Sandvine Incorporated
AIM : SAND
TSX : SVC

Sandvine Incorporated

January 13, 2011 07:00 ET

Sandvine Reports Q4 and Fiscal Year 2010 Results

WATERLOO, ONTARIO--(Marketwire - Jan. 13, 2011) -

Attention: Technology Editors

Sandvine, (TSX:SVC)(AIM:SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported record quarterly revenue of $25.0 million and GAAP net income of $0.9 million (non-GAAP1: $1.7 million) for its fourth quarter of 2010. Fiscal 2010 revenue was $93.8 million, 36% higher than the $68.8 million reported for fiscal 2009. GAAP net income for fiscal 2010 was $5.6 million (non-GAAP1: $10.1 million), compared to a loss of $19.5 million (non-GAAP1: $10.5 million loss) in fiscal 2009.

"The DSL market and the Asia Pacific sales region were exceptionally strong for us in both the fourth quarter and full year. For the year, revenue from the DSL market almost doubled and revenue from Asia Pacific grew by over 160%," said Dave Caputo, Sandvine's President and Chief Executive Officer. "We grew revenue in every sales region, thanks in part to our reseller revenue almost doubling for the year. We now work with over 20 resellers globally, including four strategic relationships with major network equipment providers."

For the fourth quarter, approximately 60% of the Company's revenue was derived from the DSL access market (FY 2010: 47%), 22% from the mobile access market (FY 2010: 30%) and 18% from cable network operators (FY 2010: 23%). During the fourth quarter, approximately 72% of total revenues came from outside North America (FY 2010: 58%) and 64% of the Company's revenue was earned through reseller partners (FY 2010: 50%).

FINANCIAL HIGHLIGHTS (All amounts are in Canadian dollars)  
Millions of dollars, except per share data and where otherwise indicated   Q4
2010
    Q4
2009
    Change     Q3
2010
    Change  
Revenue   25.0     19.0     32 %   24.4     2 %
Gross Margin percent   72 %   73 %   -1 pp    74 %   -2 pp 
R&D, SG&A   15.0     14.5     4 %   13.8     9 %
Net Income (Loss)   0.9     (4.7 )   -     2.2     -60 %
Diluted Earnings (Loss) Per Share   0.006     (0.035 )   -     0.016     -63 %
                               
Non-GAAP1 Income (Loss)   1.7     (1.8 )   -     3.1     -44 %
Non-GAAP1 Diluted Income (Loss) Per Share   0.012     (0.013 )   -     0.022     -45 %

Sandvine's cash, cash equivalents and marketable securities balance at the end of the fourth quarter remained strong at $90.3 million (August 31: $89.4 million; November 30, 2009: $85.8 million) and increased by $4.5 million since November 30, 2009.

Sandvine's fiscal 2010 non-GAAP1 net income was $10.1 million, or $0.072 per diluted share (GAAP basis: $5.6 million, or $0.040 per diluted share) compared to a $10.5 million loss, or $0.077 loss per diluted share for fiscal 2009 (GAAP basis: $19.5 million loss, or 0.144 per diluted share).

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 200 service provider customers in over 80 countries. Together these customers serve more than 90 million fixed line broadband subscribers and more than 250 million mobile subscribers, a rapidly growing number of whom use broadband data services. In the fourth quarter of 2010 Sandvine won five new customers.

  • By access technology: two DSL service providers, two mobile service providers and one cable operator.
  • By geography: three from EMEA, one from Asia Pacific and one from North America.
  • Sales channel: two customers were won through reseller partners, including one through a strategic relationship with a global network equipment vendor.

Change in Functional and Reporting Currency

As a result of the continuing shift experienced in the proportion of Sandvine's revenues, expenses, assets and liabilities that are denominated in U.S. dollars (USD), and its expectation that this shift will continue in future periods, effective December 1, 2010 Sandvine has adopted the USD as its functional and reporting currency. In conjunction with adopting the US dollar as the Company's reporting currency, certain historical USD denominated financial results have been included in the Company's Management's Discussion and Analysis, filed on SEDAR. This information is provided for the purpose of assisting readers in comparing such results with results to be reported after December 1, 2010.

CONFERENCE CALL

The Company will discuss the financial 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 3416
Toll-free North America   877 974 0446
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 4398340#) from approximately 10:30 a.m. Eastern time today through January 20.

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 more than 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's reseller partners may offer their own products which are competitive with the Company's products;

  • 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, numerous telecommunications regulators in various jurisdictions have considered or are considering what, if any, regulations might be appropriate with respect to how internet service providers manage the impact of different types of traffic on their networks. These ongoing processes may cause uncertainty in the network investment decisions of the Company's target customers, and any new rules or regulations that result from these considerations may impact the demand for the Company's products within various markets, including markets that may not be considering any new regulation but where the Company's customers may look to other markets for future guidance or trends;

  • 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 GAAP net income (loss) and related per share amounts to non-GAAP net income (loss) and the related per share amounts for the periods 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 and intangible 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
    Twelve month
period ended
 
    November
30
2010
$
  August
31
 2010
$
  November
30
2009
$
    November
30
2010
$
  November
30
2009
$
 
    Amounts in thousands  
       
Net income (loss)   874   2,200   (4,729 )   5,590   (19,517 )
                         
Excluded Expenses                        
Stock based compensation expense   645   666   2,519     2,721   4,982  
Amortization of intangible assets acquired through business acquisitions   191   192   400     1,113   1,600  
Goodwill impairment   -   -   -     -   2,425  
Intangible impairment   -   -   -     669   -  
Net income (loss) excluding the impact of Excluded Expenses   1,710   3,058   (1,810 )   10,093   (10,510 )
                         
