RNS Number:1689Z
March Networks Corporation
02 March 2006
FOR IMMEDIATE RELEASE
March Networks Reports Third Quarter Revenues Up 63% Compared to Last Year
* Q3 Revenue: CDN $20.0 million (63% increase year over year)
* Q3 Net Earnings: CDN $5.4 million
* Q3 Diluted Earnings Per Share From Continuing Operations: CDN $0.30
OTTAWA, Ontario, March 1, 2006 -- March Networks(TM) (TSX:MN; AIM:MNW - all
figures in Canadian dollars and in accordance with Canadian GAAP), a leading
provider of Internet Protocol (IP)-based digital video surveillance solutions,
today announced financial results for the third quarter and first nine months of
fiscal year 2006, ended January 31, 2006.
Revenue for the third quarter of fiscal 2006 was $20.0 million, compared with
$12.3 million for the same period last year, an increase of 63 percent. Revenue
for the first nine months of fiscal 2006 was $54.7 million, representing an 88%
increase over revenues of $29.2 million in the same period last year.
Net earnings from continuing operations were $5.2 million or $0.30 per share on
a diluted basis, which compares to $0.22 per share for the third quarter of
fiscal 2005. Fiscal year to date net earnings from continuing operations were
$13.1 million, or $0.78 per share on a diluted basis, which compares with net
earnings of $3.5 million or $0.34 per share for the first nine months of fiscal
2005.
"Our go-to-market strategy continues to be effective as March Networks delivers
yet another quarter of sequential growth," said Peter Strom, President and CEO
of March Networks. "March Networks is focused on delivering innovative
products, great service, and outstanding sales execution. These financial
results are a direct result of that unwavering focus."
Q3 Financial Highlights
* Achieved tenth consecutive quarter of revenue growth and sixth consecutive
quarter of increased profitability.
* 4,860 units shipped representing an increase of 101% over the third
quarter of fiscal 2005 and bringing the installed base to 26,346 units.
* Fifth consecutive quarter of net cash generation from operations. Net cash
generated from operations was $11.6 million for the first nine months of
fiscal 2006, compared with $2.7 million in the first nine months of fiscal
2005.
* Raised proceeds of $5.1 million from the exercise of stock options and
warrants during the quarter.
"We are very pleased with the financial performance of the Company in Q3. We
continue to achieve our revenue targets while improved gross margins have
allowed us to exceed our expectations on net earnings," said Ken Taylor, CFO for
March Networks.
Business Outlook
March Networks maintains its focus on long-term growth objectives and provides
only full year guidance.
The Company is maintaining the fiscal 2006 revenue guidance provided on November
30, 2005 but is raising fiscal 2006 profitability guidance based on the strength
of the Company's gross margin results in the first nine months and fourth
quarter expectations. The Company's fiscal 2006 annual guidance is as follows.
* Revenue expectations for the fiscal year ending April 30, 2006 remain
in the range of $72 million to $76 million.
* Net earnings for the year ending April 30, 2006 are now expected to be
in the range of $16 million to $18 million, as compared to the November 30
guidance of $14.0 million to $16 million.
* The Company intends to sell the operations of its eHealth business in
order to focus on its DVR business. The Company expects to find a potential
acquirer but may abandon the eHealth business if an acquirer is not found in
the fourth quarter of fiscal 2006. The Company has reflected only normal
operating costs of this segment (approximately $2 million) in the fiscal 2006
guidance and has not attempted to reflect the potential impact of exiting the
eHealth business.
March Networks' management will discuss the full results and business outlook on
a conference call and Webcast to be held on March 2, 2006 at 8:30 a.m. EST (1:30
p.m. BST). The conference call may be accessed at 1-800-814-4941 (North
America) or 00 800 0000 2288 (Europe). The Webcast may be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1372800. A replay of
the conference call may be accessed at 1-877-289-8525 until March 9, 2006. The
pass code for the replay is 21133196#
About March Networks
March Networks(TM) (TSX:MN; AIM:MNW) is a leading provider of innovative IP-
based video applications used for security surveillance and monitoring. Our
software and hardware solutions allow businesses to increase operational
efficiencies, address risk, and manage assets with an integrated set of video-
based intelligence tools that support enhanced decision-making. Today, the ISO
9001: 2000 certified company serves the needs of leading banks, retail
organizations and transportation authorities in more than 40 countries
throughout the world. For more information, please visit www.marchnetworks.com.
Forward-Looking Statements
Certain statements included in this management's discussion and analysis
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 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
expectations.
Assumptions made in preparing forward-looking statements and financial guidance
include, but are not limited to, the following:
* The market for the Company's products will continue to grow by at
least 20% annually.
* End-user customers will deploy the Company's products in substantially
all of the addressable locations identified during the sales process.
* The Company will generate at least 10% of its revenue from channel
partner initiated sales.
* New customer deployments will support annual revenue growth of no less
than the anticipated DVR market growth.
* No material change in patent litigation costs.
* The competitive environment will dictate average selling price
degradation of 5% per year.
