March Networks Announces Record Revenue in Second Quarter and First Half of Fiscal 2008



    
    Summary Operating Results:
    -------------------------------------------------------------------------
    $Cdn millions                                         Q1-Q2        Q1-Q2
     except EPS data           Q2 '08       Q2 '07          '08          '07
    -------------------------------------------------------------------------

    Revenue                    $ 27.7       $ 26.3       $ 52.3       $ 49.1
    -------------------------------------------------------------------------

    Earnings (loss)
     from continuing
     operations before
     income taxes(*)           $ (0.9)      $  2.4       $  0.1       $  7.5
    -------------------------------------------------------------------------

    Net earnings (loss)
     from continuing
     operations(*)             $ (0.7)      $  1.4       $ (0.3)      $  4.3
    -------------------------------------------------------------------------

    Diluted earnings (loss)
     per share from
     continuing operations     $(0.04)      $ 0.08       $(0.02)      $ 0.24
    -------------------------------------------------------------------------
    (*) Includes a $2.4 million charge to FY 2008 second quarter and year to
        date earnings for retrofit costs and a $2.3 million charge to FY 2007
        second quarter and year to date earnings for patent litigation
        settlement.
    

    OTTAWA, Nov. 28 /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 second quarter and first six months of fiscal 2008
ended October 31, 2007. All figures in Canadian dollars and in accordance with
Canadian GAAP unless otherwise specified.
    Record revenue of $27.7 million in the second quarter of fiscal 2008
represented an increase of 5% as compared with revenue of $26.3 million in the
second quarter of fiscal 2007 and represented an increase of 13% as compared
to the first quarter of fiscal 2008. Revenue of $52.3 million in the first six
months of fiscal 2008 ended October 31, 2007 was also a record for the Company
and represented an increase of 6% as compared to the first six months of
fiscal 2007.
    The Company incurred a net loss from continuing operations before income
taxes in the second quarter of fiscal 2008 of $872,000 as compared to earnings
from continuing operations before income taxes of $2.4 million in the second
quarter of fiscal 2007 and earnings of $0.9 million in the first quarter of
fiscal 2008. Earnings from continuing operations before income taxes in the
first six months of fiscal 2008 were $58,000 as compared to earnings of
$7.5 million in the first six months of fiscal 2007. Earnings from continuing
operations before income taxes in the second quarter and first six months of
fiscal 2008 reflected a one time $2.4 million charge related to a retrofit
program which the Company initiated to proactively address design issues
related to the Company's installed base of transit products. Earnings from
continuing operations before income taxes in the second quarter and first six
months of fiscal 2007 were negatively impacted by a $2.3 million lawsuit
settlement.
    The Company incurred a loss from continuing operations in the second
quarter of fiscal 2008 of $666,000 or $0.04 per diluted share as compared to
net earnings of $1.4 million or $0.08 per diluted share in the second quarter
of fiscal 2007 and net earnings of $374,000 or $0.02 per share in the first
quarter of fiscal 2008. The Company's net loss from continuing operations of
$292,000 or $0.02 per diluted share in the first six months of fiscal 2008
compares to earnings of $4.2 million or $0.24 per share in the first six
months of fiscal 2007.
    "Our second quarter results represent another quarter of achievement for
the Company as we recorded new revenue highs in several segments of our
business. Our commitment to customer service continues to be a key
differentiator for the Company as is demonstrated by proactively addressing
design issues within the Company's installed base of transit products" said
Peter Strom, President and CEO of March Networks.

    
    Financial Highlights

    - Revenue excluding the Company's largest customer at record level and
      up 27% in the first six months of fiscal 2008 from the same period last
      year.

    - Second quarter 2008 revenue from the Company's largest customer
      increased by 27% from the first quarter of fiscal 2008.

    - Achieved record Transportation revenues of $5.6 million.

    - Generated $5.0 million and $10.9 million of cash flow from operating
      activities in the second quarter and first six months of fiscal 2008,
      respectively; cash resources at October 31, 2007 were $96.2 million.

    "The Company has demonstrated its ability to maintain strong revenue
levels with its largest customer and to generate strong revenue growth outside
of this customer which are the key drivers to successfully achieving the
Company's financial objectives for fiscal 2008." said Ken Taylor, CFO of March
Networks.

    Business Outlook

    March Networks maintains its focus on long-term growth objectives and will
continue to provide only full year guidance. The Company is maintaining the
annual revenue and profitability guidance ranges that were last published in
the Company's first quarter results release on August 29, 2007. The Company's
ability to achieve its revenue and profitability expectations is subject to a
significantly increased level of risk associated with the value of the US
dollar, which is currently trading at approximately $US1.00=$Cdn0.99 or 6%
below the Company's guidance rate of $US1.00=$CDN1.05. In addition, the
$2.4 million retrofit charge that was taken in the second quarter of fiscal
2008 will affect the Company's ability to achieve the profitability range
provided.
    The Company's revenue expectations for the fiscal year ending April 30,
2008 are toward the top end of the range of $94 million to $103 million.
    The Company's expectations of net earnings before income taxes for the
fiscal year ending April 30, 2008 are in the range of $0.5 million to
$4.5 million.

