Bridgewater Systems Announces Record Revenue for Fiscal 2008



    Company Presents Strong Outlook for 2009

    OTTAWA, Feb. 26 /CNW/ - Bridgewater Systems (TSX: BWC), the mobile
personalization company, today announced its financial results for the fourth
quarter and year ended December 31, 2008 consistent with the preliminary
results issued on February 4, 2009. All amounts are stated in Canadian dollars
unless otherwise noted.

    
    Fiscal 2008 Highlights

    -   Revenue of $44.2 million, an increase of 13% compared to
        $39.2 million in 2007.
    -   Migration of 3G to 4G networks contributed 20% of revenue versus 3%
        in 2007.
    -   Increased customer base in 3G GSM networks and achieved objective of
        six GSM customers for the year.
    -   Net earnings, including a $1.1 million reserve for potential
        collectability issues associated with a reseller ("reseller
        reserve"), were $2.8 million, or $0.11 per diluted share, compared
        with $2.7 million, or $0.13 per diluted share, in 2007.
    -   Development and successful launch of WideSpan(R) system; secured
        $30.0 million contract from Verizon Wireless and a second order from
        an existing Tier 2 customer to manage mobile data growth.
    -   Subsequent to year end, won a significant policy control order with a
        Tier 1 customer.
    -   Continued momentum in WiMAX deployments, with 24 customer wins to
        date.
    

    "Building on our track record of strong financial performance, we
delivered record revenue in 2008 despite a challenging economic environment,"
said Ed Ogonek, CEO of Bridgewater Systems. "This reflects the highly
successful launch of our WideSpan system, new customer growth, revenue
diversification, long-term contracts, continued growth in the subscriber data
management, and policy control market segments.
    In 2009, we are expecting revenue growth of 18% to 31% and net earnings
of $6 to $9 million. With a strong cash position, long-term contracts that
provide significant revenue visibility, and a large installed base of
customers, we are well positioned to achieve these targets. Despite the
macroeconomic climate, our products and solutions will remain in high demand
in 2009 because they enable mobile service providers to increase their
revenues by capitalizing on the tremendous growth in data services."

    Financial Review

    In fiscal 2008, revenue was $44.2 million, an increase of 13% compared to
$39.2 million in fiscal 2007. The increase was partially due to 30 new
customers added during the year. The company also continued to diversify its
revenue mix. Revenue derived from the migration of 3G to 4G networks
contributed 20% of revenue, compared with 3% in 2007, CDMA-EVDO customers
accounted for 54% of revenue in 2008 versus 74% in the prior year, and
wireline revenue accounted for 26% of total revenue, most of which was related
to the Alcatel-Lucent Source Code License Agreement. For the fourth quarter of
2008, revenue totaled $13.5 million, an increase of 14% from $11.8 million in
the prior year period and an increase of 31% from $10.3 million in third
quarter of 2008.
    Gross margin for 2008 was $34.0 million (77% of revenue) versus $33.1
million (85% of revenue) in 2007. The lower gross margin percentage reflects a
higher services revenue mix and the initial contribution of WideSpan revenue
in Q4. The expansion of the Company's professional services and the delivery
of WideSpan are expected to result in higher revenue and operating margins in
future periods.
    Net earnings for 2008 were $2.8 million, or $0.11 per diluted share. Net
earnings for the fourth quarter of 2008 were $1.7 million, or $0.07 per
diluted share.
    For fiscal 2008, non-GAAP net earnings, excluding the reseller reserve of
$1.1 million, were $3.9 million, or $0.16 per diluted share, up from $2.7
million, or $0.13 per diluted share, in fiscal 2007. In the fourth quarter of
2008, non-GAAP net earnings, excluding the reseller reserve of $1.1 million,
were $2.8 million, or $0.12 per diluted share, up from net earnings of $1.9
million, or $0.09 per diluted share, in the fourth quarter of 2007.
Reconciliation of net earnings and earnings per share between GAAP and
non-GAAP measurement is included as an appendix to the financial statements
accompanying this press release.
    Cash at the end of December 31, 2008 was $50.4 million, compared with
$38.6 million (including a $10 million note receivable) as at December 31,
2007. The $11.8 million net cash inflow was primarily the result of net
earnings of $2.8 million, net proceeds from the exercise of options of $0.9
million, and a decrease in working capital of $11.6 million, which was
partially offset by purchase of capital assets of $1.1 million and additions
to long-term deferred cost of sales of $5.5 million.
    A complete set of financial statements and the management's discussion
and analysis for the fourth quarter and year ended December 31, 2008 can be
found at www.bridgewatersystems.com or at www.sedar.com.

