Bridgewater Systems Reports Financial Results for Q2 2010

    
    -   Revenue of $22.7 million for Q2 2010, an increase of 41% over prior
        year

    -   Earnings before income taxes of $4.8 million for Q2 2010, compared
        with $4.1 million in Q2 2009

    -   Cash and cash equivalents, and short-term investments of
        $77.6 million
    

OTTAWA, July 29 /CNW/ - Bridgewater Systems (TSX: BWC), the mobile personalization company, today announced financial results for the three and six months ended June 30, 2010. 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.

"Our investments to expand global sales, service and partnerships are aimed at securing new customers and capitalizing on the growing demand for our solutions to manage rapid mobile data growth, said Ed Ogonek, CEO of Bridgewater Systems. "We are particularly pleased with our progress with Tier 1 partners."

    
    Financial Highlights
    --------------------

    -   Revenue of $22.7 million for Q2 2010 represents an increase of
        41% compared with $16.1 million for Q2 2009. Product revenue for
        Q2 2010 was $17.1 million, an increase of 47%, compared with
        $11.7 million for Q2 2009.

    -   On a year-to-date basis, revenues of $47.2 million are 56% higher
        than revenues in the first six months of fiscal 2009.

    -   Q2 2010 gross margin was $15.0 million (66% of revenue) versus
        $12.1 million (75% of revenue) in Q2 2009, reflecting increases in
        direct product costs associated with the delivery of integrated
        systems, investments in operations support infrastructure, as well as
        increased global professional services engagements.

    -   Total operating expenses in Q2 2010 were $10.7 million (47% of
        revenue), net of $0.6 million of investment tax credits, compared
        with $8.2 million (51% of revenue) in the same period last year. The
        year-over-year increase in operating expenses mainly reflects higher
        investments in research and development and sales and marketing to
        support the Company's growth initiatives.

    -   Net earnings before income taxes rose 17% to $4.8 million in Q2 2010,
        versus $4.1 million in Q2 2009. Net earnings before income taxes for
        the first half of 2010 increased to $10.5 million, compared with $6.9
        million for the same period in 2009.

    -   Net earnings for Q2 2010 were $3.2 million, or $0.13 per share fully
        diluted, versus $4.1 million, or $0.17 per share fully diluted, in
        the prior year. Net earnings for Q2 2010 include a current income tax
        expense of $0.6 million and non-cash future income tax expense of
        $0.9 million.

    -   Cash and cash equivalents, and short-term investments were
        $77.6 million, compared with $67.3 million at December 31, 2009.

    Business Highlights
    -------------------

    -   Opened a new India Center of Excellence that is providing technology
        development sales, professional services and support services.

    -   Broadened relationship with Cisco by becoming a Cisco Preferred
        Solution Developer for the mobile packet core for 3G and 4G networks.
        Successfully completed extensive interoperability testing with Cisco
        and, subsequent to quarter end, announced the availability of the
        Bridgewater(R) Policy Controller and Home Subscriber Server on the
        Cisco Unified Computing System. This enables service providers to
        deploy Bridgewater's complete and pre-integrated control plane
        portfolio to increase scalability and business agility, and to reduce
        total cost of ownership.

    -   Added 17 new customers in the quarter, including 11 in the APAC and
        EMEA regions.

    Outlook
    -------

    With the release of its Q2 2010 results, Bridgewater reiterated guidance
for 2010. For 2010, the Company is expecting:

    -   Revenues of $85 to $94 million

    -   Net earnings before tax of $14 to $17 million

    -   Net earnings after tax of $10 to $12 million
    

Factors supporting Bridgewater's annual outlook include: high revenue visibility due to significant contracts with Tier 1 customers; a large installed customer base in existing and emerging markets; the long-term industry trends of growth in mobile data services and applications; 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 and six months ended June 30, 2010 can be found at www.bridgewatersystems.com or at www.sedar.com.

