------- NET LOSS $(1,021) $ (666) $(3,469) $ (292) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss per share: ------------------------------------------------------------------------- Basic $ (0.06) $ (0.04) $ (0.20) $ (0.02) ------------------------------------------------------------------------- Diluted $ (0.06) $ (0.04) $ (0.20) $ (0.02) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Shares used in per-share calculation: ------------------------------------------------------------------------- Basic 17,480,295 16,886,938 17,712,643 16,881,446 ------------------------------------------------------------------------- Diluted 18,217,440 18,004,947 18,449,887 17,993,784 ------------------------------------------------------------------------- March Networks Corporation ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------- (Canadian dollars, amounts in thousands) (Unaudited) ------------------------------------------------------------------------- October 31, April 30, 2008 2008 ------------------------------------------------------------------------- ASSETS ------------------------------------------------------------------------- Current assets: ------------------------------------------------------------------------- Cash $ 6,265 $ 4,187 ------------------------------------------------------------------------- Short-term investments 35,585 59,209 ------------------------------------------------------------------------- Restricted cash 2,882 2,410 ------------------------------------------------------------------------- Accounts receivable 23,317 15,432 ------------------------------------------------------------------------- Inventories 25,602 22,220 ------------------------------------------------------------------------- Prepaid expenses and other current assets 2,311 2,982 ------------------------------------------------------------------------- Future tax assets 5,023 4,556 ------------------------------------------------------------------------- Total current assets 100,985 110,996 ------------------------------------------------------------------------- Capital assets 6,377 2,492 ------------------------------------------------------------------------- Intangible assets 14,546 16,377 ------------------------------------------------------------------------- Future tax assets 21,350 21,081 ------------------------------------------------------------------------- Goodwill 22,133 22,048 ------------------------------------------------------------------------- TOTAL ASSETS $165,391 $172,994 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------------------------------------------- Current liabilities: ------------------------------------------------------------------------- Accounts payable $ 9,984 $11,576 ------------------------------------------------------------------------- Accrued liabilities 10,691 10,236 ------------------------------------------------------------------------- Refundable royalty advance 2,882 2,410 ------------------------------------------------------------------------- Deferred revenue 2,245 3,329 ------------------------------------------------------------------------- Deferred leasehold inducement 132 - ------------------------------------------------------------------------- Income taxes payable 421 422 ------------------------------------------------------------------------- Total current liabilities 26,355 27,973 ------------------------------------------------------------------------- Deferred revenue 9,808 9,048 ------------------------------------------------------------------------- Deferred leasehold inducement 1,167 - ------------------------------------------------------------------------- Long term compensation 396 451 ------------------------------------------------------------------------- Future tax liabilities 3,849 4,362 ------------------------------------------------------------------------- Total liabilities 41,575 41,834 ------------------------------------------------------------------------- Shareholders' equity 123,816 131,160 ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $165,391 $172,994 ------------------------------------------------------------------------- March Networks Corporation ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------------------------------------------- (Canadian dollars, amounts in thousands) (Unaudited) ------------------------------------------------------------------------- Three Months Ended Six Months Ended ------------------------------------------------------------------------- October 31, October 31, October 31, October 31, 2008 2007 2008 2007 ------------------------------------------------------------------------- Cash flows from operating activities: ------------------------------------------------------------------------- Net loss $ (1,021) $ (666) $ (3,469) $ (292) ------------------------------------------------------------------------- Items not affecting cash: ------------------------------------------------------------------------- Amortization of capital assets 698 333 1,089 658 ------------------------------------------------------------------------- Amortization of acquired intangible assets 933 137 1,859 274 ------------------------------------------------------------------------- Stock based compensation 279 805 763 1,610 ------------------------------------------------------------------------- Unrealized foreign exchange (gain)/ loss 555 (481) 660 (615) ------------------------------------------------------------------------- Future income taxes and non- refundable investment tax credits 258 (479) (37) (143) ------------------------------------------------------------------------- Net change in non-cash items (3,294) 5,398 (14,089) 9,363 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net cash generated (consumed) by operating activities (1,592) 5,047 (13,224) 10,855 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows from investing activities: ------------------------------------------------------------------------- Redemption (purchase) of short-term investments 7,861 (4,524) 23,624 (9,813) ------------------------------------------------------------------------- Purchase of capital assets (2,796) (252) (3,446) (377) ------------------------------------------------------------------------- Acquisition of business (41) - (699) - ------------------------------------------------------------------------- Net cash generated (consumed) by investing activities 5,024 (4,776) 19,479 (10,190) ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows from financing activities: ------------------------------------------------------------------------- Issuance (repurchase) of share capital, net (2,622) 75 (4,574) 127 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net cash generated (consumed) by financing activities (2,622) 75 (4,574) 127 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net increase in cash 810 346 1,681 792 ------------------------------------------------------------------------- Foreign exchange gain (loss) on foreign cash held 325 (164) 397 (187) ------------------------------------------------------------------------- Cash, beginning of period 5,130 3,949 4,187 3,526 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash, end of period $ 6,265 $ 4,131 $ 6,265 $ 4,131 ------------------------------------------------------------------------- -------------------------------------------------------------------------SOURCE MARCH NETWORKS CORPORATION
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