March Networks Announces Record Revenues and Strong Earnings in Third Quarter of Fiscal 2012

Summary Operating Results:
$USD millions except EPS data		Q3 2012		Q3 2011		Q1-Q3 2012		Q1-Q3 2011
Revenue		$32.4		$20.6		$76.7		$73.4
Net earnings (loss)		$1.6		$(2.5)		$(1.6)		$(1.2)
Diluted earnings (loss) per share		$0.09		$(0.14)		$(0.09)		$(0.07)
Earnings impact of foreign exchange gains (losses)		0.3		0.7		0.0		0.5
Cash and short-term investments		$39.1		$38.5		$39.1		$38.5

 

OTTAWA, March 6, 2012 /CNW/ - March Networks^®  (TSX: MN), a global provider of intelligent IP video solutions, today announced financial results for the fiscal quarter and nine months ended January 31, 2012. All figures are in US dollars and in accordance with International Financial Reporting Standards ("IFRS") unless otherwise specified.

The Company's third quarter fiscal 2012 revenue of $32.4 million represented a 57% increase relative to revenue of $20.6 million in the third quarter of fiscal 2011 and grew 48% as compared to the second quarter fiscal 2012. Revenue for the first nine months of fiscal 2012 of $76.7 million increased by 5% relative to the first nine months of fiscal 2011.

Net earnings for the third quarter of fiscal 2012 were $1.6 million or $0.09 per common share as compared to a net loss of $2.5 million or $0.14 per share in the third quarter of fiscal 2011. Net loss for the nine-month period ended January 31, 2012 was $1.6 million or $0.09 per common share as compared to a net loss of $1.2 million or $0.07 per share in the nine-month period ended January 31, 2011.

The Company's cash and short-term investment position of $39.1 million at January 31, 2012 increased by $592,000 as compared to January 31, 2011 but declined by $6.8 million relative to $45.8 million at April 30, 2011.

"We are pleased with the overall business activity in the third quarter of fiscal 2012," said Peter Strom, President and CEO of March Networks. "Our record revenues in the third quarter reflect strong order intake from our large customers in the Americas and allowed the Company to build backlog in the quarter".

"The Company's believes that its fiscal 2012 revenue may be flat to slightly above fiscal 2011, however, the Company does not expect to generate net earnings in fiscal 2012", said Ken Taylor CFO of March Networks.

Update on Definitive Agreement to be Acquired by Infinova

The Company announced on December 9, 2011 that it had entered into a definitive arrangement agreement pursuant to which Infinova (Canada) Ltd. ("Infinova"), an indirect, wholly-owned Canadian subsidiary of Shenzhen Infinova Ltd., will acquire through a statutory plan of arrangement, all of the issued and outstanding shares of the Company in a $5.00 per share all cash transaction. The Arrangement is subject to, among other things, approval from four regulatory agencies in the People's Republic of China, the approval of the shareholders of Shenzhen Infinova and the approvals of the shareholders of March Networks and the Ontario Superior Court of Justice (Commercial List) (the "Court"). Shenzhen Infinova has obtained the approval of its shareholders. In addition, Shenzhen Infinova has received the necessary approvals from the Shenzhen Development and Reform Commission and the Shenzhen Science, Industry, Trade and Information Technology Commission, with approvals from China's Foreign Currency Administration Bureau and the China Securities Regulatory Commission remaining outstanding.

March Networks would like to remind its shareholders that, pursuant to an interim order of the Court, the special meeting of shareholders to approve the Arrangement (the "Special Meeting") will be held on March 20, 2012 at 9:30 a.m. (Eastern Daylight Time) at the Brookstreet Hotel, 525 Legget Drive, Ottawa (Kanata), Ontario. Shareholders are also reminded that whether or not they intend to attend the Special Meeting, proxies need to be completed and returned, or procedures for internet or telephone voting need to be followed, before 5:00 p.m. (Eastern Daylight Time) on March 16, 2012 (or the date that is two business days immediately prior to the date set for any adjournment or postponement of the Special Meeting). Further details are contained in the management proxy circular of March Networks and related materials prepared in connection with the Special Meeting, which were mailed to shareholders and filed on SEDAR at www.sedar.com between February 14 and February 16, 2012.

