March Networks Reports Third Quarter 2009 Financial Results



    
    Summary Operating Results:

    -------------------------------------------------------------------------
    $Cdn millions
    except EPS data              Q3 2009     Q3 2008  Q1-Q3 2009  Q1-Q3 2008
    -------------------------------------------------------------------------
    Revenue                    $    23.6   $    21.1   $    79.7   $    73.4
    -------------------------------------------------------------------------
    Operating earnings(*)            0.6        (3.2)     0.4(xx)   (3.3)(xx)
    -------------------------------------------------------------------------
    Net loss                   $    (1.3)  $    (3.1)  $    (4.7)  $    (3.4)
    -------------------------------------------------------------------------
    Loss per share             $   (0.07)  $   (0.18)  $   (0.27)  $   (0.20)
    -------------------------------------------------------------------------
    Cash and short-term
     investments               $    46.6   $    97.2   $    46.6   $    97.2
    -------------------------------------------------------------------------

    (*)  Non-GAAP measure: earnings (loss) before stock based compensation,
         amortization of acquired intangibles, restructuring costs,
         interest and income taxes. This measure may not be comparable to
         similar measures used by other companies.
    (xx) Includes provisions of $1.2 million for potential contract losses in
         Q1'2009 and $2.4 million for retrofit costs in Q2'2008.
    

    OTTAWA, Feb. 25 /CNW Telbec/ - March Networks(TM) (TSX:MN), a leading
provider of innovative video and data applications used for security
surveillance, monitoring, analysis and business optimization, today announced
financial results for the third quarter and nine months ended January 31,
2009. All figures in Canadian dollars and in accordance with Canadian GAAP
unless otherwise specified.
    The Company's third quarter fiscal 2009 revenue was $23.6 million
representing an increase of 12% as compared to revenue of $21.1 million in the
third quarter of fiscal 2008. Revenue for the first nine months of fiscal 2009
of $79.7 million increased by 9% as compared to the first nine months of
fiscal 2008.
    The Company recorded non-GAAP operating earnings of $0.6 million in the
third quarter of fiscal 2009 which compares to a loss of $3.2 million in the
third quarter of fiscal 2008. Non-GAAP operating earnings for the first nine
months of fiscal 2009 of $386,000 have improved by $3.7 million as compared to
a loss of $3.3 million in the first nine months of fiscal 2008.
    The Company incurred a net loss in the third quarter of fiscal 2009 of
$1.3 million or $0.07 per share, including the impact of $1.2 million of
restructuring charges mainly associated with staff reductions during the
quarter, as compared to a net loss of $3.1 million, or $0.18 per share, in the
third quarter of fiscal 2008.
    "Q3 results demonstrate continued progress towards achieving the
Company's FY2009 strategic objectives in a challenging economic environment as
evidenced by on-going revenue growth and diversification, a second consecutive
quarter of positive operating earnings and strong positive cash flow" said
Peter Strom, President and CEO.

    
    Third Quarter 2009 Financial Highlights

    - Revenue up 12% from the same quarter a year ago.

    - Operating earnings up $3.8 million from third quarter of last year.

    - Generated $5.5 million in cash flow from operating activities.

    - Third quarter net loss improved by $1.8 million or $0.11 per share from
      last year.
    

    "The Company's investments over the past year and half have positioned
the Company for growth with new products and an expanded market presence",
said Ken Taylor, CFO of March Networks. "The Company's recent restructuring
activity has reduced operating expenses to a level that will allow the Company
to profit from these investments while mitigating the risks associated with an
uncertain economic environment."

    Business Outlook

    The Company is maintaining its original fiscal 2009 annual revenue and
earnings guidance that were first published on June 11, 2008 and last
published in the Company's second quarter fiscal 2009 results released on
November 26th, 2008.
    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 on-going cash flow impacting operating activities. The Company
defines this measure as earnings before interest, taxes, amortization of
acquired intangibles, restructuring costs and stock based compensation
expense. This measure may not be comparable to similar measures used by other
companies.

    The Company will discuss the results on a conference call and webcast on
Thursday, February 26, 2009 at 8:30 a.m. EST (1:30 p.m. GMT). The conference
call may be accessed by dialing 1-800-594-3615 (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=2550680.
    A replay of the conference call will be available from February 26, 2009
at 10:30 a.m. EST until March 5, 2009 at 11:59 p.m. EST. The replay can be
accessed at 1-877-289-8525 or 416-640-1917. The passcode for the replay is
21297369#.

