March Networks Reports Improved Profitability from Reduced Operating Expenses in First Quarter of Fiscal 2010



    
    Summary Operating Results:

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    $Cdn millions                               Q1          Q4          Q1
     except per share data                     2010        2009        2009
    -------------------------------------------------------------------------
    Revenue                                    $24.0       $21.5       $27.8
    -------------------------------------------------------------------------
    Non-GAAP operating earnings (loss)(*)        0.5        (1.4)       (1.2)
    -------------------------------------------------------------------------
    Net loss                                   $(0.5)      $(1.9)      $(2.4)
    -------------------------------------------------------------------------
    Loss per share                            $(0.03)     $(0.11)     $(0.14)
    -------------------------------------------------------------------------
    Cash and short-term investments            $45.3       $50.9       $48.6
    -------------------------------------------------------------------------

    (*) Non-GAAP measure: earnings (loss) before stock based compensation,
        amortization of acquired intangibles, interest and income taxes. This
        measure may not be comparable to similar measures used by other
        companies.
    

    OTTAWA, Aug. 26 /CNW Telbec/ - March Networks(TM) (TSX:MN), a leading
provider of intelligent IP video and business analysis applications, today
announced financial results for the quarter ended July 31, 2009. All figures
in Canadian dollars and in accordance with Canadian GAAP unless otherwise
specified.
    The Company's first quarter fiscal 2010 revenue was $24.0 million
representing an increase of 12% as compared to revenue of $21.5 million in the
fourth quarter of fiscal 2009 and a decline of 14% as compared to revenue of
$27.8 million in the first quarter of fiscal 2009.
    The Company recorded non-GAAP operating earnings of $453,000 in the first
quarter of fiscal 2010 which represents an improvement of $1.8 million
relative to the non-GAAP operating loss of $1.4 million in the fourth quarter
of fiscal 2009 and an improvement of $1.6 million as compared to the $1.2
million non-GAAP operating loss in the first quarter of fiscal 2009.
    The Company incurred a net loss in the first quarter of fiscal 2010 of
$489,000, or $0.03 per share, as compared to a net loss of $1.9 million, or
$0.11 per share, in fourth quarter of fiscal 2009 and a net loss of $2.4
million, or $0.14 per share, in the first quarter of fiscal 2009.
    "The Company achieved solid performance improvements over its fourth
quarter 2009 results in a difficult market through international revenue
growth and attention to keeping operating costs down," said Peter Strom,
President and CEO of March Networks.

    
    First Quarter 2010 Financial Highlights

    -   Sequential and year over year improvements in quarterly
        profitability.

    -   International revenues up 10% year over year and up 58% from Q4 2009.

    -   Working capital ratio improved to 4.2:1 from 3.6:1 at April 30, 2009.
    

    "The Company's lower operating cost structure has allowed the Company to
stay on course for improved profitability in fiscal 2010," said Ken Taylor,
CFO of March Networks. "We also continue to anticipate revenue growth in
fiscal 2010 as compared to fiscal 2009 despite challenging market conditions."
    The Company will discuss the results on a conference call and webcast on
Thursday, August 27, 2009 at 8:30 a.m. EDT (1:30 p.m. GMT). The conference
call may be accessed by dialing 1-800-732-9303 (North America) or +1
416-644-3416. The conference call webcast can be accessed at:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2770460
    A replay of the conference call will be available from August 27, 2009 at
10:30 a.m. EDT until September 3, 2009 at 11:59 p.m. EDT. The replay can be
accessed at 1-877-289-8525 or +1 416-640-1917. The passcode for the replay is
21312645 followed by the number sign.

    About March Networks

    March Networks(TM) (TSX:MN) 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.