Forward-Looking Statements

Certain statements in this release, including the estimates of future revenues 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;
    -   Bridgewater's visibility into the deployment plans of its major
        customers;
    -   Bridgewater's ability to maintain and grow its installed customer
        base in existing and emerging markets; and
    -   Bridgewater's expectations regarding long-term industry trends in
        growth in mobile data services and applications.
    

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 Bridgewater's Annual Information Form dated March 31, 2010 and Management's Discussion & Analysis of Financial Condition and Results of Operation dated June 30, 2010, 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;
    -   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's engagements with its customers 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.

Conference Call and Webcast

A conference call and webcast will be held today, Thursday, July 29, 2010 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(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 suite 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 150 leading service providers including America Movil, Bell Canada, Clearwire, Cox, Hutchison Telecom, Iusacell, 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, Smart Caps, myPolicy, 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.

    
    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Statements of Earnings and
    Comprehensive Earnings
    For the three and six months ended June 30, 2010 and 2009
    (expressed in Canadian dollars)
    (unaudited)
    -------------------------------------------------------------------------
                            Three months ended            Six months ended
                      --------------------------- ---------------------------
                           June 30,      June 30,      June 30,      June 30,
                              2010          2009          2010          2009
                      ------------- ------------- ------------- -------------

    Revenue
      Product         $ 17,144,414  $ 11,679,272  $ 35,996,393  $ 22,416,562
      Service and
       support           5,584,958     4,455,216    11,228,850     7,761,023
    --------------------------------------------- ---------------------------
                        22,729,372    16,134,488    47,225,243    30,177,585

    Cost of sales        7,732,280     4,083,645    15,912,319     7,406,713
    --------------------------------------------- ---------------------------

    Gross margin        14,997,092    12,050,843    31,312,924    22,770,872
    --------------------------------------------- ---------------------------

    Expenses
      Sales and
       marketing         3,840,382     3,281,831     7,880,693     6,214,389
      Research and
       development       6,053,970     3,753,494    11,238,052     7,181,464
      General and
       administration    1,178,187     1,602,411     2,203,865     3,103,687
      Investment tax
       credit
       carryforwards
       recognized         (600,000)            -    (1,000,000)            -
      Bad debt
       recovery (Note 3)         -      (487,735)      (49,929)     (263,897)
      Stock-based
       compensation        227,325        95,000       343,187       170,488
    --------------------------------------------- ---------------------------

                        10,699,864     8,245,001    20,615,868    16,406,131
    --------------------------------------------- ---------------------------

    Earnings before
     undernoted items    4,297,228     3,805,842    10,697,056     6,364,741

    Foreign exchange
     gain (loss)           434,150        98,305      (306,169)       94,608
    Interest and
     other income           85,281       168,871       157,441       398,894
    Loss on disposal
     of property,
     equipment and
     intangible assets     (64,724)            -       (86,724)            -
    --------------------------------------------- ---------------------------

    Earnings before
     income taxes        4,751,935     4,073,018    10,461,604     6,858,243

    Current income
     tax expense           600,000             -     1,000,000             -
    Future income
     tax expense
     (recovery)            944,000       (70,000)    1,661,000      (170,000)
    --------------------------------------------- ---------------------------

    NET EARNINGS AND
     COMPREHENSIVE
     EARNINGS         $  3,207,935  $  4,143,018  $  7,800,604  $  7,028,243
    --------------------------------------------- ---------------------------
    --------------------------------------------- ---------------------------


    Net earnings per
     share - basic    $       0.13  $       0.17  $       0.32  $       0.30

    Net earnings per
     share - diluted  $       0.13  $       0.17  $       0.30  $       0.29

    Weighted average
     number of shares
     outstanding -
     basic (Note 2)     24,619,914    24,483,296    24,531,389    23,653,629

    Weighted average
     number of shares
     outstanding -
     diluted (Note 2)   25,591,709    25,033,020    25,580,342    24,615,850



