March Networks Reports Record Revenue and Return to Positive Operating Earnings* in Second Quarter of Fiscal 2009
Wed Nov 26, 7:30 PM
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.TO), 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 $28.3 million in the second quarter of fiscal 2009 representing an increase of 2% as compared to revenue of $27.7 million and $27.8 million in the second quarter of fiscal 2008 and the first quarter of fiscal 2009, respectively. Revenue for the first six months of fiscal 2009 of $56.1 million increased by 7% as compared to the first six months of fiscal 2008.
The Company recorded non-GAAP operating earnings of $1.0 million in the second quarter of fiscal 2009 compared to a loss of $1.0 million in the second quarter of fiscal 2008 and represents a $2.2 million improvement from the loss of $1.2 million that was recorded in the first quarter of fiscal 2009. Operating earnings for the first half of fiscal 2009 reflected a loss of $168,000 as compared to a loss of $58,000 in the first six months of fiscal 2008.
The Company incurred a net loss in the second quarter of fiscal 2009 of $1.0 million or $0.06 per share, including the impact of $1.4 million of restructuring charges associated with staff reductions during the quarter, as compared to a net loss of $666,000, or $0.04 per share, in the second quarter of fiscal 2008, and a net loss of $2.4 million, or $0.14 per share, in the first quarter of fiscal 2009.
"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.TO) 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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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.
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* 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
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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 Six Months Ended
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October 31, October 31, October 31, October 31,
2008 2007 2008 2007
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REVENUE $28,276 $27,713 $56,080 $52,259
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COST OF REVENUE 16,041 14,527 30,926 27,844
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CONTRACT LOSSES
AND RETROFIT - 2,439 1,187 2,439
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GROSS MARGIN 12,235 10,747 23,967 21,976
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EXPENSES:
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Selling,
marketing and
support 5,063 3,949 9,917 7,971
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Research and
development 3,509 3,705 7,552 6,669
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General and
administrative 2,663 4,096 6,666 7,394
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Stock based
compensation 279 805 763 1,610
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Amortization of
acquired
intangibles 933 137 1,859 274
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Restructuring
costs 1,419 - 1,419 -
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Total expenses 13,866 12,692 28,176 23,918
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LOSS BEFORE
UNDERNOTED ITEMS (1,631) (1,945) (4,209) (1,942)
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Interest and other
income, net 310 1,073 704 2,000
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EARNINGS (LOSS)
BEFORE INCOME
TAXES (1,321) (872) (3,505) 58
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Current income
tax expense (320) 22 (7) 22
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Future income
tax expense 20 (228) (29) 328
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NET LOSS $(1,021) $ (666) $(3,469) $ (292)
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Net loss per
share:
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Basic $ (0.06) $ (0.04) $ (0.20) $ (0.02)
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Diluted $ (0.06) $ (0.04) $ (0.20) $ (0.02)
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Shares used in
per-share
calculation:
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Basic 17,480,295 16,886,938 17,712,643 16,881,446
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Diluted 18,217,440 18,004,947 18,449,887 17,993,784
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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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October 31, April 30,
2008 2008
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ASSETS
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Current assets:
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Cash $ 6,265 $ 4,187
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Short-term investments 35,585 59,209
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Restricted cash 2,882 2,410
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Accounts receivable 23,317 15,432
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Inventories 25,602 22,220
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Prepaid expenses and other current assets 2,311 2,982
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Future tax assets 5,023 4,556
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Total current assets 100,985 110,996
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Capital assets 6,377 2,492
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Intangible assets 14,546 16,377
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Future tax assets 21,350 21,081
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Goodwill 22,133 22,048
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TOTAL ASSETS $165,391 $172,994
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable $ 9,984 $11,576
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Accrued liabilities 10,691 10,236
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Refundable royalty advance 2,882 2,410
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Deferred revenue 2,245 3,329
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Deferred leasehold inducement 132 -
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Income taxes payable 421 422
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Total current liabilities 26,355 27,973
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Deferred revenue 9,808 9,048
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Deferred leasehold inducement 1,167 -
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Long term compensation 396 451
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Future tax liabilities 3,849 4,362
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Total liabilities 41,575 41,834
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Shareholders' equity 123,816 131,160
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $165,391 $172,994
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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 Six Months Ended
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October 31, October 31, October 31, October 31,
2008 2007 2008 2007
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Cash flows from
operating
activities:
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Net loss $ (1,021) $ (666) $ (3,469) $ (292)
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Items not
affecting cash:
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Amortization of
capital assets 698 333 1,089 658
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Amortization of
acquired
intangible
assets 933 137 1,859 274
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Stock based
compensation 279 805 763 1,610
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Unrealized foreign
exchange (gain)/
loss 555 (481) 660 (615)
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Future income
taxes and non-
refundable
investment
tax credits 258 (479) (37) (143)
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Net change in
non-cash items (3,294) 5,398 (14,089) 9,363
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Net cash generated
(consumed) by
operating
activities (1,592) 5,047 (13,224) 10,855
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Cash flows from
investing
activities:
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Redemption
(purchase) of
short-term
investments 7,861 (4,524) 23,624 (9,813)
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Purchase of
capital assets (2,796) (252) (3,446) (377)
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Acquisition of
business (41) - (699) -
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Net cash
generated
(consumed) by
investing
activities 5,024 (4,776) 19,479 (10,190)
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Cash flows from
financing
activities:
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Issuance
(repurchase) of
share capital,
net (2,622) 75 (4,574) 127
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Net cash
generated
(consumed) by
financing
activities (2,622) 75 (4,574) 127
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Net increase in
cash 810 346 1,681 792
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Foreign exchange
gain (loss) on
foreign cash
held 325 (164) 397 (187)
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Cash, beginning
of period 5,130 3,949 4,187 3,526
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Cash, end of
period $ 6,265 $ 4,131 $ 6,265 $ 4,131
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SOURCE MARCH NETWORKS CORPORATION
136.40 (1.48%)