Bridgewater Systems Reports Q1 2011 Financial Results

OTTAWA, May 13 /CNW/ - Bridgewater Systems (TSX: BWC), the leader in intelligent broadband controls, today announced financial results for the three months ended March 31, 2011 and its updated outlook for fiscal 2011. The first quarter of 2011 represents Bridgewater's first financial reporting period under IFRS. This news release contains forward-looking statements. Reference should be made to "Forward-Looking Statements" at the end of this news release. All amounts are stated in Canadian dollars except where otherwise noted.

"In an important transition year for the Company, we made progress in the first quarter toward diversifying and globalizing our business, highlighted by revenue growth outside North America and through channel partners," said Ed Ogonek, CEO of Bridgewater Systems. "While the timing to close larger new business opportunities remains difficult to predict, we continue to be encouraged by market trends for intelligent broadband controls, underpinned by the increase in data traffic and applications. We are well positioned to capitalize on these trends in the medium to longer term."

Financial Summary

  • Total revenue for Q1 2011 was $19.1 million, compared with $24.5 million for Q1 2010. Among other factors, reported revenue for Q1 2011 was affected by the significant strengthening of the Canadian dollar relative to the U.S. dollar.

  • Excluding the Company's major customer, revenue for Q1 2011 increased by 30% over Q1 2010 to $12.0 million. Revenue from customers outside the Americas increased to $2.8 million in Q1 2011, compared with $2.0 million in Q1 2010.

  • Product revenue for Q1 2011 was $13.8 million, or 72% of total revenue, compared to $18.9 million, or 77% of total revenue, for Q1 2010. The year-over-year decrease reflects two expected and previously disclosed changes: the transition in the Company's business model with its largest customer and the expiration of the Alcatel-Lucent Source Code License Agreement in Q4 2010.

  • Gross margin for Q1 2011 was $12.2 million (64% of revenue) versus $16.3 million (67% of revenue) in Q1 2010. The year-over-year change mainly reflects higher direct costs associated with the delivery of integrated systems products to several customers in Q1 2011.

  • Earnings before income taxes were $1.4 million in Q1 2011, versus $5.6 million in Q1 2010. Net earnings for Q1 2011 were $0.9 million, or $0.03 per share fully diluted, versus $4.5 million, or $0.18 per share fully diluted, in the prior year.

  • Cash and cash equivalents, and short-term investments increased to $83.0 million at March 31, 2011 compared to $67.6 million December 31, 2010.

Q1 2011 Business Highlights

  • Increased the customer base, adding 9 new service provider customers.

  • Added two new global reseller partners, including Juniper Networks and another leading network equipment vendor. Bridgewater now has reseller relationships with five leading network equipment vendors.

  • Continued to expand footprint with existing customers, highlighted by a new policy deployment with a key customer in EMEA.

  • Deployed first Linux-based policy solution with global mobile operator property in EMEA.

Outlook

Based on several factors, including the continued strength of the Canadian dollar in comparison to the U.S. dollar, Bridgewater updated its full-year guidance for 2011. For 2011, the Company is expecting:

  • Revenues of $77.0 to $87.0 million
  • Earnings before taxes of $8.0 to $13.5 million
  • Net earnings of $5.5 to $9.5 million

This guidance is based on the following factors:

  • Continued strength of Canadian dollar;
  • Revenue visibility, including revenue recognition associated with software-based transaction license agreement with major customer;
  • Increased revenue from existing deployments as our customers grow and continue to add new subscribers and devices to their networks;
  • Growth in revenue from EMEA and APAC;
  • Increase in channel revenue from global channel partners and regional partners;
  • Sales of existing and new products in wireless and converged networks; and
  • Continued evolution of our business model for delivering products and services to address higher transaction capacity needs.

The complete financial statements and management's discussion and analysis for the three months ended March 31, 2011 can be found at www.bridgewatersystems.com or at www.sedar.com.

