March Networks Announces Third Quarter Fiscal 2010 Financial Results
Summary Operating Results:
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$Cdn millions Q3 Q3 Q1-Q3 Q1-Q3
except EPS data 2010 2009 2010 2009
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Revenue $20.0 $23.6 $65.4 $79.7
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Non-GAAP operating
earnings (loss)* (3.2) 0.6 (2.7) 0.4
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Net loss $(3.5) $(1.3) $(5.0) $(4.7)
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Loss per share $(0.20) $(0.07) $(0.29) $(0.27)
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Cash and short-term
investments $50.2 $46.6 $50.2 $46.6
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* Non-GAAP measure: earnings (loss) before stock based compensation,
amortization of acquired intangibles, restructuring charges, interest and
income taxes. This measure may not be comparable to similar measures used
by other companies.
OTTAWA, Feb. 24 /PRNewswire-FirstCall/ - March Networks(R) (TSX:MN), a global provider of intelligent IP video solutions, today announced financial results for the quarter and nine months ended January 31, 2010. All figures are in Canadian dollars and in accordance with Canadian GAAP unless otherwise specified.
The Company's third quarter fiscal 2010 revenue was $20.0 million, representing a decrease of 15% as compared to revenue of $23.6 million in the third quarter of fiscal 2009. On a year-to-date basis, the Company's revenue of $65.4 million declined by 18% as compared to revenue of $79.7 million in the first nine months of fiscal 2009.
The Company recorded a non-GAAP operating loss of $3.2 million in the third quarter of fiscal 2010, representing a decline of $3.8 million relative to non-GAAP operating earnings of $554,000 in the third quarter of fiscal 2009. Non-GAAP operating earnings during the first nine months of fiscal 2010 declined by $3.0 million to a loss of $2.7 million from non-GAAP operating earnings of $386,000 in the first nine months of fiscal 2009.
The Company incurred a net loss in the third quarter of fiscal 2010 of $3.5 million, or $0.20 per share, which represents a decline of $2.3 million, or $0.13 per share as compared to the net loss of $1.3 million incurred in the third quarter of fiscal 2009. Net loss for the nine months ended January 31, 2010 declined by $300,000 to $5.0 million or $0.29 per share as compared to the net loss of $4.7 million or $0.27 per share in the nine months ended January 31, 2009.
Notwithstanding the losses incurred in the third quarter and first nine months, the Company's cash and short-term investment position has increased to $50.2 million at January 31, 2010 from $46.6 million at January 31, 2009 through strong working capital management particularly with respect to reducing inventory levels.
"Due to weak sales visibility attributable to the impact of the economic downturn in markets such as the US and Dubai, as well as the strength of the Canadian dollar, the Company has not met its expectations to increase revenue and profitability in the first nine months of fiscal 2010," said Ken Taylor, CFO of March Networks. "The Company anticipates modest revenue growth in the fourth quarter as compared to the third quarter of fiscal 2010 and that fiscal 2010 revenue and profitability will be lower than fiscal 2009."
"In spite of the economic challenges and deferred capital spending within many of our vertical markets, the Company has experienced year to date revenue growth in the Commercial Industrial market," said Peter Strom, CEO of March Networks. "We continue to invest in R&D and technologies that address the evolving needs of customers in our key vertical markets in order to support revenue growth."
The Company will discuss the results on a conference call and webcast on Thursday, February 25, 2010 at 8:30 a.m. EST (1:30 p.m. GMT). The conference call may be accessed by dialing 1-877-974-0446 (North America) or +1 416-644-3417.
The conference call webcast can be accessed at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2949760
A replay of the conference call will be available from February 25, 2010 at 10:30 a.m. EST until March 4, 2010 at 11:59 p.m. EST. The replay can be accessed at 1-877-289-8525 or +1 416-640-1917. The passcode for the replay is 4206564 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.
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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.
- The Company will return to generating gross margin as a percentage of
revenue of at least 45%.
- The average fiscal 2010 exchange rates for US dollars and Euros to
Canadian dollars will approximate US$1.00=CDN$1.05 and
Euro 1=CDN$1.50.
- The Company will develop and deliver new products on time in order to
satisfy the demands of current and potential customers.
- The Company's investments in new geographical and vertical markets
will contribute to near term profitability.
- Annual operating expense run rate will be approximately $45 million,
excluding stock based compensation and amortization of acquired
intangibles.
- 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 ability to generate revenue growth and profitability
may be negatively impacted by delays in closing large projects in its
sales pipeline; increased pricing pressure; and economic instability
in key markets, such as the US, which increases the potential for
delay or cancellation of sales opportunities.
- Difficulty in developing the sales channel, technology partnerships
and support infrastructure required to compete successfully in new
vertical markets.
- Weaker than expected success versus competitors in new customer and
vertical market opportunities.
- 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.
- Higher than targeted product costs and/or higher than expected
declines in market pricing for the Company's products.
