Sandvine Corporation
TSX : SVC
AIM : SAND

Sandvine Corporation

July 09, 2009 07:00 ET

Sandvine Reports Q2 2009 Results

WATERLOO, ONTARIO--(Marketwire - July 9, 2009) - 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 second quarter fiscal 2009 revenue of $15.2 million, which is 37% higher than the same quarter last year and 18% lower than Q1 2009 revenue.

"While a sequential decline in Q2 revenue is consistent with Q1 benefiting from certain orders coming in earlier than expected, it is still disappointing. At the same time, our year-to-date results have kept us on track for growth in 2009," said Dave Caputo, Sandvine's president and chief executive officer."

Second quarter 2009 net loss was $5.6 million, or $0.042 per diluted share. On a non-GAAP(1) basis, which excludes certain non-cash items, the Company's net loss was $4.4 million, or $0.033 per diluted share. A reconciliation of GAAP to non-GAAP(1) results is included as Table 1. The Company's cash and marketable securities at May 31, 2009 totaled $90.0 million.

In the second quarter of 2009, Sandvine won nine new service provider customers. Eight of the new customers were secured through reseller partners, with one win coming through a new global distribution agreement with Nokia Siemens Networks. In all, over 40% of revenue came through reseller partners. In the second quarter, the Company recognized record revenue from the wireless market, which for the first time was the largest source of quarterly revenue.

"As fixed line and wireless networks converge, it will be increasingly important to offer network policy control solutions that add value across all types of access networks," added Caputo. "Sandvine leads the cable broadband market, while the DSL market has become our largest by customer count. We believe that this success, together with our growing strength in wireless, will position us as a leader as fixed-mobile network convergence is realized."



FINANCIAL HIGHLIGHTS (All amounts are in Canadian dollars)
---------------------------------------------------------------------------
Millions of dollars, except per
share data and where
otherwise indicated Q2 2009 Q2 2008 Change Q1 2009 Change
---------------------------------------------------------------------------
Revenue 15.2 11.1 37% 18.6 -18%
Gross Margin percent 76% 77% -1pp 76% -
R&D, SG&A 14.7 12.1 22% 14.3 3%
Net Loss (5.6) (4.6) (4.8)
Non-GAAP(1) Loss (4.4) (3.4) (1.2)
Diluted Loss Per Share (0.042) (0.034) (0.035)
Non-GAAP(1) Diluted Loss Per
Share (0.033) (0.025) (0.009)
---------------------------------------------------------------------------


Sandvine's year-to-date revenue was $33.8 million, up 74% from $19.4 million for the comparable period of fiscal 2008. Year-to-date non-GAAP net loss was $5.6 million (GAAP basis: $10.4 million), compared to $9.3 million (GAAP basis: $11.6 million) for the comparable period of fiscal 2008.

STRATEGIC UPDATE and OUTLOOK

Sandvine is focused on growing its service provider customer base and the number of broadband subscribers they represent. The Company has over 160 service provider customers in 70 countries. Together these customers serve more than 80 million fixed line broadband subscribers and a rapidly growing number of mobile data subscribers.

In the second quarter of 2009 Sandvine won nine new customers.

- By access technology: six mobile data operators, two DSL service providers, and one cableco.

- By geography: four from EMEA, three from Caribbean and Latin America and one each from North America, and Asia Pacific. Sandvine made initial sales to customers in four new countries.

- Large customers: initial orders from one new wireless customer that is in the Top 100 worldwide, by voice subscriber count.

- Sales channel: eight customers were won through reseller partners, including six that were won through our strategic relationships with global network equipment vendors.

CONFERENCE CALL

A copy of the quarterly results are available through the Investor Relations section of Sandvine's website. The Company will discuss the results and business outlook on a conference call at 8:30 a.m. Eastern time (1:30 BST) today. A webcast will also be available from the Investor Relations section of Sandvine's website.



Date July 9, 2009
Time 8:30 a.m. Eastern (1:30 BST)
Local dial-in number 416 644 3418
Toll-free North America 800 732 6179
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 21309674#) from approximately 10:30 a.m. Eastern time on the day of the call through July 16.

ABOUT SANDVINE

Sandvine is focused on protecting and improving the quality of experience on the Internet. Our award-winning network equipment and solutions help cable, DSL, FTTx, fixed wireless and mobile operators better serve their subscribers and understand network trends; offer new services; mitigate malicious traffic; manage network congestion; and deliver QoS-prioritized multimedia services. With customers in 70 countries serving over a hundred million broadband and wireless subscribers, Sandvine is enhancing the Internet experience worldwide. www.sandvine.com

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;

- 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, 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;

- Overall economic conditions and the availability of credit may negatively impact the Company's customers and suppliers.

- 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;

- The introduction and sale of new products and services by the Company may impact the timing of revenue recognition which could raise greater revenue fluctuations from quarter to quarter than has been experienced historically.

