RNS Number:1649I
March Networks Corporation
29 August 2006
FOR IMMEDIATE RELEASE 29 AUGUST 2006
March Networks Delivers 53% Revenue Growth in First Quarter of Fiscal 2007
Summary Results:
$Cdn millions Q1'07 Versus
except EPS data Q1'06
----------------------- ------- ---------
Revenue $22.8 +53%
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Net earnings from continuing operations, excluding future
income taxes $ 5.0 +55%
----------------------- ------- ---------
Diluted EPS from continuing operations, excluding future
income taxes $0.28 +$0.09
----------------------- ------- ---------
Net earnings $ 2.9
----------------------- ------- ---------
Diluted EPS $0.16
----------------------- ------- ---------
OTTAWA, Ontario, August 28, 2006 -- March NetworksTM (TSX:MN; AIM:MNW), a
leading provider of Internet Protocol (IP)-based digital video surveillance
solutions, today announced financial results for the first fiscal quarter of
2007, ended July 31, 2006. All figures in Canadian dollars and in accordance
with Canadian GAAP unless otherwise specified.
Revenue for the quarter ended July 31, 2006 was $22.8 million, compared with
$14.9 million in the same quarter last year, representing an increase of 53%.
Net earnings from continuing operations, excluding future income taxes, for the
first quarter of fiscal 2007 were $5.0 million, or $0.28 per share on a diluted
basis, compared with $3.2 million or $0.19 per diluted share for the first
quarter of fiscal 2006.
"In Q1 our customers continued with their deployments of digital video
solutions, allowing March Networks to achieve another impressive quarter of
sequential and year-over-year growth," said Peter Strom, President and CEO of
March Networks. "The Company's track record of organic growth and ability to
execute is second to none in the industry. In addition, the completion of the
Trax acquisition is a positive step forward and is in line with our strategy of
adding complementary software applications to our portfolio. We look forward to
continuing with our go-to-market strategy and continuing with our success."
Net earnings for the quarter ended July 31, 2006 were $2.9 million or $0.16 per
share, on a diluted basis.
Q1 Financial Highlights
*12th consecutive quarter of revenue growth; 8th consecutive quarter of
growth in profitability; and 7th consecutive quarter of generating operating
cash flow.
*Achieved year over year revenue growth in all target market sectors.
*Record level of units shipped in Q1 (5,466) representing an increase of
78% compared to the same quarter last year. Installed base of almost 37,000
units.
*Completed the acquisition of the assets of Trax for approximately $8.9
million (US$7.9 million, including transaction related costs).
*Cash resources at July 31,2006 of $84.4 million on the strength of
operating cash from continuing operations of $3.9 million.
"Our execution in Q1 has resulted in solid revenue growth, sustained gross
margins, continued positive cash flow, and a strong balance sheet. We are
confident in our business model today and going forward," said Ken Taylor, CFO
of 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 is maintaining the
fiscal 2007 revenue guidance provided on June 8, 2006 but is revising fiscal
2007 profitability guidance to reflect the impact of amortization of intangible
assets acquired from Trax, which had not been finalized on June 8th. The
Company's fiscal 2007 annual guidance is as follows:
Revenue for the fiscal year ending April 30, 2007 is expected to be in the range
of $97 million to $107 million.
Net earnings before income taxes for the fiscal year ending April 30, 2007 are
expected to be in the range of $19 million to $22 million. Expectations include
approximately $500,000 of amortization of the intangible assets acquired from
Trax.
The Company expects fiscal 2007 net earnings to be in the range of $12 million
to $14 million. Net earnings expectations on a per diluted share basis for
fiscal 2007 are expected to be between $0.66 and $0.77.
The March Networks management team will discuss the full results and business
outlook on a conference call and Webcast to be held on August 29, 2006 at 8:30
ET (1:30pm UK time). The conference call may be accessed at 1-800-814-4941
(North America) or 00 800 000 2288 (UK). The Webcast may be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1560240 . A replay of
the conference call may be accessed at 1-877-289-8525 until September 5, 2006.
The pass code for the replay is 21199193#.
About March Networks
March NetworksTM (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, March Networks
is an ISO 9001:2000 certified company that 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 release, including those contained in the business
outlook section, 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 relative to
customer demand.
* Variability in customer deployments from quarter to quarter and/ or loss
of customers to competitors.
* Changes in pricing models and sales strategies required to address the
competitive environment.
* Fluctuations in the exchange rate between the US dollar and the Canadian
dollar.