    The Company will discuss the results on a conference call and webcast on
November 29, 2007 at 8:30 a.m. EST (1:30 p.m. GMT). The conference call may be
accessed by dialing 1-800-732-9303 (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=2087580
    A replay of the conference call will be available from November 29, 2007
at 10:30 a.m. EST until December 6, 2007. The replay can be accessed at
1-877-289-8525. The passcode for the replay is 21252902#.

    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 outside of its current largest customer will grow
      by at least 30% from the level generated in fiscal 2007.
    - 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 in fiscal 2008 will decline relative to
      fiscal 2007 as a result of competitive pricing strategies and sales
      mix.
    - The Company's increased investments in sales and marketing and in
      research and development will result in increased revenues and expanded
      addressable markets.
    - The prevailing exchange rate for US dollars to Canadian dollars will be
      US$1.00=CDN$1.05.
    - 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:

    - The prevailing exchange rate for US dollars to Canadian dollars may
      remain significantly below the Company's expected level for fiscal 2007
      (currently US$1.00=CDN$0.99).
    - Losses incurred by financial institutions in the sub-prime mortgage
      market that negatively impact their spending on video surveillance
      solutions.
    - Product issues in the Company's installed base that result in increased
      costs to the Company and/or lost revenue opportunities.
    - Delays in developing or delivering new products and new product
      features to meet customer demand.
    - Increasing competition from larger entities resulting from the
      consolidation of competitors and with larger entrants from other
      industries.
    - Shortages or long lead times in component supply that affect the
      Company's ability to meet customer demand.
    - Weaker than expected success versus competitors in new customer
      opportunities and/or loss of existing customers to competitors.
    - Inability to attract and retain key employees.
    - Higher than targeted product costs and/or higher than expected declines
      in market pricing for new products.
    - Revenue shortfalls due to delays in securing new customer opportunities
      and the lack of long term purchase commitments from customers.

    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         Six Months Ended
    -------------------------------------------------------------------------
                           October 31,  October 31,  October 31,  October 31,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    REVENUE               $    27,713  $    26,320  $    52,259  $    49,127
    -------------------------------------------------------------------------
    COST OF REVENUE            16,966       11,942       30,283       21,659
    -------------------------------------------------------------------------
    GROSS MARGIN               10,747       14,378       21,976       27,468
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing
     and support                3,949        4,543        7,971        8,050
    -------------------------------------------------------------------------
    Research and
     development                3,705        2,388        6,669        4,636
    -------------------------------------------------------------------------
    General and
     administrative             4,096        3,051        7,394        5,734
    -------------------------------------------------------------------------
    Stock based
     compensation                 805          451        1,610          783
    -------------------------------------------------------------------------
    Amortization
     of acquired
     intangibles                  137          138          274          166
    -------------------------------------------------------------------------
    Lawsuit settlement              -        2,263            -        2,263
    -------------------------------------------------------------------------
    Total expenses             12,692       12,834       23,918       21,632
    -------------------------------------------------------------------------
    EARNINGS (LOSS)
     BEFORE UNDERNOTED
     ITEMS                     (1,945)       1,544       (1,942)       5,836
    -------------------------------------------------------------------------
    Interest and other
     income, net                1,073          845        2,000        1,665
    -------------------------------------------------------------------------
    EARNINGS (LOSS)
     BEFORE INCOME TAXES
     AND DISCONTINUED
     OPERATIONS                  (872)       2,389           58        7,501
    -------------------------------------------------------------------------
    Current income tax
     expense                       22          100           22          200
    -------------------------------------------------------------------------
    Future income tax
     expense                     (228)         859          328        3,088
    -------------------------------------------------------------------------
    NET EARNINGS (LOSS)
     FROM CONTINUING
     OPERATIONS                  (666)       1,430         (292)       4,213
    -------------------------------------------------------------------------
    Discontinued
     operations                     -           (2)           -           85
    -------------------------------------------------------------------------
    NET EARNINGS (LOSS)   $      (666) $     1,428  $      (292) $     4,298
    -------------------------------------------------------------------------
    Net earnings (loss)
     per share:
    -------------------------------------------------------------------------
    Basic
         - from
            continuing
            operations    $     (0.04) $      0.09  $     (0.02) $      0.25
    -------------------------------------------------------------------------
         - from
            discontinued
            operations              -            -            -         0.01
    -------------------------------------------------------------------------
                          $     (0.04) $      0.09  $     (0.02) $      0.26
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Diluted
           - from
              continuing
              operations  $     (0.04) $      0.08  $     (0.02) $      0.24
    -------------------------------------------------------------------------
           - from
              discontinued
              operations            -            -            -            -
    -------------------------------------------------------------------------
                          $     (0.04) $      0.08  $     (0.02) $      0.24
    -------------------------------------------------------------------------
    Shares used in
     per-share
     calculation:
    -------------------------------------------------------------------------
    Basic                  16,886,938   16,651,215   16,881,446   16,625,801
    -------------------------------------------------------------------------
    Diluted                18,004,947   17,941,436   17,993,784   17,947,439
    -------------------------------------------------------------------------


