Bridgewater Systems Reports Financial Results for Q3 2010

• Revenue of $23.9 million for Q3 2010, an increase of 52% over prior year
• Earnings before income taxes of $5.1 million for Q3 2010, compared with $1.5 million in Q3 2009
• Cash and cash equivalents, and short-term investments of $71.0 million

OTTAWA, Nov. 2 /CNW/ - Bridgewater Systems (TSX: BWC), the mobile personalization company, today announced financial results for the three and nine months ended September 30, 2010. This news release contains forward-looking statements. Reference should be made to "Forward-Looking Statements" at the end of this news release. All amounts are stated in Canadian dollars except where otherwise noted.

"The third quarter was highlighted by continued strength with our core customers and important progress with our partnership strategies," said Ed Ogonek, CEO of Bridgewater Systems. "We also demonstrated our progress in 4G through our live LTE deployment with MetroPCS and selection by Cellcom for their new network."

Financial Highlights

• Revenue of $23.9 million for Q3 2010, an increase of 52% compared with $15.8 million for Q3 2009. Product revenue for Q3 2010 was $19.1 million, 65% higher than the $11.6 million for Q3 2009.
• On a year-to-date basis, revenues of $71.1 million increased 55% compared with revenues in the first nine months of fiscal 2009. 
• Q3 2010 gross margin was $16.9 million (71% of revenue) versus $10.1 million (64% of revenue) in Q3 2009.   
• Total operating expenses in Q3 2010 were $11.4 million (48% of revenue), net of $0.6 million of investment tax credits, compared with $8.5 million (54% of revenue) in the same period last year.
• Earnings before income taxes increased to $5.1 million in Q3 2010, versus $1.5 million in Q3 2009. Earnings before income taxes for the first nine months of 2010 rose to $15.6 million, compared with $8.4 million for the same period in 2009.
• Net earnings for Q3 2010 were $3.4 million, or $0.13 per share fully diluted, versus $1.7 million, or $0.07 per share fully diluted, in the prior year. Net earnings for Q3 2010 include a current income tax expense of $0.6 million and non-cash future income tax expense of $1.1 million.
• Cash and cash equivalents, and short-term investments were $71.0 million at September 30, 2010, compared with $67.3 million at December 31, 2009.

Business Highlights

• Bridgewater continued to increase its customer base and diversify geographically by adding 32 new service provider customers in the fiscal year to date, of which 13 were in EMEA, 13 were in the Americas, and 6 in APAC.
• Continued market momentum for mobile control plane solutions that integrate subscriber (HSS), service (AAA), and policy (PCRF) controls with subscriber data management. Bridgewater is now live with MetroPCS, the first operator to launch LTE services in North America. The company has received new customer and partner orders for the Bridgewater® EPC 500 LTE system including from Cellcom and for the public safety market. Bridgewater is also engaged in several LTE trials with global operators in Asia, the Middle East, and the U.S.
• Extended partner relationships with Cisco and Motorola.
• Bridgewater set industry-first performance benchmarks for the 3G and 4G mobile packet core with Cisco under conditions which are representative of a large, data-centric Tier 1 service provider network with high mobile data transaction rates.  The two companies have recently won two new opportunities with mobile operators.
• Motorola and Bridgewater are working together on global 4G opportunities and new customer deployments with mobile operators and public safety agencies.  The two companies have deployed a live LTE network at the Shanghai Expo and recently won a public safety opportunity in the U.S.
• Bridgewater continued to build on its broad, multi-vendor interoperability capabilities with the announcement that Sandvine and Bridgewater successfully completed integration and interoperability testing of policy control solutions for 3G and 4G operators. The two companies are engaged in a number of customer opportunities globally.

Outlook

With the release of its Q3 2010 results, Bridgewater updated guidance for 2010. For 2010, the Company is expecting: 

• Revenues of $92 to $94 million
• Earnings before taxes of $17 to $18.5 million
• Net earnings of $12 to $13.5 million

Factors supporting Bridgewater's annual outlook include: high revenue visibility due to significant contracts with Tier 1 customers; a large installed customer base in existing and emerging markets; the long-term industry trends of growth in mobile data services and applications; and continued evolution of our business model for delivering products and services to address higher transaction capacity needs.

