RNS Number:2450E
March Networks Corporation
08 June 2006
FOR IMMEDIATE RELEASE 8 June 2006
March Networks Delivers 79% Growth in Revenue and 201% Growth in Earnings for
Fiscal 2006
Summary Results:
-------------------- ------- -------- ------- ---------
$Cdn millions Q4'06 Versus Fiscal 2006 Versus
except EPS data Q4'05 Fiscal 2005
-------------------- ------- -------- ------- ---------
Revenue $21.4 +59% $76.2 +79%
-------------------- ------- -------- ------- ---------
Net earnings from continuing
operations, excluding future income
tax recovery $ 6.0 +113% $20.6 +201%
-------------------- ------- -------- ------- ---------
Diluted EPS from continuing
operations, excluding future tax
asset $0.34 $1.22
recognition ------- -------- ------- ---------
--------------------
Net earnings $30.6 $43.9
-------------------- ------- -------- ------- ---------
Diluted EPS $1.74 $2.60
-------------------- ------- -------- ------- ---------
OTTAWA, Ontario, June 8, 2006 -- March Networks(TM) (TSX:MN; AIM:MNW), a leading
provider of Internet Protocol (IP)-based digital video surveillance solutions,
today announced financial results for the fourth quarter and full fiscal year
2006, ended April 30, 2006. All figures are in Canadian dollars and in
accordance with Canadian GAAP unless otherwise specified.
Revenue for the fiscal year ended April 30, 2006 was $76.2 million, compared
with $42.7 million in fiscal 2005 representing an increase of 79%. Net earnings
from continuing operations, excluding the recognition of future tax assets, for
fiscal 2006 were $20.6 million, or $1.22 per share on a diluted basis, compared
with $6.8 million or $0.59 per diluted share for fiscal 2005.
Revenue for the fourth quarter of fiscal 2006 was $21.4 million, compared with
$13.5 million from the same period last year, an increase of 59%. Net earnings
from continuing operations, excluding the recognition of future tax assets, for
the fourth quarter were $6.0 million or $0.34 per diluted share, compared with
net earnings of $2.8 million or $0.20 per share on a diluted basis for the same
period last year.
"Q4 represented yet another great quarter for March Networks. With outstanding
sales growth and record profitability it is clear that we are executing on our
growth strategy," said Peter Strom, President and CEO for March Networks. "Our
performance in fiscal 2006 demonstrates the Company's ability to grow to new
heights, capitalize on the market opportunity, and continue to gain market share
within this expanding market for digital video solutions."
The Company recognized $25.8 million in future tax assets at April 30, 2006
having determined it is more likely than not that the Company will realize the
benefit of these assets given the Company's expectations of future
profitability. The recognition of the value of future tax assets positively
impacted diluted earnings per share for the fourth quarter and fiscal year by
$1.47 per share and $1.53 per share, respectively. The Company will recognize
future tax expense in future periods to reduce Canadian income taxes that would
otherwise be payable until the value of these future tax assets has been fully
drawn down.
The Company ceased operations of its eHealth business on April 15, 2006. The
Company's fiscal 2006 loss from discontinuing eHealth operations amounted to
$2.7 million (Q406 - $1.3 million). The fiscal 2006 loss was comprised of $2.0
million of normal operating expenses (Q406 - $0.5 million) in addition to fourth
quarter costs associated with staff reductions and asset write-downs.
Discontinued operations in fiscal 2006 also included a third quarter gain of
$0.2 million associated with the earn-out provision on the fiscal 2004 sale of
the Company's ERS business unit.
Net earnings for the fourth quarter and fiscal year were $30.6 million ($1.74
per share, diluted) and $43.9 million ($2.60 per share, diluted), respectively.
Q4 Financial Highlights
*11th consecutive quarter of revenue growth; 7th consecutive quarter of
growth in profitability; and 6th consecutive quarter of generating operating
cash flow.
*Record level of units shipped in Q4 (5,175) representing an increase of
88% compared to the same quarter last year. Over 18,000 units shipped during
fiscal 2006.
*Cash resources grew to $89.1 million on the strength of operating cash
flow of $5.7 million in the fourth quarter and $17.3 million during the
fiscal year.
*Celebrated the one-year anniversary of the Company's initial public
offering on April 27, 2006.
"Q4 tops off a successful fiscal year 2006 for March Networks. A successful
initial public offering followed by four strong quarters of growth in revenue,
profitability, and cash flow has the Company financially poised for continued
success in fiscal 2007," said Ken Taylor, CFO for 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's fiscal year 2007
annual guidance is as follows:
*Revenue for the fiscal year ended April 30, 2007 is expected to be in the
range of $97 million to $107 million.
*Net earnings for the fiscal year ended April 30, 2007 is expected to be
in the range of $12.5 million to $14.5 million for a diluted earnings per
share in the range $0.70 to $0.81. The Company's annual guidance for fiscal
2007 includes the impact of a pending acquisition that was announced on June
6, 2006 except for the amortization of the acquired assets which will be
dependent upon finalizing the allocation of the purchase price to specific
assets on closing of the transaction. Net earnings expectations for fiscal
2007 reflect future income tax expense of approximately 36% on Canadian
taxable income.
The March Networks management team will discuss the full results and business
outlook on a conference call and Webcast to be held on July 8, 2006 at 8:30am
EST (1:30pm BST). The conference call may be accessed at 1-800-814-4941 (North
America) or 00 800 000 2288 (United Kingdom). The Webcast may be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1477080. A replay of the
conference call may be accessed at 1-877-289-8525 until June 15, 2006. The pass
code for the replay is 21133197#.
