RNS Number:0956S
March Networks Corporation
01 March 2007
FOR IMMEDIATE RELEASE 1 March 2007
March Networks
March Networks Releases Third Quarter Fiscal 2007 Results
Summary Results:
------------------ ------- ------- --------- ---------
$Cdn millions Q3'07 Q3'06 Q1-Q3 2007 Q1-Q3 2006
except EPS data
------------------ ------- ------- --------- ---------
Revenue $18.7 $20.0 $67.8 $54.7
------------------ ------- ------- --------- ---------
Earnings from continuing operations
before income taxes $ 1.9 $ 5.7 $9.4 $14.6
------------------ ------- ------- --------- ---------
Net earnings $ 2.2 $ 5.4 $6.5 $13.3
------------------ ------- ------- --------- ---------
Diluted net earnings per share $0.13 $0.31 $0.37 $0.79
------------------ ------- ------- --------- ---------
OTTAWA, Ontario, February 28, 2007 -- 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 third quarter and first
nine months of fiscal 2007, ended January 31, 2007. All figures in Canadian
dollars and in accordance with Canadian GAAP unless otherwise specified.
Revenue for the first nine months of fiscal 2007 ended January 31, 2007 was
$67.8 million, compared with $54.7 million in the first nine months of fiscal
2006, representing an increase of 24%. Revenue for the third quarter of fiscal
2007 ended January 31, 2007 was $18.7 million, compared with $20.0 million in
the third quarter of fiscal 2006, representing a decline of 7%.
Net earnings from continuing operations before income taxes for the first nine
months of fiscal 2007 were $9.4 million, or $0.54 per diluted share, compared
with $14.6 million, or $0.86 per diluted share, in the first nine months of
fiscal 2006. Net earnings from continuing operations for the first nine months
of fiscal 2007 were $5.3 million or $0.30 per diluted share. Net earnings from
continuing operations before income taxes for the third quarter of fiscal 2007
were $1.9 million, or $0.11 per share on a diluted basis, compared with $5.7
million or $0.33 per diluted share for the third quarter of fiscal 2006. Net
earnings from continuing operations for the third quarter of fiscal 2007 were
$1.0 million or $0.06 per diluted share.
"I am pleased with our ability to continue to win enterprise projects across all
of our targeted markets in a competitive environment. Our unique business
solution with demonstrated ROI has proven to be compelling for leading banks,
retailers, and transit authorities. We will continue to maintain the investment
levels required to achieve our objective of being the market leader in each of
our target vertical markets" said Peter Strom, President and CEO of March
Networks
Financial Notes
*Achieved year over year revenue growth in all three primary vertical
sectors in the first nine months of fiscal 2007.
*Cash flow from operating activities of $5.5 million in the first nine
months of 2007 despite the $2.3 million payment to settle the E-Watch
lawsuit.
*Units shipped in the first nine months of fiscal 2007 (15,390) increased
by 20% compared to the first nine months of fiscal 2006. Installed base of
close to 47,000 units.
*Recognized $1.1 million gain from discontinued operations related to the
sale of the Company's e-Health business in November 2006.
*Announced revision to business outlook on January 15, 2007 due to
uncertainty of future revenue stream from the Company's largest customer.
The revised business outlook resulted in a $0.7 million reduction in third
quarter operating expenses associated with the reversal of previously
accrued employee incentive compensation.
*Cash resources at January 31, 2007 were $88 million.
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 and earnings guidance that was provided in its revised
business outlook release on January 15, 2007, excluding the impact of the
E-Watch lawsuit settlement. The Company's fiscal 2007 annual guidance and
general expectations for fiscal 2008 are as follows:
Revenue for the fiscal year ending April 30, 2007 is expected to be in the range
of $80 million to $85 million.
Pre- tax earnings from continuing operations, excluding the $2.3 million E-Watch
lawsuit settlement, for the fiscal year ending April 30, 2007 are expected to be
in the range of $8 million to $10 million.
