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March Networks Announces Third Quarter Fiscal 2010 Financial Results
Feb 24, 2010 (06:02 PM EST)


    Summary Operating Results:

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    $Cdn millions                 Q3           Q3         Q1-Q3        Q1-Q3
     except EPS data             2010         2009         2010         2009
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    Revenue                     $20.0        $23.6        $65.4        $79.7
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    Non-GAAP operating
     earnings (loss)*          (3.2)         0.6         (2.7)         0.4
    -------------------------------------------------------------------------
    Net loss                    $(3.5)       $(1.3)       $(5.0)       $(4.7)
    -------------------------------------------------------------------------
    Loss per share             $(0.20)      $(0.07)      $(0.29)      $(0.27)
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    Cash and short-term
     investments                $50.2        $46.6        $50.2        $46.6
    -------------------------------------------------------------------------
    * 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.

OTTAWA, Feb. 24 /PRNewswire-FirstCall/ - March Networks(R) (TSX:MN), a global provider of intelligent IP video solutions, today announced financial results for the quarter and nine months ended January 31, 2010. All figures are in Canadian dollars and in accordance with Canadian GAAP unless otherwise specified.

The Company's third quarter fiscal 2010 revenue was $20.0 million, representing a decrease of 15% as compared to revenue of $23.6 million in the third quarter of fiscal 2009. On a year-to-date basis, the Company's revenue of $65.4 million declined by 18% as compared to revenue of $79.7 million in the first nine months of fiscal 2009.

The Company recorded a non-GAAP operating loss of $3.2 million in the third quarter of fiscal 2010, representing a decline of $3.8 million relative to non-GAAP operating earnings of $554,000 in the third quarter of fiscal 2009. Non-GAAP operating earnings during the first nine months of fiscal 2010 declined by $3.0 million to a loss of $2.7 million from non-GAAP operating earnings of $386,000 in the first nine months of fiscal 2009.

The Company incurred a net loss in the third quarter of fiscal 2010 of $3.5 million, or $0.20 per share, which represents a decline of $2.3 million, or $0.13 per share as compared to the net loss of $1.3 million incurred in the third quarter of fiscal 2009. Net loss for the nine months ended January 31, 2010 declined by $300,000 to $5.0 million or $0.29 per share as compared to the net loss of $4.7 million or $0.27 per share in the nine months ended January 31, 2009.

Notwithstanding the losses incurred in the third quarter and first nine months, the Company's cash and short-term investment position has increased to $50.2 million at January 31, 2010 from $46.6 million at January 31, 2009 through strong working capital management particularly with respect to reducing inventory levels.

"Due to weak sales visibility attributable to the impact of the economic downturn in markets such as the US and Dubai, as well as the strength of the Canadian dollar, the Company has not met its expectations to increase revenue and profitability in the first nine months of fiscal 2010," said Ken Taylor, CFO of March Networks. "The Company anticipates modest revenue growth in the fourth quarter as compared to the third quarter of fiscal 2010 and that fiscal 2010 revenue and profitability will be lower than fiscal 2009."

"In spite of the economic challenges and deferred capital spending within many of our vertical markets, the Company has experienced year to date revenue growth in the Commercial Industrial market," said Peter Strom, CEO of March Networks. "We continue to invest in R&D and technologies that address the evolving needs of customers in our key vertical markets in order to support revenue growth."

The Company will discuss the results on a conference call and webcast on Thursday, February 25, 2010 at 8:30 a.m. EST (1:30 p.m. GMT). The conference call may be accessed by dialing 1-877-974-0446 (North America) or +1 416-644-3417.

The conference call webcast can be accessed at:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2949760

A replay of the conference call will be available from February 25, 2010 at 10:30 a.m. EST until March 4, 2010 at 11:59 p.m. EST. The replay can be accessed at 1-877-289-8525 or +1 416-640-1917. The passcode for the replay is 4206564 followed by the number sign.