                         March Networks Corporation
    -------------------------------------------------------------------------
                     CONSOLIDATED BALANCE SHEETS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                     October 31,    April 30,
                                                           2007         2007
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    -------------------------------------------------------------------------
    Cash and cash equivalents                         $   4,131    $   3,526
    -------------------------------------------------------------------------
    Short-term investments                               92,106       82,305
    -------------------------------------------------------------------------
    Restricted cash                                       3,070        2,775
    -------------------------------------------------------------------------
    Accounts receivable                                  14,326       19,396
    -------------------------------------------------------------------------
    Inventories                                           9,989       11,577
    -------------------------------------------------------------------------
    Prepaid expenses and other current assets             2,863        1,778
    -------------------------------------------------------------------------
    Future tax assets                                     3,864        2,198
    -------------------------------------------------------------------------
    Total current assets                                130,349      123,555
    -------------------------------------------------------------------------
    Restricted cash                                           -          833
    -------------------------------------------------------------------------
    Capital assets                                        2,439        2,720
    -------------------------------------------------------------------------
    Intangible assets                                     2,814        3,088
    -------------------------------------------------------------------------
    Future income taxes                                  20,063       21,975
    -------------------------------------------------------------------------
    Goodwill                                              5,397        5,397
    -------------------------------------------------------------------------

    TOTAL ASSETS                                      $ 161,062    $ 157,568

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

    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                                  $   5,022    $   5,790
    -------------------------------------------------------------------------
    Accrued liabilities                                   8,149        4,337
    -------------------------------------------------------------------------
    Refundable royalty advance                            2,362        2,775
    -------------------------------------------------------------------------
    Acquisition escrow                                      708            -
    -------------------------------------------------------------------------
    Deferred revenue                                      4,876        7,560
    -------------------------------------------------------------------------
    Income taxes payable                                    421          467
    -------------------------------------------------------------------------
    Total current liabilities                            21,538       20,929
    -------------------------------------------------------------------------
    Acquisition escrow                                        -          833
    -------------------------------------------------------------------------
    Deferred revenue                                      8,166        5,881
    -------------------------------------------------------------------------
    Long term compensation                                  178            -
    -------------------------------------------------------------------------
    Total liabilities                                    29,882       27,643
    -------------------------------------------------------------------------
    Shareholders' equity                                131,180      129,925
    -------------------------------------------------------------------------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $ 161,062    $ 157,568

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


                         March Networks Corporation
    -------------------------------------------------------------------------
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                         Six Months Ended
    -------------------------------------------------------------------------
                                                     October 31,  October 31,
                                                           2007         2006
    -------------------------------------------------------------------------
    Cash flows from operating activities:
    -------------------------------------------------------------------------
    Net earnings - continuing operations              $    (292)   $   4,213
    -------------------------------------------------------------------------
    Net earnings - discontinued operations                    -           85
    -------------------------------------------------------------------------
    Items not affecting cash:
    -------------------------------------------------------------------------
    Amortization of capital assets                          658          319
    -------------------------------------------------------------------------
    Amortization of acquired intangibles                    274          166
    -------------------------------------------------------------------------
    Gain on sale of discontinued operations                   -          (86)
    -------------------------------------------------------------------------
    Stock based compensation                              1,610          783
    -------------------------------------------------------------------------
    Foreign exchange loss on foreign cash and
     cash equivalents held                                 (615)         (38)
    -------------------------------------------------------------------------
    Future income taxes and non-refundable
     investment tax credits                                (143)       2,873
    -------------------------------------------------------------------------
    Net change in non-cash items:
    -------------------------------------------------------------------------
      Continuing operations                               9,363         (479)
    -------------------------------------------------------------------------
      Discontinued operations                                 -         (409)
    -------------------------------------------------------------------------
    Net cash generated by operating activities           10,855        7,427
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows from investing activities:
    -------------------------------------------------------------------------
    (Purchase) redemption of short-term investments      (9,813)       1,010
    -------------------------------------------------------------------------
    Purchase of capital assets                             (377)      (1,509)
    -------------------------------------------------------------------------
    Acquisition of business                                   -       (8,316)
    -------------------------------------------------------------------------
    Proceeds from sale of discontinued operations             -           86
    -------------------------------------------------------------------------
    Net cash consumed by investing activities           (10,190)      (8,729)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows from financing activities:
    -------------------------------------------------------------------------
    Issuance of share capital, net                          127        1,269
    -------------------------------------------------------------------------
    Net cash generated by financing activities              127        1,269
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Increase in cash and cash equivalents -
     continuing operations                                  792          291
    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents -
     discontinued operations                                  -         (324)
    -------------------------------------------------------------------------
    Net increase (decrease) in cash and cash
     equivalents                                            792          (33)
    -------------------------------------------------------------------------
    Foreign exchange loss on foreign cash and
     cash equivalents held                                 (187)           5
    -------------------------------------------------------------------------
    Cash and cash equivalents, beginning of period        3,526        3,292
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period          $   4,131    $   3,264
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

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

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