Sandvine Corporation
TSX : SVC
AIM : SAND

Sandvine Corporation

January 24, 2007 07:00 ET

Sandvine Corporation Announces Fourth Quarter and Fiscal Year 2006 Results

WATERLOO, ONTARIO--(CCNMatthews - Jan. 24, 2007) - Sandvine Corporation (TSX:SVC)(AIM:SAND) (the "Company"), one of the leading developers and marketers of network equipment targeted at the evolving needs of residential broadband service providers, today announced consolidated financial results for the fourth quarter and fiscal year ended November 30, 2006. All figures are in Canadian dollars and are in accordance with Canadian GAAP unless otherwise specified.

Revenue for the fiscal year ended November 30, 2006 was $ 31.7 million, compared with $ 15.8 million in fiscal 2005, representing an increase of 100.3%. Net loss for fiscal 2006 was $ 0.4 million, or a basic loss of $0.004 per share, compared with a net loss of $ 3.0 million or a basic loss of $0.039 per share for fiscal 2005.

Revenue for the quarter ended November 30, 2006 was $ 9.2 million, compared with $ 6.4 million in the same quarter last year, representing an increase of 44.2% . Net income for the fourth quarter of fiscal 2006 was $ 0.1 million, or $0.001 per share on a diluted basis, compared with net income of $0.4 million or $0.004 per share on a diluted basis for the fourth quarter of fiscal 2005.

FINANCIAL HIGHLIGHTS

- Continued to achieve year over year revenue growth with 100% increase for FY06 over FY05

- 8th consecutive quarter of revenue growth

- Continued to achieve strong gross margins

- Continued strong balance sheet with $ 57.1 million of cash resources at November 30, 2006

- Annual net loss reduction from $ 3.0m in FY05 to $ 0.4m in FY06

BUSINESS HIGHLIGHTS

- 8 new customers (5 DSL/2 Cable/1 fiber-to-the-home) added in the fourth quarter of the year

- The Company now has 73 broadband service provider customers in 33 countries

- Sandvine has sold equipment to service providers which operate networks with more than 37 million residential subscribers

- Announced "first network-wide deployment for 10GB DPI-based policy solution" in November 2006

Dave Caputo, President and CEO for Sandvine commented:

"We are excited to report the successful execution of our projected growth strategy for 2006. Sandvine enhanced solution offerings with the launch and first network-wide deployment of our 10 Gigabit, Policy Traffic Switch platform, expanded our global presence and continued to deliver intelligent broadband network solutions to service providers around the world. For 2007, we feel we are extremely well positioned to continue success in the Cable and DSL markets as well as take advantage of emerging opportunities in both wireless and fiber-to-the-home."

Scott Hamilton, Chief Financial Officer for Sandvine commented:

"Fiscal 2006 was a successful year for Sandvine. The Company completed its admission to trading on AIM in March, followed by two strong quarters of growth and its initial public listing on the Toronto Stock Exchange. As a result, the Company is financially well positioned for success in 2007."

BUSINESS OUTLOOK

The Company maintains its focus on long-term growth objectives and continues to provide full year revenue guidance. The Company's fiscal 2007 annual guidance is as follows:

- Revenue for the year ended November 30, 2007 is expected to be in the range of $ 50 million to $ 60 million.

- The Company will continue to increase its investment in sales and marketing and research and development activities with increased focus on achieving profitability later in fiscal 2007.

The Sandvine management team will discuss the full results on a conference call to be held today, January 24, 2007 at 8:30am ET (1:30pm GMT). The call can be accessed by dialing into +1 416 644 3415 and the accompanying presentation can be downloaded prior to the call at http://www.sandvine.com/about_us/investors.asp. A recorded copy of the call will be available within 48 hours following and posted for thirty days at http://www.sandvine.com/about_us/investors.asp.

ABOUT SANDVINE

Sandvine's award-winning network equipment helps Cable, DSL and emerging broadband service providers characterize what is really happening on their networks, enabling polices that improve customer satisfaction, reduce operational costs and increase profitability. Sandvine's DPI-based policy solutions are both application and subscriber-aware, empowering service providers to better manage network traffic congestion, mitigate the proliferation of malicious traffic, and deliver QoS-prioritized multimedia services. With over 73 customers in 33 countries, Sandvine is enhancing the Internet experience for millions of broadband users worldwide.

CAUTION REGARDING FORWARD LOOKING INFORMATION

Certain statements in this report which are not historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements") and are made pursuant to the "safe harbour" provisions of such laws. Statements related to Sandvine's projected revenues, earnings, growth rates, revenue mix and product plans, in particular the statements above under the heading "Business Outlook", are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "anticipated", "expected", "projected", "targeting", "estimate" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance or achievements of Sandvine to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Many factors could cause the actual results of Sandvine to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, each of the following factors:

- The Company's revenues may fluctuate from quarter to quarter and year to year depending upon sales cycles and customer demand;

- The Company is dependent on a small number of key customers for a large percentage of our revenues;

- The Company faces intense competition in markets where there are typically several different competing technologies and rapid technological changes;

- The Company's growth is dependent on the development of the market for intelligent broadband network management solutions and the decisions of the Company's target customers to deploy and further invest in those technologies;

- The Company is dependent on its suppliers to ensure continuous supply on terms that allow the Company to fulfil demand, maintain quality and achieve its projected gross margins;

- The Company's failure to successfully manage growth may adversely impact its operating results;

- The Company has only a short operating history;

- The Company may be affected by rapid technological changes within evolving industry standards and customer requirements; and

- The Company is dependent on relationships with sales channel partners.

