March Networks Announces Fourth Quarter and Fiscal Year 2008 Financial Results



    
    Summary Operating Results:
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    $Cdn millions                                         Fiscal      Fiscal
     except EPS data              Q4 '08      Q4 '07      '08(*)     '07(xx)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                       $ 21.1      $ 19.8      $ 94.4       $87.6
    -------------------------------------------------------------------------
    Earnings (loss) from
     continuing operations
     before income taxes            (4.2)       (0.7)       (7.1)        8.8
    -------------------------------------------------------------------------
    Net earnings (loss)
     from continuing
     operations                   $ (3.1)     $ (0.4)     $ (6.5)      $ 4.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per share from continuing
     operations                   $(0.18)     $(0.03)     $(0.38)      $0.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)  Earnings measures include the impact of retrofit charges for
         $750,000 and $3.2 million in Q4'08 and fiscal '08, respectively.
    (xx) Earnings measures include the impact of a $2.3 million lawsuit
         settlement.
    

    OTTAWA, June 11 /CNW Telbec/ - March Networks(TM) (TSX:MN; AIM:MNW), a
leading provider of innovative video and data applications used for security
surveillance, monitoring, analysis and business optimization, today announced
financial results for the fourth quarter and fiscal year ended April 30, 2008.
All figures in Canadian dollars and in accordance with Canadian GAAP unless
otherwise specified.
    The Company recorded revenue of $21.1 million in the fourth quarter of
fiscal 2008 representing an increase of 6% as compared to revenue of
$19.8 million in the fourth quarter of fiscal 2007 and was even as compared to
the third quarter of fiscal 2008. Revenue of $94.4 million in the fiscal year
ended April 30, 2008 represented an increase of 8% as compared to fiscal 2007.
    The Company incurred a loss from continuing operations before income
taxes in the fourth quarter of fiscal 2008 of $4.2 million as compared to a
loss from continuing operations before income taxes of $0.7 million in the
fourth quarter of fiscal 2007 and a loss of $2.9 million in the third quarter
of fiscal 2008. Loss from continuing operations before income taxes in the
fiscal year ended April 30, 2008 was $7.1 million as compared to earnings of
$8.8 million in fiscal 2007. Earnings from continuing operations before income
taxes in the fourth quarter and fiscal year ended reflected charges of
$750,000 and $3.2 million in the fourth quarter and fiscal year ended April
30, 2008, respectively, related to a retrofit program which the Company
initiated in the second quarter of fiscal 2008 to proactively address design
issues related to the Company's installed base of transit products. Earnings
from continuing operations before income taxes in fiscal 2007 were negatively
impacted by a $2.3 million lawsuit settlement.
    The Company incurred a net loss from continuing operations in the fourth
quarter of fiscal 2008 of $3.1 million or $0.18 per diluted share as compared
to a net loss of $444,000 or $0.03 per diluted share in the fourth quarter of
fiscal 2007 and a net loss of $3.1 million or $0.18 per share in the third
quarter of fiscal 2008. The Company's net loss from continuing operations of
$6.5 million or $0.38 per diluted share in fiscal 2008 compares to earnings of
$4.8 million or $0.27 per diluted share in fiscal 2007.
    "Fiscal 2008 was a year of investment and diversification for the Company
that featured excellent revenue growth outside of our largest customer, the
establishment of a strong European presence through the acquisition of Cieffe
and enhancement of the Company's product portfolio through this acquisition
and the Company's internal development initiatives. We expect 2009 to be an
exciting year for the Company with a return to operating profitability, an
industry leading product line and strong international growth" said Peter
Strom, President and Chief Executive Officer.

    
    Financial Highlights

    - Revenue excluding the Company's year to date largest customer was up
      32% and 37% in the fourth quarter and fiscal 2008, respectively, from
      the comparable periods in fiscal 2007.

    - Fourth quarter 2008 revenue growth in the Banking market which grew by
      36% as compared to the third quarter of fiscal 2008 and 19% as compared
      to the fourth quarter of fiscal 2007.

    - Fourth quarter 2008 gross margin as a percentage of revenue, excluding
      retrofit charge, was at its highest level since Q307 at 49.0%.

    - Acquisition of Cieffe for approximately $28.6 million including
      transaction costs.

