Sandvine Corporation
TSX : SVC
AIM : SAND

Sandvine Corporation

July 08, 2008 07:00 ET

Sandvine Reports Q2 2008 Revenue of $11.1 Million and Diluted Loss Per Share of $0.034

WATERLOO, ONTARIO--(Marketwire - July 8, 2008) - 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 revenue of $11.1 million. Net loss was $4.6 million, or $0.034 per diluted share, which includes $1.2 million attributable to non-cash, acquisition-related expenses and stock-based compensation.

Sandvine won 12 new customers in the second quarter - matching a record for the Company.

Dave Caputo, Sandvine's President and Chief Executive Officer, said, "This was a positive quarter for Sandvine in many respects. It was our best quarter in terms of revenue from the DSL market, and for the first time one of Sandvine's major global reseller partners contributed over 10 percent of total revenue. Also, the EMEA region had its strongest revenue quarter ever."

However, delays in certain opportunities impacted the results for the quarter and the Company's ability to rely upon the material assumptions underlying its 2008 annual revenue guidance of $80 to $85 million, introduced March 6th. Most notably, given the time remaining in the current fiscal year, Sandvine no longer believes that it can rely upon the assumptions that it would earn at least $40 million in revenue from existing customers and $40 million in revenue from new customers. Consequently, the Company has withdrawn its annual revenue guidance.

The timing of customer decisions has become increasingly difficult to forecast due to a variety of factors, including the effect of the network neutrality debate on Sandvine's North American installed base, the reduced predictability associated with expansion into new markets, such as Sandvine's entrance into the Tier-one DSL and wireless markets, and the increasing number of opportunities being pursued through the indirect sales channel.

Caputo added, "While we haven't lost any meaningful business and we believe that the delayed opportunities are still available to be won, the decision dates have proven to be unpredictable and may not fall within our fiscal year. As a result, we think it is prudent to withdraw guidance at this time."



FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
Millions of dollars, except per Q2 2008 Q2 2007 Change Q1 2008 Change
share data and where
otherwise indicated
----------------------------------------------------------------------------
Revenue 11.1 20.0 -45% 8.3 34%
Gross Margin percent 77% 81% -4 pp 75% 2 pp
R&D, SG&A 12.2 8.8 38% 12.5 -3%
Other Operating Expenses 2.0 0.9 132% 1.8 9%
Net (Loss) Income(i) (4.6) 10.3 (7.0)
Diluted (Loss) Earnings Per Share (0.034) 0.079 (0.051)
----------------------------------------------------------------------------
(i) Includes $1.2 million attributable to non-cash, acquisition-related
expenses and stock-based compensation (Q2 2007: $0.2 million; Q1 2008:
$1.1 million).


The above comments constitute forward-looking information. See "Caution Regarding Forward-Looking Information" below. All amounts are in Canadian dollars unless otherwise specified.

STRATEGIC UPDATE

Sandvine is focused on increasing its market penetration, in terms of number of customers and the number of broadband subscribers they represent. The Company has over 100 customers serving over 60 million broadband subscribers, in over 40 countries. Eighteen of the top 100 broadband service providers around the world have selected Sandvine's solutions. Since the last quarterly results news release, Sandvine has made significant progress on some of its core strategies.

Sales and Marketing. Sandvine believes that diversifying its customer base by access technology (DSL, cable, wireless and FTTx) and geography, winning large network operators, increasing penetration of its market-leading 10 GE solution, and increasing traction through its strategic reseller partners are key to its growth strategy.

Sandvine won 12 new customers in the second quarter, as follows.

- By access technology: eight DSL, three cable and one wireless customer.

- By geography: seven from North America, four from EMEA, and one from Asia Pacific.

- Large customers: initial orders from two new DSL customers that have over one million broadband subscribers each.

- 10GE product: a record 12 customers in the quarter bought the PTS 14000 for the first time. In total, over 40 customers have purchased the PTS 14000.

- Strategic partners: won two customers through a global reseller.

