Sandvine Corporation
TSX : SVC
AIM : SAND

Sandvine Corporation

April 06, 2010 07:00 ET

Sandvine Reports Q1 2010 Results

WATERLOO, ONTARIO--(Marketwire - April 6, 2010) - Sandvine Corporation, (TSX:SVC)(AIM:SAND) a leading provider of intelligent broadband network solutions for DSL, cable, FTTx, fixed wireless and mobile operators, today reported record quarterly revenue of $21.9 million and GAAP net income of $0.6 million for its first quarter of 2010.

"I am extremely pleased to see Sandvine return to profitability this quarter. Our results are starting to show the benefit of some significant investments that we have been making to expand Sandvine's long-term market opportunity and to enable a balance in our business across broadband access technology markets, sales regions and sales channels," said Dave Caputo, president and chief executive officer.

The cable and DSL markets each contributed 36% of Sandvine's first quarter revenue, while mobile and other markets contributed 28% of revenue. Sandvine's revenue was split almost equally between North America and all other sales regions. Over forty percent of revenue was earned through reseller partners.

Sandvine's GAAP net income in the first quarter was $0.6 million ($0.004 per diluted share) and non-GAAP(1) net income was $1.6 million ($0.012 per diluted share), compared to losses in both Q4 2009 and Q1 2009. A reconciliation of GAAP to non-GAAP(1) results is included as Table 1. The results for the quarter reflect the adoption of EIC 175, Multiple Deliverable Revenue Arrangements, which increased first quarter revenue by $1.5 million compared to what would have otherwise been recognized under the previous accounting standard.

Sandvine added $2.7 million to its cash and marketable securities balance over the quarter, to total $88.4 million at February 28, due largely to positive cash flow from operations.

FINANCIAL HIGHLIGHTS (All amounts are in Canadian dollars)
Millions of dollars, except per share data and where otherwise indicated Q1
2010
  Q1
2009
  Change   Q4
2009
  Change  
Revenue 21.9   18.6   18 % 19.0   15 %
Gross Margin percent 75 % 76 % -1 pp   73 % 2 pp  
R&D, SG&A 13.6   14.3   -5 % 14.5   -6 %
Net Income (Loss) 0.6   (4.8 ) -   (4.7 ) -  
Diluted Earnings (Loss) Per Share 0.004   (0.035 ) -   (0.035 ) -  
                     
Non-GAAP(1) Income (Loss) 1.6   (1.2 ) -   (1.8 ) -  
Non-GAAP(1) Diluted Income (Loss) Per Share 0.012   (0.009 ) -   (0.013 ) -  

Sandvine is focused on growing its fixed and mobile service provider customer base and the number of broadband subscribers they represent. The Company has over 180 service provider customers in 80 countries. Together these customers serve more than 90 million fixed line broadband subscribers and more than 200 million mobile subscribers, a rapidly growing number of whom use broadband data services.

In the first quarter of 2009 Sandvine won six new customers.

  • By access technology: three DSL service providers, two cable operators and one mobile service provider.
  • By geography: five from EMEA and one from Asia Pacific. Sandvine made initial sales to customers in three new countries.
  • Sales channel: three customers were won through reseller partners, including two that were won through a strategic relationship with a global network equipment vendor.

CONFERENCE CALL

The Company will discuss the quarterly results and business outlook on a conference call at 8:30 a.m. Eastern time (1:30 BST) today. A webcast will be available on Sandvine's website.

Local dial-in number  416 644 3415
Toll-free North America  800 814 4860
Toll-free United Kingdom  0800 358 5263

A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4272125#) from approximately 10:30 a.m. Eastern time on the day of the call through April 13.

ABOUT SANDVINE

Sandvine's network policy control solutions focus on protecting and improving the quality of experience on the Internet.

Our award-winning network equipment and software helps DSL, FTTx, cable, fixed wireless and mobile operators better understand network traffic, manage network congestion, create new services and revenues, mitigate traffic that is malicious or undesirable to subscribers, deliver QoS-prioritized multimedia services and increase subscriber satisfaction. With service provider customers in 80 countries serving hundreds of millions of broadband and mobile data subscribers, Sandvine is enhancing the Internet experience worldwide.

