March Networks Releases First Quarter 2008 Financial Results
Summary Operating Results:
$Cdn millions
except EPS data |
Q1’08
|
Q4’07
|
Q1’07
|
|
Revenue
|
$24.5
|
$19.8
|
$22.8
|
|
Earnings (loss) from continuing operations before income taxes
|
$ 0.9
|
$ (0.7)
|
$ 5.1
|
|
Net earnings (loss) from continuing operations
|
$ 0.4
|
$ (0.4)
|
$ 2.8
|
|
Diluted earnings (loss) per share
from continuing operations
|
$ 0.02
|
$(0.03)
|
$0.16
|
OTTAWA, Ontario, August 29, 2007 –– March NetworksTM (TSX:MN; AIM:MNW), a leading provider of innovative video and data applications used for security surveillance, monitoring, analysis and business optimization, today announced financial results for the first quarter of fiscal 2008 ended July 31, 2007. All figures in Canadian dollars and in accordance with Canadian GAAP unless otherwise specified.
Revenue for the fiscal quarter ended July 31, 2007 was $24.5 million, compared with $22.8 million in the same quarter in the prior fiscal year, representing an increase of 8%. Revenue for the first quarter of fiscal 2008 represented an increase of 24% as compared to the fourth quarter of fiscal 2007.
Net earnings from continuing operations before income taxes for the first quarter of fiscal 2008 were $930,000 which compares to earnings of $5.1 million in the first quarter of fiscal 2007 and a loss of $692,000 in the fourth quarter of fiscal 2007. Net earnings from continuing operations for the quarter ended July 31, 2007 were $374,000 or $0.02 per diluted share which compares to earnings of $2.8 million or $0.16 per diluted share in the same quarter last year and a loss of $444,000 or $0.03 per share in the fourth quarter of fiscal 2007.
"Q1 represented an outstanding quarter for the Company as we continued to execute on our plan to become a global leader in the IP video marketplace. The results of the first quarter are a confirmation that the investments of the past year are contributing to strong organic growth and a diversifying revenue base. I am pleased with our success in winning new business and look forward to building on this success throughout the fiscal year" said Peter Strom, President and CEO of March Networks.
Financial Highlights
- First quarter revenues from other than the Company’s current largest customer increased by 33% as compared to the first quarter of fiscal 2007 and by 8% as compared to the fourth quarter of fiscal 2007.
- Revenue from the Company’s largest customer increased by 60% from the fourth quarter of fiscal 2007.
- Achieved record transportation revenues of $5.5 million.
- Recorded greater than $100,000 in revenue from each of 24 customers in the first quarter of fiscal 2008.
- Shipped a quarterly record of 5,698 units during the first quarter of fiscal 2008; the Company’s installed base is now close to 57,000 units.
- Generated $5.8 million of cash flow from operating activities; cash resources at July 31, 2007 were $91.5 million.
“The Company demonstrated in the first quarter of fiscal 2008 that it is on track to achieving its fiscal 2008 revenue and profitability objectives. The Company’s strong balance sheet will support the Company’s strategy of enhancing its competitive position by more aggressively expanding its sales and marketing presence and accelerating its product development initiatives in fiscal 2008” said Ken Taylor, CFO of March Networks.
Business Outlook
March Networks maintains its focus on long-term growth objectives and will continue to provide only full year guidance. The Company is maintaining the revised fiscal 2008 annual guidance ranges that were published in its preliminary first quarter results release on August 7, 2007.
Revenue for the fiscal year ending April 30, 2008 is expected to be in the range of $94 million to $103 million.
Net earnings before income taxes for the fiscal year ending April 30, 2008 are expected to be in the range of $0.5 million to $4.5 million.
The Company believes it will achieve results toward the top end of its fiscal 2008 guidance based upon revenue and order intake levels achieved to date.
The Company will discuss the results on a conference call and webcast on August 30, 2007 at 8:30 a.m. EDT (1:30 p.m. BST). The conference call may be accessed by dialing 1-800-733-7560 (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=1971860.