    - Balance sheet remains strong with $63.4 million in cash and short term
      investments, a working capital ratio of 4:1 and no debt.

    "The Company undertook some important initiatives in the fourth quarter of
fiscal 2008 to put it on course for operating profitability and strong revenue
growth in fiscal 2009 including trimming of the Company's cost structure and
expansion of the Company's product line and market presence as a result of the
acquisition of Cieffe." , said Ken Taylor, CFO of March Networks. "The
Company's recently announced normal course issuer bid confirms that the
Company's Management and Board of Directors believe in the prospects for the
Company and that the market price for the Company's shares may be such that
the purchase of common shares by the Company would be in the best interests of
the Company and its shareholders."

    Business Outlook

    The Company's revenue expectations for the fiscal year ending April 30,
2009 are in the range of $100 million to $115 million.
    The Company's expectations of operating earnings for fiscal 2009 are in
the range of $0.5 million to $5 million. Operating earnings is a non-GAAP
measure that the Company uses to evaluate its performance in order to
emphasize cash flow impacting operating activities. The Company defines this
measure as earnings before interest, taxes, amortization of acquired
intangibles and stock based compensation expense. The Company's expectations
of operating earnings for fiscal 2009 compare to preliminary results for
fiscal 2008 which indicate a loss of approximately $7 million. This measure
may not be comparable to similar measures used by other companies.

    The Company will release its fourth quarter and fiscal year 2008 financial
results on June 11, 2008 and will discuss the results on a conference call and
webcast on June 12, 2008 at 8:30 a.m. EDT (1:30 p.m. BST). The conference call
may be accessed by dialing 1-800-732-0232 (North America) or 00 800 2288 3501
(Europe).

    The conference call webcast can be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2284920

    A replay of the conference call will be available from June 12 at
10:30 a.m. EDT until June 19, 2008 at 11:59 p.m. EDT. The replay can be
accessed at 1-877-289-8525 or 416-640-1917. The passcode for the replay is
21271057#

    About March Networks

    March Networks(TM) (TSX:MN; AIM:MNW) is a leading provider of intelligent
IP video and business analysis applications that enable organizations to
reduce losses, mitigate risks and improve security and operational efficiency.
The Company's advanced software suite includes enterprise-class video
management, powerful analytics and comprehensive managed and professional
services. Our software and systems are used by leading financial institutions,
retailers, transportation authorities and other organizations in more than
50 countries. For more information, please visit www.marchnetworks.com.

    -------------------------------------------------------------------------
    Forward-Looking Statements

    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 and financial
guidance contained in this release include, but are not limited to, the
following:

    - The market for the Company's products will grow by greater than 10%
      annually.
    - The Company's revenue concentration with any end user customer will not
      exceed 10% in fiscal 2009.
    - The Company will develop and deliver new products on time in order to
      satisfy the demands of current and potential customers.
    - The Company will have adequate component supply to meet customer
      demand.
    - The Company's gross margin as a percentage of revenue in fiscal 2009
      will improve relative to fiscal 2008.
    - The Company will lower its operating cost structure as a percentage of
      revenue relative to fiscal 2008.
    - The prevailing exchange rate for US dollars and Euros to Canadian
      dollars will be US$1.00=CDN$1.00 and Euro 1=CDN
      $1.50.
    - 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:

    - Higher than targeted product costs and/or higher than expected declines
      in market pricing for new products.
    - 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 success versus competitors in new customer
      opportunities and/or loss of existing customers to competitors.
    - Revenue shortfalls due to delays in securing new customer opportunities
      and the lack of long term purchase commitments from customers.
    - Slower than expected customer adoption of the Company's new product and
      service offerings.
    - Product issues in the Company's installed base that result in increased
      costs to the Company and/or lost revenue opportunities.
    - Difficulties integrating acquired business operations and related
      diversion of management attention.
    - Shortages or long lead times in component supply that affect the
      Company's ability to meet customer demand.
    - Reduced customer spending associated with the impact of deteriorating
      economic conditions and increasing fuel prices.

    Additional risks are discussed herein and under "Risk Factors" in the
Company's Annual Information Form available online at www.sedar.com.
    -------------------------------------------------------------------------
    (*)MARCH NETWORKS and the MARCH NETWORKS logo are trademarks of March
       Networks Corporation. All other trademarks are the property of their
       respective owners.



