March Networks Announces Second Quarter Fiscal 2010 Financial Results
Summary Operating Results:
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$Cdn millions Q1-Q2 Q1-Q2
except EPS data Q2 2010 Q2 2009 2010 2009
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Revenue $21.4 $28.3 $45.4 $56.1
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Non-GAAP operating
earnings (loss)* 0.0 1.0 $0.5 (0.2)
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Net loss $(1.0) $(1.0) $(1.5) $(3.5)
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Loss per share $(0.06) $(0.06) $(0.09) $(0.20)
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Cash and
short-term
investments $51.0 $41.9 $51.0 $41.9
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* Non-GAAP measure: earnings (loss) before stock based compensation,
amortization of acquired intangibles, restructuring charges, interest
and income taxes. This measure may not be comparable to similar
measures used by other companies.
The Company's second quarter fiscal 2010 revenue was
The Company recorded non-GAAP operating earnings of
The Company incurred a net loss in the second quarter of fiscal 2010 of
"The fundamentals of the business are sound, as evidenced by improved gross margin and lower operating expenses, so we expect improved profitability once revenue levels recover," said
Second Quarter 2010 Financial Highlights
- Operating expenses down 11% and 19% in the second quarter and first
six months of fiscal 2010 respectively, as compared to the same
periods in fiscal 2009.
- Generated over $6 million in operating cash flow in the second
quarter of 2010 including a $3.4 million reduction in inventory.
- Cash and short-term investments improved to $51.0 million.
"The Company's lower operating cost structure has allowed the Company to stay on course for improved profitability in fiscal 2010 despite the decline in revenue," said
The Company will discuss the results on a conference call and webcast on
The conference call webcast can be accessed at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2868580
A replay of the conference call will be available from
About March Networks
March Networks(R) (TSX:MN) is a global provider of intelligent IP video solutions. For close to a decade, the Company has helped some of the world's largest commercial and government organizations transition from traditional CCTV to networked video surveillance used for advanced security, loss prevention and risk mitigation. VideoSphere(R), the Company's enterprise-class video management portfolio, includes open-platform VMS software complemented by high-definition IP cameras, encoders, video analytics and recording platforms, as well as outstanding professional and managed services. March Networks systems are delivered through an extensive distribution and partner network and currently support over one million channels of video in more than 50 countries.
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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.
- 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(equal
sign)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 unexpected delays in closing large projects in its sales
pipeline; increased pricing pressure; and instability in the global
economic environment leading to higher potential for delay or
cancellation of sales opportunities.
- Shifts in value of the Canadian dollar relative to billing
currencies.
- Weaker than expected success versus competitors in new customer and
vertical market opportunities and/or loss of existing customers to
competitors.
- Delays in product development programs for new products and new
product features which lead to cost overruns and /or missed customer
opportunities.
- The Company may experience difficulty in developing the sales
channels, technology partnerships and support infrastructure required
to compete successfully in new vertical markets.
- 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.
- Changes in the mix of revenues between fixed and mobile
transportation solutions.
- The Company may have to write down the value of certain future tax
assets if it is unable to demonstrate its ability to generate
sufficient future profits to realize the value of these assets.
Additional risks are discussed herein and under "Risk Factors" in the
Company's Annual Information Form available online at www.sedar.com.
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* MARCH NETWORKS, VideoSphere and the MARCH NETWORKS logo are
registered trademarks of March Networks Corporation.
All other trademarks are the property of their respective owners.