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 return to generating gross margin as a percentage of
        revenue of at least 45%.
    -   The average fiscal 2010 exchange rates for US dollars and Euros to
        Canadian dollars will approximate US$1.00=CDN$1.05 and
        Euro 1=CDN$1.50.
    -   The Company will develop and deliver new products on time in order to
        satisfy the demands of current and potential customers.
    -   The Company's investments in new geographical and vertical markets
        will contribute to near term profitability.
    -   Annual operating expense run rate will be approximately $45 million,
        excluding stock based compensation and amortization of acquired
        intangibles.
    -   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 generate revenue growth and profitability
        may be negatively impacted by delays in closing large projects in its
        sales pipeline; increased pricing pressure; and economic instability
        in key markets, such as the US, which increases the potential for
        delay or cancellation of sales opportunities.
    -   Difficulty in developing the sales channel, technology partnerships
        and support infrastructure required to compete successfully in new
        vertical markets.
    -   Weaker than expected success versus competitors in new customer and
        vertical market opportunities.
    -   Product issues that result in increased costs to the Company and/or
        lost revenue opportunities.
    -   Delays in product development programs for new products and new
        product features which lead to cost overruns and/or missed customer
        opportunities.
    -   Higher than targeted product costs and/or higher than expected
        declines in market pricing for the Company's products.
    -   Lack of availability or long lead times on key product components
        and/or 3rd party products sold by the Company.
    -   Shifts in the value of the Canadian dollar relative to billing
        currencies.
    -   A write down of the value of certain future tax assets if the Company
        is unable to demonstrate that it is more likely than not 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
    -------------------------------------------------------------------------
                    CONSOLIDATED STATEMENTS OF OPERATIONS
    -------------------------------------------------------------------------
    (Canadian dollars, amounts in thousands, except share and per-share data)
                                 (Unaudited)
    -------------------------------------------------------------------------
                              Three Months Ended        Nine Months Ended
    -------------------------------------------------------------------------
                           January 31,  January 31,  January 31,  January 31,
                              2010         2009         2010         2009
    -------------------------------------------------------------------------
    REVENUE                   $20,005      $23,581      $65,391      $79,661
    -------------------------------------------------------------------------
    Cost of revenue            12,200       11,814       37,443       42,740
    -------------------------------------------------------------------------
    Contract losses                 -            -            -        1,187
    -------------------------------------------------------------------------
    GROSS MARGIN                7,805       11,767       27,948       35,734
    -------------------------------------------------------------------------
    EXPENSES:
    -------------------------------------------------------------------------
    Selling, marketing
     and support                5,281        5,205       15,338       15,122
    -------------------------------------------------------------------------
    Research and
     development                3,663        2,447        8,768        9,999
    -------------------------------------------------------------------------
    General and
     administrative             2,017        3,561        6,502       10,227
    -------------------------------------------------------------------------
    Stock based
     compensation                (109)         299          682        1,062
    -------------------------------------------------------------------------
    Amortization of
     acquired intangible
     assets                       888        1,021        2,683        2,880
    -------------------------------------------------------------------------
    Restructuring costs             -        1,246            -        2,665
    -------------------------------------------------------------------------
    Total expenses             11,740       13,779       33,973       41,955
    -------------------------------------------------------------------------
    LOSS BEFORE UNDERNOTED
     ITEMS                     (3,935)      (2,012)      (6,025)      (6,221)
    -------------------------------------------------------------------------
    Interest and other
     income, net                  192          273          356          977
    -------------------------------------------------------------------------
    LOSS BEFORE INCOME
     TAXES                     (3,743)      (1,739)      (5,669)      (5,244)
    -------------------------------------------------------------------------
    Current income tax
     expense                       21          (49)          82          (56)
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    Future income tax
     expense                     (242)        (429)        (722)        (458)
    -------------------------------------------------------------------------
    NET LOSS                  $(3,522)     $(1,261)     $(5,029)     $(4,730)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Loss per share:
    -------------------------------------------------------------------------
    Basic                      $(0.20)      $(0.07)      $(0.29)      $(0.27)
    -------------------------------------------------------------------------
    Diluted                    $(0.20)      $(0.07)      $(0.29)      $(0.27)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Shares used in
     per-share calculation:
    -------------------------------------------------------------------------
    Basic                  17,201,220   17,188,221   17,199,657   17,581,538
    -------------------------------------------------------------------------