A replay of the conference call will be available from August 30, 2007 at 10:30 a.m. EDT until September 6, 2007. The replay can be accessed at 1-877-289-8525. The passcode for the replay is 21243347#
About March Networks
March Networks™ (TSX:MN; AIM:MNW) 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.
Forward-Looking Statements
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 outside of its current largest customer will grow by at least 30% from the level generated in fiscal 2007.
- 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 in fiscal 2008 will decline relative to fiscal 2007 as a result of competitive pricing strategies and sales mix.
- The Company’s increased investments in sales and marketing and in research and development will result in increased revenues and expanded addressable markets.
- The prevailing exchange rate for US dollars to Canadian dollars will be US$1.00=CDN$1.05.
- 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:
- Delays in developing or delivering new products and new product features to meet customer demand.
- Increasing competition from larger entities resulting from the consolidation of competitors and with larger entrants from other industries.
- Product issues in the Company’s installed base that result in increased costs to the Company and/or lost revenue opportunities.
- Shortages or long lead times in component supply that affect the Company’s ability to meet customer demand.
- Weaker than expected success versus competitors in new customer opportunities and/or loss of existing customers to competitors.
- Inability to attract and retain key employees.
- Higher than targeted product costs and/or higher than expected declines in market pricing for new products.
- Fluctuations in the exchange rate between the US dollar and the Canadian dollar.
- Revenue shortfalls due to delays in securing new customer opportunities and the lack of long term purchase commitments from customers.
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.
For further information, please contact:
March Networks Corporation
Peter Wilenius, VP Corporate Development
(613) 591-8181
e-mail: pwilenius@marchnetworks.com
March Networks Corporation
|
CONSOLIDATED STATEMENTS OF OPERATIONS (CDN $)
|
(In thousands, except share and per-share amounts)
(Unaudited)
|
|
|
Fiscal Quarter Ended
|
|
|
|
|
July 31,
2007
|
July 31,
2006
|
|
|
|
REVENUE
|
|
|
$24,546
|
$22,807
|
|
COST OF REVENUE
|
|
|
13,317
|
9,717
|
|
GROSS MARGIN
|
|
|
11,229
|
13,090
|
|
EXPENSES:
|
|
Selling, marketing and support
|
|
|
4,022
|
3,507
|
|
Research and development
|
|
|
2,964
|
2,248
|
|
General and administrative
|
|
|
3,298
|
2,683
|
|
Stock based compensation
|
|
|
805
|
332
|
|
Amortization of acquired intangibles
|
|
|
137
|
28
|
|
Total expenses
|
|
|
11,226
|
8,798
|
|
EARNINGS BEFORE UNDERNOTED ITEMS
|
|
|
3
|
4,292
|
|
Interest and other income, net
|
|
|
927
|
820
|
|
EARNINGS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS
|
|
|
930
|
5,112
|
|
Current income tax expense
|
|
|
—
|
100
|
|
Future income tax expense
|
|
|
556
|
2,229
|
|
NET EARNINGS FROM CONTINUING OPERATIONS
|
|
|
374
|
2,783
|
|
Discontinued operations
|
|
|
—
|
87
|
|
NET EARNINGS
|
|
|
$374
|
$2,870
|
|
Net earnings per share:
|
|
Basic – from continuing operations
|
|
|
$0.02
|
$0.17
|
|
– from discontinued operations
|
|
|
—
|
—
|
|
|
|
|
$0.02