                         March Networks Corporation
    -------------------------------------------------------------------------
               CONSOLIDATED STATEMENTS OF OPERATIONS (CDN $)
    -------------------------------------------------------------------------
             (In thousands, except share and per-share amounts)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                Fiscal Quarter Ended      Fiscal Year Ended
    -------------------------------------------------------------------------
                                April 30,   April 30,   April 30,   April 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    REVENUE                      $21,052     $19,815     $94,410     $87,620
    -------------------------------------------------------------------------
    COST OF REVENUE               11,500      10,475      53,972      41,650
    -------------------------------------------------------------------------
    GROSS MARGIN                   9,552       9,340      40,438      45,970
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing and
     support                       5,479       4,140      17,402      16,134
    -------------------------------------------------------------------------
    Research and development       4,584       3,027      15,823       9,356
    -------------------------------------------------------------------------
    General and administrative     3,598       3,286      14,625      10,970
    -------------------------------------------------------------------------
    Stock based compensation         446         291       2,760       1,485
    -------------------------------------------------------------------------
    Amortization of acquired
     intangibles                     399         136         810         439
    -------------------------------------------------------------------------
    Lawsuit settlement                 -           -           -       2,263
    -------------------------------------------------------------------------
    Total expenses                14,506      10,880      51,420      40,647
    -------------------------------------------------------------------------
    EARNINGS (LOSS) BEFORE
     UNDERNOTED ITEMS             (4,954)     (1,540)    (10,982)      5,323
    -------------------------------------------------------------------------
    Interest and other income,
     net                             773         848       3,921       3,428
    -------------------------------------------------------------------------
    EARNINGS (LOSS) BEFORE INCOME
     TAXES AND DISCONTINUED
     OPERATIONS                   (4,181)       (692)     (7,061)      8,751
    -------------------------------------------------------------------------
    Current income tax expense        68          30          93         330
    -------------------------------------------------------------------------
    Future income tax expense     (1,125)       (278)       (639)      3,606
    -------------------------------------------------------------------------
    NET EARNINGS (LOSS) FROM
     CONTINUING OPERATIONS        (3,124)       (444)     (6,515)      4,815
    -------------------------------------------------------------------------
    Discontinued operations            -           2           -       1,227
    -------------------------------------------------------------------------
    NET EARNINGS (LOSS)          $(3,124)    $  (442)    $(6,515)    $ 6,042
    -------------------------------------------------------------------------
    Net earnings (loss) per
     share:
    -------------------------------------------------------------------------
    Basic - from continuing
            operations           $ (0.18)    $ (0.03)    $ (0.38)    $  0.29
    -------------------------------------------------------------------------
          - from discontinued
            operations                 -           -           -        0.07
    -------------------------------------------------------------------------
                                 $ (0.18)    $ (0.03)    $ (0.38)    $  0.36
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Diluted - from continuing
              operations         $ (0.18)    $ (0.03)    $ (0.38)    $  0.27
    -------------------------------------------------------------------------
            - from discontinued
              operations               -           -           -        0.07
    -------------------------------------------------------------------------
                                 $ (0.18)    $ (0.03)    $ (0.38)    $  0.34
    -------------------------------------------------------------------------
    Shares used in per-share
     calculation:
    -------------------------------------------------------------------------
    Basic                     17,633,233  16,848,071  17,194,161  16,714,709
    -------------------------------------------------------------------------
    Diluted                   18,547,657  17,931,083  18,162,208  17,938,447
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                     CONSOLIDATED BALANCE SHEETS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                        April 30,   April 30,
                                                            2008        2007
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    -------------------------------------------------------------------------
    Cash                                                $  4,187    $  3,526
    -------------------------------------------------------------------------
    Short-term investments                                59,209      82,305
    -------------------------------------------------------------------------
    Restricted cash                                        2,410       2,775
    -------------------------------------------------------------------------
    Accounts receivable                                   15,432      19,396
    -------------------------------------------------------------------------
    Inventories                                           22,220      11,577
    -------------------------------------------------------------------------
    Prepaid expenses and other current assets              2,982       1,778
    -------------------------------------------------------------------------
    Future tax assets                                      4,556       2,198
    -------------------------------------------------------------------------
    Total current assets                                 110,996     123,555
    -------------------------------------------------------------------------
    Restricted cash                                            -         833
    -------------------------------------------------------------------------
    Capital assets                                         2,492       2,720
    -------------------------------------------------------------------------
    Intangible assets                                     16,377       3,088
    -------------------------------------------------------------------------
    Future tax assets                                     21,081      21,975
    -------------------------------------------------------------------------
    Goodwill                                              22,048       5,397
    -------------------------------------------------------------------------

