March Networks Releases First Quarter 2008 Financial Results



    
    Summary Operating Results:
    -------------------------------------------------------------------------
    $Cdn millions
     except EPS data                               Q1'08     Q4'07     Q1'07
    -------------------------------------------------------------------------
    Revenue                                       $ 24.5    $ 19.8    $ 22.8

    Earnings (loss) from continuing operations
     before income taxes                          $  0.9    $ (0.7)   $  5.1

    Net earnings (loss) from continuing
     operations                                   $  0.4    $ (0.4)   $  2.8
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    Diluted earnings (loss) per share from
     continuing operations                        $ 0.02    $(0.03)   $ 0.16
    -------------------------------------------------------------------------
    

    OTTAWA, Aug. 29 /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 first quarter of fiscal 2008 ended July 31, 2007.
All figures in Canadian dollars and in accordance with Canadian GAAP unless
otherwise specified.
    Revenue for the fiscal quarter ended July 31, 2007 was $24.5 million,
compared with $22.8 million in the same quarter in the prior fiscal year,
representing an increase of 8%. Revenue for the first quarter of fiscal 2008
represented an increase of 24% as compared to the fourth quarter of fiscal
2007.
    Net earnings from continuing operations before income taxes for the first
quarter of fiscal 2008 were $930,000 which compares to earnings of
$5.1 million in the first quarter of fiscal 2007 and a loss of $692,000 in the
fourth quarter of fiscal 2007. Net earnings from continuing operations for the
quarter ended July 31, 2007 were $374,000 or $0.02 per diluted share which
compares to earnings of $2.8 million or $0.16 per diluted share in the same
quarter last year and a loss of $444,000 or $0.03 per share in the fourth
quarter of fiscal 2007.
    "Q1 represented an outstanding quarter for the Company as we continued to
execute on our plan to become a global leader in the IP video marketplace. The
results of the first quarter are a confirmation that the investments of the
past year are contributing to strong organic growth and a diversifying revenue
base. I am pleased with our success in winning new business and look forward
to building on this success throughout the fiscal year" said Peter Strom,
President and CEO of March Networks.

    
    Financial Highlights

    - First quarter revenues from other than the Company's current largest
      customer increased by 33% as compared to the first quarter of fiscal
      2007 and by 8% as compared to the fourth quarter of fiscal 2007.

    - Revenue from the Company's largest customer increased by 60% from the
      fourth quarter of fiscal 2007.

    - Achieved record transportation revenues of $5.5 million.

    - Recorded greater than $100,000 in revenue from each of 24 customers in
      the first quarter of fiscal 2008.

    - Shipped a quarterly record of 5,698 units during the first quarter of
      fiscal 2008; the Company's installed base is now close to 57,000 units.

    - Generated $5.8 million of cash flow from operating activities; cash
      resources at July 31, 2007 were $91.5 million.

    "The Company demonstrated in the first quarter of fiscal 2008 that it is
on track to achieving its fiscal 2008 revenue and profitability objectives.
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 is maintaining the
revised fiscal 2008 annual guidance ranges that were published in its
preliminary first quarter results release on August 7, 2007.

    Revenue for the fiscal year ending April 30, 2008 is expected to be in the
range of $94 million to $103 million.
    Net earnings before income taxes for the fiscal year ending April 30, 2008
are expected to be in the range of $0.5 million to $4.5 million.

    The Company believes it will achieve results toward the top end of its
fiscal 2008 guidance based upon revenue and order intake levels achieved to
date.

    The Company will discuss the results on a conference call and webcast on
August 30, 2007 at 8:30 a.m. EDT (1:30 p.m. BST). The conference call may be
accessed by dialing 1-800-733-7560 (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=1971860.

    A replay of the conference call will be available from August 30, 2007 at
10:30 a.m. EDT until September 6, 2007. The replay can be accessed at
1-877-289-8525. The passcode for the replay is 21243347#.

    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:

    - 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.
    - Product issues in the Company's installed base that result in increased
      costs to the Company and/or lost revenue opportunities.
    - 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.
    - Fluctuations in the exchange rate between the US dollar and the
      Canadian dollar.
    - 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
    -------------------------------------------------------------------------
                                                         July 31,    July 31,
                                                            2007        2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    REVENUE                                            $  24,546   $  22,807
    -------------------------------------------------------------------------
    COST OF REVENUE                                       13,317       9,717
    -------------------------------------------------------------------------
    GROSS MARGIN                                          11,229      13,090
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing and support                         4,022       3,507
    -------------------------------------------------------------------------
    Research and development                               2,964       2,248
    -------------------------------------------------------------------------
    General and administrative                             3,298       2,683
    -------------------------------------------------------------------------
    Stock based compensation                                 805         332
    -------------------------------------------------------------------------
    Amortization of acquired intangibles                     137          28
    -------------------------------------------------------------------------
    Total expenses                                        11,226       8,798
    -------------------------------------------------------------------------
    EARNINGS BEFORE UNDERNOTED ITEMS                           3       4,292
    -------------------------------------------------------------------------
    Interest and other income, net                           927         820
    -------------------------------------------------------------------------
    EARNINGS BEFORE INCOME TAXES AND DISCONTINUED
     OPERATIONS                                              930       5,112
    -------------------------------------------------------------------------
    Current income tax expense                                 -         100
    -------------------------------------------------------------------------
    Future income tax expense                                556       2,229
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    NET EARNINGS FROM CONTINUING OPERATIONS                  374       2,783
    -------------------------------------------------------------------------
    Discontinued operations                                    -          87
    -------------------------------------------------------------------------
    NET EARNINGS                                       $     374   $   2,870
    -------------------------------------------------------------------------
    Net earnings per share:
    -------------------------------------------------------------------------
    Basic - from continuing operations                 $    0.02   $    0.17
    -------------------------------------------------------------------------
          - from discontinued operations                       -           -
    -------------------------------------------------------------------------
                                                       $    0.02   $    0.17
    -------------------------------------------------------------------------
    Diluted - from continuing operations               $    0.02   $    0.16
    -------------------------------------------------------------------------
            - from discontinued operations                     -           -
    -------------------------------------------------------------------------
                                                       $    0.02   $    0.16
    -------------------------------------------------------------------------
    Shares used in per-share calculation:
    -------------------------------------------------------------------------
    Basic                                             16,875,685  16,602,026
    -------------------------------------------------------------------------
    Diluted                                           17,983,992  17,952,596
    -------------------------------------------------------------------------