The Company expects fiscal 2007 net earnings from continuing operations,
excluding the $1.5 million after tax impact of the E-Watch lawsuit settlement,
to be in the range of $4.5 million to $6 million or between $0.26 and $0.34 per
diluted share.
Net earnings from continuing operations under GAAP for fiscal 2007 are expected
to be between $3.0 million and $4.5 million or between $0.18 and $0.26 per
diluted share.
The Company is planning to maintain approximately the current level of quarterly
operating expenses throughout fiscal 2008 in order to fund the required selling,
marketing and support and research and product development activities that will
allow the Company to realize its revenue growth potential. The Company is
planning to generate sufficient revenue in fiscal 2008 to achieve breakeven
earnings before income taxes at the current operating expense level without any
revenue contribution from its current largest customer.
The March Networks management team will discuss the full results and business
outlook on a conference call and Webcast to be held on March 1, 2007 at 8:30 ET
(1:30pm UK time). The conference call may be accessed at 1-800-731-6941 (North
America) or 00 800 0000 2288 (UK). The Webcast may be accessed at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1739100.
A replay of the conference call may be accessed at 1-877-289-8525 until March 8,
2007. The pass code for the replay is 21219619#.
About March Networks
March Networks(TM) (TSX:MN; AIM:MNW) is a leading provider of innovative video and
data applications used for security surveillance, monitoring, analysis, and
business optimization. The Company's software and IP-based hardware solutions
allow businesses to increase operational efficiencies, address risk, and manage
assets with an integrated set of video-based intelligence tools and business
intelligence applications. The ISO 9001:2000 certified company serves the needs
of leading financial institutions, retailers, transportation authorities,
commercial and homeland security organizations in more than 40 countries
throughout the world. For more information, please visit www.marchnetworks.com.
Forward-Looking Statements
Certain statements included in this press 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 press release include, but are not limited to, the
following:
* The market for the Company's products will continue to grow by at least
20% annually.
* The Company's current largest customer will represent less than 10% of
the Company's revenue, for fiscal years after fiscal 2007.
* The Company will develop and deliver new products on time in order to
satisfy customer demand.
* The Company will have adequate component supply to meet customer demand.
* End-user customers will deploy the Company's products in substantially
all of the addressable locations identified during the March Networks sales
process except the Company's current largest customer.
* 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.
* 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 approximately the current level of quarterly
operating expenses.
* 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:
* Delays in delivering or developing new products and new product
features to meet customer demand.
* Shortages or long lead times in component supply that affect the
Company's ability to meet customer demand.
* Product issues in the Company's installed base could result in increased
costs and/or lost revenue opportunities.
* Increased competition from large entities from other industries and
those formed through consolidation of competitors.
* Slower than anticipated success in international markets.
* Changes in pricing models and sales strategies required to address
competitive environment.
* Shifts in the mix of products sold.
* Variability in customer deployments from quarter to quarter and/ or loss
of customers.
* Fluctuations in the exchange rate between the US dollar and the Canadian
dollar.
* Declines in market growth rates for the Company's products.
* Costs associated with defending unanticipated patent infringement
claims.
