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Bridgewater Systems Reports Q1 2011 Financial Results

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^{Published in Science and Technology on Friday, May 13th 2011 at 4:10 GMT by Market Wire}  

OTTAWA, May 13 /CNW/ - Bridgewater Systems (TSX: BWC), the leader in intelligent broadband controls, today announced financial results for the three months ended March 31, 2011 and its updated outlook for fiscal 2011. The first quarter of 2011 represents Bridgewater's first financial reporting period under IFRS. This news release contains forward-looking statements. Reference should be made to "Forward-Looking Statements" at the end of this news release. All amounts are stated in Canadian dollars except where otherwise noted.

"In an important transition year for the Company, we made progress in the first quarter toward diversifying and globalizing our business, highlighted by revenue growth outside North America and through channel partners," said Ed Ogonek, CEO of Bridgewater Systems. "While the timing to close larger new business opportunities remains difficult to predict, we continue to be encouraged by market trends for intelligent broadband controls, underpinned by the increase in data traffic and applications. We are well positioned to capitalize on these trends in the medium to longer term."

Financial Summary

• Total revenue for Q1 2011 was $19.1 million, compared with $24.5 million for Q1 2010. Among other factors, reported revenue for Q1 2011 was affected by the significant strengthening of the Canadian dollar relative to the U.S. dollar.
  
  
• Excluding the Company's major customer, revenue for Q1 2011 increased by 30% over Q1 2010 to $12.0 million. Revenue from customers outside the Americas increased to $2.8 million in Q1 2011, compared with $2.0 million in Q1 2010.
  
  
• Product revenue for Q1 2011 was $13.8 million, or 72% of total revenue, compared to $18.9 million, or 77% of total revenue, for Q1 2010. The year-over-year decrease reflects two expected and previously disclosed changes: the transition in the Company's business model with its largest customer and the expiration of the Alcatel-Lucent Source Code License Agreement in Q4 2010.
  
  
• Gross margin for Q1 2011 was $12.2 million (64% of revenue) versus $16.3 million (67% of revenue) in Q1 2010. The year-over-year change mainly reflects higher direct costs associated with the delivery of integrated systems products to several customers in Q1 2011.
  
  
• Earnings before income taxes were $1.4 million in Q1 2011, versus $5.6 million in Q1 2010. Net earnings for Q1 2011 were $0.9 million, or $0.03 per share fully diluted, versus $4.5 million, or $0.18 per share fully diluted, in the prior year.
  
  
• Cash and cash equivalents, and short-term investments increased to $83.0 million at March 31, 2011 compared to $67.6 million December 31, 2010.

Q1 2011 Business Highlights

• Increased the customer base, adding 9 new service provider customers.
  
  
• Added two new global reseller partners, including Juniper Networks and another leading network equipment vendor. Bridgewater now has reseller relationships with five leading network equipment vendors.
  
  
• Continued to expand footprint with existing customers, highlighted by a new policy deployment with a key customer in EMEA.
  
  
• Deployed first Linux-based policy solution with global mobile operator property in EMEA.

Outlook

Based on several factors, including the continued strength of the Canadian dollar in comparison to the U.S. dollar, Bridgewater updated its full-year guidance for 2011. For 2011, the Company is expecting:

• Revenues of $77.0 to $87.0 million
• Earnings before taxes of $8.0 to $13.5 million
• Net earnings of $5.5 to $9.5 million

This guidance is based on the following factors:

• Continued strength of Canadian dollar;
• Revenue visibility, including revenue recognition associated with software-based transaction license agreement with major customer;
• Increased revenue from existing deployments as our customers grow and continue to add new subscribers and devices to their networks;
• Growth in revenue from EMEA and APAC;
• Increase in channel revenue from global channel partners and regional partners;
• Sales of existing and new products in wireless and converged networks; and
• Continued evolution of our business model for delivering products and services to address higher transaction capacity needs.