                         March Networks Corporation
    -------------------------------------------------------------------------
                     CONSOLIDATED BALANCE SHEETS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                         July 31,   April 30,
                                                            2007        2007
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    -------------------------------------------------------------------------
    Cash and cash equivalents                          $   3,949   $   3,526
    -------------------------------------------------------------------------
    Short-term investments                                87,582      82,305
    -------------------------------------------------------------------------
    Restricted cash                                        3,467       2,775
    -------------------------------------------------------------------------
    Accounts receivable                                   17,286      19,396
    -------------------------------------------------------------------------
    Inventories                                           11,041      11,577
    -------------------------------------------------------------------------
    Prepaid expenses and other current assets              2,230       1,778
    -------------------------------------------------------------------------
    Future tax assets                                      2,578       2,198
    -------------------------------------------------------------------------
    Total current assets                                 128,133     123,555
    -------------------------------------------------------------------------
    Restricted cash                                            -         833
    -------------------------------------------------------------------------
    Capital assets                                         2,520       2,720
    -------------------------------------------------------------------------
    Intangible assets                                      2,951       3,088
    -------------------------------------------------------------------------
    Future income taxes                                   21,183      21,975
    -------------------------------------------------------------------------
    Goodwill                                               5,397       5,397
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    TOTAL ASSETS                                       $ 160,184   $ 157,568
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    LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                                   $   7,728   $   5,790
    -------------------------------------------------------------------------
    Accrued liabilities                                    4,974       4,337
    -------------------------------------------------------------------------
    Refundable royalty advance                             2,667       2,775
    -------------------------------------------------------------------------
    Acquisition escrow                                       800           -
    -------------------------------------------------------------------------
    Deferred revenue                                       5,588       7,560
    -------------------------------------------------------------------------
    Income taxes payable                                     421         467
    -------------------------------------------------------------------------
    Total current liabilities                             22,178      20,929
    -------------------------------------------------------------------------
    Acquisition escrow                                         -         833
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    Deferred revenue                                       6,862       5,881
    -------------------------------------------------------------------------
    Total liabilities                                     29,040      27,643
    -------------------------------------------------------------------------
    Shareholders' equity                                 131,144     129,925
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    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $ 160,184   $ 157,568
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                         March Networks Corporation
    -------------------------------------------------------------------------
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
    -------------------------------------------------------------------------
                               (In thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                        Fiscal Quarter Ended
    -------------------------------------------------------------------------
                                                         July 31,    July 31,
                                                            2007        2006
    -------------------------------------------------------------------------
    Cash flows from operating activities:
    -------------------------------------------------------------------------
    Net earnings - continuing operations               $     374   $   2,783
    -------------------------------------------------------------------------
    Net earnings - discontinued operations                     -          87
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    Items not affecting cash:
    -------------------------------------------------------------------------
    Amortization of capital assets                           325         139
    -------------------------------------------------------------------------
    Amortization of acquired intangibles                     137          28
    -------------------------------------------------------------------------
    Gain on sale of discontinued operations                    -         (86)
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    Stock based compensation                                 805         332
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    Foreign exchange loss on foreign cash and
     cash equivalents held                                  (134)        (34)
    -------------------------------------------------------------------------
    Future income taxes and non-refundable
     investment tax credits                                  336       2,104
    -------------------------------------------------------------------------
    Net change in non-cash items:
    -------------------------------------------------------------------------
      Continuing operations                                3,965      (1,462)
    -------------------------------------------------------------------------
      Discontinued operations                                  -        (305)
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    Net cash generated by operating activities             5,808       3,586
    -------------------------------------------------------------------------
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    Cash flows from investing activities:
    -------------------------------------------------------------------------
    (Purchase) redemption of short-term investments       (5,289)      5,348
    -------------------------------------------------------------------------
    Purchase of capital assets                              (125)       (873)
    -------------------------------------------------------------------------
    Acquisition of business                                    -      (8,021)
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    Proceeds from sale of discontinued operations              -          86
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    Net cash consumed by investing activities             (5,414)     (3,460)
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    Cash flows from financing activities:
    -------------------------------------------------------------------------
    Issuance of share capital, net                            52         585
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    Net cash generated by financing activities                52         585
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    Increase in cash and cash equivalents -
     continuing operations                                   446         929
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    Decrease in cash and cash equivalents -
     discontinued operations                                   -        (218)
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    Net increase in cash and cash equivalents                446         711
    -------------------------------------------------------------------------
    Foreign exchange loss on foreign cash and
     cash equivalents held                                   (23)          4
    -------------------------------------------------------------------------
    Cash and cash equivalents, beginning of period         3,526       3,292
    -------------------------------------------------------------------------
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    Cash and cash equivalents, end of period           $   3,949   $   4,007
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For further information:

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

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