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 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 MD&A, 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 March Networks 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 the Company's patent litigation costs.
* The competitive environment in which the Company carries on business
will dictate average selling price degradation of 5% per year.
* The Company will invest and be successful in new markets and
technologies while maintaining operating expenses below 40% of revenue.
* The prevailing exchange rate for US dollars to Canadian dollars will be
US$1.00=CDN$1.14.
* 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 new products and product features.
* Variability in customer deployments from quarter to quarter and/ or loss
of customers to competitors.
* Declines in market growth rates for the Company's products.
* Inability to transition to new technologies to meet customer demand.
* Changes in pricing models and sales strategies required to address
competitive environment.
* 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.
* Component supply disruptions and/or cost increases associated with
government directives on the use of hazardous substances.
* Difficulties integrating acquired business operations and related
diversion of management attention.
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 Year Ended
April 30, April 30, April 30, April 30,
2006 2005 2006 2005
REVENUE $21,448 $13,509 $76,182 $ 42,662
COST OF REVENUE 9,355 6,210 32,825 20,430
GROSS MARGIN 12,093 7,299 43,357 22,232
EXPENSES:
Selling, marketing and
support 3,015 2,456 10,463 7,564
Research and development 736 988 4,538 3,647
General and 2,325 896 8,482 3,956
administrative
Stock based compensation 176 164 712 270
Total expenses 6,252 4,504 24,195 15,437
EARNINGS BEFORE
UNDERNOTED 5,841 2,795 19,162 6,795
ITEMS
Interest and other
income, 663 42 1,905 44
net
EARNINGS BEFORE INCOME
TAXES AND DISCONTINUED
OPERATIONS 6,504 2,837 21,067 6,839
Current income tax 475 - 475 -
expense
Future income tax (25,803) - (25,803) -
recovery
NET EARNINGS FROM
CONTINUING OPERATIONS 31,832 2,837 46,395 6,839
Discontinued operations (1,259) (288) (2,502) (816)
NET EARNINGS $30,573 $2,549 $43,893 $ 6,023
Net earnings per share:
Basic - from continuing
operations $ 1.93 $ 0.22 $ 2.90 $ 0.60
- from discontinued
operations (0.08) (0.02) (0.16) (0.07)
$ 1.85 $ 0.20 $ 2.74 $ 0.53
Diluted - from
continuing $ 1.81 $ 0.22 $ 2.75 $ 0.59
operations
- from discontinued
operations (0.07) (0.02) (0.15) (0.07)
$ 1.74 $ 0.20 $ 2.60 $ 0.52
Shares used in per-share calculation:
Basic 16,531,970 12,828,443 15,995,657 11,318,552
Diluted 17,609,221 13,027,796 16,897,037 11,638,245
March Networks Corporation
CONSOLIDATED BALANCE SHEETS (CDN $)
(In thousands)
(Unaudited)
April 30, April 30,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $ 3,292 $ 7,435
Short-term investments 85,761 56,400
Accounts receivable 13,655 6,865
Inventories 6,346 4,497
Future tax asset 7,984 -
Prepaid expenses and other current assets 994 468
Current assets - discontinued operations 48 1
Total current assets 118,080 75,666
Capital assets 889 144
Capital assets - discontinued operations - 150
Future tax asset 18,587 -
Other assets - 147
TOTAL ASSETS $137,556 $ 76,107
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $9,634 $5,767
Accrued liabilities 3,748 4,279
Deferred revenue 3,637 2,403
Income taxes payable 475 -
Current liabilities - discontinued operations 597 141
Total liabilities 18,091 12,590
Shareholders' equity 119,465 63,517
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $137,556 $ 76,107
March Networks Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
(In thousands)
(Unaudited)
Year Ended
April 30, April 30,
2006 2005
Cash flows from operating activities:
Net earnings from continuing operations $46,395 $ 6,839
Discontinued operations (2,502) (816)
Items not affecting cash:
Amortization of capital assets 196 79
Writedown of other assets - 101
Stock-based compensation 712 270
Foreign exchange loss on foreign cash and cash
equivalents held 190 87
Future income taxes and non-refundable investment tax
credits (26,571) -
Items not affecting cash in discontinued operations (14) -
Change in non-cash operating working capital items:
Continuing operations (1,555) (2,170)
Discontinued operations 409 140
Net cash generated by operating activities 17,260 4,530
Cash flows from investing activities:
Purchase of short-term investments (29,361) (56,400)
Purchase of capital assets (641) (154)
Purchase of capital assets - discontinued operations (32) (150)
Long term receivable - discontinued operations 343 535
Net cash consumed by investing activities (29,691) (56,169)
Cash flows from financing activities:
Issuance of share capital, net 8,478 56,237
Issuance of warrants - 492
Net cash generated by financing activities 8,478 56,729
Net (decrease) increase in cash and cash equivalents (2,157) 5,381
- continuing operations
Net decrease in cash and cash equivalents - discontinued
operations (1,796) (291)
Net (decrease)/ increase in cash and cash equivalents (3,953) 5,090
Foreign exchange loss on foreign cash and cash
equivalents held (190) (87)
Cash and cash equivalents, beginning of period 7,435 2,432
Cash and cash equivalents, end of period $ 3,292 $ 7,435
This information is provided by RNS
The company news service from the London Stock Exchange
END
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