CAUTION REGARDING FORWARD LOOKING INFORMATION

Certain statements in this press release which are not historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements related to Sandvine's projected revenues, earnings, growth rates, revenue mix and product plans are forward-looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "may", "anticipated", "expected", "projected", "targeting", "estimate", "intend" 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, achievements or developments of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and the Company does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

Many factors could cause the actual results of the Company 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, and those factors which are further discussed in the Company's Annual Information Form ("AIF"), a copy of which is available on SEDAR at www.sedar.com.

  • The Company's revenues may fluctuate from quarter to quarter and year to year depending upon sales cycles, customer demand and the timing of customer purchase decisions;
  • The Company's gross margins may fluctuate from period to period depending upon a variety of factors including product mix in the quarter, competitive pricing pressures and the level of sales generated through indirect channels;
  • The Company is dependent upon and expects to continue to derive a large percentage of its revenue from both a small number of key customers and key reseller partners, none of whom are bound to any fixed purchase commitment or exclusivity obligations and could change their buying patterns and/or source of supply at any time, which could have a material impact on the Company's revenues;
  • The Company faces intense competition in markets where there are typically several different competing technologies and rapid technological changes. The Company faces the risk of emergence of new technologies that may be either competitive to those of the Company or that change the requirements of the Company's customers for solutions such as those offered by the Company;
  • 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, which decisions may be impacted upon by changing requirements in the area of broadband network management policies and/or changes in the regulatory framework to which the Company's customers may be subject. In particular, the Federal Communications Commission in the United States (the "FCC") has announced a Notice of Proposed Rulemaking pursuant to which the FCC intends to consider whether additional regulation in respect of network management practices of internet service providers is required. This process may cause uncertainty in the network investment decisions of the Company's target customers, and any new rules or regulations that result from this process may impact the demand for the Company's products within the United States, which has historically been the Company's largest market, and elsewhere, as service providers and regulators in other countries may look to practices adopted in the United States;
  • The majority of the Company's operating expenses are denominated in Canadian dollars, U.S. dollars and New Israeli Shekels while its revenues and cost of 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;

Table 1

1. Non-GAAP Financial Measures

The following table provides a reconciliation of non-GAAP net income (loss) and related per share amounts to GAAP net income (loss) and the related per share amounts for the period indicated. These non-GAAP financial measures which are used internally by management to evaluate the Company's ongoing performance exclude the impact of stock based compensation, amortization of intangible assets acquired through business acquisitions and goodwill impairment expenses (collectively referred to as "Excluded Expenses"). The Company provides these non-GAAP financial measures as it is the Company's view that the Excluded Expenses are either (i) not part of its normal day-to-day operations and/or (ii) represent a "non-cash" accounting charge that does not deplete its cash resources. Accordingly, the Company believes that such financial measures may also be useful to investors in enhancing their understanding of the Company's operating performance. Non-GAAP net income (loss) is not recognized under Canadian GAAP and does not have a standardized meaning prescribed by Canadian GAAP. Therefore it is unlikely to be comparable to similarly titled measures reported by other issuers. Non-GAAP financial measures should be considered in the context of the Company's GAAP results.

  Three month period ended  
  February 28, 2010
$
February 28, 2009
$
 
  Amounts in thousands  
       
Net income (loss) 558 (4,795 )
  Stock based compensation expense 667 816  
  Amortization of intangible assets acquired through business acquisitions 400 400  
  Goodwill impairment - 2,425  
Net income (loss) excluding the impact of the items specified above 1,625 (1,154 )
       
  Three month period ended  
  February 28, 2010
$
February 28, 2009
$
 
       
Basic and diluted earnings (loss) per share 0.004 (0.035 )
Impact on basic and diluted earnings per share of Excluded Expenses 0.008 0.026  
Basic and diluted earnings (loss) per share excluding the impact of Excluded Expenses 0.012 (0.009 )
 
 
Sandvine Corporation
Consolidated Balance Sheets 
As at February 28, 2010
(in Canadian dollars, amounts in thousands) (unaudited)
 