These risks and uncertainties include, without limitation, factors such as business and economic conditions and growth trends in the broadband network equipment industry and in various geographic regions; global economic conditions and uncertainties in the geopolitical environment including the impact of regulation related to the internet and the delivery of internet services; the impact of foreign currency fluctuations; overall information technology spending; the growth of broadband internet usage and levels of capital spending on broadband network management systems; the timing of orders and manufacturing lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; increased competition in the broadband network equipment industry; dependence on the timely development and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks including dependence on key suppliers and key technologies; product defects and returns; dependence upon indirect channel sales and resellers; litigation involving patents, intellectual property, antitrust, shareholder and other matters; the ability to recruit and retain key personnel and the ability to manage financial risk. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and Sandvine does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

Additional risks and uncertainties that relate to an investment in the securities of the Company and which can also impact upon forward looking information which may be contained in this report can be found in the annual MD&A of the Company dated January 23, 2007 and other regulatory filings of the Company which are available on SEDAR at www.sedar.com.



Sandvine Corporation
(Canadian dollars, in thousands, except share and per share amounts)

Consolidated Statements of Operations

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Three months ended Fiscal year ended
November 30, November 30,
(unaudited)
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2006 2005 2006 2005
------ ------ ------ ------

Revenue
Product $ 8,203 $ 5,813 $ 28,003 $ 14,516
Service 1,403 599 3,662 1,293
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9,246 6,412 31,665 15,809
Cost of sales
Product 2,399 1,543 7,525 4,075
Service 325 109 1,113 282
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2,724 1,652 8,638 4,357
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Gross margin 6,522 4,760 23,027 11,452

Expenses
Sales and marketing 2,759 1,908 8,947 6,694
Research and
development 2,682 2,008 10,214 7,686
Government (assistance)
repayments (339) (675) (115) (2,826)
General and
administration 1,264 990 4,182 2,439
Amortization 563 243 1,587 668
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Total operating
expenses 6,929 4,474 24,815 14,661
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Income (loss) from
operations (407) 286 (1,788) (3,209)
Interest and other
income 554 102 1,506 244
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Income (loss) before
provision for
income taxes 147 388 (282) (2,965)
Provision for income
taxes 31 12 100 14
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Net income (loss)
for the period $ 116 $ 376 ($382) ($2,979)
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Basic and diluted
earnings (loss) per
share 0.001 0.004 (0.004) (0.039)

Weighted average
common shares
outstanding
Basic 117,655,735 86,735,031 107,232,201 76,686,248
Diluted 124,065,770 88,172,494 107,232,201 76,686,248
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Sandvine Corporation
(Canadian dollars, in thousands, except share and per share amounts)

Consolidated Balance Sheets

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November 30, November 30,
As at 2006 2005
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Assets

Current assets
Cash and cash equivalents $ 19,564 $ 9,755
Marketable securities 37,515 2,623
Accounts receivable 4,421 4,827
Other receivables 1,941 2,220
Inventory 9,625 5,025
Prepaid expenses 366 337
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73,432 24,787
Capital assets 6,114 2,983
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79,546 27,770
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Liabilities

Current liabilities
Accounts payable and accrued
liabilities 5,590 3,001
Current portion of deferred
revenue 701 2,476
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6,291 5,477
Deferred revenue 88 11
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6,379 5,488
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Shareholders' equity

Share capital 91,247 40,316
Contributed surplus 403 67
Deficit (18,483) (18,101)
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73,167 22,282
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79,546 27,770
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Sandvine Corporation
(Canadian dollars, in thousands, except share and per share amounts)

Consolidated Statements of Cash Flows

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Fiscal year ended
November 30, November 30,
(unaudited)
-------------------------------------------------------------------------

2006 2005 2006 2005
---- ---- ---- ----

Cash provided by (used in)

Operating activities
Net income (loss) for the period $116 $377 ($382) ($2,979)
Items not affecting cash
Amortization 563 243 1,587 668
Foreign exchange loss (gain) (69) 291 88 98
Stock-based compensation 152 13 344 50
Loss on disposal of capital assets - - 28 -
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762 924 1,665 (2,163)

Changes in non-current deferred
revenue 29 (19) 77 (139)
Changes in non-cash working capital
balances (2,891) (2,455) (3,216) (4,717)
--------------------------------------
(2,100) (1,550) (1,474) (7,019)
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Investing activities
Purchase of capital assets (1,592) (1,240) (4,857) (3,205)
Government assistance applied
against capital assets 110 - 110 444
Net (purchase) sale of marketable
securities (3,150) 11,116 (34,892) 1,015
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(4,632) 9,876 (39,639) (1,746)
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Financing activity
Proceeds from issuance of share
capital 13,485 705 50,922 18,045
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Net increase in cash during the
period 6,753 9,031 9,809 9,280

Cash and cash equivalents -
Beginning of period 12,811 724 9,755 475
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Cash and cash equivalents -
End of period 19,564 9,755 19,564 9,755
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Contact Information

  • Sandvine Corporation
    Amanda Weber
    Director Communications
    (519) 880-2600
    or
    Buchanan Communications
    James Strong/Bobby Morse
    + 44 20 7466 5000
    or
    Canaccord Adams Limited
    Chris Bowman/Andrew Chubb
    + 44 20 7050 6500