* 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 Nine Months Ended
January 31, January 31, January 31, January 31,
2007 2006 2007 2006
REVENUE $18,678 $20,009 $67,805 $54,734
COST OF REVENUE 9,516 8,257 31,175 23,470
GROSS MARGIN 9,162 11,752 36,630 31,264
EXPENSES:
Selling, marketing and
support 3,944 2,676 11,994 7,448
Research and
development 1,693 1,401 6,329 3,802
General and
administrative 1,950 2,325 7,684 6,159
Stock based
compensation 411 183 1,194 534
Amortization of
acquired intangibles 137 303 -
Lawsuit settlement - - 2,263 -
Total expenses 8,135 6,585 29,767 17,943
EARNINGS BEFORE
UNDERNOTED ITEMS 1,027 5,167 6,863 13,321
Interest and other
income, net 915 566 2,580 1,242
EARNINGS BEFORE INCOME
TAXES AND DISCONTINUED
OPERATIONS 1,942 5,733 9,443 14,563
Current income tax
expense 100 - 300 -
Future income tax
expense 796 - 3,884 -
NET EARNINGS FROM
CONTINUING OPERATIONS 1,046 5,733 5,259 14,563
Discontinued
operations 1,140 (362) 1,225 (1,243)
NET EARNINGS $ 2,186 $ 5,371 $ 6,484 $13,320
Net earnings per share:
Basic - from
continuing operations $ 0.06 $ 0.35 $ 0.32 $ 0.92
- from discontinued
operations 0.07 (0.02) 0.07 (0.08)
$ 0.13 $ 0.33 $ 0.39 $ 0.84
Diluted - from
continuing operations $ 0.06 $ 0.33 $ 0.30 $ 0.86
- from discontinued
operations 0.07 (0.02) 0.07 (0.07)
$ 0.13 $ 0.31 $ 0.37 $ 0.79
Shares used in per-share calculation:
Basic 16,749,515 16,146,634 16,675,771 15,850,828
Diluted 17,482,929 17,373,776 17,415,524 16,889,912
March Networks Corporation
CONSOLIDATED BALANCE SHEETS (CDN $)
(In thousands)
(Unaudited)
January 31, April 30,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $ 3,348 $ 3,292
Short-term investments 84,733 85,761
Restricted cash 2,942 -
Accounts receivable 17,700 13,655
Inventories 9,834 6,346
Prepaid expenses and other current assets 2,144 994
Current assets - discontinued operations 2 48
Future tax assets 1,795 7,984
Total current assets 122,498 118,080
Restricted cash 883 -
Capital assets 2,677 889
Intangible assets 3,224 -
Future income taxes 21,767 18,587
Goodwill 5,397 -
TOTAL ASSETS $156,446 $137,556
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $10,728 $9,634
Accrued liabilities 3,453 3,748
Refundable royalty advance 2,942 -
Deferred revenue 3,128 2,602
Income taxes payable 437 475
Current liabilities - discontinued operations 62 597
Total current liabilities 20,750 17,056
Acquisition escrow 883 -
Deferred revenue 4,989 1,035
Total liabilities 26,622 18,091
Shareholders' equity 129,824 119,465
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $156,446 $137,556
March Networks Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (CDN $)
(In thousands)
(Unaudited)
Nine Months Ended
January 31, January 31,
2007 2006
Cash flows from operating activities:
Net earnings - continuing operations $5,259 $14,563
Net earnings (loss) - discontinued operations 1,225 (1,243)
Items not affecting cash:
Amortization of capital assets 651 175
Amortization of acquired intangibles 303 -
Gain from sale of discontinued operations (1,221) -
Stock based compensation 1,194 534
Foreign exchange loss on foreign cash and cash
equivalents held 50 217
Future income taxes and non-refundable investment
tax credits 3,935 -
Items not affecting cash in discontinued
operations - 19
Change in non-cash items:
Continuing operations: non-cash working capital
items (6,182) (2,139)
Discontinued operations: non-cash working capital
items (489) (213)
Long term future tax asset and long term deferred
revenue 774 -
Net cash generated by operating activities 5,499 11,913
Cash flows from investing activities:
Purchases of short-term investments 1,026 (22,731)
Purchase of capital assets (2,073) (440)
Purchase of capital assets - discontinued
operations - (42)
Acquisition of business (8,316) -
Proceeds from sale of discontinued operations 1,221 146
Net cash consumed by investing activities (8,142) (23,067)
Cash flows from financing activities:
Issuance of share capital, net 2,681 7,555
Net cash generated by financing activities 2,681 7,555
Net increase/(decrease) in cash and cash
equivalents (698) (2,266)
- continuing operations
Net increase/(decrease) in cash and cash
equivalents - discontinued operations 736 (1,333)
Net decrease in cash and cash equivalents 38 (3,599)
Foreign exchange gain (loss) on foreign cash and
cash equivalents held 18 (217)
Cash and cash equivalents, beginning of period 3,292 7,435
Cash and cash equivalents, end of period $ 3,348 $ 3,619
This information is provided by RNS
The company news service from the London Stock Exchange
END
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