The complete financial statements and management's discussion and analysis for the three and nine months ended September 30, 2010 can be found at www.bridgewatersystems.com or at www.sedar.com.

Forward-Looking Statements

Certain statements in this release, including the estimates of future revenues and net earnings provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. These statements are subject to certain assumptions, risks and uncertainties. Material factors and assumptions used to develop such estimates include:

• Bridgewater's ability to maintain its relationships and contracts with Tier 1 customers;
• Bridgewater's visibility into the deployment plans of its major customers;
• Bridgewater's ability to maintain and grow its installed customer base in existing and emerging markets; and
• Bridgewater's expectations regarding long-term industry trends in growth in mobile data services and applications.

Readers are cautioned not to place undue reliance on such statements. These statements are provided to enable external stakeholders to understand Bridgewater's expectations as of the date of this release and may not be appropriate for other purposes.

Actual results, performance, achievements or developments of Bridgewater may differ materially from the results, performance, achievements or developments expressed or implied by such statements. Risk factors that may cause the actual results, performance, achievements or developments of Bridgewater to differ materially from the results, performance, achievements or developments expressed or implied by such statements can be found in the public documents filed by Bridgewater with Canadian securities regulatory authorities, including, but not limited to Bridgewater's Annual Information Form dated March 31, 2010 and Management's Discussion & Analysis of Financial Condition and Results of Operation dated November 2, 2010, which are available at www.sedar.com, and include the following:

• Bridgewater operates in highly competitive and continually evolving markets, and if it is not able to compete effectively, it may not be able to continue to expand its business as expected;
• Bridgewater relies on a limited number of customers for a large percentage of its revenue, and the loss of, or significant shortfall in business from, a key customer could significantly reduce its revenue;
• Bridgewater must continue to evolve its business models and platforms for delivery of products and services to respond to transaction capacity needs of its customers;
• Bridgewater's engagements with its customers involve complex arrangements and the size, timing and contractual terms of orders for Bridgewater's products may affect when revenue is recognized;
• Bridgewater has a lengthy and variable sales cycle; and
• Bridgewater may engage in future acquisitions that could disrupt its business and affect its financial condition and operating results.

Bridgewater assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law.

Conference Call and Webcast

A conference call and webcast will be held today, Tuesday, November 2, 2010 at 8:30 a.m. ET to discuss this announcement. The telephone numbers to access the call are 647-427-7450 or 1-888-231-8191. To access the live webcast, please visit www.bridgewatersystems.com or www.newswire.ca. Participants will require Windows Media Player™ to listen to the webcast.

Bridgewater Systems, the mobile personalization company, enables service providers to efficiently manage and profit from mobile data services, content and commerce. The company's market leading mobile personalization portfolio provides a real-time, unified view of subscribers including entitlements, devices, networks, billing profiles, preferences and context. Anchored by Bridgewater's Subscriber Data Broker™, the portfolio of carrier-grade and standards-based products includes the Bridgewater® Service Controller (AAA), the Bridgewater® Policy Controller (PCRF) and the Bridgewater® Home Subscriber Server (HSS). More than 150 leading service providers including America Movil, Bell Canada, Clearwire, Cox, Hutchison Telecom, Iusacell, Scartel, SmarTone-Vodafone, Sprint, Tata Teleservices, Tatung, Telmex, Telstra, and Verizon Wireless use Bridgewater's solutions to rapidly deliver innovative mobile services to over 150 million subscribers. For more information, visit us at www.bridgewatersystems.com. 

Bridgewater, Bridgewater Systems, the Bridgewater Systems logo, WideSpan, Smart Caps, myPolicy, and Subscriber Data Broker are trademarks or registered trademarks of Bridgewater Systems Corporation.  All other company, product names and any registered and unregistered trademarks mentioned are used for identification purposes only and remain the exclusive property of their respective owners.