    -------------------------------------------------------------------------
    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 contained in this release include, but are not
limited to, the following:

    
    -   Under stable economic conditions the market for the Company's
        products will grow by greater than 10% annually, however market
        growth will be impaired by depressed global economic conditions.
    -   The Company will successfully reduce product costs to improve the
        Company's gross margin and/or avoid any margin erosion associated
        with competitive pricing pressure.
    -   The average fiscal 2010 exchange rates for US dollars and Euros to
        Canadian dollars will be US$1.00=CDN$1.10 and
        Euro 1=CDN$1.60.
    -   The Company will develop and deliver new products on time in order to
        satisfy the demands of current and potential customers.
    -   The Company's new investments in certain international markets will
        contribute to near term profitability.
    -   Annual operating expenses, excluding stock based compensation and
        amortization of acquired intangibles, will approximate fiscal 2009
        levels
    -   The Company will have adequate component supply to meet customer
        demand.
    -   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 Company's ability to forecast revenue and profitability is
        impaired by the depressed global economic environment, which has
        introduced delays in the sales process; increased pricing pressure;
        and higher potential for cancellation or loss of opportunities in the
        sales pipeline.
    -   Shifts in value of the Canadian dollar relative to billing
        currencies.
    -   The impact of the depressed global economy and other factors may
        result in financial difficulty for key suppliers that would impact
        the Company's ability to meet demand and cost reduction targets.
    -   Weaker than expected success versus competitors in new customer and
        vertical market 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.
    -   Higher than targeted product costs and/or higher than expected
        declines in market pricing for the Company's products.
    -   Delays in product development programs for new products and new
        product features which lead to cost overruns and /or missed customer
        opportunities.
    -   Product issues that result in increased costs to the Company and/or
        lost revenue opportunities.
    -   Changes in the mix of revenues between fixed and mobile
        transportation solutions.

    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
    -------------------------------------------------------------------------
          (Canadian dollars, amounts in thousands, except share and
                               per-share data)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                         Three Months Ended
    -------------------------------------------------------------------------
                                                        July 31,    July 31,
                                                          2009        2008
    -------------------------------------------------------------------------
    REVENUE                                              $24,014     $27,804
    -------------------------------------------------------------------------
    Cost of revenue                                       13,958      14,885
    -------------------------------------------------------------------------
    Contract losses                                            -       1,187
    -------------------------------------------------------------------------
    GROSS MARGIN                                          10,056      11,732
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing and support                         5,142       4,854
    -------------------------------------------------------------------------
    Research and development                               2,431       4,043
    -------------------------------------------------------------------------
    General and administrative                             2,030       4,003
    -------------------------------------------------------------------------
    Stock based compensation                                 257         484
    -------------------------------------------------------------------------
    Amortization of intangible assets related
     to business acquisitions                                903         926
    -------------------------------------------------------------------------
    Total expenses                                        10,763      14,310
    -------------------------------------------------------------------------
    LOSS BEFORE UNDERNOTED ITEMS                            (707)     (2,578)
    -------------------------------------------------------------------------
    Interest and other income, net                            16         394
    -------------------------------------------------------------------------
    LOSS BEFORE INCOME TAXES                                (691)     (2,184)
    -------------------------------------------------------------------------
    Current income tax expense                                38         313
    -------------------------------------------------------------------------
    Future income tax expense                               (240)        (49)
    -------------------------------------------------------------------------
    NET LOSS                                               $(489)    $(2,448)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Loss per share:
    -------------------------------------------------------------------------
    Basic                                                 $(0.03)     $(0.14)
    -------------------------------------------------------------------------
    Diluted                                               $(0.03)     $(0.14)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Shares used in per-share calculation:
    -------------------------------------------------------------------------
    Basic                                             17,198,094  17,974,854
    -------------------------------------------------------------------------