* Unanticipated product problems in the Company's installed base resulting
in increased costs and/or lost revenue opportunities.
* Declines in market growth rates for the Company's products.
* Shifts in the mix of products sold.
* 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)
Fiscal Quarter Ended
July 31, July 31,
2006 2005
REVENUE $22,807 $14,876
COST OF REVENUE 9,717 6,771
GROSS MARGIN 13,090 8,105
EXPENSES:
Selling, marketing and support 3,507 2,197
Research and development 2,248 1,090
General and administrative 2,683 1,717
Stock based compensation 332 152
Amortization of acquired intangibles 28 -
Total expenses 8,798 5,156
EARNINGS BEFORE UNDERNOTED ITEMS 4,292 2,949
Interest and other income, net 820 292
EARNINGS BEFORE INCOME TAXES AND DISCONTINUED
OPERATIONS 5,112 3,241
Current income tax expense 100 -
Future income tax expense 2,229 -
NET EARNINGS FROM CONTINUING OPERATIONS 2,783 3,241
Discontinued operations 87 (406)
NET EARNINGS $ 2,870 $ 2,835
Net earnings per share:
Basic - from continuing operations $ 0.17 $ 0.21
- from discontinued operations - (0.03)
$ 0.17 $ 0.18
Diluted - from continuing operations $ 0.16 $ 0.19
- from discontinued operations - (0.02)
$ 0.16 $ 0.17
Shares used in per-share calculation:
Basic 16,602,026 15,555,023
Diluted 17,698,146 16,865,101
March Networks Corporation
CONSOLIDATED BALANCE SHEETS (CDN $)
(In thousands)
(Unaudited)
July 31, April 30,
2006 2006
ASSETS
Current assets:
Cash and cash equivalents $ 4,007 $ 3,292
Short-term investments 80,412 85,761
Restricted cash 2,829 -
Accounts receivable 14,296 13,655
Inventories 6,542 6,346
Prepaid expenses and other current assets 1,617 994
Current assets - discontinued operations 2 48
Future tax assets 8,507 7,984
Total current assets 118,212 118,080
Restricted cash 849 -
Capital assets 1,623 889
Intangible assets 3,499 -
Future income taxes 15,960 18,587
Goodwill 5,397 -
TOTAL ASSETS $145,540 $137,556
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,155 $9,634
Accrued liabilities 4,110 3,748
Refundable royalty advance 2,829 -
Deferred revenue 6,249 3,637
Income taxes payable 575 475
Current liabilities - discontinued operations 246 597
Total current liabilities 21,164 18,091
Acquisition escrow 849 -
Deferred revenue 275 -
Total liabilities 22,288 18,091
Shareholders' equity 123,252 119,465
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $145,540 $137,556
March Networks Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
(In thousands)
(Unaudited)
Fiscal Quarter Ended
July 31, July 31,
2006 2005
Cash flows from operating activities:
Net earnings from continuing operations $2,783 $ 3,241
Discontinued operations 87 (406)
Items not affecting cash:
Amortization of capital assets 139 31
Amortization of acquired intangibles 28 -
Gain on other assets - discontinued operations (86) -
Stock based compensation 332 152
Foreign exchange loss on foreign cash and cash
equivalents held (34) 83
Future income taxes and non-refundable investment tax
credits 2,104 -
Items not affecting cash in discontinued operations - 3
Change in non-cash operating working capital items:
Continuing operations (1,462) (1,155)
Discontinued operations (305) (28)
Net cash generated by operating activities 3,586 1,921
Cash flows from investing activities:
Purchases of short-term investments 5,348 (5,366)
Purchase of capital assets (873) (45)
Purchase of capital assets - discontinued operations - (5)
Acquisition of business (8,021) -
Long term receivable - discontinued operations 86 86
Net cash consumed by investing activities (3,460) (5,330)
Cash flows from financing activities:
Issuance of share capital, net 585 2,624
Net cash generated by financing activities 585 2,624
Net increase (decrease) in cash and cash equivalents 929 (432)
- continuing operations
Net decrease in cash and cash equivalents - discontinued
operations (218) (353)
Net (decrease)/ increase in cash and cash equivalents 711 (785)
Foreign exchange loss on foreign cash and cash
equivalents held 4 (83)
Cash and cash equivalents, beginning of period 3,292 7,435
Cash and cash equivalents, end of period $ 4,007 $ 6,567
This information is provided by RNS
The company news service from the London Stock Exchange
END
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