Conference Call and Webcast

A conference call and webcast will be held today, Friday, May 13, 2011 at 8:30 a.m. ET to discuss this announcement. The telephone numbers to access the call are 647-427-7450 or 1-888-231-8191. To access the live webcast, please visit www.bridgewatersystems.com or www.newswire.ca. Participants will require Windows Media Player™ to listen to the webcast.

About Bridgewater Systems

Bridgewater Systems, the leader in intelligent broadband controls, provides pre-integrated solutions for mobile and converged operators to transform their networks, optimize mobile data growth, and innovate with new services.   The Bridgewater portfolio of carrier-grade products includes Service Controller (AAA), Policy Controller (PCRF) and Home Subscriber Server (HSS), anchored by a common identity and device management system.  More than 150 leading service providers worldwide leverage Bridgewater to create and deliver profitable services to consumer, enterprise, cloud and machine markets. For more information, visit us at www.bridgewatersystems.com

Bridgewater, Bridgewater Systems, the Bridgewater Systems logo, WideSpan, Smart Caps, and Subscriber Data Broker are trademarks or registered trademarks of Bridgewater Systems Corporation.  All other company, product names and any registered and unregistered trademarks mentioned are used for identification purposes only and remain the exclusive property of their respective owners.

Forward-Looking Statements

Certain statements in this release, including the estimates of future revenues, earnings before taxes, and net earnings provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. These statements are subject to certain assumptions, risks and uncertainties. Material factors and assumptions used to develop such estimates include:

  • Bridgewater's ability to maintain its relationships and contracts with Tier 1 customers;
  • visibility into the deployment plans of Bridgewater's major customers;
  • Bridgewater's ability to maintain and grow its installed customer base in existing and emerging markets;
  • expectations regarding profile and timing of new customer acquisitions, with associated revenue weighted toward the second half of the year;
  • expectations regarding long-term industry trends in growth in mobile data services and applications; and
  • macroeconomic factors including expected growth in the markets served by Bridgewater

Readers are cautioned not to place undue reliance on such statements. These statements are provided to enable external stakeholders to understand Bridgewater's expectations as of the date of this release and may not be appropriate for other purposes.

Actual results, performance, achievements or developments of Bridgewater may differ materially from the results, performance, achievements or developments expressed or implied by such statements. Risk factors that may cause the actual results, performance, achievements or developments of Bridgewater to differ materially from the results, performance, achievements or developments expressed or implied by such statements can be found in the public documents filed by Bridgewater with Canadian securities regulatory authorities, including, but not limited to Management's Discussion & Analysis of Financial Condition and Results of Operation dated May 13, 2011 and Bridgewater's Annual Information Form dated March 31, 2011, which are available at www.sedar.com, and include the following:

  • Bridgewater operates in highly competitive and continually evolving markets, and if it is not able to compete effectively, it may not be able to continue to expand its business as expected;
  • Bridgewater relies on a limited number of customers for a large percentage of its revenue, and the loss of, or significant shortfall in business from, a key customer could significantly reduce its revenue and profitability;
  • Bridgewater must continue to evolve its business models and platforms for delivery of products and services to respond to transaction capacity needs of its customers;
  • Bridgewater is exposed to risks associated with foreign exchange fluctuations, and in particular, most of Bridgewater's revenues are received in US dollars while most of its expenses are payable in Canadian dollars;
  • Bridgewater's engagements with its customers often involve complex arrangements and the size, timing and contractual terms of orders for Bridgewater's products may affect when revenue is recognized;
  • Bridgewater has a lengthy and variable sales cycle; and
  • Bridgewater may engage in future acquisitions that could disrupt its business and affect its financial condition and operating results.

Bridgewater assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law.