    Outlook

    The company's outlook for 2009 remains strong despite a challenging
economic environment. Revenue is expected to be between $52 million and $58
million, representing growth of between 18% and 31% compared to fiscal 2008.
The company is forecasting 2009 net earnings to be between $6 million and $9
million, based on solid revenue growth, continued focus on cost management,
and leveraging its investment in R&D.
    The following factors support Bridgewater's strong outlook:

    
    -   High revenue visibility due to significant multi-year contracts with
        Tier 1 customers;
    -   A large installed customer base in existing and emerging markets;
    -   Long-term industry trends, particularly the growth in mobile data
        services and applications, which create significant market
        opportunities;
    -   A strong balance sheet with cash of $50.4 million and no debt.
    

    The company has a clear strategy to capitalize on the tremendous growth
in mobile data:

    Extend and enhance its product offering. Bridgewater is building on its
Subscriber Data Broker platform through products such as Service Controller,
Policy Controller and Home Subscriber Server. Bridgewater's products are now
delivered in three formats: software, single-purpose network systems and as a
highly scalable, integrated WideSpan system. The company expects demand for
its Policy Controller and Subscriber Data Broker products to rise as they
enable mobile service providers to deliver personalized services and manage
mobile data growth.

    Expand its addressable market with the evolution to 3G and 4G. The
company has expanded into the GSM/UMTS market with six customer deployments
and continues to invest in product development to support the evolution to
4G/LTE. Bridgewater has made strong inroads into the WiMAX market with 24
global customers to date, the largest of which is Sprint and its XOHM network.

    Global expansion. To effectively market on a global scale, Bridgewater
has partnered with global channel partners such as Motorola, Alvarion,
Alcatel-Lucent and Nortel and is expanding its direct sales capability. The
company will continue this effort in 2009.

    Non-GAAP financial measures

    Net earnings excluding the reseller reserve is a non-GAAP financial
measure that does not have any prescribed meaning by GAAP and is therefore
unlikely to be comparable to similar measures presented by other issuers.
Management believes that this non-GAAP financial measure, when taken together
with the corresponding consolidated GAAP measures, increases the transparency
of the Company's current results and enables investors to more fully
understand trends in its current and future performance. A reconciliation of
net earnings to net earnings excluding the reseller reserve is included at the
end of the release.

    Conference Call and Webcast

    A conference call and webcast will be held today, Thursday, February 26,
2009, at 8:30 am ET to discuss this announcement. The telephone numbers to
access the call are 416-644-3426 or 1-800-590-1817. To access the live
webcast, please visit www.bridgewatersystems.com or www.newswire.ca.
Participants will require Windows Media Player(TM) to listen to the webcast.

    About Bridgewater Systems

    Bridgewater Systems, the mobile personalization company, enables service
providers to efficiently manage and profit from mobile data services, content
and commerce. The company's market leading mobile personalization portfolio
provides a real-time, unified view of subscribers including entitlements,
devices, networks, billing profiles, preferences and context. Anchored by
Bridgewater's Subscriber Data Broker(TM), the portfolio of carrier-grade and
standards-based products includes the Bridgewater(R) Service Controller (AAA),
the Bridgewater(R) Policy Controller (PCRF) and the Bridgewater(R) Home
Subscriber Server (HSS). More than 100 leading service providers including
America Movil, Bell Canada, Clearwire, Hutchison Telecom, Leap Wireless,
Scartel, SmarTone-Vodafone, Sprint, Tata Teleservices, Tatung, Telmex,
Telstra, and Verizon Wireless use Bridgewater's solutions to rapidly deliver
innovative mobile services to over 150 million subscribers. For more
information, visit us at www.bridgewatersystems.com.

    Bridgewater, Bridgewater Systems, the Bridgewater Systems logo, WideSpan,
Subscriber Data Broker and Smart Caps 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.