* Costs per unit of existing products will not increase more than 5% per year.
* The Company will invest and be successful in new markets and
technologies while maintaining operating expenses below 40% of revenue.
* The Company will have reduced taxes payable as a result of utilizing
available tax losses carried forward.
Factors that could cause actual results to differ materially from expected
results include, but are not limited to, the following:
* Timeliness of delivery of product features.
* Variability in customer deployment schedules from quarter to quarter.
* Declines in market growth rates for the Company's products.
* Inability to transition to new technologies to meet customer demand.
* Pricing models and sales strategies required to address competitive
environment in new markets.
* Shifts in the mix of products sold.
* Fluctuations in the exchange rate between the US dollar and the
Canadian dollar.
* Variations in average sales cycles.
* Key component supply restrictions and/or cost increases.
* Complications associated with implementation of a new business system
and related processes.
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.
For further information, please contact:
March Networks Corporation
Anil Dilawri, Director - Investor and Public Relations
(613) 591-8181
e-mail: adilawri@marchnetworks.com
Buchanan Communications
Bobby Morse / Jeremy Garcia / James Strong
+44 (0) 20 7466 5000
e-mail: bobbym@buchanan.uk.com
March Networks Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (CDN $)
(In thousands, except share and per-share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
January January January January
31, 2006 31, 2005 31, 2006 31, 2005
REVENUE $20,009 $12,312 $54,734 $ 29,153
COST OF REVENUE 8,257 6,227 23,470 14,220
GROSS MARGIN 11,752 6,085 31,264 14,933
EXPENSES:
Selling, marketing and 2,776 2,099 7,678 5,143
support
Research and development 1,784 1,138 4,776 3,143
General and administrative 2,400 510 6,394 3,070
Stock based compensation 183 41 534 105
Total expenses 7,143 3,787 19,382 11,461
EARNINGS BEFORE UNDERNOTED
ITEMS 4,609 2,298 11,882 3,472
Interest and other income, 566 (3) 1,242 2
net
EARNINGS BEFORE DISCONTINUED
OPERATIONS 5,175 2,295 13,124 3,474
Discontinued operations 196 - 196 -
NET EARNINGS 5,371 2,295 $13,320 $ 3,474
Net earnings per share:
Basic - from continuing $ 0.32 $ 0.22 $ 0.83 $ 0.34
operations
- from discontinued $0.01 - $ 0.01 -
operations
$ 0.33 $ 0.22 $ 0.84 $ 0.34
Diluted - from continuing $ 0.30 $ 0.22 $ 0.78 $ 0.34
operations
- from discontinued $ 0.01 - $ 0.01 -
operations
$ 0.31 $ 0.22 $ 0.79 $ 0.34
Shares used in per-share
calculation:
Basic 16,146,634 10,318,036 15,850,828 10,315,754
Diluted 17,373,776 10,378,476 16,889,812 10,376,194
March Networks Corporation
CONSOLIDATED BALANCE SHEETS (CDN $)
(In thousands)
(Unaudited)
January 31, 2006 April 30, 2005
ASSETS
Current assets:
Cash and cash equivalents $ 3,620 $ 7,435
Short-term investments 79,040 56,400
Accounts receivable 10,723 6,865
Inventories 3,692 4,497
Prepaid expenses and other current assets 732 166
Total current assets 97,807 75,363
Capital assets 583 294
Other assets - 147
TOTAL ASSETS $ 98,390 $ 75,804
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,655 $5,901
Accrued liabilities 3,531 3,983
Deferred revenue 412 2,403
Total liabilities 10,598 12,287
Shareholders' equity 87,792 63,517
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 98,390 $ 75,804
March Networks Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
(In thousands)
(Unaudited)
Nine Months Ended
January 31, 2006 January 31, 2005
Cash flows from operating activities:
Net earnings $13,320 $ 3,474
Items not affecting cash:
Amortization of capital assets 152 54
(Gain)/write down on other assets (196) 100
Foreign exchange loss on foreign cash and cash 218 140
equivalents held
Stock based compensation 534 105
Change in non-cash operating working capital
items:
Accounts receivable (3,858) (694)
Inventories 805 (3,061)
Prepaid expenses and other current assets (566) (197)
Accounts payable 2,947 300
Accrued liabilities 221 227
Deferred revenue (1,991) 2,259
Net cash generated by operating activities 11,586 2,707
Cash flows from investing activities:
Purchases of short-term investments (22,640) -
Purchase of capital assets (441) (67)
Long-term receivable 343 -
Proceeds from sale of division - 279
Net cash (consumed) generated by investing (22,738) 212
activities
Cash flows from financing activities:
Issuance of share capital, net 7,555 (69)
Issuance of warrants - 513
Net cash generated by financing activities 7,555 444
Net increase in cash and cash equivalents (3,597) 3,363
Foreign exchange loss on foreign cash and cash (218) (140)
equivalents held
Cash and cash equivalents, beginning of period 7,435 2,432
Cash and cash equivalents, end of period $3,620 $5,655
This information is provided by RNS
The company news service from the London Stock Exchange
END
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