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 Six month period ended
----------------------------------------------------------------------------
May 31, 2009 May 31, 2008 May 31, 2009 May 31, 2008
$ $ $ $
Amounts in thousands

Net loss (5,635) (4,631) (10,430) (11,608)
Stock based
compensation expense 824 795 1,640 1,498
Amortization of
intangible assets
acquired
through business
acquisitions 400 400 800 800
Goodwill impairment - - 2,425 -
----------------------------------------------------------------------------
Net loss excluding
the impact of the
items
specified above (4,411) (3,436) (5,565) (9,310)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three month period ended Six month period ended
----------------------------------------------------------------------------
May 31, 2009 May 31, 2008 May 31, 2009 May 31, 2008
$ $ $ $

Basic and diluted
loss per share (0.042) (0.034) (0.077) (0.085)
Impact on basic and
diluted earnings per
share of Excluded
Expenses 0.009 0.009 0.036 0.016
----------------------------------------------------------------------------
Basic and diluted
loss per share
excluding
the impact of
Excluded Expenses (0.033) (0.025) (0.041) (0.069)
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Sandvine Corporation
Consolidated Interim Balance Sheets
As at May 31, 2009
(in Canadian dollars, amounts in thousands)
(unaudited)

May 31 November 30
2009 2008
$ $
Assets

Current assets
Cash and cash equivalents 6,314 3,872
Marketable securities 83,734 88,676
Accounts receivable 11,610 19,202
Inventory 12,334 14,960
Other 2,599 1,513
-----------------------
116,591 128,223
-----------------------

Non current assets
Plant and equipment 13,839 12,595
Intangible assets 6,087 6,809
Goodwill - 2,425
-----------------------
19,926 21,829
-----------------------

136,517 150,052
-----------------------
-----------------------

Liabilities

Current liabilities
Accounts payable and accrued liabilities 5,695 8,941
Current portion of deferred revenue 7,366 8,951
-----------------------
13,061 17,892
-----------------------

Non current liabilities
Deferred revenue 396 186
Future tax liability 277 196
-----------------------
673 382
-----------------------

13,734 18,274
-----------------------

Shareholders' equity

Share capital 146,580 145,103
Contributed surplus 5,791 5,608
Accumulated other comprehensive income (loss) (179) 46
Deficit (29,409) (18,979)
-----------------------
122,783 131,778
-----------------------

136,517 150,052
-----------------------
-----------------------



Sandvine Corporation
Consolidated Interim Statements of Operations
For the three and six month periods ended May 31, 2009
(in Canadian dollars, amounts in thousands, except share and per share data)
(unaudited)

Three months ended Six months ended
---------------------------------------------------

May 31 May 31 May 31 May 31
2009 2008 2009 2008
$ $ $ $

Revenue
Product 10,186 7,955 25,050 12,714
Service 5,023 3,132 8,736 6,661
---------------------------------------------------
15,209 11,087 33,786 19,375
---------------------------------------------------
Cost of sales
Product 2,977 2,048 6,759 3,539
Service 714 465 1,471 1,038
---------------------------------------------------
3,691 2,513 8,230 4,577
---------------------------------------------------

Gross margin 11,518 8,574 25,556 14,798
---------------------------------------------------

Expenses
Sales and marketing 5,380 4,190 10,631 8,172
Research and development 6,890 5,720 13,988 11,859
General and
administrative 2,438 2,176 4,350 4,500
Stock based compensation 824 795 1,640 1,498
Amortization of
intangible assets 535 531 1,033 1,055
Depreciation 1,185 758 2,235 1,445
Goodwill impairment - - 2,425 -
---------------------------------------------------
17,252 14,170 36,302 28,529
---------------------------------------------------
Loss from operations (5,734) (5,596) (10,746) (13,731)

Interest and other
income 134 802 466 1,980
---------------------------------------------------
Loss before income taxes (5,600) (4,794) (10,280) (11,751)
---------------------------------------------------

Provision for (recovery
of) income taxes
Current 21 19 68 39
Future 14 (182) 82 (182)
---------------------------------------------------
35 (163) 150 (143)
---------------------------------------------------

Net loss for the period (5,635) (4,631) (10,430) (11,608)
---------------------------------------------------
---------------------------------------------------

Loss per share
Basic and diluted (0.042) (0.034) (0.077) (0.085)
Basic and diluted
weighted average number
of shares outstanding 135,585,389 136,878,515 135,569,699 136,856,170
---------------------------------------------------
---------------------------------------------------



Sandvine Corporation
Consolidated Interim Statements of Cash Flows
For the three and six month periods ended May 31, 2009
(in Canadian dollars, amounts in thousands)(unaudited)

Three months ended Six months ended
----------------------------------------
May 31 May 31 May 31 May 31
2009 2008 2009 2008
$ $ $ $

Cash provided by (used in)

Operating activities
Net loss for the period (5,635) (4,631) (10,430) (11,608)
Items not affecting cash
Amortization of intangible assets 535 531 1,033 1,055
Depreciation 1,200 785 2,291 1,482
Foreign exchange (gain) loss (104) 273 (115) 236
Stock-based compensation 824 795 1,640 1,498
Goodwill impairment - - 2,425 -
Future income tax provision 14 (182) 82 (182)
Other - - - (328)
----------------------------------------

(3,166) (2,429) (3,074) (7,847)

Changes in non-current balances 146 - 210 11
Changes in non-cash working capital
balances 1,551 (2,631) 4,237 (2,314)
----------------------------------------

(1,469) (5,060) 1,373 (10,150)
----------------------------------------

Investing activities
Purchase of plant, equipment and
intangible software assets (1,101) (1,092) (3,846) (2,543)
Purchase of marketable securities (172,361) (230,148) (384,418) (431,006)
Sale of marketable securities 171,727 235,014 389,313 443,916
----------------------------------------

(1,735) 3,774 1,049 10,367
----------------------------------------

Financing activities
Proceeds from the issuance of share
capital 20 13 20 174
Common shares repurchased - (752) - (752)
----------------------------------------

20 (739) 20 (578)
----------------------------------------

Net (decrease) increase in cash
during period (3,184) (2,025) 2,442 (361)

Cash and cash equivalents -
Beginning of period 9,498 9,542 3,872 7,878
----------------------------------------

Cash and cash equivalents -
End of period 6,314 7,517 6,314 7,517
----------------------------------------
----------------------------------------

Cash and cash equivalents are
represented by
Balances with banks 1,692 4,167 1,692 4,167
Cash equivalents 4,622 3,350 4,622 3,350


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