Bridgewater Systems Announces Third Quarter 2008 Results



    OTTAWA, Oct. 30 /CNW/ - Bridgewater Systems (TSX: BWC) today announced
its financial results for the three and nine months ended September 30, 2008.
All amounts are stated in Canadian dollars unless otherwise noted.

    
    Q3 2008 Highlights

    -   Revenue was $10.3 million, an increase of 14% compared to
        $9.0 million in Q3 2007
    -   Migration of 3G to 4G networks contributed 31% of revenue versus 3%
        in the same period last year
    -   Net earnings rose 67% to $0.5 million, or $0.02 per diluted share,
        compared with $0.3 million, or $0.01 per diluted share, in Q3 2007
    -   New deployments in mobile WiMAX with Sprint's XOHM network and
        Scartel LLC in Russia
    -   Important new contracts subsequent to quarter end:
        -  Four WiMAX wins in Latin America through channel partners Alvarion
           and Motorola
        -  WideSpan integrated solution chosen by a second North American
           customer
    

    "Strong progress was made during the quarter with respect to expanding
into the WiMAX market and broadening our product portfolio, resulting in
numerous customer wins over the past month," said Ed Ogonek, CEO of
Bridgewater Systems. "Our WiMAX customers now total 15, most of which are
outside North America. In addition, a second existing customer has chosen
'WideSpan', our integrated solution, to support its mobile services growth."
    "While the macroeconomic climate creates uncertainty, we have a strong
foundation to manage through this period and deliver sustained growth, based
on our solid balance sheet, sales momentum, long-term contracts and high
revenue visibility. In addition, industry trends remain in our favour, with
data services continuing to be the growth area for wireless carriers."

    Financial Review

    In the third quarter of 2008, revenue was $10.3 million, compared to
$9.0 million for the same period last year. Revenue from professional services
and maintenance and support contracts increased by more than 100%
year-over-year and represented 42% of sales compared to 23% in the same
quarter last year. During Q3 2008, five new customers were added, bringing
total customer deployments to 133.
    The Company continues to diversify its revenue mix with CDMA customers
accounting for 42% of revenue in Q3 2008 versus 92% in the prior year period.
Revenue derived from the migration of 3G to 4G networks contributed 31% of
revenue compared to 3% in Q3 2007. Wireline revenue accounted for 27% of total
revenue, or $2.8 million, most of which related to the Alcatel-Lucent Source
Code License Agreement. Excluding this agreement, sales outside North America
were 22% of total sales versus 10% in the same period in 2007.
    Gross margin was $7.7 million (75% of revenue) versus $7.7 million (86%
of revenue) in Q3 2007. The lower gross margin reflects a higher services
revenue mix. The expansion of professional services and the delivery of
WideSpan are expected to lower the Company's gross margin but result in higher
revenue and higher operating margins in future periods.
    Net earnings for the three months ended September 30, 2008 were
$0.5 million, or $0.02 per diluted share, compared to $0.3 million, or $0.01
per diluted share, in the prior year period.
    Cash at the end of September 30, 2008 was $38.9 million, compared with
$28.6 million at December 31, 2007. The $10.3 million net cash inflow was
primarily the result of collection of note receivable of $10.0 million, net
earnings of $1.1 million, and net proceeds from the exercise of options of
$0.9 million, and an increase in working capital of $1.8 million.
    For the nine months ended September 30, 2008, revenue totaled
$30.7 million compared to $27.4 million in the prior year period, representing
an increase of 12% (23% in US dollars). Net earnings increased to $1.1
million, or $0.04 per diluted share, compared to $0.9 million, or $0.04 per
diluted share, for the nine months ended September 30, 2007.
    A complete set of financial statements and the management's discussion
and analysis for the three and nine months ended September 30, 2008 can be
found at www.bridgewatersystems.com or at www.sedar.com.

    Outlook

    Taking into account the uncertainty around the macroeconomic climate, as
well as an assumption that revenue from the Verizon integrated solution
contract will commence in Q1 2009, Bridgewater is currently forecasting
revenue of approximately $42 million for fiscal 2008. Based on this revenue
forecast, the 2008 operating margin is expected to be approximately 2%.
    Looking ahead, Bridgewater believes it has a strong foundation to deliver
continued growth despite challenging market conditions. The following factors
position Bridgewater well:

    
    -   A strong balance sheet with cash of $38.9 million and no debt;
    -   High revenue visibility due to multi-year contracts;
    -   A large installed customer base in existing and emerging markets;
    -   Long-term industry trends, particularly the growth in wireless data
        services and applications, which create significant market
        opportunities.

    The Company continues to follow its key growth initiatives:

    -   Extend and enhance its product portfolio. Bridgewater is building on
        its subscriber data management platform, by introducing solutions
        such as policy management, and has developed the WideSpan integrated
        solution which has been validated by two key customers.

