March Networks Announces Fourth Quarter and Fiscal Year 2010 Financial Results
Summary Operating Results:
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Q4 Q4 Fiscal Fiscal
$Cdn millions except EPS data 2010 2009 2010 2009
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Revenue $21.2 $21.5 $86.6 $101.2
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Non-GAAP operating loss* (4.6) (1.4) (7.3) (1.0)
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Net loss $(27.5) $(1.9) $(32.5) $(6.6)
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Loss per share $(1.58) $(0.11) $(1.88) $(0.38)
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Cash and short-term investments $47.9 $50.9 $47.9 $50.9
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* Non-GAAP measure: earnings (loss) before stock based compensation,
amortization of acquired intangibles, special charges, interest and
income taxes. This measure may not be comparable to similar measures used
by other companies.
OTTAWA, June 9 /PRNewswire-FirstCall/ - March Networks(R) (TSX:MN), a global provider of intelligent IP video solutions, today announced financial results for the quarter and fiscal year ended April 30, 2010. All figures are in Canadian dollars and in accordance with Canadian GAAP unless otherwise specified.
The Company's fourth quarter fiscal 2010 revenue was $21.2 million, representing a decrease of 1% as compared to revenue of $21.5 million in the fourth quarter of fiscal 2009. The Company's fiscal 2010 revenue of $86.6 million declined by 14% as compared to revenue of $101.2 million in fiscal 2009.
The Company recorded a non-GAAP operating loss of $4.6 million in the fourth quarter of fiscal 2010, representing an increase of $3.2 million relative to the non-GAAP operating loss of $1.4 million in the fourth quarter of fiscal 2009. Non-GAAP operating losses increased by $6.3 million in fiscal 2010 to a loss of $7.3 million as compared to a non-GAAP operating loss of $1.0 million in fiscal 2009.
The Company recorded write-downs totaling $21.3 million, or $1.23 per share, against the Company's future income tax assets and investment tax credits in the fourth quarter of fiscal 2010. Including the impact of the write-downs, the Company incurred a net loss in the fourth quarter of fiscal 2010 of $27.5 million, or $1.58 per share, and a net loss of $32.5 million, or $1.88 per share, for the fiscal year ended April 30, 2010 which compares to a loss of $1.9 million or $0.11 per share in the fourth quarter of fiscal 2009 and a loss of $6.6 million, or $0.38 per share, in the fiscal year ended April 30, 2009.
The Company's cash and short-term investment position remains strong at $47.9 million at April 30, 2010.
"We continued to execute on our strategic initiatives in fiscal 2010," said Peter Strom, CEO of March Networks. "Looking forward, we are more confident in the economic outlook and have a clearer visibility of our revenue pipeline."
The Company increased revenue by 6% sequentially from the third quarter of fiscal 2010 as existing customers demonstrated their confidence in and reliance on the March Networks portfolio of products and services. This commitment was highlighted by significant repeat purchases from key enterprise customers including a $7 million win with a top 10 global financial institution in which the March Networks Banking solution displaced a competitor's system. This contract assisted March Networks in achieving a record revenue quarter in the U.S. banking market. Additionally, the company secured a Managed Services contract with a large retail customer to manage its network of 28,000 systems further demonstrating the customer satisfaction levels that March Networks has achieved within the world's most demanding enterprises.
"Fiscal 2010 was a difficult year for the Company as its expectations of revenue and profitability growth were dampened by weak demand in key markets and a dramatic strengthening in the value of the Canadian dollar relative to billing currencies," said Ken Taylor, CFO of March Networks. "The Company continues to believe that it will return to profitability as the economy recovers and utilize its carry forwards to offset taxes otherwise payable in Canada in the future."
The company will discuss the results on a conference call and webcast on Thursday, June 10, 2010 at 8:30 a.m. EDT (12:30 p.m. UTC). The conference call may be accessed by dialing 1-877-974-0445 (North America) or +1-416-644-3414.
