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March Networks Announces Fourth Quarter and Fiscal Year 2010 Financial Results

Summary Operating Results:

$Cdn millions except EPS data	Q4 2010	Q4 2009	Fiscal 2010	Fiscal 2009
Revenue	$21.2	$21.5	$86.6	$101.2
Non-GAAP operating loss*	(4.6)	(1.4)	(7.3)	(1.0)
Net loss	$(27.5)	$(1.9)	$(32.5)	$(6.6)
Loss per share	$(1.58)	$(0.11)	$(1.88)	$(0.38)
Cash and short-term investments	$47.9	$50.9	$47.9	$50.9

* 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, Ontario, June 9, 2010 –– March Networks (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#.

About March Networks
March Networks (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®, 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.

FOR FURTHER INFORMATION, PLEASE CONTACT:
Ken Taylor
Chief Financial Officer, March Networks
+1 613-591-8181
ktaylor@marchnetworks.com

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.

March Networks Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(Canadian dollars, amounts in thousands, except share and per-share data)
(Unaudited)

	Three Months Ended		Fiscal Year Ended
	April 30, 2010	April 30, 2009	April 30, 2010	April 30, 2009
REVENUE	$21,235	$21,530	$86,626	$101,191
Cost of revenue	13,660	11,422	51,103	54,162
Contract losses	—	—	—	1,187
GROSS MARGIN	7,575	10,108	35,523	45,842
EXPENSES:
Selling, marketing and support	5,767	4,724	21,105	19,846
Research and development	3,886	2,177	12,654	12,176
General and administrative	2,567	4,569	9,069	14,796
Stock based compensation	273	283	955	1,345
Amortization of acquired intangible assets	883	899	3,566	3,779
Write down of investment tax credits	4,156	—	4,156	—
Restructuring costs	—	—	—	2,665
Total expenses	17,532	12,652	51,505	54,607
LOSS BEFORE UNDERNOTED ITEMS	(9,957)	(2,544)	(15,982)	(8,765)
Interest and other income, net	51	250	407	1,227
LOSS BEFORE INCOME TAXES	(9,906)	(2,294)	(15,575)	(7,538)
Current income tax expense	3	134	85	78
Future income tax expense (recovery)	17,555	(568)	16,833	(1,026)
NET LOSS	$(27,464)	$(1,860)	$(32,493)	$(6,590)

Loss per share:
Basic	$(1.58)	$ (0.11)	$(1.88)	$ (0.38)
Diluted	$(1.58)	$ (0.11)	$(1.88)	$ (0.38)

Shares used in per-share calculation:
Basic and diluted	17,375,178	17,191,908	17,287,886	17,504,349

March Networks Corporation
CONSOLIDATED BALANCE SHEETS
(Canadian dollars, amounts in thousands)
(Unaudited)

	April 30, 2010	April 30, 2009
ASSETS
Current assets:
Cash and cash equivalents	$ 9,492	$ 10,126
Short-term investments	38,384	40,740
Accounts receivable	16,441	14,892
Inventories	11,337	23,932
Prepaid expenses and other current assets	3,549	4,040
Future tax assets	315	5,128
Total current assets	79,518	98,858
Property and equipment	5,205	5,940
Intangible assets	10,192	12,931
Future tax assets	4,200	15,646
Investment tax credits	—	6,505
Goodwill	22,429	22,429
TOTAL ASSETS	$121,544	$162,309
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 8,658	$ 12,004
Accrued liabilities	7,192	7,328
Deferred revenue	7,795	7,851
Deferred leasehold inducement	132	132
Short-term compensation	2	—
Income taxes payable	101	390
Total current liabilities	23,880	27,705
Deferred revenue	4,789	8,239
Deferred leasehold inducement	968	1,100
Long-term compensation	437	666
Future tax liabilities	2,372	3,330
Total liabilities	32,446	41,040
Shareholders' equity	89,098	121,269
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$121,544	$162,309

March Networks Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian dollars, amounts in thousands)
(Unaudited)

	Three Months Ended		Fiscal Years Ended
	April 30, 2010	April 30, 2009	April 30, 2010	April 30, 2009
Cash flows from operating activities:
Net loss	$(27,464)	$ (1,860)	$(32,493)	$ (6,590)
Items not affecting cash:
Amortization of capital and intangible assets	248	543	1,768	2,069
Amortization of intangible assets related to business acquisitions	883	899	3,566	3,779
Stock based compensation and shares issued to directors	273	350	955	1,412
Unrealized foreign exchange (gain)/ loss	(326)	(41)	(1,102)	488
Future income taxes and non-refundable investment tax credits	22,609	464	20,989	(207)
Net change in non-cash items	1,965	4,083	5,530	(4,228)
Net cash generated (consumed) by operating activities	(1,812)	4,438	(787)	(3,277)

Cash flows from investing activities:
Redemption (purchase) of short-term investments	116	(2,887)	2,357	18,469
Purchase of capital and intangible assets	(229)	(48)	(1,616)	(4,146)
Acquisition of business	-	1	-	(698)
Net cash generated (consumed) by investing activities	(113)	(2,934)	741	13,625

Cash flows from financing activities:
Issuance (repurchase) of share capital, net	(1)	(54)	10	(4,628)
Net cash generated (consumed) by financing activities	(1)	(54)	10	(4,628)

Net increase (decrease) in cash and cash equivalents	(1,926)	1,450	(36)	5,720
Foreign exchange gain (loss) on foreign cash held	(293)	(114)	(598)	219
Cash and cash equivalents, beginning of period	11,711	8,790	10,126	4,187
Cash and cash equivalents, end of period	$9,492	$10,126	$9,492	$10,126