BRIDGEWATER SYSTEMS CORPORATION
Consolidated Statements of Earnings and
Comprehensive Earnings
For the three and nine months ended September 30, 2010 and 2009
(expressed in Canadian dollars)
(unaudited)

		Three months ended				Nine months ended
		September 30, 2010		September 30, 2009		September 30, 2010		September 30, 2009
Revenue
Product		$  19,115,927		$  11,550,556		$  55,112,320		$  33,967,118
Service and support		4,798,480		4,218,772		16,027,330		11,979,795
		23,914,407		15,769,328		71,139,650		45,946,913
Cost of sales		6,966,559		5,636,789		22,878,878		13,043,502
Gross margin		16,947,848		10,132,539		48,260,772		32,903,411
Expenses
Sales and marketing		4,197,428		3,408,637		12,078,121		9,623,026
Research and development		6,144,661		3,863,831		17,382,713		11,045,295
General and administration		1,343,572		1,100,750		3,547,437		4,204,437
Investment tax credit carryforwards recognized		(575,000)		-		(1,575,000)		-
Bad debt recovery		-		-		(49,929)		(263,897)
Stock-based compensation		260,392		100,598		603,579		271,086
		11,371,053		8,473,816		31,986,921		24,879,947
Earnings before undernoted items		5,576,795		1,658,723		16,273,851		8,023,464
Foreign exchange loss		(507,427)		(225,009)		(813,596)		(130,401)
Interest and other income		121,461		74,095		278,902		472,989
Loss on disposal of property, equipment and intangible assets		(47,131)		-		(133,855)		-
Earnings before income taxes		5,143,698		1,507,809		15,605,302		8,366,052
Current income tax expense		575,000		-		1,575,000		-
Future income tax expense (recovery)		1,146,000		(143,000)		2,807,000		(313,000)
NET EARNINGS AND COMPREHENSIVE EARNINGS		$  3,422,698		$  1,650,809		$  11,223,302		$  8,679,052
Net earnings per share - basic		$  0.14		$  0.07		$  0.46		$  0.36
Net earnings per share - diluted		$  0.13		$  0.07		$  0.44		$  0.35
Weighted average number of shares outstanding - basic		24,787,959		24,359,491		24,617,853		23,940,792
Weighted average number of shares outstanding - diluted		25,555,952		25,237,721		25,558,974		24,909,273

BRIDGEWATER SYSTEMS CORPORATION
Consolidated Balance Sheets
as at September 30, 2010 and December 31, 2009
(expressed in Canadian dollars)
(unaudited)
		September 30, 2010		December 31, 2009
CURRENT ASSETS
Cash and cash equivalents		$  66,591,452		$  53,828,859
Short-term investments		4,431,363		13,459,190
Accounts receivable		12,067,265		24,879,197
Unbilled receivables		1,894,794		1,360,741
Deferred cost of sales		3,787,473		12,324,813
Prepaid expenses and other assets		3,410,119		3,229,227
Future income tax asset		1,577,000		5,113,000
		93,759,466		114,195,027
RECOVERABLE TAXES		644,641		-
FUTURE INCOME TAX ASSET		4,432,000		3,703,000
PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS		2,748,791		3,604,811
		$  101,584,898		$  121,502,838
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$  6,889,397		$  9,617,441
Deferred revenue		14,496,143		44,288,403
		21,385,540		53,905,844
SHAREHOLDERS' EQUITY
Share capital		70,758,058		69,872,842
Contributed surplus		1,402,040		908,194
Retained earnings (Deficit)		8,039,260		(3,184,042)
		80,199,358		67,596,994
		$  101,584,898		$  121,502,838

BRIDGEWATER SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2010 and 2009
(expressed in Canadian dollars)
(unaudited)