    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 and
financial guidance 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 in the current depressed economic environment.

    - 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 Company's restructuring efforts to address deteriorating economic
      conditions will achieve expected cost reductions without significantly
      impacting the Company's business.

    - The prevailing exchange rate for US dollars and Euros to Canadian
      dollars will be US$1.00=CDN$1.20 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:

    - The Company's ability to forecast revenue and profitability is
      significantly impaired by the depressed global economic situation which
      has introduced delays in the sales process; increased pricing pressure
      and a higher potential for cancellation or loss of opportunities in the
      sales pipeline.

    - 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.

    - Product issues that result in increased costs to the Company and/or
      lost revenue opportunities.

    - Delays in product development programs for new products and new product
      features which lead to cost overruns and /or missed customer
      opportunities.

    - Changes in the mix of revenues between fixed and mobile transportation
      solutions.

    - Shifts in value of the Canadian dollar relative to billing currencies.

    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       Nine Months Ended
    -------------------------------------------------------------------------
                              January 31, January 31, January 31, January 31,
                                    2009        2008        2009        2008
    REVENUE                    $  23,581   $  21,099   $  79,661   $  73,358
    -------------------------------------------------------------------------
    COST OF REVENUE               11,814      12,189      42,740      40,033
    -------------------------------------------------------------------------
    CONTRACT LOSSES AND
     RETROFIT                          -           -       1,187       2,439
    -------------------------------------------------------------------------
    GROSS MARGIN                  11,767       8,910      35,734      30,886
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing and
     support                       5,205       3,952      15,122      11,923
    -------------------------------------------------------------------------
    Research and development       2,447       4,570       9,999      11,239
    -------------------------------------------------------------------------
    General and administrative     3,561       3,633      10,227      11,027
    -------------------------------------------------------------------------
    Stock based compensation         299         704       1,062       2,314
    -------------------------------------------------------------------------
    Amortization of acquired
     intangible assets             1,021         137       2,880         411
    -------------------------------------------------------------------------
    Restructuring costs            1,246           -       2,665           -
    -------------------------------------------------------------------------
    Total expenses                13,779      12,996      41,955      36,914
    -------------------------------------------------------------------------
    LOSS BEFORE UNDERNOTED
     ITEMS                        (2,012)     (4,086)     (6,221)     (6,028)
    -------------------------------------------------------------------------
    Interest and other income,
     net                             273       1,148         977       3,148
    -------------------------------------------------------------------------
    LOSS BEFORE INCOME TAXES      (1,739)     (2,938)     (5,244)     (2,880)
    -------------------------------------------------------------------------
    Current income tax expense       (49)          4         (56)         26
    -------------------------------------------------------------------------
    Future income tax expense       (429)        157        (458)        485
    -------------------------------------------------------------------------
    NET LOSS                   $  (1,261)  $  (3,099)  $  (4,730)  $  (3,391)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net loss per share:
    -------------------------------------------------------------------------
    Basic                      $   (0.07)  $   (0.18)  $   (0.27)  $   (0.20)
    -------------------------------------------------------------------------
    Diluted                    $   (0.07)  $   (0.18)  $   (0.27)  $   (0.20)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Shares used in per-share calculation:
    -------------------------------------------------------------------------
    Basic                     17,188,221  17,021,047  17,581,538  16,948,366
    -------------------------------------------------------------------------
    Diluted                   17,188,221  17,021,047  17,581,538  16,948,366
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         March Networks Corporation