    Certain statements in this release, including the guidance provided
above, constitute forward-looking statements or forward-looking information
within the meaning of applicable securities laws and are made pursuant to the
"safe harbour" provisions of such laws. These statements are subject to
certain assumptions, risks and uncertainties. Readers are cautioned not to
place undue reliance on such statements. Risk factors that may cause the
actual results, performance, achievements or developments of the Company to
differ materially from the results, performance, achievements or developments
expressed or implied by such forward-looking statements can be found in the
public documents filed by the Company from time to time with Canadian
securities regulatory authorities. In particular, actual results could differ
materially from those expressed in any forward-looking statements.
    Because the Company's business depends on the strength of the
telecommunications industry, its operating results will suffer if that
industry experiences an economic downturn. For a more complete list of risk
factors, please refer to Bridgewater's Annual Information Form dated March 28,
2008. The Company assumes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.


    
    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Statements of Earnings,
    Comprehensive Earnings and Deficit
    years ended December 31, 2008 and 2007
    (expressed in Canadian dollars)
    -------------------------------------------------------------------------

                                                         2008           2007
                                                -------------- --------------
    Revenue
      Product                                   $  28,586,917  $  29,842,076
      Service and support                          15,591,272      9,375,094
    -------------------------------------------------------------------------
                                                   44,178,189     39,217,170

    Cost of sales                                  10,226,717      6,076,940
    -------------------------------------------------------------------------

    Gross margin                                   33,951,472     33,140,230
    -------------------------------------------------------------------------

    Expenses
      Sales and marketing                          13,372,256     13,502,125
      Research and development                     14,934,992     13,808,659
      General and administration                    3,919,694      2,859,795
      Bad debt expense                              1,183,077            971
      Stock-based compensation                        234,827        201,788
    -------------------------------------------------------------------------

                                                   33,644,846     30,373,338
    -------------------------------------------------------------------------

    Earnings before undernoted items                  306,626      2,766,892

    Foreign exchange gain (loss)                    1,495,851     (1,160,787)
    Interest and other income                       1,260,670        666,753
    Loss on disposal of capital assets               (118,159)             -
    -------------------------------------------------------------------------

    Earnings before income taxes                    2,944,988      2,272,858

    Future income tax (expense) recovery             (180,000)       470,000
    -------------------------------------------------------------------------

    NET EARNINGS AND COMPREHENSIVE EARNINGS         2,764,988      2,742,858

    DEFICIT, BEGINNING OF YEAR                    (16,155,652)   (18,898,510)
    -------------------------------------------------------------------------

    DEFICIT, END OF YEAR                        $ (13,390,664) $ (16,155,652)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share - basic              $        0.12  $        0.15

    Net earnings per share - diluted                     0.11           0.13

    Weighted average number of shares
     outstanding - basic                           22,653,503     18,644,430

    Weighted average number of shares
     outstanding - diluted                         24,183,094     21,024,278



    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Balance Sheets
    as at December 31, 2008 and 2007
    (expressed in Canadian dollars)
    -------------------------------------------------------------------------

                                                         2008           2007
                                                -------------- --------------
    CURRENT ASSETS

      Cash and cash equivalents                 $  50,363,771  $  28,571,239
      Note receivable                                       -     10,000,000
      Accounts receivable                          13,423,994     10,929,411
      Investment tax credits receivable                     -      1,667,978
      Unbilled receivables                            968,363      5,321,664
      Deferred cost of sales                        3,518,085              -
      Prepaid expenses and other assets             1,735,267        678,245
      Future income tax asset                       2,557,000      1,993,000
    -------------------------------------------------------------------------

                                                   72,566,480     59,161,537

    DEFERRED COST OF SALES                          5,525,354              -
    FUTURE INCOME TAX ASSET                         5,763,000      6,507,000
    CAPITAL ASSETS                                  3,351,911      3,817,480
    -------------------------------------------------------------------------

                                                $  87,206,745  $  69,486,017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES

      Accounts payable and accrued liabilities  $   7,305,923  $   3,223,544
      Deferred revenue                             24,013,113     14,244,055
    -------------------------------------------------------------------------

                                                   31,319,036     17,467,599
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY

      Share capital                                68,444,332     67,477,616
      Contributed surplus                             834,041        696,454
      Deficit                                     (13,390,664)   (16,155,652)
    -------------------------------------------------------------------------