    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Balance Sheets
    as at June 30, 2010 and December 31, 2009
    (expressed in Canadian dollars)
    (unaudited)
    -------------------------------------------------------------------------

                                                      June 30,   December 31,
                                                         2010           2009
                                                -------------- --------------


    CURRENT ASSETS

      Cash and cash equivalents                 $  64,035,839  $  53,828,859
      Short-term investments (Note 3)              13,612,070     13,459,190
      Accounts receivable                          11,345,383     24,879,197
      Unbilled receivables                            787,212      1,360,741
      Deferred cost of sales                        6,085,031     12,324,813
      Prepaid expenses and other assets             4,302,699      3,229,227
      Future income tax asset                       2,021,000      5,113,000
    -------------------------------------------------------------------------

                                                  102,189,234    114,195,027

    FUTURE INCOME TAX ASSET                         5,134,000      3,703,000
    PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS       3,019,155      3,604,811
    -------------------------------------------------------------------------

                                                $ 110,342,389  $ 121,502,838
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES

      Accounts payable and accrued
       liabilities                              $   5,475,413  $   9,617,441
      Deferred revenue                             28,428,293     44,288,403
    -------------------------------------------------------------------------

                                                   33,903,706     53,905,844
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY

      Share capital (Note 2)                       70,667,939     69,872,842
      Contributed surplus                           1,154,182        908,194
      Retained earnings (Deficit)                   4,616,562     (3,184,042)
    -------------------------------------------------------------------------

                                                   76,438,683     67,596,994
    -------------------------------------------------------------------------

                                                $ 110,342,389  $ 121,502,838
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Statements of Cash Flows
    For the three and six months ended June 30, 2010 and 2009
    (expressed in Canadian dollars)
    (unaudited)
    -------------------------------------------------------------------------

                            Three months ended            Six months ended
                      --------------------------- ---------------------------
                           June 30,      June 30,      June 30,      June 30,
                              2010          2009          2010          2009
                      ------------- ------------- ------------- -------------

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

    OPERATING
      Net earnings    $  3,207,935  $  4,143,018  $  7,800,604  $  7,028,243
      Items not
       affecting cash
        Bad debt
         expense                 -        23,860             -       247,698
        Stock-based
         compensation      227,325        95,000       343,187       170,488
        Foreign
         exchange loss
         (gain) on
         cash held in
         foreign
         currency       (1,227,211)    2,088,394       414,557     1,651,250
        Loss on
         disposal
         of assets          64,724             -        86,724             -
        Future income
         tax expense
         (recovery)        944,000       (70,000)    1,661,000      (170,000)
        Amortization of
         property,
         equipment and
         intangible
         assets            328,559       311,225       647,132       593,121
    -------------------------------------------------------------------------

                         3,545,332     6,591,497    10,953,204     9,520,800

    Changes in
     non-cash
     operating
     working
     capital items
     (Note 5)          (11,956,863)      891,553      (628,441)      (54,864)
    -------------------------------------------------------------------------

                        (8,411,531)    7,483,050    10,324,763     9,465,936
    -------------------------------------------------------------------------

    INVESTING
      Purchase of
       short-term
       investments      (5,379,621)            -      (152,880)            -
      Purchases of
       property,
       equipment and
       intangible
       assets              (89,987)     (585,272)     (248,244)     (959,139)
    -------------------------------------------------------------------------

                        (5,469,608)     (585,272)     (401,124)     (959,139)
    -------------------------------------------------------------------------

    FINANCING
      Proceeds from
       issuance of
       common shares
       (Note 2)            670,851       434,391       697,898     2,170,803
      Repurchase of
       shares under
       normal course
       issuer bid
       (Note 2)                  -    (1,580,051)            -    (1,788,342)
    -------------------------------------------------------------------------