    -   Expand its addressable market with 3G to 4G evolution. Bridgewater
        has made strong inroads into the WiMAX market with 15 global
        customers to date, the largest of which is Sprint and its XOHM
        network. The Company has also expanded into the 3G GSM market with
        four customer deployments and continues to invest in product
        development to support the evolution to 4G/LTE.

    -   Global expansion. To effectively market on a global scale,
        Bridgewater has partnered with global channel partners such as
        Alvarion, Motorola and Nortel.
    

    Conference Call and Webcast

    A conference call and webcast will be held today, Thursday, October 30,
2008, at 8:30 am ET to discuss this announcement. The telephone numbers to
access the call are 416-644-3416 or 1-800-732-9307. To access the live
webcast, please visit www.bridgewatersystems.com or www.newswire.ca for
directions. Participants will require Windows Media Player(TM) to listen to
the webcast.

    About Bridgewater Systems

    Bridgewater Systems enables service providers to personalize, manage and
deliver applications such as mobile commerce, mobile video, and social
networking to over 150 million subscribers globally. The company's subscriber
management solutions provide a real-time, unified view of the subscriber
including service entitlements, devices and networks being used, billing
profiles, and preferences based on their location or time of day. This allows
service providers to launch and monetize new services faster by personalizing
the subscriber's mobile experience and adopting new service models. Today,
more than 100 leading service providers including Verizon Wireless, Sprint
Nextel, Bell Mobility, SmarTone-Vodafone and Scartel use Bridgewater's
solutions and professional services to deliver innovative services. For more
information, please visit us at www.bridgewatersystems.com.
    Certain statements in this release 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.
Statements related to potential benefits of, and demand for, Bridgewater's
products including statements with respect to the features and benefits that
may be achieved through the use of Bridgewater's products and the relative
position of these products vis-à-vis competitive offerings in the industry are
forward-looking statements which 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 or
achievements of Bridgewater 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
Bridgewater from time to time with Canadian securities regulatory authorities.
Bridgewater assumes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.



    
    Consolidated Statements of Earnings, Comprehensive Earnings and Deficit
    For the three and nine months ended September 30, 2008 and 2007
    (Expressed in Canadian dollars)
    (Unaudited)
    -------------------------------------------------------------------------

                          Three months ended           Nine months ended
                      --------------------------- ---------------------------

                      September 30, September 30, September 30, September 30,
                              2008          2007          2008          2007
                      ------------- ------------- ------------- -------------
                      -------------               -------------

    Revenue           $ 10,293,694  $  8,998,283  $ 30,654,720  $ 27,422,683

    Cost of sales        2,555,297     1,297,212     6,609,576     4,036,189
    -------------------------------------------------------------------------

    Gross margin         7,738,397     7,701,071    24,045,144    23,386,494
    -------------------------------------------------------------------------

    Expenses
      Sales and
       marketing         3,329,261     3,078,016     9,825,762    10,125,133
      Research and
       development       3,215,931     3,523,444    11,599,745     9,792,781
      General and
       administration      910,263       526,310     2,924,914     1,825,299
      Stock-based
       compensation         72,050        50,001       168,818       149,532
    -------------------------------------------------------------------------

                         7,527,505     7,177,771    24,519,239    21,892,745
    -------------------------------------------------------------------------

    Earnings (loss)
     before undernoted
     items                 210,892       523,300      (474,095)    1,493,749

    Foreign exchange
     gain (loss)            76,922      (440,741)      627,553    (1,081,370)
    Interest and other
     income                275,595       167,566       987,097       461,573
    -------------------------------------------------------------------------

    Earnings before
     income taxes          563,409       250,125     1,140,555       873,952

    Future income tax
     recovery (expense)    (80,000)            -       (80,000)            -
    -------------------------------------------------------------------------

    NET EARNINGS AND
     COMPREHENSIVE
     EARNINGS              483,409       250,125     1,060,555       873,952

    DEFICIT, BEGINNING
     OF PERIOD         (15,578,506)  (18,274,683)  (16,155,652)  (18,898,510)
    -------------------------------------------------------------------------

    DEFICIT, END OF
     PERIOD           $(15,095,097) $(18,024,558) $(15,095,097) $(18,024,558)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per
     share - basic    $       0.02  $       0.01  $       0.05  $       0.05

    Net earnings per
     share - diluted  $       0.02  $       0.01  $       0.04  $       0.04

    Weighted average
     number of shares
     outstanding -
     basic              22,758,098    18,473,560    22,546,214    18,449,727

    Weighted average
     number of shares
     outstanding -
     diluted            24,208,862    20,953,134    24,216,263    20,813,315



    Consolidated Balance Sheets
    as at September 30, 2008 and December 31, 2007
    (Expressed in Canadian dollars)
    (Unaudited)
    -------------------------------------------------------------------------