The company will discuss the financial results on a conference call and webcast on Wednesday, March 7, 2012 at 8:30 a.m. EST (1:30 p.m. UTC). The conference call may be accessed by dialing 1-877-974-0445 (North America) or [phone].The conference call webcast can be accessed at: http://www.newswire.ca/en/webcast/detail/922197/984877

A replay of the conference call will be available from March 7, 2012 at 10:30 a.m. EST until March 14, 2012 at 11:59 p.m. EDT. The replay can be accessed at 1-877-289-8525 or [phone] and the passcode is 4516094#.

About March Networks
March Networks^® (TSX:MN) is a leading provider of intelligent IP video solutions. For more than a decade, the company has helped some of the world's largest commercial and government organizations transition from traditional CCTV to advanced surveillance technologies used for security, loss prevention, risk mitigation and operational efficiency. Its highly scalable and easy to use Command^™ video management platform incorporates a web-based client interface to enable rapid system deployment and complete system control. It is complemented by the company's portfolio of high-definition IP cameras, encoders, video analytics and hybrid recorders, as well as outstanding professional and managed services. March Networks systems are delivered through an extensive distribution and partner network in more than 50 countries. For more information, please visit www.marchnetworks.com.

*MARCH NETWORKS, March Networks Command and the MARCH NETWORKS logo are trademarks of March Networks Corporation. All other trademarks are the property of their respective owners.

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:

• The Company's pipeline of sales opportunities will yield year over year revenue growth in the second half of fiscal 2012 as compared to the second half of fiscal 2011.
  
• The Company will have adequate component supply to meet customer demand.
  
• 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 products will address the needs of new and existing customers and contribute to near term profitability.
  
• The Company will successfully reduce product costs to improve the Company's gross margin and/or avoid margin erosion associated with competitive pricing pressure.
  
• The average exchange rates for Canadian dollars and Euros to US dollars will be US$1.00=CDN$1.00 and Euro 1=US$1.40.

Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following:

• The Company has announced that it has entered into a definitive arrangement agreement to be acquired. The completion of the Arrangement is subject to a number of terms and conditions, including required court and regulatory approvals, as well as certain termination rights available to the parties under the Arrangement Agreement. To the extent such approvals are outstanding, they may not be obtained, the other conditions to the transaction may not be satisfied in accordance with their terms, and/or the parties to the Arrangement Agreement may exercise their termination rights. Actual developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the proposed transaction and that the transaction will not be successfully completed for any reason (including the failure to obtain any required approvals or satisfy other conditions). The uncertainty during the period until the transaction closes could lead to disruption in the Company's business and affect the Company's financial condition, operating results, and/ or ability to attract and retain staff. If the transaction is not successfully completed, a material decline in the Company's share price could occur.
  
• The Company's quarterly revenue is generally dependent upon conversion of opportunities in the sales pipeline during the quarter and, as a result, revenue and operating results can be difficult to predict and can fluctuate substantially. The Company's success in realizing customer opportunities may be negatively impacted by depressed economic conditions, changes in sales cycles, and/or weaker than expected success versus competitors.
  
• Longer than expected lead times from component suppliers and/or supply constraints due to component obsolescence could result in production delays resulting in delayed or lost revenue and/or reduced profits.
  
• The Company's gross margin and operating results may be adversely affected by pricing models required to compete successfully, lower than expected revenue mix of software and high margin hardware products, and/or a failure by the Company to achieve its product cost targets.
• 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.
• Weaker than expected market acceptance of several new products being introduced by the Company that are expected to contribute significant revenue in the second half of fiscal 2012.
• The Company plans to become increasingly dependent upon third parties for product design and supply.  Higher than expected costs and delayed or lost revenue may result if these activities are not transitioned and managed effectively.
• Shifts in value of the US dollar relative to the Canadian Dollar may cause the Company's operating costs to fluctuate significantly.

Additional risks are discussed under "Risk Factors" in the Company's Annual Information Form available online at www.sedar.com.