BRIDGEWATER SYSTEMS CORPORATION        
Consolidated Interim Statements of Comprehensive Earnings    
For the three months ended March 31, 2011 and 2010        
(expressed in Canadian dollars)        
(unaudited)        
         
    Three months ended
         
    March 31, 2011   March 31, 2010
         
Revenue        
  Product    $              13,821,137    $              18,851,979
  Service and support                      5,259,783                      5,643,892
                     19,080,920                    24,495,871
         
Cost of sales                      6,906,507                      8,180,039
         
Gross margin                    12,174,413                    16,315,832
Expenses        
  Sales and marketing                      4,474,786                      4,060,276
  Research and development                      6,193,385                      5,313,227
  General and administration                       1,319,210                      1,063,219
  Investment tax credits                    (1,200,000)                       (400,000)
  Bad debt recovery                                   -                           (49,929)
         
                     10,787,381                      9,986,793
Earnings before undernoted items                      1,387,032                      6,329,039
         
Foreign exchange loss                       (180,636)                       (740,319)
Interest and other income                         220,602                           72,160
Loss on disposal of property, equipment and intangible assets                                  -                           (22,000)
Earnings before income taxes                      1,426,998                      5,638,880
         
Current income tax expense                          575,000                         400,000
Future income tax (recovery) expense                         (20,000)                         717,000
Income tax expense                          555,000                      1,117,000
         
NET EARNINGS AND TOTAL COMPREHENSIVE EARNINGS    $                   871,998    $                4,521,880
         
         
Net earnings per share - basic    $                         0.04    $                         0.19
         
Net earnings per share - diluted    $                         0.03    $                         0.18
         
Weighted average number of shares outstanding - basic                     24,891,218                    24,441,881
         
Weighted average number of shares outstanding - diluted                     25,638,229                    25,558,286
         

BRIDGEWATER SYSTEMS CORPORATION        
Consolidated Interim Balance Sheets            
as at March 31, 2010, December 31, 2010 and January 1, 2010            
(expressed in Canadian dollars)            
(unaudited)            
             
             
    March 31, 2011   December 31, 2010   January 1, 2010
             
             
CURRENT ASSETS            
             
  Cash and cash equivalents    $             77,057,005    $           61,711,508    $            53,828,859
  Short-term investments                      5,909,086                   5,886,942                  13,459,190
  Accounts receivable                      9,324,320                 22,076,889                  24,879,197
  Unbilled receivables                     3,413,522                   2,699,631                    1,360,741
  Deferred cost of sales                        470,376                   2,968,329                  12,324,813
  Prepaid expenses and other assets                     3,349,285                   2,984,933                    3,229,227
  Investment tax credit recoverable                      2,300,000                   1,600,000                                -  
             
                  101,823,594                 99,928,232                109,082,027
             
INVESTMENT TAX CREDIT RECOVERABLE                      9,225,000                   9,300,000                                -  
DEFERRED INCOME TAX ASSET                      2,703,000                   2,683,000                    8,816,000
PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS                      2,654,826                   2,576,371                    3,604,811
RECOVERABLE TAXES                         394,641                      394,641                                -  
             
     $           116,801,061    $         114,882,244    $          121,502,838
             
CURRENT LIABILITIES            
             
  Accounts payable and accrued liabilities    $               3,929,161    $             7,043,848    $              9,617,441
  Deferred revenue                   18,692,668                 14,902,394                  44,288,403
             
                    22,621,829                 21,946,242                  53,905,844
             
SHAREHOLDERS' EQUITY            
             
  Share capital                    71,259,849                 71,138,494                  69,872,842
  Share-based reserve                      2,416,320                   2,166,443                       699,865
  Retained earnings (deficit)                   20,503,063                 19,631,065                  (2,975,713)
             
                    94,179,232                 92,936,002                  67,596,994
             
     $           116,801,061    $         114,882,244    $          121,502,838
             

BRIDGEWATER SYSTEMS CORPORATION      
Consolidated Interim Statements of Cash Flows        
For the three months ended March 31, 2011 and 2010        
(expressed in Canadian dollars)        
(unaudited)        
         
    Three months ended
         
    March 31, 2011   March 31, 2010
         
NET INFLOW (OUTFLOW) OF CASH RELATED        
  TO THE FOLLOWING ACTIVITIES:        
         