                                                  September 30,  December 31,
                                                          2008          2007
                                                  ------------- -------------
                                                  -------------

    CURRENT ASSETS

      Cash and cash equivalents                   $ 38,910,196  $ 28,571,239
      Note receivable                                        -    10,000,000
      Accounts receivable                           14,154,935    10,929,411
      Investment tax credits receivable                      -     1,667,978
      Unbilled receivables                           3,377,923     5,321,664
      Work in process                                5,897,853             -
      Prepaid expenses and other assets              1,980,304       678,245
      Future income tax asset                        1,210,000     1,993,000
    -------------------------------------------------------------------------

                                                    65,531,211    59,161,537

    FUTURE INCOME TAX ASSET                          7,210,000     6,507,000
    CAPITAL ASSETS                                   3,815,511     3,817,480
    -------------------------------------------------------------------------

                                                  $ 76,556,722  $ 69,486,017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES

      Accounts payable and accrued liabilities       4,535,646     3,223,544
      Deferred revenue                              17,907,309    14,244,055
    -------------------------------------------------------------------------

                                                    22,442,955    17,467,599
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY

      Share capital                                 68,440,442    67,477,616
      Contributed surplus                              768,422       696,454
      Deficit                                      (15,095,097)  (16,155,652)
    -------------------------------------------------------------------------

                                                    54,113,767    52,018,418
    -------------------------------------------------------------------------

                                                  $ 76,556,722  $ 69,486,017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    For the three and nine months ended September 30, 2008 and 2007
    (Expressed in Canadian dollars)
    (Unaudited)
    -------------------------------------------------------------------------

                          Three months ended           Nine months ended
                      --------------------------- ---------------------------

                      September 30, September 30, September 30, September 30,
                              2008          2007          2008          2007
                      ------------- ------------- ------------- -------------
                      -------------               -------------

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

    OPERATING
      Net earnings    $    483,409  $    250,125  $  1,060,555  $    873,952
      Items not
       affecting cash
        Stock-based
         compensation       72,050        50,001       168,818       149,532
        Foreign
         exchange
         (gain) loss      (311,360)      342,482      (322,264)      680,428
        Future income
         tax expense        80,000             -        80,000             -
        Amortization
         of capital
         assets            385,226       346,571       997,811       894,019
    -------------------------------------------------------------------------

                           709,325       989,179     1,984,920     2,597,931

        Changes in
         non-cash
         operating
         working
         capital
         items          (1,654,967)    2,930,068    (1,838,361)   (5,173,451)
    -------------------------------------------------------------------------

                          (945,642)    3,919,247       146,559    (2,575,520)
    -------------------------------------------------------------------------

    INVESTING
      Issuance of note
       receivable                -             -             -   (12,000,000)
      Repayment of note
       receivable                -             -    10,000,000    12,000,000
      Purchases of
       capital assets      (90,516)     (667,920)     (995,842)   (1,215,345)
    -------------------------------------------------------------------------

                           (90,516)     (667,920)    9,004,158    (1,215,345)
    -------------------------------------------------------------------------

    FINANCING
      Proceeds from
       issuance of
       common shares       363,179        27,645       932,534        98,167
      Share issuance
       costs                     -             -       (66,558)            -
    -------------------------------------------------------------------------

                           363,179        27,645       865,976        98,167
    -------------------------------------------------------------------------

    Foreign exchange
     gain (loss) on cash
     held in foreign
     currency              311,360      (342,482)      322,264      (680,428)
    -------------------------------------------------------------------------

    NET CASH (OUTFLOW)
     INFLOW               (361,619)    2,936,490    10,338,957    (4,373,126)

    CASH AND CASH
     EQUIVALENTS,
     BEGINNING OF
     PERIOD             39,271,815    13,884,642    28,571,239    21,194,258
    -------------------------------------------------------------------------

    CASH AND CASH
     EQUIVALENTS,
     END OF PERIOD    $ 38,910,196  $ 16,821,132  $ 38,910,196  $ 16,821,132
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary
     information:

      Cash on hand
       and bank
       balances       $ 11,485,740  $  4,207,322  $ 11,485,740  $  4,207,322
      Short-term
       investments      27,424,456    12,613,810    27,424,456    12,613,810
    -------------------------------------------------------------------------

      Total cash and
       cash
       equivalents    $ 38,910,196  $ 16,821,132  $ 38,910,196  $ 16,821,132
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Interest
       received       $    275,595  $    167,566  $    987,097  $    453,179
    






For further information:

For further information: Investor Relations, The Equicom Group Inc.,
Vanessa Beresford, vberesford@equicomgroup.com, (416) 815-0700; Bridgewater
Systems, Kim Butler, Chief Financial Officer,
kim.butler@bridgewatersystems.com, (613) 591-9104 ext 6023

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