    TOTAL ASSETS                                        $172,994    $157,568

    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY

    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                                     $11,576    $  5,790
    -------------------------------------------------------------------------
    Accrued liabilities                                   10,236       4,337
    -------------------------------------------------------------------------
    Refundable royalty advance                             2,410       2,775
    -------------------------------------------------------------------------
    Deferred revenue                                       3,329       7,560
    -------------------------------------------------------------------------
    Income taxes payable                                     422         467
    -------------------------------------------------------------------------
    Total current liabilities                             27,973      20,929
    -------------------------------------------------------------------------
    Acquisition escrow                                         -         833
    -------------------------------------------------------------------------
    Deferred revenue                                       9,048       5,881
    -------------------------------------------------------------------------
    Long term compensation                                   451           -
    -------------------------------------------------------------------------
    Future tax liabilities                                 4,362           -
    -------------------------------------------------------------------------
    Total liabilities                                     41,834      27,643
    -------------------------------------------------------------------------
    Shareholders' equity                                 131,160     129,925
    -------------------------------------------------------------------------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          $172,994    $157,568

    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                           Fiscal Year Ended
    -------------------------------------------------------------------------
                                                        April 30,   April 30,
                                                            2008        2007
    -------------------------------------------------------------------------
    Cash flows from operating activities:
    -------------------------------------------------------------------------
    Net earnings - continuing operations                 $(6,515)     $4,815
    -------------------------------------------------------------------------
    Net earnings - discontinued operations                     -       1,227
    -------------------------------------------------------------------------
    Items not affecting cash:
    -------------------------------------------------------------------------
    Amortization of capital assets                         1,367       1,020
    -------------------------------------------------------------------------
    Amortization of acquired intangibles                     810         439
    -------------------------------------------------------------------------
    Gain on sale of discontinued operations                    -      (1,226)
    -------------------------------------------------------------------------
    Stock based compensation                               2,760       1,485
    -------------------------------------------------------------------------
    Unrealized foreign exchange (gain)/ loss                (229)       (137)
    -------------------------------------------------------------------------
    Future income taxes and non-refundable
     investment tax credits                               (1,756)      3,879
    -------------------------------------------------------------------------
    Net change in non-cash items:
    -------------------------------------------------------------------------
      Continuing operations                                7,161      (7,536)
    -------------------------------------------------------------------------
      Discontinued operations                                  -        (550)
    -------------------------------------------------------------------------
    Net cash generated by operating activities             3,598       3,416
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows from investing activities:
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Purchase) redemption of
     short-term investments                               23,725       3,456
    -------------------------------------------------------------------------
    Purchase of capital assets                              (757)     (2,493)
    -------------------------------------------------------------------------
    Acquisition of business                              (26,078)     (8,316)
    -------------------------------------------------------------------------
    Proceeds from sale of
     discontinued operations                                   -       1,226
    -------------------------------------------------------------------------
    Net cash consumed by investing activities             (3,110)     (6,127)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows from financing activities:
    -------------------------------------------------------------------------
    Issuance of share capital, net                           314       2,933
    -------------------------------------------------------------------------
    Net cash generated by financing activities               314       2,933
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Increase in cash - continuing operations                 802        (455)
    -------------------------------------------------------------------------
    Decrease in cash - discontinued operations                 -         677
    -------------------------------------------------------------------------
    Net increase (decrease) in cash                          802         222
    -------------------------------------------------------------------------
    Foreign exchange loss on foreign cash held              (141)         12
    -------------------------------------------------------------------------
    Cash, beginning of period                              3,526       3,292
    -------------------------------------------------------------------------
    Cash, end of period                                   $4,187      $3,526
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Peter Wilenius, VP Corporate Development, March
Networks Corporation (613) 591-8181, pwilenius@marchnetworks.com

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