March Networks Corporation
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(Canadian dollars, amounts in thousands, except share and per-share data)
(Unaudited)
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Three Months Ended Six Months Ended
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October 31, October 31, October 31, October 31,
2009 2008 2009 2008
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REVENUE $ 21,372 $ 28,276 $ 45,386 $ 56,080
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Cost of revenue 11,285 16,041 25,243 30,926
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Contract losses - - - 1,187
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GROSS MARGIN 10,087 12,235 20,143 23,967
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EXPENSES:
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Selling, marketing
and support 4,915 5,063 10,057 9,917
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Research and
development 2,674 3,509 5,105 7,552
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General and
administrative 2,455 2,663 4,485 6,666
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Stock based
compensation 534 279 791 763
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Amortization of
acquired
intangible assets 892 933 1,795 1,859
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Restructuring costs - 1,419 - 1,419
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Total expenses 11,470 13,866 22,233 28,176
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LOSS BEFORE
UNDERNOTED ITEMS (1,383) (1,631) (2,090) (4,209)
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Interest and other
income, net 148 310 164 704
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LOSS BEFORE INCOME
TAXES (1,235) (1,321) (1,926) (3,505)
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Current income tax
expense 23 (320) 61 (7)
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Future income tax
expense (240) 20 (480) (29)
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NET LOSS $ (1,018) $ (1,021) $ (1,507) $ (3,469)
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Loss per share:
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Basic $ (0.06) $ (0.06) $ (0.09) $ (0.20)
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Diluted $ (0.06) $ (0.06) $ (0.09) $ (0.20)
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Shares used in
per-share
calculation:
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Basic 17,200,594 17,480,295 17,198,927 17,712,643
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March Networks Corporation
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CONSOLIDATED BALANCE SHEETS
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(Canadian dollars, amounts in thousands)
(Unaudited)
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October 31, April 30,
2009 2009
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ASSETS
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Current assets:
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Cash and cash equivalents $ 12,566 $ 10,126
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Short-term investments 38,464 40,740
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Accounts receivable 15,535 14,892
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Inventories 19,148 23,932
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Prepaid expenses and other current assets 3,286 4,040
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Future tax assets 5,131 5,128
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Total current assets 94,130 98,858
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Capital assets 5,669 5,962
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Intangible assets 11,555 12,909
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Future tax assets 15,132 15,646
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Investment tax credits 7,105 6,505
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Goodwill 22,429 22,429
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TOTAL ASSETS $ 156,020 $ 162,309
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable $ 8,015 $ 12,004
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Accrued liabilities 7,314 7,328
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Deferred revenue 8,393 7,851
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Deferred leasehold inducement 132 132
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Income taxes payable 105 390
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Total current liabilities 23,959 27,705
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Deferred revenue 6,806 8,239
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Deferred leasehold inducement 1,034 1,100
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Long term compensation 848 666
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Future tax liabilities 2,847 3,330
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Total liabilities 35,494 41,040
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Shareholders' equity 120,526 121,269
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 156,020 $ 162,309
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March Networks Corporation
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Canadian dollars, amounts in thousands)
(Unaudited)
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Three Months Ended Six Months Ended
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October 31, October 31, October 31, October 31,
2009 2008 2009 2008
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Cash flows from
operating
activities:
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Net loss $ (1,018) $ (1,021) $ (1,507) $ (3,469)
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Items not
affecting
cash:
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Amortization of
capital and
intangible
assets 443 698 841 1,089
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Amortization of
intangible
assets
related to
business
acquisitions 892 933 1,795 1,859
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Stock based
compensation
and shares
issued to
directors 534 316 791 817
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Unrealized foreign
exchange (gain)/
loss 123 555 (486) 660
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Future income
taxes and non-
refundable
investment
tax credits (541) 258 (1,078) (37)
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Net change in
non-cash items 5,619 (3,294) 930 (14,089)
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Net cash consumed
by operating
activities 6,052 (1,555) 1,286 (13,170)
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Cash flows from
investing
activities:
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Redemption
(purchase) of
short-term
investments (194) 7,861 2,277 23,624
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Purchase of
capital and
intangible assets (361) (2,796) (898) (3,446)
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Acquisition of
business - (41) - (699)
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Net cash
generated by
investing
activities (555) 5,024 1,379 19,479
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Cash flows from
financing
activities:
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Issuance
(repurchase)
of share capital,
net - (2,659) 9 (4,628)
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Net cash
generated
(consumed) by
financing
activities - (2,659) 9 (4,628)
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Net increase in
cash 5,497 810 2,674 1,681
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Foreign exchange
gain (loss) on
foreign cash
held 8 325 (234) 397
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Cash, beginning
of period 7,061 5,130 10,126 4,187
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Cash, end of
period $ 12,566 $ 6,265 $ 12,566 $ 6,265
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For further information: March Networks Corporation, Ken Taylor, Chief Financial Officer, (613) 591-8181, Email: [email protected]
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