Research and Development. Sandvine is focused on extending its technological lead in the market for Intelligent Broadband Network solutions. In May, the Company launched Sandvine FairShare™ to enhance its suite of Traffic Optimization solutions. Sandvine FairShare enables service providers to ensure equitable allocation of network resources during periods of congestion, through a wide range of policy options including a fully application-agnostic approach.

In June, Sandvine launched its Solutions Partner Ecosystem, which extends Sandvine's product offerings through pre-integrated joint solutions with other best-of-breed vendors that focus on improving subscribers' quality of experience. Sandvine's initial partnerships are with a content caching solutions provider, PeerApp, and a content control solutions provider, Netsweeper.

CONFERENCE CALL

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 8
Time 8:30 a.m. Eastern (1:30 BST)
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 21275785#) from approximately 10:30 a.m. Eastern time on the date of the call through July 15.

ABOUT SANDVINE

Sandvine is focused on protecting and improving the quality of experience on the Internet. Our award-winning network equipment helps DSL, FTTx, cable, fixed wireless and mobile operators better understand network traffic, increase customer satisfaction, mitigate the proliferation of malicious traffic, manage network congestion, and deliver QoS-prioritized multimedia services. With more than 100 customers in over 40 countries, Sandvine is enhancing the Internet experience for millions of broadband and mobile subscribers worldwide. www.sandvine.com

CAUTION REGARDING FORWARD LOOKING INFORMATION

Certain statements in this release 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", "believe" 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, those factors discussed under the heading "Risk Factors" in Sandvine's most recent Annual Information Form ("AIF"), a copy of which is available on SEDAR at www.sedar.com, as well as each of the following.

- Sandvine's revenues may fluctuate from quarter to quarter and year to year depending upon sales cycles, customer demand and the timing of customer order purchase decisions;

- Sandvine'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;

- Sandvine 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.

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

- Sandvine'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 regulations and requirements in the area of broadband network management policies;

- The majority of Sandvine'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 Sandvine trades.

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

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.




Sandvine Corporation

Consolidated Balance Sheets
As at May 31, 2008
(in Canadian dollars, amounts in thousands, except share
and per share data) (unaudited)


May 31 November 30
2008 2007
$ $

Assets

Current assets
Cash and cash equivalents 7,517 7,878
Marketable securities 92,164 105,136
Accounts receivable 11,027 10,003
Inventory 15,896 13,874
Future tax asset 1,075 1,075
Other 1,614 1,637
-------------------------
129,293 139,603
-------------------------

Non current assets
Property, plant and equipment 11,271 10,137
Intangible assets 6,500 7,300
Goodwill 2,425 2,425
-------------------------
20,196 19,862
-------------------------

149,489 159,465
-------------------------
-------------------------

Liabilities

Current liabilities
Accounts payable and accrued liabilities 5,100 6,094
Current portion of deferred revenue 5,534 4,028
-------------------------
10,634 10,122
-------------------------

Non current liabilities
Deferred revenue 66 57
Future tax liability 192 374
Other 311 342
-------------------------
569 773
-------------------------

11,203 10,895
-------------------------

Shareholders' equity

Share capital 146,371 146,568
Contributed surplus 2,828 1,532
Accumulated other comprehensive income 7 69
Retained earnings (deficit) (10,920) 401
-------------------------
138,286 148,570
-------------------------

149,489 159,465
-------------------------
-------------------------


Sandvine Corporation

Consolidated Statements of Operations
For the three and six month periods ended May 31, 2008
(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
2008 2007 2008 2007
$ $ $ $

Revenue
Product 7,955 17,797 12,714 31,355
Service 3,132 2,225 6,661 4,042
--------------------------------------------------
11,087 20,022 19,375 35,397
--------------------------------------------------
Cost of sales
Product 2,048 3,338 3,539 5,912
Service 465 367 1,038 714
--------------------------------------------------
2,513 3,705 4,577 6,626
--------------------------------------------------

