Sandvine Incorporated
AIM : SAND
TSX : SVC

Sandvine Incorporated

October 30, 2006 07:00 ET

Sandvine Corporation Announces Q3 2006 Financial Results

WATERLOO, ONTARIO--(CCNMatthews - Oct. 30, 2006) - Sandvine Corporation (TSX:SVC)(AIM:SAND), 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 third quarter of 2006, ended August 31, 2006. All figures are in Canadian dollars and are in accordance with Canadian GAAP unless otherwise specified.

Revenue for the quarter ended August 31, 2006 was $ 8.1 million, compared with $ 4.1 million in the same quarter last year, representing an increase of 99.4%. Net income for the third quarter of fiscal 2006 was $ 0.2 million, or $0.002 per share on a diluted basis, compared with a net loss of $1.4 million or $0.016 loss per share for the third quarter of fiscal 2005.

FINANCIAL HIGHLIGHTS

- 7th consecutive quarter of revenue growth

- Continued to achieve year over year and quarter over quarter revenue growth

- Continued to achieve strong gross margins in excess of 70%

- Continued strong balance sheet with $47.2 m of cash resources at Aug 31, 2006

- Subsequent to the end of the third quarter, the Company raised approximately $13.2 m of net proceeds from its initial public offering on the Toronto Stock Exchange

BUSINESS HIGHLIGHTS

- 5 new customers (3 Cable/2 DSL) added in the third quarter of the year

- The Company now has 65 broadband service provider customers in 30 countries

- Sandvine has sold equipment to service providers which operate networks with more than 35 million residential subscribers

- PTS 14000 platform unveiled in June, enabling intelligent broadband network solutions with 10 gigabit connectivity

- Sandvine successfully completed ISO 9001 certification of its manufacturing processes in September

Dave Caputo, President and CEO for Sandvine commented:

"Having successfully executed on our financing strategy with public offerings on both the AIM and TSX in 2006, we now look forward to executing on our growth strategy by continuing to enhance our solution offerings, expanding our global presence and delivering intelligent broadband networks to service providers around the world".

Scott Hamilton, Chief Financial Officer for Sandvine commented:

"We are very pleased with the financial results demonstrated this quarter. With a second successful public offering and continued revenue growth in fiscal 2006, we continue to be well positioned to meet our 2006 targets."

The Sandvine management team will discuss the full results on a conference call to be held today, October 30, 2006 at 9:00am ET (2pm GMT). The call can be accessed by dialing into +1 416 644 3423 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 profitably. 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 60 customers in 30 countries, Sandvine is enhancing the Internet experience for millions of broadband users worldwide. Sandvine is a wholly owned subsidiary of Sandvine Corporation (AIM:SAND)(TSX:SVC).

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 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, 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 under the heading "Risk Factors" in the prospectus of the Company dated October 18, 2006 which is available on SEDAR at www.sedar.com.



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

Consolidated Statements of Operations
(Unaudited)
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Three months ended
August 31
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2006 2005
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Revenue
Product $7,152 $3,772
Service 924 279
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8,076 4,051
Cost of Sales
Product 1,738 1,056
Service 339 77
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2,077 1,133
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Gross margin 5,999 2,918

Expenses
Sales and marketing 2,320 1,772
Research and development 2,443 2,248
Government (assistance) repayments 81 (687)
General and administration 976 835
Amortization 440 211
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Total operating expenses 6,260 4,379
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Loss from operations (261) (1,461)
Interest and other income 496 59
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Income (loss) before provision for income taxes 235 (1,402)
Provision for income taxes 52 4
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Net income (loss) for the period $183 ($1,406)
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Basic and diluted earnings (loss) per share 0.002 (0.016)

Weighted average common shares outstanding
Basic 114,561,616 86,288,863
Diluted 121,110,016 86,288,863
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Sandvine Corporation
(Canadian dollars, in thousands, except share and per share amounts)

Consolidated Balance Sheets
(Unaudited)
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August 31, November 30,
As at 2006 2005
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Assets
Current Assets
Cash and cash equivalents $12,811 $9,755
Marketable Securities 34,364 2,623
Accounts Receivable 6,299 4,827
Other Receivables 1,067 2,220
Inventory 5,765 5,025
Prepaid expenses 409 337
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60,715 24,787
Capital Assets 5,197 2,983
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65,912 27,770
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Liabilities
Current Liabilities
Accounts payable and accrued liabilities 4,012 3,001
Current portion of deferred revenue 2,427 2,476
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6,439 5,477
Deferred revenue 59 11
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6,498 5,488
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Shareholders' Equity
Share capital 77,754 40,316
Contributed surplus 259 67
Deficit (18,599) (18,101)
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59,414 22,282
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65,912 27,770
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Sandvine Corporation
(Canadian dollars, in thousands, except share and per share amounts)

Consolidated Statements of Cash Flows
(Unaudited)
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Three months ended
August 31
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2006 2005
---- ----

Cash Provided by (used in)

Operating activities
Net Income (loss) for the period $183 ($1,406)
Items not affecting cash
Amortization 440 211
Foreign exchange loss 24 254
Stock-based compensation 90 38
------------------------
737 (903)

Changes in non-current deferred revenue 59 (40)
Changes in non-cash working capital balances (2,634) (530)
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(1,838) (1,473)
Investing activities
Purchase of capital assets (1,404) (933)
Government assistance applied against capital assets 443
Net sale (purchase) of marketable securities 14,854 2,177
------------------------
13,450 1,687
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Financing Activity
Proceeds from issuance of share capital 83 (40)
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Net increase in cash during the period 11,695 174

Cash and cash equivalents - Beginning of period 1,116 550
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Cash and cash equivalents - End of period 12,811 724
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Contact Information

  • Sandvine Corporation
    Amanda Weber
    Director Communications
    (519) 880-2600
    or
    Buchanan Communications
    Jeremy Garcia/Bobby Morse
    + 44 20 7466 5000