                         March Networks Corporation
    -------------------------------------------------------------------------
                         CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
                   (Canadian dollars, amounts in thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                     January 31,   April 30,
                                                        2010         2009
    -------------------------------------------------------------------------
    ASSETS
    -------------------------------------------------------------------------
    Current assets:
    -------------------------------------------------------------------------
    Cash and cash equivalents                           $11,711      $10,126
    -------------------------------------------------------------------------
    Short-term investments                               38,500       40,740
    -------------------------------------------------------------------------
    Accounts receivable                                  14,101       14,892
    -------------------------------------------------------------------------
    Inventories                                          15,189       23,932
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    Prepaid expenses and other current assets             3,071        4,040
    -------------------------------------------------------------------------
    Future tax assets                                     5,131        5,128
    -------------------------------------------------------------------------
    Total current assets                                 87,703       98,858
    -------------------------------------------------------------------------
    Capital assets                                        5,360        5,962
    -------------------------------------------------------------------------
    Intangible assets                                    10,819       12,909
    -------------------------------------------------------------------------
    Future tax assets                                    15,074       15,646
    -------------------------------------------------------------------------
    Investment tax credits                                7,405        6,505
    -------------------------------------------------------------------------
    Goodwill                                             22,429       22,429
    -------------------------------------------------------------------------
    TOTAL ASSETS                                       $148,790     $162,309
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    LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
    -------------------------------------------------------------------------
    Accounts payable                                     $8,264      $12,004
    -------------------------------------------------------------------------
    Accrued liabilities                                   6,702        7,328
    -------------------------------------------------------------------------
    Deferred revenue                                      7,084        7,851
    -------------------------------------------------------------------------
    Deferred leasehold inducement                           132          132
    -------------------------------------------------------------------------
    Short term compensation                                   7            -
    -------------------------------------------------------------------------
    Income taxes payable                                    101          390
    -------------------------------------------------------------------------
    Total current liabilities                            22,290       27,705
    -------------------------------------------------------------------------
    Deferred revenue                                      5,652        8,239
    -------------------------------------------------------------------------
    Deferred leasehold inducement                         1,001        1,100
    -------------------------------------------------------------------------
    Long term compensation                                  462          666
    -------------------------------------------------------------------------
    Future tax liabilities                                2,606        3,330
    -------------------------------------------------------------------------
    Total liabilities                                    32,011       41,040
    -------------------------------------------------------------------------
    Shareholders' equity                                116,779      121,269
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $148,790     $162,309
    -------------------------------------------------------------------------



                         March Networks Corporation
    -------------------------------------------------------------------------
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------
                   (Canadian dollars, amounts in thousands)
                                 (Unaudited)
    -------------------------------------------------------------------------
                              Three Months Ended        Nine Months Ended
    -------------------------------------------------------------------------
                           January 31,  January 31,  January 31,  January 31,
                              2010         2009         2010         2009
    -------------------------------------------------------------------------
    Cash flows from
     operating activities:
    -------------------------------------------------------------------------
    Net loss                 $ (3,522)    $ (1,261)    $ (5,029)    $ (4,730)
    -------------------------------------------------------------------------
    Items not affecting
     cash:
    -------------------------------------------------------------------------
    Amortization of capital
     and intangible assets        679          437        1,520        1,526
    -------------------------------------------------------------------------
    Amortization of
     intangible assets
     related to business
     acquisitions                 888        1,021        2,683        2,880
    -------------------------------------------------------------------------
    Stock based
     compensation and
     shares issued to
     directors                   (109)         299          682        1,062
    -------------------------------------------------------------------------
    Unrealized foreign
     exchange (gain)/loss        (290)        (131)        (776)         529
    -------------------------------------------------------------------------
    Future income taxes
     and non-refundable
     investment tax credits      (542)        (634)      (1,620)        (671)
    -------------------------------------------------------------------------
    Net change in non-cash
     items                      2,635        5,778        3,565       (8,311)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net cash generated
     (consumed) by operating
     activities                  (261)       5,509        1,025       (7,715)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flows from
     investing activities:
    -------------------------------------------------------------------------
    Redemption (purchase) of
     short-term investments       (36)      (2,268)       2,241       21,356
    -------------------------------------------------------------------------
    Purchase of capital and
     intangible assets           (489)        (652)      (1,387)      (4,098)
    -------------------------------------------------------------------------
    Acquisition of business         -            -            -         (699)
    -------------------------------------------------------------------------
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    Net cash generated
     (consumed) by investing
     activities                  (525)      (2,920)         854       16,559
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flows from
     financing activities:
    -------------------------------------------------------------------------
    Issuance (repurchase)
     of share capital, net          2            -           11       (4,574)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net cash generated
     (consumed) by financing
     activities                     2            -           11       (4,574)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash                     (784)       2,589        1,890        4,270
    -------------------------------------------------------------------------
    Foreign exchange gain
     (loss) on foreign cash
     held                         (71)         (64)        (305)         333
    -------------------------------------------------------------------------
    Cash, beginning of
     period                    12,566        6,265       10,126        4,187
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash, end of period       $11,711       $8,790      $11,711       $8,790
    -------------------------------------------------------------------------
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SOURCE MARCH NETWORKS CORPORATION