March Networks Releases Fourth Quarter and Fiscal 2007 Financial Results



    
    Summary Operating Results:
    -------------------------------------------------------------------------
    $Cdn millions
     except EPS data              Q4'07       Q4'06       Fiscal      Fiscal
                                                            2007        2006
    -------------------------------------------------------------------------
    Revenue                      $ 19.8      $ 21.4       $ 87.6      $ 76.2
    -------------------------------------------------------------------------
    (Loss) earnings from
     continuing operations
     before income taxes         $ (0.7)     $  6.5       $  8.8      $ 21.1
    -------------------------------------------------------------------------
    Net (loss) earnings from
     continuing operations       $ (0.4)     $ 31.8          4.8      $ 46.4
    -------------------------------------------------------------------------
    Diluted (loss) earnings
     per share from
     continuing operations,
     as restated(1)              $ (0.03)    $ 1.76       $ 0.27      $ 2.62
    -------------------------------------------------------------------------
    

    OTTAWA, June 6 /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, 2007.
All figures in Canadian dollars and in accordance with Canadian GAAP unless
otherwise specified.
    Revenue for the fiscal year ended April 30, 2007 was $87.6 million,
compared with $76.2 million in the prior fiscal year, representing an increase
of 15%. Revenue for the fourth quarter of fiscal 2007 of $19.8 million
increased by 6% as compared to the third quarter of fiscal 2007, and declined
by 8% as compared to revenue of $21.4 million in the fourth quarter of fiscal
2006.
    Net earnings from continuing operations before income taxes for fiscal
2007 were $8.8 million, or $0.49 per diluted share, compared with
$21.1 million, or $1.19 per diluted share, as restated, in fiscal 2006. Net
earnings from continuing operations for fiscal 2007 were $4.8 million or $0.27
per diluted share. Net loss from continuing operations before income taxes for
the fourth quarter of fiscal 2007 was $0.7 million, or $0.04 per share,
compared to net earnings of $6.5 million, or $0.36 per diluted share, as
restated(1) in the fourth quarter of fiscal 2006. Net loss from continuing
operations for the fourth quarter of fiscal 2007 was $0.4 million or $0.03 per
share.
    "I am pleased with our continued success in building strong partnerships
and securing new business around the globe. Fiscal 2007 was a milestone year
for the Company, as the investments made set the stage for future growth and
support our goal of positioning the company as a global leader in each of our
core vertical markets " said Peter Strom, President and CEO of March Networks.

    1. See Consolidated Statements of Operations.

    
    Financial Highlights

    - Fourth quarter revenues from other than the Company's current largest
      customer increased by 26% as compared to the third quarter of fiscal
      2007.

    - Achieved year over year revenue growth in all target market segments in
      fiscal 2007 as compared to fiscal 2006.

    - Recorded greater than $400,000 in revenue from each of 21 customers in
      fiscal 2007.

    - Shipped a record 19,653 units during fiscal 2007; the Company's
      installed base is now more than 51,000 units.

    - Cash resources at April 30, 2007 were $86 million.

    "The Company demonstrated in the fourth quarter that it is on track to
diversifying its revenue base and to generating the revenue growth required to
achieve its objectives for fiscal 2008. The Company's strong balance sheet
will support the Company's strategy of enhancing its competitive position by
more aggressively expanding its sales and marketing presence and accelerating
its product development initiatives in 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's fiscal 2008 annual
guidance is as follows:

    Revenue for the fiscal year ending April 30, 2008 is expected to be in the
range of $70 million to $80 million.

    Net loss before income taxes for the fiscal year ending April 30, 2008 is
expected to be in the range of $5 million to $10 million.

    The company will discuss the results on a conference call and webcast on
June 7, 2007 at 8:30 a.m. EDT (1:30 p.m. BST). The conference call may be
accessed by dialing 1-800-731-6941 (North America) or 00 800 0000 2288
(Europe). The conference call webcast can be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1858780. A replay of
the conference call will be available from June 7, 2007 at 10:30 a.m. EDT
until June 14, 2007. The replay can be accessed at 1-877-289-8525. The
passcode for the replay is 21232093#.

