Sandvine Corporation
TSX : SVC
AIM : SAND

Sandvine Corporation

January 16, 2008 07:00 ET

Sandvine Reports Annual Revenue of $73.7 Million and Diluted Earnings Per Share of $0.139

Fourth quarter results include $17.1 million in revenue, break-even EPS

WATERLOO, ONTARIO--(Marketwire - Jan. 16, 2008) - Sandvine (TSX:SVC)(AIM:SAND), a leading provider of intelligent broadband network solutions for DSL, FTTH, cable, and wireless carriers grew revenue by 133% to $73.7 million for the fiscal year ended November 30, 2007, compared to $31.7 million for fiscal 2006. All amounts are in Canadian dollars unless otherwise specified.



FINANCIAL HIGHLIGHTS
Millions of dollars, except per share data and where otherwise indicated
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Q4 2007 Q4 2006 Q3 2007 FY 2007 FY 2006
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Revenue 17.1 9.2 21.2 73.7 31.7
Gross Margin percent 73% 71% 74% 77% 73%
Operating Expenses 14.0 6.9 12.3 43.1 24.8
Stock-based Compensation, Non- 1.0 0.2 0.7 2.1 0.3
cash Acquisition-Related Charges
Included in Operating Expenses
Net Income (Loss) 0.1 0.1 2.7 19.0 (0.4)
Diluted Earnings (Loss) Per
Share 0.000 0.001 0.020 0.139 (0.004)
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Net income for fiscal 2007 grew to $19.0 million ($0.139 per diluted share) from a net loss of $0.4 million ($0.004 per diluted share) in fiscal 2006. Included in net income was $2.1 million attributable to non-cash, acquisition-related expenses and stock-based compensation (FY 2006: $0.3 million attributable to non-cash stock-based compensation).

"Heading into 2007, we expected revenue in the range of fifty to sixty million dollars and stated that we would focus on making the right investments for the long-term success of the business. We were pleased to have been able to raise our revenue target twice during the year, make the necessary investments and record a profit for the year," said Dave Caputo, Sandvine's President and CEO. "While we expect strong growth in revenues in 2008, we are focused on the long-term opportunity and will continue to invest to remain the market leader."

Revenue for the fourth quarter of 2007 grew by 85% to $17.1 million from $9.2 million for Q4 2006. Sandvine's fourth quarter net income was consistent with Q4 2006 at $0.1 million. Included in net income was $1.0 million attributable to non-cash, acquisition-related expenses and stock-based compensation, compared to $0.2 million attributable to non-cash stock-based compensation expenses in Q4 2006. Diluted earnings per share was $0.000 compared to diluted earnings per share of $0.001 in Q4 2006.

STRATEGIC UPDATE

Sandvine is focused on increasing its market penetration, both in terms of the number of customers and the number of broadband subscribers they represent. The Company now has over 100 customers serving in excess of 50 million broadband subscribers, in over 40 countries worldwide. Fourteen of the top 100 broadband service providers around the world have selected Sandvine's solutions.

Since the last the quarterly results news release, Sandvine has made significant progress on some of its core strategies:

- Continued investment in sales and marketing - added 10 new customers in the quarter. Six customers purchased the PTS 14000 for the first time. In total, 26 customers have purchased the PTS 14000 since its launch over a year ago.

- Increased focus on larger customers - won two new Tier 1 service providers:

-- a major North American wireless service provider;

-- a national property of a pan-European mobile and DSL operator. The property has over a half-million DSL subscribers and approximately 5 million mobile subscribers.

- Increased focus on emerging access technologies - four of the 10 new customers in the quarter were from emerging access markets: three wireless and one FTTH. The other six new customers were split equally between DSL and cable.

- Continued investment in research and development - launched three new software applications derived from Sandvine's recent acquisitions: Sandvine Protection Center, Sandvine Search Guide and the Sandvine Service Delivery Engine. Collectively, the solutions help service providers:

-- protect their subscribers from malicious traffic;

-- create new advertising revenue opportunities; and

-- launch new multimedia IP services with guaranteed quality of service network- wide.