                                                   55,887,709     52,018,418
    -------------------------------------------------------------------------

                                                $  87,206,745  $  69,486,017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Statements of Cash Flows
    years ended December 31, 2008 and 2007
    (expressed in Canadian dollars)
    -------------------------------------------------------------------------

                                                         2008           2007
                                                -------------- --------------
    NET INFLOW (OUTFLOW) OF CASH RELATED
     TO THE FOLLOWING ACTIVITIES:

      OPERATING
        Net earnings                            $   2,764,988  $   2,742,858
        Items not affecting cash
          Bad debt expense                          1,183,077            971
          Stock-based compensation                    234,827        201,788
          Foreign exchange (gain) loss on
           cash held in foreign currency           (1,826,193)       898,248
          Loss on disposal of assets                  118,159              -
          Future income tax expense (recovery)        180,000       (470,000)
          Amortization of capital assets            1,400,482      1,309,058
    -------------------------------------------------------------------------

                                                    4,055,340      4,682,923

        Changes in non-cash operating
         working capital items                     11,619,949     (2,467,397)
    -------------------------------------------------------------------------

                                                   15,675,289      2,215,526
    -------------------------------------------------------------------------

      INVESTING
        Repayment (Issuance) of note receivable    10,000,000    (10,000,000)
        Deferred cost of sales                     (5,525,354)             -
        Purchases of capital assets                (1,053,072)    (1,489,097)
    -------------------------------------------------------------------------

                                                    3,421,574    (11,489,097)
    -------------------------------------------------------------------------

      FINANCING
        Proceeds from issuance of common shares       936,034     20,231,180
        Share issuance costs                          (66,558)    (2,682,380)
    -------------------------------------------------------------------------

                                                      869,476     17,548,800
    -------------------------------------------------------------------------

    Foreign exchange gain (loss) on cash
     held in foreign currency                       1,826,193       (898,248)
    -------------------------------------------------------------------------

    NET CASH INFLOW                                21,792,532      7,376,981

    CASH AND CASH EQUIVALENTS,
     BEGINNING OF YEAR                             28,571,239     21,194,258
    -------------------------------------------------------------------------

    CASH AND CASH EQUIVALENTS,
     END OF YEAR                                $  50,363,771  $  28,571,239
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:

      Cash on hand and bank balances            $  19,661,902  $   9,474,248
      Short-term investments                       30,701,869     19,096,991
    -------------------------------------------------------------------------

      Total cash and cash equivalents           $  50,363,771  $  28,571,239
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Interest received                         $   1,258,824  $     629,115



    Reconciliation of Net Earnings and EPS

                                  Three months ended      Fiscal year ended
                                      December 31,           December 31,
                                 --------------------    --------------------
                                    2008        2007        2008        2007
                                 --------    --------    --------    --------
                                          (in thousands of dollars,
                                          except per share amounts)

    Net earnings                 $ 1,704     $ 1,869     $ 2,765     $ 2,742

    Basic earnings per share     $  0.07     $  0.10     $  0.12     $  0.15
    Diluted earnings per share      0.07        0.09        0.11        0.13

    Excluding bad debt expense of $1.1 million related to a reseller who
    filed for creditor protection(1)

    Net earnings                 $ 2,806     $ 1,869     $ 3,867     $ 2,742

    Basic earnings per share     $  0.12     $  0.10     $  0.17     $  0.15
    Diluted earnings per share      0.12        0.09        0.16        0.13


    (1) These are non-GAAP financial measures that do not have any prescribed
        meaning by GAAP and are therefore unlikely to be comparable to
        similar measures presented by other issuers. Management believes that
        these non-GAAP financial measures, when taken together with the
        corresponding consolidated GAAP measures, increase the transparency
        of the Company's current results and enable investors to more fully
        understand trends in its current and future performance.
    





For further information:

For further information: Investor Relations, Kim Butler, Chief Financial
Officer, Bridgewater Systems, kim.butler@bridgewatersystems.com, (613)
591-9104 extension 6023; Vanessa Beresford, The Equicom Group Inc.,
vberesford@equicomgroup.com, (416) 815-0700 extension 227; Media Relations,
David Sharpley, Senior Vice President, Marketing and Product Management,
Bridgewater Systems, david.sharpley@bridgewatersystems.com, (613) 591-9104
extension 2121

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