The complete financial statements and management's discussion and analysis for the three months ended March 31, 2011 can be found at [ www.bridgewatersystems.com ] or at [ www.sedar.com ].

Conference Call and Webcast

A conference call and webcast will be held today, Friday, May 13, 2011 at 8:30 a.m. ET to discuss this announcement. The telephone numbers to access the call are 647-427-7450 or 1-888-231-8191. To access the live webcast, please visit [ www.bridgewatersystems.com ] or [ www.newswire.ca ]. Participants will require Windows Media Player™ to listen to the webcast.

About Bridgewater Systems

Bridgewater Systems, the leader in intelligent broadband controls, provides pre-integrated solutions for mobile and converged operators to transform their networks, optimize mobile data growth, and innovate with new services.   The Bridgewater portfolio of carrier-grade products includes Service Controller (AAA), Policy Controller (PCRF) and Home Subscriber Server (HSS), anchored by a common identity and device management system.  More than 150 leading service providers worldwide leverage Bridgewater to create and deliver profitable services to consumer, enterprise, cloud and machine markets. For more information, visit us at [ www.bridgewatersystems.com ]. 

Bridgewater, Bridgewater Systems, the Bridgewater Systems logo, WideSpan, Smart Caps, and Subscriber Data Broker are trademarks or registered trademarks of Bridgewater Systems Corporation.  All other company, product names and any registered and unregistered trademarks mentioned are used for identification purposes only and remain the exclusive property of their respective owners.

Forward-Looking Statements

Certain statements in this release, including the estimates of future revenues, earnings before taxes, and net earnings provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. These statements are subject to certain assumptions, risks and uncertainties. Material factors and assumptions used to develop such estimates include:

• Bridgewater's ability to maintain its relationships and contracts with Tier 1 customers;
• visibility into the deployment plans of Bridgewater's major customers;
• Bridgewater's ability to maintain and grow its installed customer base in existing and emerging markets;
• expectations regarding profile and timing of new customer acquisitions, with associated revenue weighted toward the second half of the year;
• expectations regarding long-term industry trends in growth in mobile data services and applications; and
• macroeconomic factors including expected growth in the markets served by Bridgewater

Readers are cautioned not to place undue reliance on such statements. These statements are provided to enable external stakeholders to understand Bridgewater's expectations as of the date of this release and may not be appropriate for other purposes.

Actual results, performance, achievements or developments of Bridgewater may differ materially from the results, performance, achievements or developments expressed or implied by such statements. Risk factors that may cause the actual results, performance, achievements or developments of Bridgewater to differ materially from the results, performance, achievements or developments expressed or implied by such statements can be found in the public documents filed by Bridgewater with Canadian securities regulatory authorities, including, but not limited to Management's Discussion & Analysis of Financial Condition and Results of Operation dated May 13, 2011 and Bridgewater's Annual Information Form dated March 31, 2011, which are available at [ www.sedar.com ], and include the following:

• Bridgewater operates in highly competitive and continually evolving markets, and if it is not able to compete effectively, it may not be able to continue to expand its business as expected;
• Bridgewater relies on a limited number of customers for a large percentage of its revenue, and the loss of, or significant shortfall in business from, a key customer could significantly reduce its revenue and profitability;
• Bridgewater must continue to evolve its business models and platforms for delivery of products and services to respond to transaction capacity needs of its customers;
• Bridgewater is exposed to risks associated with foreign exchange fluctuations, and in particular, most of Bridgewater's revenues are received in US dollars while most of its expenses are payable in Canadian dollars;
• Bridgewater's engagements with its customers often involve complex arrangements and the size, timing and contractual terms of orders for Bridgewater's products may affect when revenue is recognized;
• Bridgewater has a lengthy and variable sales cycle; and
• Bridgewater may engage in future acquisitions that could disrupt its business and affect its financial condition and operating results.

Bridgewater assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law.