OUTLOOK

As reported on December 20, 2007, the Company expects total revenue for fiscal 2008 in the range of $100 million to $110 million, based on the following assumptions:

- Approximately 50% of the revenue target will be earned from existing customers;

- Sandvine will earn revenue in fiscal 2008 from four to six new "tier one" service providers (service providers with over one million broadband/mobile data subscribers) from the DSL and wireless markets, combined;

- Sales through channel partners will account for approximately 15% to 20% of revenue;

- The Canadian dollar will be at par with the US dollar for the year.

Management's Discussion and Analysis for the quarter and fiscal 2007 is available at www.sedar.com.

CONFERENCE CALL

The Company will discuss its fiscal year and fourth quarter 2007 results and the business outlook on a conference call at 8:30 a.m. Eastern time (1:30 BST) today. A webcast will be available from the Investor Relations section of Sandvine's site where listeners may also download an accompanying slide presentation (http://www.sandvine.com/about_us/investors.asp).



Local dial-in number 416-644-3414
Toll-free North America 800-733-7571
Toll-free United Kingdom 00-800-2288-3501

A replay of the call will be available at 416-640-1917 or toll-free at
877-289-8525 (passcode 21257145#) from approximately 10:30 a.m. Eastern
time today through January 23.


ABOUT SANDVINE

Sandvine's award-winning network equipment helps DSL, FTTH, cable, and wireless 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 100 customers in more than 40 countries, Sandvine is enhancing the Internet experience for millions of broadband users worldwide. www.sandvine.com.

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 "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. These risks and uncertainties include, without limitation, each of the following:

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

- The Company's gross margins may fluctuate from period to period depending upon a variety of factors including product mix in the period, competitive pricing pressures and the level of sales generated through indirect channels;

- The Company is dependent upon and has derived a large percentage of its revenue from both a small number of key customers and customers who are predominantly cable based broadband service providers.

- The Company faces intense competition in the markets in which it operates 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 majority of the Company's expenses are denominated in Canadian dollars while its sales are generally denominated in U.S. dollars. The Company's earnings are impacted by fluctuations in the exchange rates between these and other currencies in which the Company trades.

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 release can be found in the Company's Annual Information Form and other regulatory filings which are available on SEDAR at www.sedar.com.



Sandvine Corporation
Consolidated Balance Sheets
As at November 30, 2007
(in Canadian dollars, amounts in thousands,
except share and per share data) (unaudited)


2007 2006
$ $

Assets

Current assets
Cash and cash equivalents 7,878 19,564
Marketable securities 105,136 37,515
Accounts receivable 10,003 4,421
Inventory 13,874 9,625
Future tax asset 1,075 -
Other 1,637 2,306
-----------------------
139,603 73,431
-----------------------

Non current assets
Capital assets 10,137 6,115
Intangible assets 7,300 -
Goodwill 2,425 -
-----------------------
19,862 6,115
-----------------------

159,465 79,546
-----------------------
-----------------------

Liabilities

Current liabilities
Accounts payable and accrued liabilities 6,094 5,591
Current portion of deferred revenue 4,028 700
-----------------------
10,122 6,291
-----------------------

Non current liabilities
Deferred revenue 57 88
Future tax liability 374 -
Other 342 -
-----------------------
773 88
10,895 6,379
-----------------------

Shareholders' equity

Share capital 146,568 91,247
Contributed surplus 1,532 403
Accumulated other comprehensive income 69 -
Retained earnings (deficit) 401 (18,483)
-----------------------
148,570 73,167
-----------------------

159,465 79,546
-----------------------
-----------------------



Sandvine Corporation
Consolidated Statements of Operations
For the three and twelve month period ended November 30, 2007
(in Canadian dollars, amounts in thousands, except share and
per share data) (unaudited)