Gross margin 8,574 16,317 14,798 28,771
--------------------------------------------------
Expenses
Sales and marketing 4,233 3,413 8,259 6,464
Research and development 5,757 3,823 11,932 6,466
General and
administrative 2,176 1,576 4,500 2,328
Stock based compensation 715 220 1,338 404
Amortization of
intangible assets 400 - 800 -
Depreciation 889 642 1,700 1,162
--------------------------------------------------
14,170 9,674 28,529 16,824
--------------------------------------------------
Income (loss) from
operations (5,596) 6,643 (13,731) 11,947

Interest and other income 802 658 1,980 1,297
--------------------------------------------------
Income (loss) before
provision for income
taxes (4,794) 7,301 (11,751) 13,244
--------------------------------------------------

Provision for (recovery
of) income taxes
Current 19 99 39 170
Future (182) (3,118) (182) (3,118)
--------------------------------------------------
(163) (3,019) (143) (2,948)
--------------------------------------------------

Net income (loss) for the
period (4,631) 10,320 (11,608) 16,192
--------------------------------------------------
--------------------------------------------------

Earnings (loss) per share
Basic (0.034) 0.084 (0.085) 0.132
--------------------------------------------------
Diluted (0.034) 0.079 (0.085) 0.125
--------------------------------------------------
Basic weighted average
number of shares
outstanding 136,878,515 123,344,744 136,856,170 123,051,037
--------------------------------------------------
--------------------------------------------------

Diluted weighted average
number of shares
outstanding 136,878,515 130,521,184 136,856,170 129,885,661
--------------------------------------------------
--------------------------------------------------



Sandvine Corporation

Consolidated Statements of Cash Flows
For the three and six month periods ended May 31, 2008
(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
2008 2007 2008 2007
$ $ $ $

Cash provided by (used in)
Operating activities

Net income (loss) for the period (4,631) 10,320 (11,608) 16,192
Items not affecting cash
Amortization of intangible assets 400 - 800 -
Depreciation 916 642 1,737 1,162
Foreign exchange loss 273 333 236 7
Stock-based compensation 715 220 1,338 404
Future income tax recovery (182) (3,118) (182) (3,118)
Other 80 51 (168) 51
----------------------------------------

(2,429) 8,448 (7,847) 14,698

Changes in non-current balances - (206) 11 (200)
Changes in non-cash working capital
balances (2,631) (14,206) (2,314) (3,517)
----------------------------------------

(5,060) (5,964) (10,150) 10,981
----------------------------------------
Investing activities
Purchase of property, plant and
equipment (1,092) (1,644) (2,543) (3,421)
Purchase of marketable securities (230,148) (107,103) (431,006) (182,654)
Sale of marketable securities 235,014 108,113 443,916 158,330
----------------------------------------

3,774 (634) 10,367 (27,745)
----------------------------------------

Financing activities
Proceeds from the issuance of share
capital 13 633 174 820
Common shares repurchased (752) - (752) -
----------------------------------------

(739) 633 (578) 820
----------------------------------------

Net (decrease) in cash during
period (2,025) (5,965) (361) (15,944)

Cash and cash equivalents -
Beginning of period 9,542 9,585 7,878 19,564
----------------------------------------

Cash and cash equivalents - End of
period 7,517 3,620 7,517 3,620
----------------------------------------
----------------------------------------

Cash and cash equivalents are
represented by
Balances with banks 4,167 908 4,167 908
Cash equivalents 3,350 2,712 3,350 2,712

Contact Information

  • INVESTOR RELATIONS
    Sandvine
    Rick Wadsworth
    (519) 880-2400 ext. 3503
    Email: rwadsworth@sandvine.com
    or
    MEDIA CONTACT
    Sandvine
    Jennifer Ross
    (519) 880-2232
    Email: jross@sandvine.com
    or
    AIM NOMAD
    Canaccord Adams Limited
    Neil Johnson/Andrew Chubb
    +44 0207 050 6500