                         March Networks Corporation
    -------------------------------------------------------------------------
                         CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
                   (Canadian dollars, amounts in thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                        July 31,    April 30,
                                                          2009        2009
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    -------------------------------------------------------------------------
    Cash                                                 $ 7,061    $ 10,126
    -------------------------------------------------------------------------
    Short-term investments                                38,269      40,740
    -------------------------------------------------------------------------
    Accounts receivable                                   15,245      14,892
    -------------------------------------------------------------------------
    Inventories                                           22,549      23,932
    -------------------------------------------------------------------------
    Prepaid expenses and other current assets              4,261       4,040
    -------------------------------------------------------------------------
    Future tax assets                                      5,128       5,128
    -------------------------------------------------------------------------
    Total current assets                                  92,513      98,858
    -------------------------------------------------------------------------
    Capital assets                                         5,759       5,962
    -------------------------------------------------------------------------
    Intangible assets                                     12,396      12,909
    -------------------------------------------------------------------------
    Future tax assets and investment tax credits          21,918      22,151
    -------------------------------------------------------------------------
    Goodwill                                              22,429      22,429
    -------------------------------------------------------------------------
    TOTAL ASSETS                                        $155,015    $162,309
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY

    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                                     $ 7,609    $ 12,004
    -------------------------------------------------------------------------
    Accrued liabilities                                    6,282       7,328
    -------------------------------------------------------------------------
    Deferred revenue                                       7,686       7,851
    -------------------------------------------------------------------------
    Deferred leasehold inducement                            132         132
    -------------------------------------------------------------------------
    Income taxes payable                                     389         390
    -------------------------------------------------------------------------
    Total current liabilities                             22,098      27,705
    -------------------------------------------------------------------------
    Deferred revenue                                       7,243       8,239
    -------------------------------------------------------------------------
    Deferred leasehold inducement                          1,067       1,100
    -------------------------------------------------------------------------
    Long term compensation                                   738         666
    -------------------------------------------------------------------------
    Future tax liabilities                                 3,088       3,330
    -------------------------------------------------------------------------
    Total liabilities                                     34,234      41,040
    -------------------------------------------------------------------------
    Shareholders' equity                                 120,781     121,269
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          $155,015    $162,309
    -------------------------------------------------------------------------



                         March Networks Corporation
    -------------------------------------------------------------------------
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------
                   (Canadian dollars, amounts in thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                         Three Months Ended
    -------------------------------------------------------------------------
                                                        July 31,    July 31,
                                                          2009        2008
    -------------------------------------------------------------------------
    Cash flows from operating activities:
    -------------------------------------------------------------------------
    Net loss                                               $(489)    $(2,448)
    -------------------------------------------------------------------------
    Items not affecting cash:
    -------------------------------------------------------------------------
    Amortization of capital and acquired
     intangible assets                                       398         391
    -------------------------------------------------------------------------
    Amortization of intangible assets related
     to business acquisitions                                903         926
    -------------------------------------------------------------------------
    Stock based compensation and shares
     issued to directors                                     257         501
    -------------------------------------------------------------------------
    Unrealized foreign exchange (gain)/ loss                (609)        105
    -------------------------------------------------------------------------
    Future income taxes and non-refundable
     investment tax credits                                 (537)       (295)
    -------------------------------------------------------------------------
    Net change in non-cash items                          (4,689)    (10,795)
    -------------------------------------------------------------------------
    Net cash consumed by operating activities             (4,766)    (11,615)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flows from investing activities:
    -------------------------------------------------------------------------
    Redemption (purchase) of short-term investments        2,471      15,763
    -------------------------------------------------------------------------
    Purchase of capital and intangible assets               (537)       (650)
    -------------------------------------------------------------------------
    Acquisition of business                                    -        (658)
    -------------------------------------------------------------------------
    Net cash generated by investing activities             1,934      14,455
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flows from financing activities:
    -------------------------------------------------------------------------
    Issuance (repurchase) of share capital, net                9      (1,969)
    -------------------------------------------------------------------------
    Net cash generated (consumed) by financing activities      9      (1,969)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net increase in cash                                  (2,823)        871
    -------------------------------------------------------------------------
    Foreign exchange gain (loss) on foreign cash held       (242)         72
    -------------------------------------------------------------------------
    Cash, beginning of period                             10,126       4,187
    -------------------------------------------------------------------------
    Cash, end of period                                   $7,061      $5,130
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For further information:

For further information: March Networks Corporation, Ken Taylor, Chief
Financial Officer, (613) 591-8181, e-mail: ktaylor@marchnetworks.com

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March Networks Corporation

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