Three months ended Fiscal Year Ended
------------------------------------------------------

November 30 November 30 November 30 November 30
2007 2006 2007 2006
$ $ $ $
Revenue
Product 14,756 8,203 65,127 28,003
Service 2,350 1,043 8,552 3,662
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17,106 9,246 73,679 31,665
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Cost of sales
Product 4,206 2,399 15,261 7,525
Service 364 325 1,455 1,113
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4,570 2,724 16,716 8,638
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Gross margin 12,536 6,522 56,963 23,027
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Expenses
Sales and marketing 4,341 2,759 15,103 8,947
Research and
development 5,687 2,343 16,941 10,099
General and
administrative 2,254 1,112 6,454 3,838
Stock based
compensation 560 152 1,329 344
Amortization of
intangible assets 400 - 667 -
Depreciation 803 563 2,639 1,587
------------------------------------------------------
14,045 6,929 43,133 24,815
------------------------------------------------------
Income (loss) from
operations (1,509) (407) 13,830 (1,788)

Interest and other
income 1,267 554 3,808 1,506
------------------------------------------------------
Income (loss)
Before provision
for income taxes (242) 147 17,638 (282)
------------------------------------------------------

Provision for
(recovery of)
income taxes
Current 49 31 184 100
Future (361) - (1,508) -
------------------------------------------------------
(312) 31 (1,324) 100

Net income (loss) ------------------------------------------------------
for the period 70 116 18,962 (382)

Earnings (loss) per
share
Basic 0.001 0.001 0.148 (0.004)
------------------------------------------------------
Diluted 0.000 0.001 0.139 (0.004)
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Basic weighted
average number of
shares outstanding 136,163,010 117,655,735 128,510,680 107,232,201
------------------------------------------------------
Diluted weighted
average number of
shares outstanding 142,470,069 124,065,770 135,973,372 107,232,201
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Sandvine Corporation
Consolidated Statements of Cash Flows
For the three and twelve month period ended November 30, 2007
(in Canadian dollars, amounts in thousands, except share and per
share data) (unaudited)


Three months ended Fiscal Year Ended
-----------------------------------------------------

November 30 November 30 November 30 November 30
2007 2006 2007 2006
$ $ $ $
Cash provided by
(used in)

Operating activities
Net income (loss)
for the period 70 116 18,962 (382)
Items not
affecting cash
Amortization of
intangible assets 400 - 667 -
Depreciation 803 563 2,639 1,587
Foreign exchange
(gain) loss 66 (69) 66 88
Stock-based
compensation 560 152 1,329 344
Non-cash compensation
expense 79 - 137 -
Provision for
(recovery of)
future income taxes (361) - (1,508) -
Loss on disposal of
capital assets - - 52 28
-----------------------------------------------------
1,617 762 22,344 1,665


Changes in
non-current
balances (7) 29 (15) 78
Changes in non-cash
working capital
balances (3,750) (2,891) (6,212) (3,217)
-----------------------------------------------------
(2,140) (2,100) 16,117 (1,474)
-----------------------------------------------------

Investing activities
Purchase of capital
assets (1,386) (1,592) (6,656) (4,857)
Government assistance
applied against
capital assets - 110 - 110
Business acquisitions,
net of cash acquired - - (5,030) -
Purchase of marketable
securities - (28,692) (311,043) (72,423)
Sale of marketable
securities - 25,542 243,490 37,531
-----------------------------------------------------
(1,386) (4,632) (79,239) (39,639)


Financing activity
Proceeds from the
issuance of
share capital 611 13,485 51,436 50,922
-----------------------------------------------------
611 13,485 51,436 50,922

Net increase in cash
during period (2,915) 6,753 (11,686) 9,809

Cash and cash
equivalents
Beginning of period 10,793 12,811 19,564 9,755
-----------------------------------------------------
Cash and cash
equivalents
End of period 7,878 19,564 7,878 19,564
-----------------------------------------------------
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