    Three month
period ended
    Twelve month
period ended
 
    November
30
2010
$
  August
31
 2010
$
  November
30
2009
$
    November
30
2010
$
  November
30
2009
$
 
                         
Diluted earnings (loss) per share   0.006   0.016   (0.035 )   0.040   (0.144 )
Impact on diluted earnings (loss) per share of Excluded Expenses   0.006   0.006   0.022     0.032   0.067  
Diluted earnings (loss) per share excluding the impact of Excluded Expenses   0.012   0.022   (0.013 )   0.072   (0.077 )
 
Sandvine Corporation     
Consolidated Balance Sheets     
As at November 30, 2010     
(in Canadian dollars, amounts in thousands)     
 
  2010
$
    2009
$
 
Assets          
           
Current assets          
Cash and cash equivalents 90,287     2,341  
Marketable securities -     83,423  
Accounts receivable 26,163     20,741  
Inventory 11,568     9,744  
Other 3,286     1,773  
  131,304     118,022  
           
Non current assets          
Plant and equipment 12,669     13,026  
Intangible assets 5,261     5,221  
Other assets 525     -  
  18,455     18,247  
           
  149,759     136,269  
           
Liabilities          
           
Current liabilities          
Accounts payable and accrued liabilities 12,324     10,732  
Current portion of deferred revenue 10,530     7,513  
  22,854     18,245  
           
Non current liabilities          
Deferred revenue 722     790  
           
  23,576     19,035  
           
Shareholders' equity          
           
Share capital 147,707     146,820  
Contributed surplus 11,382     9,000  
Accumulated other comprehensive loss -     (90 )
Deficit (32,906 )   (38,496 )
  126,183     117,234  
           
  149,759     136,269  
   
Sandvine Corporation  
Consolidated Statements of Operations  
For the three and twelve month periods ended November 30, 2010  
(in Canadian dollars, amounts in thousands, except share and per share data)  
             
    Three months ended     Fiscal year ended  
                     
    November 30
2010
$
  November 30
2009
$
    November 30
2010
$
  November 30
2009
$
 
                     
Revenue                    
Product   19,433   14,913     73,847   51,958  
Service   5,615   4,119     19,915   16,890  
    25,048   19,032     93,762   68,848  
Cost of sales                    
Product   5,478   4,164     19,383   14,375  
Service   1,584   1,019     5,455   3,362  
    7,062   5,183     24,838   17,737  
                     
Gross margin   17,986   13,849     68,924   51,111  
                     
Expenses                    
Sales and marketing   5,405   5,271     19,330   20,584  
Research and development   7,193   6,997     26,002   27,681  
General and administrative   2,434   2,250     8,875   8,828  
Stock based compensation   645   2,519     2,721   4,982  
Amortization of intangible assets   353   560     1,625   2,130  
Depreciation   1,260   1,246     4,441   4,691  
Intangible impairment   -   -     669   -  
Goodwill impairment   -   -     -   2,425  
    17,290   18,843     63,663   71,321  
Income (loss) from operations   696   (4,994 )   5,261   (20,210 )
                     
Interest and other income   227   82     479   662  
Income (loss) before provision for income taxes   923   (4,912 )   5,740   (19,548 )
                     
Provision for (recovery of) income taxes                    
Current   49   70     150   165  
Future   -   (253 )   -   (196 )
    49   (183 )   150   (31 )
                     
Net income (loss) for the year   874   (4,729 )   5,590   (19,517 )
                     
Earnings (loss) per share                    
Basic   0.006   (0.035 )   0.041   (0.144 )
Diluted   0.006   (0.035 )   0.040   (0.144 )
                     
Basic weighted average number of shares outstanding   136,724,475   135,757,373     136,256,258   135,636,736  
Diluted weighted average number of shares outstanding   141,248,727   135,757,373     140,715,500   135,636,736  
                     
 
Sandvine Corporation    
Consolidated Statements of Cash Flows    
For the three and twelve month periods ended November 30, 2010    
(in Canadian dollars, amounts in thousands)    
 
    Three months ended     Fiscal year ended  
                     
    November 30
2010
$
  November 30
2009
$
    November 30
2010
$
  November 30
2009
$
 
Cash provided by (used in)        
                     
Operating activities                    
Net income (loss) for the year   874   (4,729 )   5,590   (19,517 )
Items not affecting cash                    
  Amortization of intangible assets   353   560     1,625   2,130  
  Depreciation   1,352   1,290     4,771   4,818  
  Foreign exchange loss   109   133     93   127  
  Stock-based compensation   645   2,519     2,721   4,982  
  Goodwill impairment   -   -     -   2,425  
  Future income tax recovery   -   (253 )   -   (196 )
  Intangible impairment   -   -     669   -  
                     
    3,333   (480 )   15,469   (5,231 )
                     
Changes in non-current balances   261   268     (68 ) 605  
Changes in non-cash working capital balances   (419 ) (237 )   (3,981 ) 3,521  
                     
    3,175   (449 )   11,420   (1,105 )
                     
Investing activities                    
Purchase of plant, equipment and intangible software assets   (2,470 ) (1,354 )   (7,541 ) (5,789 )
Purchase of marketable securities   (208 ) -     (82,897 ) (470,411 )
Sale of marketable securities   84,472   1,413     166,291   475,647  
                     
    81,794   59     75,853   (553 )
                     
Financing activities                    
Proceeds from the issuance of share capital   228   63     673   127  
                     
Net increase (decrease) in cash during year   85,197   (327 )   87,946   (1,531 )
                     
Cash and cash equivalents – beginning of year   5,090   2,668     2,341   3,872  
                     
Cash and cash equivalents – end of year   90,287   2,341     90,287   2,341  
                     

Contact Information

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