The conference call webcast can be accessed at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3080000
A replay of the conference call will be available from June 10, 2010 at 10:30 a.m. EDT until June 17, 2010 at 11:59 p.m. EDT. The replay can be accessed at 1-877-289-8525 or +1 416-640-1917. The passcode for the replay is 4302549 followed by the number sign.
About March Networks
March Networks(R) (TSX:MN) is a global provider of intelligent IP video solutions. For close to a decade, the company has helped some of the world's largest commercial and government organizations transition from traditional CCTV to networked video surveillance used for advanced security, loss prevention and risk mitigation. VideoSphere(R), the company's enterprise-class video management portfolio, includes open-platform VMS software complemented by high-definition IP cameras, encoders, video analytics and recording platforms, as well as outstanding professional and managed services. March Networks systems are delivered through an extensive distribution and partner network and currently support over one million channels of video in more than 50 countries. www.marchnetworks.com.
* MARCH NETWORKS, VideoSphere and the MARCH NETWORKS logo are registered trademarks of March Networks Corporation. All other trademarks are the property of their respective owners.
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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 contained in this
release include, but are not limited to, the following:
- Under stable economic conditions the market for the Company's
products will grow by greater than 10% annually, however market
growth will be impaired by depressed global economic conditions.
- The Company will successfully reduce product costs to improve the
Company's gross margin and/or avoid any margin erosion associated
with competitive pricing pressure.
- Annual operating expenses, excluding stock based compensation and
amortization of acquired intangibles, will not exceed fiscal 2010
levels.
- The Company will develop and deliver new products on time in order to
satisfy the demands of current and potential customers.
- The Company's recently introduced products will address the needs of
new and existing customers and contribute to near term profitability.
- The average exchange rates for US dollars and Euros to Canadian
dollars will be US$1.00=CDN$1.00 and
Euro 1=CDN$1.30.
- The Company will have adequate component supply to meet customer
demand.
- 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 Company's quarterly revenue is generally dependent upon
conversion of opportunities in the sales pipeline during the quarter
and, as a result, revenue and operating results can be difficult to
predict and can fluctuate substantially. The Company's success in
customer opportunities may be negatively impacted by depressed global
economic conditions, changes in sales cycles, and/or weaker than
expected success versus competitors.
- The Company's gross margin and operating results may be adversely
affected by pricing levels required to compete successfully and/or if
its product cost targets cannot be achieved.
- The Company plans to become increasingly dependent upon third parties
in its product development cycle as well as for product supply.
Higher than expected costs and delayed or lost revenue may result if
these activities are not transitioned and managed effectively.
- 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.
- Weaker than expected market acceptance of new products introduced by
the Company and new versions of the Company's current products by
existing customers.
- Longer than expected lead times from component suppliers could result
in production delays resulting in delayed or lost revenue.
- Shifts in value of the Canadian dollar relative to billing
currencies.
- A write down of the value of future tax assets if the Company is
unable to demonstrate it is more likely than not to generate
sufficient profits to realize the value of these assets.
Additional risks are discussed herein and under "Risk Factors" in the
Company's Annual Information Form available online at www.sedar.com.