                           670,851    (1,145,660)      697,898       382,461
    -------------------------------------------------------------------------

    Foreign exchange
     gain (loss) on
     cash held in
     foreign currency    1,227,211    (2,088,394)     (414,557)   (1,651,250)
    -------------------------------------------------------------------------

    NET CASH INFLOW
     (OUTFLOW)         (11,983,077)    3,663,724    10,206,980     7,238,008

    CASH AND CASH
     EQUIVALENTS,
     BEGINNING OF
     PERIOD             76,018,916    53,938,055    53,828,859    50,363,771
    -------------------------------------------------------------------------

    CASH AND CASH
     EQUIVALENTS,
     END OF PERIOD    $ 64,035,839  $ 57,601,779  $ 64,035,839  $ 57,601,779
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary
     information:

      Cash on hand
       and bank
       balances       $ 24,836,234  $  4,900,007  $ 24,836,234  $  4,900,007
      Cash equivalents  39,199,605    52,701,772    39,199,605    52,701,772
    -------------------------------------------------------------------------

      Total cash
       and cash
       equivalents    $ 64,035,839  $ 57,601,779  $ 64,035,839  $ 57,601,779
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Interest
       received       $     70,571  $    168,871  $    122,667  $    395,501



    BRIDGEWATER SYSTEMS CORPORATION
    Consolidated Statements of Shareholders' Equity
    For the six months ended June 30, 2010
    (expressed in Canadian dollars)
    (unaudited)
    -------------------------------------------------------------------------

                                            Common Shares        Contributed
                                        Number        Amount       Surplus
                                        ------        ------       -------

    Three months ended
     June 30, 2010
    ------------------

    Balance at March 31, 2010         24,447,772  $ 69,903,009  $  1,020,936
    -------------------------------------------------------------------------

    Stock-based compensation                   -             -       227,325
    Exercise of stock options
     (Note 2)                            320,406       764,930       (94,079)
    Net earnings                               -             -             -
    -------------------------------------------------------------------------

    Balance at June 30, 2010          24,768,178  $ 70,667,939  $  1,154,182
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Six months ended
     June 30, 2010
    ----------------

    Balance at December 31, 2009      24,432,468  $ 69,872,842  $    908,194
    -------------------------------------------------------------------------

    Stock-based compensation                   -             -       343,187
    Exercise of stock options
     (Note 2)                            335,710       795,097       (97,199)
    Net earnings                               -             -             -
    -------------------------------------------------------------------------

    Balance at June 30, 2010          24,768,178  $ 70,667,939  $  1,154,182
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                       Retained
                                       Earnings   Shareholders'
                                       (Deficit)     Equity
                                       ---------     ------

    Three months ended
     June 30, 2010
    ------------------

    Balance at March 31, 2010       $  1,408,627  $ 72,332,572
    -----------------------------------------------------------

    Stock-based compensation                   -       227,325
    Exercise of stock options
     (Note 2)                                  -       670,851
    Net earnings                       3,207,935     3,207,935
    -----------------------------------------------------------

    Balance at June 30, 2010        $  4,616,562  $ 76,438,683
    -----------------------------------------------------------
    -----------------------------------------------------------

    Six months ended
     June 30, 2010
    ----------------

    Balance at December 31, 2009    $ (3,184,042) $ 67,596,994
    -----------------------------------------------------------

    Stock-based compensation                   -       343,187
    Exercise of stock options
     (Note 2)                                  -       697,898
    Net earnings                       7,800,604     7,800,604
    -----------------------------------------------------------

    Balance at June 30, 2010        $  4,616,562  $ 76,438,683
    -----------------------------------------------------------
    -----------------------------------------------------------
    

SOURCE BRIDGEWATER SYSTEMS

For further information: For further information: 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, Joanne Steinberg, Marketing Director, Bridgewater Systems, joanne.steinberg@bridgewatersystems.com, +1 613-591-9104 extension 2032

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