		Three months ended				Nine months ended
		September 30, 2010		September 30, 2009		September 30, 2010		September 30, 2009
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:
OPERATING
Net earnings		$  3,422,698		$  1,650,809		$  11,223,302		$  8,679,052
Items not affecting cash
Bad debt expense		-		-		-		223,838
Stock-based compensation		260,392		100,598		603,579		271,086
Foreign exchange loss (gain) on cash held in foreign currency		578,349		1,541,372		992,906		3,192,622
Loss on disposal of property, equipment and intangibles		47,131		-		133,855		-
Future income tax expense (recovery)		1,146,000		(143,000)		2,807,000		(313,000)
Amortization of property, equipment and intangible assets		293,228		419,057		940,360		1,012,178
		5,747,798		3,568,836		16,701,002		13,065,776
Recoverable taxes paid		(394,641)		-		(394,641)		-
Changes in non-cash operating working
capital items		(11,407,492)		2,833,209		(12,035,933)		2,802,205
		(6,054,335)		6,402,045		4,270,428		15,867,981
INVESTING
Sale (purchase) of short-term investments		9,180,707		(18,166,784)		9,027,827		(18,166,784)
Purchases of property, equipment and intangible assets		(69,995)		(474,191)		(318,239)		(1,433,330)
		9,110,712		(18,640,975)		8,709,588		(19,600,114)
FINANCING
Proceeds from issuance of common shares		77,585		204,124		775,483		2,374,927
Repurchase of shares under normal course issuer bid		-		(698,807)		-		(2,487,149)
		77,585		(494,683)		775,483		(112,222)
Foreign exchange gain (loss) on cash held in foreign currency		(578,349)		(1,541,372)		(992,906)		(3,192,622)
NET CASH INFLOW (OUTFLOW)		2,555,613		(14,274,985)		12,762,593		(7,036,977)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD		64,035,839		57,601,779		53,828,859		50,363,771
CASH AND CASH EQUIVALENTS,
END OF PERIOD		$  66,591,452		$  43,326,794		$  66,591,452		$  43,326,794
Supplementary information:
Cash on hand and bank balances		$ 20,260,020		$ 12,514,071		$ 20,260,020		$ 12,514,071
Cash equivalents		46,331,432		30,812,723		46,331,432		30,812,723
Total cash and cash equivalents		$ 66,591,452		$  43,326,794		$ 66,591,452		$  43,326,794
Interest received		$ 166,060		$ 74,095		$ 231,867		$ 469,596
Taxes paid		$ 394,641		$ -		$ 394,641		$ -

BRIDGEWATER SYSTEMS CORPORATION
Consolidated Statements of Shareholders' Equity
For the nine months ended September 30, 2010
(expressed in Canadian dollars)
(unaudited)

	Common Shares				Contributed		Retained Earnings		Shareholders'
	Number		Amount		Surplus		(Deficit)		Equity
Three months ended September 30, 2010
Balance at June 30, 2010	24,768,178		$  70,667,939		$  1,154,182		$  4,616,562		$  76,438,683
Stock-based compensation	-		-		260,392		-		260,392
Exercise of stock options	35,112		90,119		(12,534)		-		77,585
Net earnings	-		-		-		3,422,698		3,422,698
Balance at September 30, 2010	24,803,290		$  70,758,058		$  1,402,040		$  8,039,260		$  80,199,358
Nine months ended June 30, 2010
Balance at December 31, 2009	24,432,468		$  69,872,842		$  908,194		$  (3,184,042)		$  67,596,994
Stock-based compensation	-		-		603,579		-		603,579
Exercise of stock options	370,822		885,216		(109,733)		-		775,483
Net earnings	-		-		-		11,223,302		11,223,302
Balance at September 30, 2010	24,803,290		$  70,758,058		$  1,402,040		$  8,039,260		$  80,199,358

For further information:

Investor Relations
Kim Butler, Chief Financial Officer
Bridgewater Systems
[email protected]
[phone] extension 6023

Craig Armitage
The Equicom Group Inc.
[email protected]
[phone] extension 278

Media Relations
Joanne Steinberg, Marketing Director,
Bridgewater Systems
[email protected]
[phone] extension 2032