    About March Networks

    March Networks(TM) (TSX:MN; AIM:MNW) is a leading provider of innovative
video and data applications used for security surveillance, monitoring,
analysis, and business optimization. The Company's software and IP-based
hardware solutions allow businesses to increase operational efficiencies,
address risk, and manage assets with an integrated set of video-based
intelligence tools and business intelligence applications. The ISO 9001:2000
certified company serves the needs of leading financial institutions,
retailers, transportation authorities, commercial and homeland security
organizations in more than 50 countries throughout the world. 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:

    - Delays in developing or delivering new products and new product
      features to meet customer demand.
    - Weaker than expected success versus competitors in new customer
      opportunities and/or loss of existing customers to competitors.
    - Increasing competition from larger entities resulting from the
      consolidation of competitors and with larger entrants from other
      industries.
    - Inability to attract and retain key employees.
    - Higher than targeted product costs and/or higher than expected declines
      in market pricing for new products.
    - Fluctuations in the exchange rate between the US dollar and the
      Canadian dollar.
    - Shortages or long lead times in component supply that affect the
      Company's ability to meet customer demand.
    - Product issues in the Company's installed base that result in increased
      costs to the Company and/or lost revenue opportunities.
    - 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        Fiscal Year Ended
                               April 30,   April 30,    April 30,   April 30,
                                   2007        2006         2007        2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    REVENUE                     $19,815    $ 21,448      $87,620     $76,182
    COST OF REVENUE              10,475       9,355       41,650      32,825
    -------------------------------------------------------------------------
    GROSS MARGIN                  9,340      12,093       45,970      43,357
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing
     and support                  4,140       3,015       16,134      10,463
    -------------------------------------------------------------------------
    Research and development      3,027         736        9,356       4,538
    -------------------------------------------------------------------------
    General and administrative    3,286       2,323       10,970       8,482
    -------------------------------------------------------------------------
    Stock based compensation        291         178        1,485         712
    -------------------------------------------------------------------------
    Amortization of acquired
     intangibles                   136            -          439           -
    -------------------------------------------------------------------------
    Lawsuit settlement               -            -        2,263           -
    -------------------------------------------------------------------------
    Total expenses               10,880       6,252       40,647      24,195
    -------------------------------------------------------------------------
    (LOSS) EARNINGS BEFORE
     UNDERNOTED ITEMS            (1,540)      5,841        5,323      19,162
    -------------------------------------------------------------------------
    Interest and other
     income, net                    848         663        3,428       1,905
    -------------------------------------------------------------------------
    (LOSS) EARNINGS BEFORE
     INCOME TAXES AND
     DISCONTINUED OPERATIONS       (692)      6,504        8,751      21,067
    -------------------------------------------------------------------------
    Current income tax expense       30         475          330         475
    -------------------------------------------------------------------------
    Future income tax expense      (278)    (25,803)       3,606     (25,803)
    -------------------------------------------------------------------------
    NET (LOSS) EARNINGS FROM
     CONTINUING OPERATIONS         (444)     31,832        4,815      46,395
    -------------------------------------------------------------------------
    Discontinued operations           2      (1,259)       1,227      (2,502)
    -------------------------------------------------------------------------
    NET (LOSS) EARNINGS         $  (442)   $ 30,573      $ 6,042     $43,893
    -------------------------------------------------------------------------
    Net (loss) earnings per
     share:
    -------------------------------------------------------------------------
    Basic - from continuing
            operations          $ (0.03)   $   1.93      $ 0.29      $  2.90
    -------------------------------------------------------------------------
          - from discontinued
            operations                -       (0.08)       0.07        (0.16)
    -------------------------------------------------------------------------
                                $ (0.03)   $   1.85      $ 0.36      $  2.74
    -------------------------------------------------------------------------
    Diluted - from continuing
              operations,
              as restated(1)    $ (0.03)   $   1.76      $ 0.27      $  2.62
    -------------------------------------------------------------------------
            - from discontinued
              operations,
              as restated(1)          -       (0.07)       0.07        (0.14)
    -------------------------------------------------------------------------
                                $ (0.03)   $   1.69      $ 0.34      $  2.48
    -------------------------------------------------------------------------
    Shares used in per-share
     calculation:
    -------------------------------------------------------------------------
    Basic                    16,848,071   16,531,97  16,714,709   15,995,657
    -------------------------------------------------------------------------
    Diluted, as restated(1)  17,931,083  18,050,897  17,938,447   17,665,729
    -------------------------------------------------------------------------

    1. Diluted earnings per share and diluted weighted average shares
       outstanding for periods in fiscal 2006 have been restated to correct
       prior errors in the calculation of the dilutive impact of warrants and
       stock options (additional 441,676 shares in Q4'06 and 768,692 shares
       in fiscal 2006).