- Lack of availability or long lead times on key product components
and/or 3rd party products sold by the Company.
- Shifts in the value of the Canadian dollar relative to billing
currencies.
- A write down of the value of certain future tax assets if the Company
is unable to demonstrate that it is more likely than not to generate
sufficient future 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, VideoSphere and the MARCH NETWORKS logo are
registered 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
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(Canadian dollars, amounts in thousands, except share and per-share data)
(Unaudited)
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Three Months Ended Nine Months Ended
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January 31, January 31, January 31, January 31,
2010 2009 2010 2009
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REVENUE $20,005 $23,581 $65,391 $79,661
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Cost of revenue 12,200 11,814 37,443 42,740
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Contract losses - - - 1,187
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GROSS MARGIN 7,805 11,767 27,948 35,734
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EXPENSES:
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Selling, marketing
and support 5,281 5,205 15,338 15,122
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Research and
development 3,663 2,447 8,768 9,999
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General and
administrative 2,017 3,561 6,502 10,227
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Stock based
compensation (109) 299 682 1,062
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Amortization of
acquired intangible
assets 888 1,021 2,683 2,880
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Restructuring costs - 1,246 - 2,665
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Total expenses 11,740 13,779 33,973 41,955
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LOSS BEFORE UNDERNOTED
ITEMS (3,935) (2,012) (6,025) (6,221)
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Interest and other
income, net 192 273 356 977
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LOSS BEFORE INCOME
TAXES (3,743) (1,739) (5,669) (5,244)
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Current income tax
expense 21 (49) 82 (56)
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Future income tax
expense (242) (429) (722) (458)
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NET LOSS $(3,522) $(1,261) $(5,029) $(4,730)
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Loss per share:
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Basic $(0.20) $(0.07) $(0.29) $(0.27)
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Diluted $(0.20) $(0.07) $(0.29) $(0.27)
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Shares used in
per-share calculation:
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Basic 17,201,220 17,188,221 17,199,657 17,581,538
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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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January 31, April 30,
2010 2009
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ASSETS
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Current assets:
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Cash and cash equivalents $11,711 $10,126
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Short-term investments 38,500 40,740
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Accounts receivable 14,101 14,892
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Inventories 15,189 23,932
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Prepaid expenses and other current assets 3,071 4,040
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Future tax assets 5,131 5,128
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Total current assets 87,703 98,858
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Capital assets 5,360 5,962
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Intangible assets 10,819 12,909
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Future tax assets 15,074 15,646
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Investment tax credits 7,405 6,505
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Goodwill 22,429 22,429
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TOTAL ASSETS $148,790 $162,309
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable $8,264 $12,004
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Accrued liabilities 6,702 7,328
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Deferred revenue 7,084 7,851
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Deferred leasehold inducement 132 132
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Short term compensation 7 -
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Income taxes payable 101 390
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Total current liabilities 22,290 27,705
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Deferred revenue 5,652 8,239
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Deferred leasehold inducement 1,001 1,100
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Long term compensation 462 666
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Future tax liabilities 2,606 3,330
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Total liabilities 32,011 41,040
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Shareholders' equity 116,779 121,269
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $148,790 $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 Nine Months Ended
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January 31, January 31, January 31, January 31,
2010 2009 2010 2009
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Cash flows from
operating activities:
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Net loss $ (3,522) $ (1,261) $ (5,029) $ (4,730)
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Items not affecting
cash:
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Amortization of capital
and intangible assets 679 437 1,520 1,526
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Amortization of
intangible assets
related to business
acquisitions 888 1,021 2,683 2,880
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Stock based
compensation and
shares issued to
directors (109) 299 682 1,062
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Unrealized foreign
exchange (gain)/loss (290) (131) (776) 529
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Future income taxes
and non-refundable
investment tax credits (542) (634) (1,620) (671)
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Net change in non-cash
items 2,635 5,778 3,565 (8,311)
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Net cash generated
(consumed) by operating
activities (261) 5,509 1,025 (7,715)
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Cash flows from
investing activities:
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Redemption (purchase) of
short-term investments (36) (2,268) 2,241 21,356
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Purchase of capital and
intangible assets (489) (652) (1,387) (4,098)
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Acquisition of business - - - (699)
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Net cash generated
(consumed) by investing
activities (525) (2,920) 854 16,559
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Cash flows from
financing activities:
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Issuance (repurchase)
of share capital, net 2 - 11 (4,574)
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Net cash generated
(consumed) by financing
activities 2 - 11 (4,574)
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Net increase (decrease)
in cash (784) 2,589 1,890 4,270
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Foreign exchange gain
(loss) on foreign cash
held (71) (64) (305) 333
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Cash, beginning of
period 12,566 6,265 10,126 4,187
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Cash, end of period $11,711 $8,790 $11,711 $8,790
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SOURCE MARCH NETWORKS CORPORATION
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