    -------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------

                   (Canadian dollars, amounts in thousands)
                                 (Unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                      January 31,   April 30,
                                                            2009        2008
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    Cash                                               $   8,790   $   4,187
    -------------------------------------------------------------------------
    Short-term investments                                37,854      59,209
    -------------------------------------------------------------------------
    Restricted cash                                            -       2,410
    -------------------------------------------------------------------------
    Accounts receivable                                   18,095      15,432
    -------------------------------------------------------------------------
    Inventories                                           25,258      22,220
    -------------------------------------------------------------------------
    Prepaid expenses and other current assets              3,504       2,982
    -------------------------------------------------------------------------
    Future tax assets                                      5,168       4,556
    -------------------------------------------------------------------------
    Total current assets                                  98,669     110,996
    -------------------------------------------------------------------------
    Capital assets                                         6,451       2,492
    -------------------------------------------------------------------------
    Intangible assets                                     13,504      16,377
    -------------------------------------------------------------------------
    Future tax assets                                     21,665      21,081
    -------------------------------------------------------------------------
    Goodwill                                              22,283      22,048
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    TOTAL ASSETS                                       $ 162,572   $ 172,994
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                                   $  11,643   $  11,576
    -------------------------------------------------------------------------
    Accrued liabilities                                    9,025      10,236
    -------------------------------------------------------------------------
    Refundable royalty advance                                 -       2,410
    -------------------------------------------------------------------------
    Deferred revenue                                       4,819       3,329
    -------------------------------------------------------------------------
    Deferred leasehold inducement                            132           -
    -------------------------------------------------------------------------
    Income taxes payable                                     421         422
    -------------------------------------------------------------------------
    Total current liabilities                             26,040      27,973
    -------------------------------------------------------------------------
    Deferred revenue                                       8,335       9,048
    -------------------------------------------------------------------------
    Deferred leasehold inducement                          1,134           -
    -------------------------------------------------------------------------
    Long term compensation                                   504         451
    -------------------------------------------------------------------------
    Future tax liabilities                                 3,571       4,362
    -------------------------------------------------------------------------
    Total liabilities                                     39,584      41,834
    -------------------------------------------------------------------------
    Shareholders' equity                                 122,988     131,160
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $ 162,572   $ 172,994
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         March Networks Corporation

    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------

                   (Canadian dollars, amounts in thousands)
                                 (Unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                              January 31, January 31, January 31, January 31,
                                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    Cash flows from operating
     activities:
    -------------------------------------------------------------------------
    Net loss                   $  (1,261)  $  (3,099)  $  (4,730)  $  (3,391)
    -------------------------------------------------------------------------
    Items not affecting cash:
    -------------------------------------------------------------------------
    Amortization of capital
     assets                          437         345       1,526       1,003
    -------------------------------------------------------------------------
    Amortization of acquired
     intangible assets             1,021         137       2,880         411
    -------------------------------------------------------------------------
    Stock based compensation         299         704       1,062       2,314
    -------------------------------------------------------------------------
    Unrealized foreign
     exchange (gain)/loss           (131)        234         529        (381)
    -------------------------------------------------------------------------
    Future income taxes and
     non-refundable investment
     tax credits                    (634)        (93)       (671)       (236)
    -------------------------------------------------------------------------
    Net change in non-cash items   5,778       2,731      (8,311)     12,094
    -------------------------------------------------------------------------
    Net cash generated (consumed)
     by operating activities       5,509         959      (7,715)     11,814
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flows from investing
     activities:
    -------------------------------------------------------------------------
    Redemption (purchase) of
     short-term investments       (2,268)       (904)     21,356     (10,717)
    -------------------------------------------------------------------------
    Purchase of capital assets      (652)       (117)     (4,098)       (494)
    -------------------------------------------------------------------------
    Acquisition of business            -           -        (699)          -
    -------------------------------------------------------------------------
    Net cash generated (consumed)
     by investing activities      (2,920)     (1,021)     16,559     (11,211)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flows from financing
     activities:
    Issuance (repurchase) of
     share capital, net                -          46      (4,574)        173
    -------------------------------------------------------------------------
    Net cash generated
     (consumed) by financing
     activities                        -          46      (4,574)        173
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net increase in cash           2,589         (16)      4,270         776
    -------------------------------------------------------------------------
    Foreign exchange gain
     (loss) on foreign cash
     held                            (64)       (101)        333         (86)
    -------------------------------------------------------------------------
    Cash, beginning of period      6,265       4,131       4,187       3,526
    -------------------------------------------------------------------------
    Cash, end of period        $   8,790   $   4,216   $   8,790   $   4,216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: March Networks Corporation: Ken Taylor, Chief
Financial Officer, (613) 591-8181, ktaylor@marchnetworks.com; Peter Wilenius,
VP Marketing, (613) 591-8181, pwilenius@marchnetworks.com

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March Networks Corporation

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