March Networks Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(US dollars, amounts in thousands, except share and per-share data)
(Unaudited)
	Three Months Ended				Nine Months Ended
	January 31, 2012		January 31, 2011		January 31, 2012		January 31, 2011
REVENUE	$32,368		$20,564		$76,692		$73,360
Cost of revenue	19,601		12,956		44,840		42,063
GROSS MARGIN	12,767		7,608		31,852		31,297
EXPENSES:
Selling, marketing and support	4,382		4,588		13,930		14,452
Research and development	2,660		2,998		8,044		7,993
General and administrative	3,117		1,787		8,645		6,799
Stock based compensation	37		191		449		484
Restructuring charges	-		-		-		884
Amortization	659		618		1,861		1,828
Total expenses	10,855		10,182		32,929		32,440
Earnings (loss) before undernoted items	1,912		(2,574)		(1,077)		(1,143)
Interest and other income, net	31		83		91		187
EARNINGS (LOSS) BEFORE INCOME TAXES	1,943		(2,491)		(986)		(956)
Deferred income taxes	303		-		621		275
NET EARNINGS (LOSS)	$1,640		$(2,491)		$(1,607)		$(1,231)
Earnings (loss) per share
Basic	$0.09		$(0.14)		($0.09)		$(0.07)
Diluted	$0.09		$(0.14)		($0.09)		$(0.07)
Shares used in per-share calculation:
Basic	18,030,736		17,559,758		17,998,974		17,554,134
Diluted	18,173,763		17,559,758		17,988,974		17,554,134

March Networks Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(US dollars, amounts in thousands)
(Unaudited)
	January 31, 2012		April 30, 2011		May 1, 2010
ASSETS
Current assets:
Cash and cash equivalents	$13,572		$15,593		$9,344
Short-term investments	25,510		30,241		37,787
Trade and other receivables	25,708		21,007		16,209
Inventories	13,927		10,058		11,162
Other current assets	3,269		3,398		3,492
Total current assets	81,986		80,297		77,994
Property and equipment	3,673		4,391		5,124
Intangible assets	4,301		3,087		2,623
Deferred tax assets	3,873		4,495		4,445
Goodwill	5,235		5,235		5,235
TOTAL ASSETS	$99,068		$97,505		$95,421
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade and other payables	$13,866		$ 9,546		$ 8,522
Accrued liabilities	6,916		7,415		4,552
Provisions	2,887		2,876		2,529
Deferred revenue	2,305		3,897		7,674
Deferred leasehold inducement	130		130		130
Current tax liabilities	-		20		99
Total current liabilities	26,104		23,884		23,506
Deferred revenue	4,518		3,334		4,714
Deferred leasehold inducement	726		823		953
Long-term compensation	732		738		528
Total liabilities	32,080		28,779		29,701
Shareholders' equity	66,988		68,726		65,720
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$99,068		$97,505		$95,421

March Networks Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars, amounts in thousands)
(Unaudited)
	Three Months Ended				Nine Months Ended
	January 31, 2012		January 31, 2011		January 31, 2012		January 31, 2011
Cash flows from operating activities:
Net earnings (loss)	$1,640		$(2,491)		($1,607)		$(1,231)
Items not affecting cash:
Amortization of property, equipment and software	659		618		1,861		1,828
Stock based compensation and shares issued to directors for services	37		202		461		506
Unrealized foreign exchange (gain)/ loss	1,363		33		591		445
Deferred income tax expense	303		-		621		275
Net change in non-cash items	(8,562)		(3,539)		(5,995)		(9,442)
Net cash consumed by operating activities	(4,560)		(5,177)		(4,068)		(7,619)
Cash flows from investing activities:
Redemption of short-term investments	3,994		(596)		4,731		7,193
Purchase of property, equipment and software	(158)		(366)		(2,043)		(701)
Net cash generated (consumed) by investing activities	3,836		(962)		2,688		6,492
Cash flows from financing activities:
Issuance of share capital, net	45		18		286		26
Net cash generated by financing activities	45		18		286		26
Net increase (decrease) in cash and cash equivalents	(679)		(6,121)		(1,094)		(1,101)
Foreign exchange gain (loss) on cash and cash equivalents	(571)		113		(927)		111
Cash and cash equivalents, beginning of period	14,822		14,362		15,593		9,344
Cash and cash equivalents, end of period	$13,572		$8,354		$13,572		$8,354

 

 

Ken Taylor
Chief Financial Officer, March Networks
[phone]
[email protected]