March Networks First Quarter Fiscal 2011 Financial Results Revenue Growth and Return to Profitability
Summary Operating Results:
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$Cdn millions Q1 Q1
except EPS data 2011 2010
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Revenue $26.3 $24.0
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Non-GAAP operating earnings* 1.9 0.5
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Net earnings (loss) $0.1 $(0.5)
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Diluted earnings per share $0.01 $(0.03)
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Cash and short-term investments $42.2 $45.3
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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, Aug. 25 /PRNewswire-FirstCall/ - March Networks(R) (TSX:MN), a global provider of intelligent IP video solutions, today announced financial results for the fiscal quarter ended July 31, 2010. All figures are in Canadian dollars and in accordance with Canadian GAAP unless otherwise specified.
The Company's first quarter fiscal 2011 revenue was $26.3 million, representing an increase of 10% as compared to revenue of $24.0 million in the first quarter of fiscal 2010 and an increase of 24% as compared to revenue of $21.2 million in the fourth quarter of fiscal 2010.
Highlights for the Company's first quarter ended July 31, 2010 include:
- Secured a $9 million dollar order from global retail customer for
delivery in the first half of fiscal 2011
- Achieved record revenue in Banking vertical
- Awarded nationwide deployment with top 5 Canadian bank
The Company recorded non-GAAP operating earnings of $1.9 million in the first quarter of fiscal 2011, representing an increase of $1.4 million relative to non-GAAP operating earnings of $453,000 in the first quarter of fiscal 2010. Non-GAAP operating earnings improved by $6.5 million in the first quarter of fiscal 2011 relative to the non-GAAP loss of $4.6 million recorded in the fourth quarter of fiscal 2010.
Net GAAP earnings for the first quarter of fiscal 2011 improved to $108,000 or $0.01 per diluted common share relative to a net loss of $489,000 or $0.03 per share in the first quarter of fiscal 2010 and a net loss of $27.5 million or $1.58 per share in the fourth quarter of fiscal 2010.
The Company's cash and short-term investment position was $42.2 million at July 31, 2010.
"The first quarter of fiscal 2011 was very encouraging for the Company as demand returned in the North American market after a tough fiscal 2010 to deliver revenue growth and a return to profitability", said Peter Strom, CEO of March Networks. "Recently announced retail and banking deals are expected to help drive continued revenue growth and profitability in the second quarter of fiscal 2011."
The company will discuss the results on a conference call and webcast on Thursday, August 26, 2010 at 8:30 a.m. EDT (12:30 p.m. UTC). The conference call may be accessed by dialing 1-800-814-4859 (North America) or +1-416-644-3414.
The conference call webcast can be accessed at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3182080
Please also view our new Investor Channel at http://investorchannel.marchnetworks.com
A replay of the conference call will be available from August 26, 2010 at 10:30 a.m. EDT until September 2, 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 4348258 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:
- The addressable market for the Company's products will grow by at least
10% in fiscal 2011.
- 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.
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 realizing
customer opportunities may be negatively impacted by depressed 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.
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
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July 31, July 31,
2010 2009
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REVENUE $26,316 $24,014
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Cost of revenue 14,151 13,958
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GROSS MARGIN 12,165 10,056
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EXPENSES:
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Selling, marketing and support 4,910 5,142
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Research and development 2,956 2,431
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General and administrative 2,398 2,030
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Stock based compensation 242 257
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Amortization of acquired intangible assets 783 903
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Restructuring costs 909 -
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Total expenses 12,198 10,763
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LOSS BEFORE UNDERNOTED ITEMS (33) (707)
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Interest and other income, net 41 16
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INCOME (LOSS) BEFORE INCOME TAXES 8 (691)
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Current income tax expense - 38
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Future income tax recovery (100) (240)
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NET EARNINGS (LOSS) $108 $(489)
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Earnings (loss) per share:
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Basic $0.01 $(0.03)
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Diluted $0.01 $(0.03)
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Shares used in per-share calculation:
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Basic 17,548,510 17,198,094
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Diluted 17,951,663 17,198,094
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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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July 31, April 30,
2010 2010
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ASSETS
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Current assets:
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Cash and cash equivalents $ 9,285 $ 9,492
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Short-term investments 32,935 38,384
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Accounts receivable 23,922 16,441
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Inventories 14,432 11,337
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Prepaid expenses and other current assets 3,165 3,549
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Future tax assets 315 315
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Total current assets 84,054 79,518
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Property and equipment 4,960 5,205
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Intangible assets 9,320 10,192
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Future tax assets 4,082 4,200
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Goodwill 22,429 22,429
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TOTAL ASSETS $124,845 $121,544
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable $12,405 $ 8,658
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Accrued liabilities 6,776 7,192
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Deferred revenue 7,696 7,795
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Deferred leasehold inducement 132 132
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Short-term compensation - 2
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Income taxes payable 118 101
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Total current liabilities 27,127 23,880
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Deferred revenue 4,720 4,789
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Deferred leasehold inducement 936 968
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Long-term compensation 466 437
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Future tax liabilities 2,154 2,372
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Total liabilities 35,403 32,446
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Shareholders' equity 89,442 89,098
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $124,845 $121,544
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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
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July 31, July 31,
2010 2009
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Cash flows from operating activities:
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Net earnings (loss) $108 $(489)
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Items not affecting cash:
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Amortization of capital and intangible assets 479 398
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Amortization of intangible assets related to
business acquisitions 783 903
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Stock based compensation and shares issued
to directors 242 257
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Unrealized foreign exchange (gain)/loss 9 (609)
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Future income taxes and non-refundable
investment tax credits (100) (537)
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Net change in non-cash items (7,046) (4,689)
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Net cash consumed by operating activities (5,525) (4,766)
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Cash flows from investing activities:
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Redemption (purchase) of short-term investments 5,449 2,471
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Purchase of capital and intangible assets (152) (537)
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Acquisition of business - -
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Net cash generated by investing activities 5,297 1,934
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Cash flows from financing activities:
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Issuance (repurchase) of share capital, net - 9
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Net cash generated (consumed) by financing
activities - 9
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Net decrease in cash and cash equivalents (228) (2,823)
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Foreign exchange gain (loss) on foreign cash held 21 (242)
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Cash and cash equivalents, beginning of period 9,492 10,126
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Cash and cash equivalents, end of period $9,285 $7,061
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SOURCE MARCH NETWORKS CORPORATION
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