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March Networks Corporation
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(Canadian dollars, amounts in thousands, except share and per-share data)
(Unaudited)
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Three Months Ended Fiscal Year Ended
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April 30, April 30, April 30, April 30,
2010 2009 2010 2009
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REVENUE $21,235 $21,530 $86,626 $101,191
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Cost of revenue 13,660 11,422 51,103 54,162
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Contract losses - - - 1,187
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GROSS MARGIN 7,575 10,108 35,523 45,842
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EXPENSES:
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Selling, marketing and
support 5,767 4,724 21,105 19,846
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Research and development 3,886 2,177 12,654 12,176
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General and administrative 2,567 4,569 9,069 14,796
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Stock based compensation 273 283 955 1,345
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Amortization of acquired
intangible assets 883 899 3,566 3,779
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Write down of investment
tax credits 4,156 - 4,156 -
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Restructuring costs - - - 2,665
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Total expenses 17,532 12,652 51,505 54,607
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LOSS BEFORE UNDERNOTED
ITEMS (9,957) (2,544) (15,982) (8,765)
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Interest and other
income, net 51 250 407 1,227
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LOSS BEFORE INCOME TAXES (9,906) (2,294) (15,575) (7,538)
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Current income tax expense 3 134 85 78
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Future income tax expense
(recovery) 17,555 (568) 16,833 (1,026)
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NET LOSS $(27,464) $(1,860) $(32,493) $(6,590)
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Loss per share:
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Basic $(1.58) $(0.11) $(1.88) $(0.38)
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Diluted $(1.58) $(0.11) $(1.88) $(0.38)
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Shares used in per-share
calculation:
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Basic and diluted 17,375,178 17,191,908 17,287,886 17,504,349
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March Networks Corporation
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CONSOLIDATED BALANCE SHEETS
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(Canadian dollars, amounts in thousands)
(Unaudited)
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April 30, April 30,
2010 2009
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ASSETS
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Current assets:
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Cash and cash equivalents $9,492 $10,126
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Short-term investments 38,384 40,740
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Accounts receivable 16,441 14,892
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Inventories 11,337 23,932
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Prepaid expenses and other current assets 3,549 4,040
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Future tax assets 315 5,128
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Total current assets 79,518 98,858
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Property and equipment 5,205 5,940
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Intangible assets 10,192 12,931
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Future tax assets 4,200 15,646
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Investment tax credits - 6,505
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Goodwill 22,429 22,429
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TOTAL ASSETS $121,544 $162,309
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable $8,658 $12,004
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Accrued liabilities 7,192 7,328
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Deferred revenue 7,795 7,851
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Deferred leasehold inducement 132 132
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Short-term compensation 2 -
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Income taxes payable 101 390
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Total current liabilities 23,880 27,705
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Deferred revenue 4,789 8,239
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Deferred leasehold inducement 968 1,100
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Long-term compensation 437 666
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Future tax liabilities 2,372 3,330
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Total liabilities 32,446 41,040
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Shareholders' equity 89,098 121,269
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $121,544 $162,309
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March Networks Corporation
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Canadian dollars, amounts in thousands)
(Unaudited)
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Three Months Ended Fiscal Years Ended
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April 30, April 30, April 30, April 30,
2010 2009 2010 2009
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Cash flows from operating
activities:
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Net loss $(27,464) $(1,860) $(32,493) $(6,590)
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Items not affecting cash:
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Amortization of capital
and intangible assets 248 543 1,768 2,069
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Amortization of
intangible assets related
to business acquisitions 883 899 3,566 3,779
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Stock based compensation
and shares issued to
directors 273 350 955 1,412
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Unrealized foreign
exchange (gain)/loss (326) (41) (1,102) 488
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Future income taxes and
non-refundable investment
tax credits 22,609 464 20,989 (207)
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Net change in non-cash
items 1,965 4,083 5,530 (4,228)
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Net cash generated
(consumed) by operating
activities (1,812) 4,438 (787) (3,277)
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Cash flows from
investing activities:
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Redemption (purchase) of
short-term investments 116 (2,887) 2,357 18,469
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Purchase of capital and
intangible assets (229) (48) (1,616) (4,146)
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Acquisition of business - 1 - (698)
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Net cash generated
(consumed) by investing
activities (113) (2,934) 741 13,625
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Cash flows from
financing activities:
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Issuance (repurchase) of
share capital, net (1) (54) 10 (4,628)
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Net cash generated
(consumed) by financing
activities (1) (54) 10 (4,628)
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Net increase (decrease)
in cash and cash
equivalents (1,926) 1,450 (36) 5,720
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Foreign exchange gain
(loss) on foreign cash
held (293) (114) (598) 219
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Cash and cash equivalents,
beginning of period 11,711 8,790 10,126 4,187
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Cash and cash equivalents,
end of period $9,492 $10,126 $9,492 $10,126
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SOURCE MARCH NETWORKS CORPORATION
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