  February 28 2010
$
  November 30 2009
$
 
Assets        
         
Current assets        
Cash and cash equivalents 8,439   2,341  
Marketable securities 79,993   83,423  
Accounts receivable 16,992   20,741  
Inventory 11,289   9,744  
Other 2,304   1,773  
  119,017   118,022  
         
Non current assets        
Plant and equipment 13,144   13,026  
Intangible assets 4,728   5,221  
  17,872   18,247  
         
  136,889   136,269  
         
Liabilities        
         
Current liabilities        
Accounts payable and accrued liabilities 8,443   10,732  
Current portion of deferred revenue 9,224   7,513  
  17,667   18,245  
         
Non current liabilities        
Deferred revenue 715   790  
  715   790  
         
  18,382   19,035  
         
Shareholders' equity        
         
Share capital 146,904   146,820  
Contributed surplus 9,596   9,000  
Accumulated other comprehensive loss (55 ) (90 )
Deficit (37,938 ) (38,496 )
  118,507   117,234  
         
  136,889   136,269  
         
         
Sandvine Corporation  
Consolidated Statements of Operations  
For the three month period ended February 28, 2010  
(in Canadian dollars, amounts in thousands, except share and per share data) (unaudited)  
       
  February 28 2010
$
February 28 2009
$
 
       
Revenue      
Product 18,816 14,864  
Service 3,047 3,713  
  21,863 18,577  
Cost of sales      
Product 4,638 3,782  
Service 924 757  
  5,562 4,539  
       
Gross margin 16,301 14,038  
       
Expenses      
Sales and marketing 4,603 5,251  
Research and development 6,531 7,098  
General and administrative 2,471 1,912  
Stock based compensation 667 816  
Amortization of intangible assets 510 498  
Depreciation 974 1,050  
Goodwill impairment - 2,425  
  15,756 19,050  
Income (loss) from operations 545 (5,012 )
       
Interest and other income 49 332  
Income (loss) before provision for income taxes 594 (4,680 )
       
Provision for income taxes      
Current 36 47  
Future - 68  
  36 115  
       
Net income (loss) for the period 558 (4,795 )
       
Earnings (loss) per share      
Basic 0.004 (0.035 )
Diluted 0.004 (0.035 )
       
Basic weighted average number of shares outstanding 135,829,754 135,553,729  
Diluted weighted average number of shares outstanding 139,591,777 135,553,729  
       
       
Sandvine Corporation  
Consolidated Statements of Cash Flows  
For the three month period ended February 28, 2010  
(in Canadian dollars, amounts in thousands) (unaudited)  
         
  February 28 2010
$
  February 28 2009
$
 
         
Cash provided by (used in)        
         
Operating activities        
Net income for the period 558   (4,795 )
Items not affecting cash        
  Amortization of intangible assets 510   498  
  Depreciation 1,044   1,091  
  Foreign exchange loss (gain) 126   (45 )
  Stock-based compensation 667   816  
  Goodwill impairment -   2,425  
  Future income tax provision -   68  
         
  2,905   58  
         
Changes in non-current balances (76 ) 64  
Changes in non-cash working capital balances 1,011   2,720  
         
  3,840   2,842  
         
Investing activities        
Purchase of plant, equipment and intangible software assets (1,223 ) (2,745 )
Purchase of marketable securities (29,489 ) (212,057 )
Sale of marketable securities 32,915   217,586  
         
  2,203   2,784  
         
Financing activities        
Proceeds from the issuance of share capital 55   -  
         
  55   -  
         
Net increase in cash during the period 6,098   5,626  
         
Cash and cash equivalents – Beginning of period 2,341   3,872  
         
Cash and cash equivalents – End of period 8,439   9,498  
         
         
Cash and cash equivalents are represented by        
Balances with banks 3,913   2,360  
Cash equivalents 4,526   7,138  

Contact Information

  • INVESTOR RELATIONS
    Sandvine
    Rick Wadsworth
    +1 519 880 2400 ext. 3503
    rwadsworth@sandvine.com
    or
    MEDIA CONTACT
    Sandvine
    Jennifer Ross
    +1 519 880 2232
    jross@sandvine.com
    or
    AIM NOMAD
    Canaccord Adams Limited
    Andrew Chubb/Simon Bridges
    +44 0207 050 6500