  CASH FLOW FROM OPERATING ACTIVITIES        
    Net earnings and total comprehensive income    $                    871,998    $             4,521,880
    Items not affecting cash        
      Share-based payments                          271,419                      186,651
      Foreign exchange loss on cash held in foreign currency                          334,867                   1,641,768
      Loss on disposal of assets                                   -                          22,000
      Investment tax credits recoverable                     (1,200,000)                    (400,000)
      Current income tax expense                          575,000                      400,000
      Future income tax (recovery) expense                           (20,000)                      717,000
      Amortization of property, equipment and intangible assets                          310,398                      318,572
         
    Changes in non-cash operating working        
      capital items                      14,733,335                 11,328,422
         
  NET CASH FROM OPERATING ACTIVITIES                     15,877,017                 18,736,293
         
  CASH FLOW FROM INVESTING ACTIVITIES        
    Redemption (purchase) of short-term investments                          (22,144)                   5,226,741
    Purchases of property, equipment and intangible assets                        (274,322)                    (158,256)
         
  NET CASH USED IN/FROM INVESTING ACTIVITIES                        (296,466)                   5,068,485
         
  CASH FLOW FROM FINANCING ACTIVITIES        
    Proceeds from issuance of common shares                             99,813                        27,047
         
  NET CASH FROM INVESTING ACTIVITIES                            99,813                        27,047
         
  Foreign exchange loss on cash held in foreign currency                        (334,867)                 (1,641,768)
         
NET CASH INFLOW                      15,345,497                 22,190,057
         
CASH AND CASH EQUIVALENTS,        
  BEGINNING OF PERIOD                     61,711,508                 53,828,859
         
CASH AND CASH EQUIVALENTS,        
  END OF PERIOD    $               77,057,005    $           76,018,916
         
Supplementary information:        
         
  Bank balances    $               31,373,193    $           36,819,311
  Cash equivalents                     45,683,812                 39,199,605
         
  Total cash and cash equivalents    $               77,057,005    $           76,018,916
  Interest received    $                    171,052    $                  52,095
         

BRIDGEWATER SYSTEMS CORPORATION    
Consolidated Interim Statements of Shareholders' Equity    
For the three months ended March 31, 2011 and 2010        
(expressed in Canadian dollars)                    
(unaudited)                    
                     
    Common Shares   Share-based   Retained Earnings   Shareholders'
    Number   Amount   Reserve   (Deficit)   Equity
                     
                     
                     
Balance at January 1, 2010   24,432,468   $    69,872,842   $     699,865   $          (2,975,713)   $        67,596,994
                     
Share-based payments   -   -   186,651   -   186,651
Exercise of stock options   15,304   30,167   (3,120)   -   27,047
Net earnings and total comprehensive earnings   -   -   -   4,521,880   4,521,880
                     
Balance at March 31, 2010   24,447,772   $    69,903,009   $     883,396   $           1,546,167   $        72,332,572
                     
                     
Balance at December 31, 2010   24,885,975   $    71,138,494     2,166,443   $         19,631,065   $        92,936,002
                     
Share-based payments   -   -   271,419   -   271,419
Exercise of stock options   29,713   121,355   (21,542)   -   99,813
Net earnings and total comprehensive earnings   -   -   -   871,998   871,998
                     
Balance at March 31, 2011   24,915,688   $    71,259,849   $   2,416,320   $         20,503,063   $        94,179,232

 

SOURCE Bridgewater Systems

For further information:

Contacts

Investor Relations
Kim Butler, Chief Financial Officer
Bridgewater Systems
kim.butler@bridgewatersystems.com
+1 613-591-9104 extension 6023

Craig Armitage
The Equicom Group Inc.
carmitage@equicomgroup.com
+1 416-815-0700 extension 278

Media Relations
Ann Hatchell, Director Solutions & Partner Marketing
Bridgewater Systems
Ann.Hatchell@bridgewatersystems.com
+1 613-591-9104 extension 2030

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Bridgewater Systems

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