|
$0.17
|
|
Diluted – from continuing operations
|
|
|
$0.02
|
$0.16
|
|
– from discontinued operations
|
|
|
—
|
—
|
|
|
|
|
$0.02
|
$0.16
|
|
Shares used in per-share calculation:
|
|
Basic
|
|
|
16,875,685
|
16,602,026
|
|
Diluted
|
|
|
17,983,992
|
17,952,596
|
March Networks Corporation
| CONSOLIDATED BALANCE SHEETS (CDN $) |
(In thousands)
(Unaudited)
|
|
July 31,
2007
|
April 30,
2007
|
|
ASSETS
|
|
|
Current assets:
|
|
|
Cash and cash equivalents
|
$ 3,949
|
$ 3,526
|
|
Short-term investments
|
87,582
|
82,305
|
|
Restricted cash
|
3,467
|
2,775
|
|
Accounts receivable
|
17,286
|
19,396
|
|
Inventories
|
11,041
|
11,577
|
|
Prepaid expenses and other current assets
|
2,230
|
1,778
|
|
Future tax assets
|
2,578
|
2,198
|
|
Total current assets
|
128,133
|
123,555
|
|
Restricted cash
|
—
|
833
|
|
Capital assets
|
2,520
|
2,720
|
|
Intangible assets
|
2,951
|
3,088
|
|
Future income taxes
|
21,183
|
21,975
|
|
Goodwill
|
5,397
|
5,397
|
|
TOTAL ASSETS
|
$160,184
|
$157,568
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
Current liabilities:
|
|
|
Accounts payable
|
$7,728
|
$5,790
|
|
Accrued liabilities
|
4,974
|
4,337
|
|
Refundable royalty advance
|
2,667
|
2,775
|
|
Acquisition escrow
|
800
|
—
|
|
Deferred revenue
|
5,588
|
7,560
|
|
Income taxes payable
|
421
|
467
|
|
Total current liabilities
|
22,178
|
20,929
|
|
Acquisition escrow
|
—
|
833
|
|
Deferred revenue
|
6,862
|
5,881
|
|
Total liabilities
|
29,040
|
27,643
|
|
Shareholders' equity
|
131,144
|
129,925
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$160,184
|
$157,568
|
March Networks Corporation
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
|
(In thousands)
(Unaudited)
|
|
Fiscal Quarter Ended
|
|
|
July 31,
2007
|
July 31,
2006
|
|
Cash flows from operating activities:
|
|
|
Net earnings - continuing operations
|
$ 374
|
$ 2,783
|
|
Net earnings - discontinued operations
|
—
|
87
|
|
Items not affecting cash:
|
|
|
Amortization of capital assets
|
325
|
139
|
|
Amortization of acquired intangibles
|
137
|
28
|
|
Gain on sale of discontinued operations
|
—
|
(86)
|
|
Stock based compensation
|
805
|
332
|
|
Foreign exchange loss on foreign cash and cash equivalents held
|
(134)
|
(34)
|
|
Future income taxes and non-refundable investment tax credits
|
336
|
2,104
|
|
Net change in non-cash items:
|
|
|
Continuing operations
|
3,965
|
(1,462)
|
|
Discontinued operations
|
—
|
(305)
|
|
Net cash generated by operating activities
|
5,808
|
3,586
|
|
Cash flows from investing activities:
|
|
|
(Purchase) redemption of short-term investments
|
(5,289)
|
5,348
|
|
Purchase of capital assets
|
(125)
|
(873)
|
|
Acquisition of business
|
—
|
(8,021)
|
|
Proceeds from sale of discontinued operations
|
—
|
86
|
|
Net cash consumed by investing activities
|
(5,414)
|
(3,460)
|
|
Cash flows from financing activities:
|
|
|
Issuance of share capital, net
|
52
|
585
|
|
Net cash generated by financing activities
|
52
|
585
|
|
Increase in cash and cash equivalents – continuing operations
|
446
|
929
|
|
Decrease in cash and cash equivalents – discontinued operations
|
—
|
(218)
|
|
Net increase in cash and cash equivalents
|
446
|
711
|
|
Foreign exchange loss on foreign cash and cash equivalents held
|
(23)
|
4
|
|
Cash and cash equivalents, beginning of period
|
3,526
|
3,292
|
|
Cash and cash equivalents, end of period
|
$ 3,949
|
$ 4,007
|
|
|
|
|