                         March Networks Corporation
    -------------------------------------------------------------------------
                     CONSOLIDATED BALANCE SHEETS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                April 30,           April 30,
                                                    2007                2006
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    -------------------------------------------------------------------------
    Cash and cash equivalents                  $   3,526           $   3,292
    -------------------------------------------------------------------------
    Short-term investments                        82,305              85,761
    -------------------------------------------------------------------------
    Restricted cash                                2,775                   -
    -------------------------------------------------------------------------
    Accounts receivable                           19,396              13,655
    -------------------------------------------------------------------------
    Inventories                                   11,577               6,346
    -------------------------------------------------------------------------
    Prepaid expenses and other current assets      1,778                 994
    -------------------------------------------------------------------------
    Current assets - discontinued operations           -                  48
    -------------------------------------------------------------------------
    Future tax assets                              2,198               7,984
    -------------------------------------------------------------------------
    Total current assets                         123,555             118,080
    -------------------------------------------------------------------------
    Restricted cash                                  833                   -
    -------------------------------------------------------------------------
    Capital assets                                 2,720                 889
    -------------------------------------------------------------------------
    Intangible assets                              3,088                   -
    -------------------------------------------------------------------------
    Future income taxes                           21,975              18,587
    -------------------------------------------------------------------------
    Goodwill                                       5,397                   -
    -------------------------------------------------------------------------
    TOTAL ASSETS                               $ 157,568           $ 137,556
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                           $   5,790           $   9,634
    -------------------------------------------------------------------------
    Accrued liabilities                            4,337               3,748
    -------------------------------------------------------------------------
    Refundable royalty advance                     2,775                   -
    -------------------------------------------------------------------------
    Deferred revenue                               7,560               2,602
    -------------------------------------------------------------------------
    Income taxes payable                             467                 475
    -------------------------------------------------------------------------
    Current liabilities - discontinued
     operations                                        -                 597
    -------------------------------------------------------------------------
    Total current liabilities                     20,929              17,056
    -------------------------------------------------------------------------
    Acquisition escrow                               833                   -
    -------------------------------------------------------------------------
    Deferred revenue                               5,881               1,035
    -------------------------------------------------------------------------
    Total liabilities                             27,643              18,091
    -------------------------------------------------------------------------
    Shareholders' equity                         129,925             119,465
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                    $ 157,568           $ 137,556
    -------------------------------------------------------------------------


                         March Networks Corporation
    -------------------------------------------------------------------------
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                           Fiscal Year Ended
    -------------------------------------------------------------------------
                                                April 30,           April 30,
                                                    2007                2006
    -------------------------------------------------------------------------
    Cash flows from operating activities:
    -------------------------------------------------------------------------
    Net earnings - continuing operations       $   4,815           $  46,395
    -------------------------------------------------------------------------
    Net earnings (loss) - discontinued
     operations                                    1,227              (2,502)
    -------------------------------------------------------------------------
    Items not affecting cash:
    -------------------------------------------------------------------------
    Amortization of capital assets                 1,020                 196
    -------------------------------------------------------------------------
    Amortization of acquired intangibles             439                   -
    -------------------------------------------------------------------------
    Gain on sale of discontinued operations       (1,226)                  -
    -------------------------------------------------------------------------
    Stock based compensation                       1,485                 712
    -------------------------------------------------------------------------
    Foreign exchange loss on foreign cash
     and cash equivalents held                      (137)                190
    -------------------------------------------------------------------------
    Future income taxes and non-refundable
     investment tax credits                        3,879             (26,571)
    Items not affecting cash in discontinued
     operations                                        -                 (14)
    -------------------------------------------------------------------------
    Net change in non-cash items:
    -------------------------------------------------------------------------
      Continuing operations                       (7,536)             (1,555)
      Discontinued operations                       (550)                409
    -------------------------------------------------------------------------
    Net cash generated by operating
     activities                                    3,416              17,260
    -------------------------------------------------------------------------
    Cash flows from investing activities:
    Purchases of short-term investments            3,456             (29,361)
    -------------------------------------------------------------------------
    Purchase of capital assets                    (2,493)               (641)
    -------------------------------------------------------------------------
    Purchase of capital assets - discontinued
     operations                                        -                 (32)
    -------------------------------------------------------------------------
    Acquisition of business                       (8,316)                  -
    -------------------------------------------------------------------------
    Proceeds from sale of discontinued
     operations                                    1,226                 343
    -------------------------------------------------------------------------
    Net cash consumed by investing
     activities                                   (6,127)            (29,691)
    -------------------------------------------------------------------------
    Cash flows from financing activities:
    -------------------------------------------------------------------------
    Issuance of share capital, net                 2,933               8,478
    -------------------------------------------------------------------------
    Net cash generated by financing
     activities                                    2,933               8,478
    Net decrease in cash and cash
     equivalents - continuing operations            (455)             (2,157)
    Net increase (decrease) in cash and
     cash equivalents - discontinued
     operations                                      677              (1,796)
    -------------------------------------------------------------------------
    Net decrease in cash and cash equivalents        222              (3,953)
    -------------------------------------------------------------------------
    Foreign exchange loss on foreign cash
     and cash equivalents held                        12                (190)
    -------------------------------------------------------------------------
    Cash and cash equivalents, beginning
     of period                                     3,292               7,435
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period   $   3,526           $   3,292
    -------------------------------------------------------------------------
    




For further information:

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

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