Sandvine Reports Q1 2012 Results

WATERLOO, ON, April 5, 2012 /CNW/ - Sandvine, (TSX: SVC) (AIM: SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $20.1 million in revenue for its first quarter of 2012 and a net loss of $6.5 million, which included a $3.7 million inventory write-down related to one of the Company's older hardware platforms. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS).

Q1 2012 highlights:

• Revenue by access technology market: DSL 22%; wireless 26%; cable 48%; other 4%
• Revenue by geography: NA 58%; EMEA 17%; APAC 18%; CALA 7%
• Revenue by sales channel: reseller 39%; direct 61%
• Gross margin was 54%. The $3.7 million inventory write-down negatively impacted gross margin by 18 percentage points
• Cash, cash equivalents and short-term investments balance: $74.1 million
• Software order value for Business Intelligence solutions exceeded that for the Company's traditional Traffic Optimization solutions
• Launched the latest version of Fairshare Traffic Management
• Seven new customers: three fixed wireless; two converged operators, one mobile customer and one DSL operator
• Won expansion orders of over $7 million from a Tier 1 US cable operator

"Business Intelligence was a major driver behind the multi-million dollar orders from Tier-1 US cable operators in the previous two quarters. We are focused on increasing our value to our installed base by continuing to lead the market with innovative solutions. We continue to expect revenue growth in 2012," said Dave Caputo, Sandvine's President and CEO.

FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)

Millions of dollars, except per share data and where otherwise indicated	Q1 2012	Q4 2011	Change	Q1 2011	Change
Revenue	20.1	20.9	-4%	19.2	5%
Gross Margin percent^2	54%	72%	-18pp	70%	-16pp
Expenses	17.2	17.6	-3%	15.8	9%
Net Loss^2	(6.5)	(2.1)	(4.4)	(2.7)	(3.8)
Diluted Loss Per Share^2	(0.047)	(0.015)		(0.020)
Non-IFRSExpenses^1	16.5	17.0	-3%	15.2	9%
Non-IFRSLoss^1, 2	(5.8)	(1.4)		(2.0)
Non-IFRS Diluted Loss Per Share^1, 2	(0.042)	(0.010)		(0.015)

¹ See Table 1 below regarding non-IFRS financial measures
² Q1 2012 figures include $3.7 million ($0.027 per diluted share) related to an inventory write-down

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 3414
Toll-free North America	877 974 0446
Toll-free United Kingdom	0800 358 5256

A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4524136#) from approximately 10:30 a.m. Eastern time today through April 12.

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 over 200 service provider customers in more than 85 countries serving hundreds of millions of broadband and mobile data subscribers, Sandvine is enhancing the Internet experience worldwide. For more information, please visit 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 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 network policy control 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 legislators and 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, New Israeli Shekels and Indian rupees. The Company's earnings are impacted by fluctuations in the exchange rates between the U.S. dollar and these currencies.

Table 1

1. Non-IFRS Financial Measures

The following table provides a reconciliation of net income (loss) and related per share amounts to non-IFRS net income (loss) and the related per share amounts for the periods indicated.  These non-IFRS financial measures, which are used internally by management to evaluate the Company's ongoing performance, exclude the impact of stock based compensation and amortization of intangible assets acquired through business acquisitions (collectively referred to as "Non-IFRS Expenses").  The Company provides these non-IFRS financial measures as it is the Company's view that the Non-IFRS Expenses are either (i) affecting the comparability of results from period to period as the Non-IFRS Expenses are not part of its normal day-to-day operations or only impact the current or comparable period 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.  These non-IFRS measures are not recognized under IFRS and do not have standardized meanings prescribed by IFRS.  Therefore it is unlikely to be comparable to similarly titled measures reported by other issuers. Non-IFRS financial measures should be considered in the context of the Company's IFRS results.

						Three month period ended
						February 29 2012 $				November 30 2011 $			February 28 2011 $
					Amounts in US$ thousands
Net loss						(6,487)				(2,111)			(2,694)
Adjustment for:
Stock compensation expense						534				489			477
Amortization of intangible assets acquired through business acquisitions						185				185			192
Non-IFRS Net loss						(5,768)				(1,437)			(2,025)
						Three month period ended
						February 29 2012 $				November 30 2011 $			February 28 2011 $
Diluted earnings (loss) per share						(0.047)				(0.015)			(0.020)
Impact on diluted earnings (loss) per share of Non-IFRS   measures						0.005				0.005			0.005
Non-IFRS Diluted earnings (loss) per share						(0.042)				(0.010)			(0.015)

Sandvine Corporation
Consolidated Statements of Financial Position
(in thousands of United States dollars, except share and per share data) (unaudited)

		As at
	February 29, 2012 $	November 30, 2011 $	December 1, 2010 $
Assets
Current assets
Cash and cash equivalents	5,046	2,952	87,949
Short term investments	69,077	71,030	-
Accounts receivable	24,977	28,194	25,485
Inventory	14,062	18,230	11,268
Other current assets	3,646	3,586	3,201
	116,808	123,992	127,903
Non current assets
Plant and equipment	12,028	11,560	11,866
Intangible assets	5,313	5,813	5,516
Other assets	511	511	511
	17,852	17,884	17,893
	134,660	141,876	145,796
Liabilities
Current liabilities
Trade and other payables	9,401	10,787	12,208
Current portion of deferred revenue	10,979	9,123	10,136
	20,380	19,910	22,344
Non current liabilities
Deferred revenue	866	789	598
Other non current liabilities	4,377	6,819	9,280
	5,243	7,608	9,878
	25,623	27,518	32,222
Shareholders' equity
Share capital	120,246	120,472	119,399
Contributed surplus	13,480	12,754	10,999
Accumulated comprehensive income (loss)	51	(615)	-
Retained deficit	(24,740)	(18,253)	(16,824)
	109,037	114,358	113,574
	134,660	141,876	145,796

Sandvine Corporation
Consolidated Statements of Income
(in thousands of United States dollars, except share and per share data) (unaudited)

	For the three month period ended
	February 29 2012 $	February 28 2011 $
Revenue
Product	13,030	13,492
Service	7,068	5,691
	20,098	19,183
Cost of sales
Product	7,208	4,240
Service	2,095	1,430
	9,303	5,670
Gross margin	10,795	13,513
Expenses
Sales and marketing	6,298	6,170
Research and development	7,306	6,478
General and administrative	3,025	3,173
Other losses (gains), net	537	-
	17,166	15,821
Loss from operations	(6,371)	(2,308)
Finance income (costs), net
Finance income	44	42
Finance costs	(132)	(194)
Foreign exchange gains (losses)	(126)	(196)
Other finance gains (losses), net	146	-
Finance income (costs), net	(68)	(348)
Loss before provision for income taxes	(6,439)	(2,656)
Provision for income taxes
Current	48	38
Net loss for the period	(6,487)	(2,694)
Net loss per share
Basic earnings per share	(0.047)	(0.020)
Diluted earnings per share	(0.047)	(0.020)

Sandvine Corporation
Consolidated Statements of Cash Flows
(in thousands of United States dollars, except share and per share data) (unaudited)

	For the three month period ended
	February 29 2012 $	February 28 2011 $
Cash provided by (used in)
Operating activities
Net loss for the period	(6,487)	(2,694)
Items not affecting cash
Amortization of intangible assets	538	361
Depreciation of plant and equipment	1,096	1,061
Unrealized foreign exchange (gains) losses	(237)	423
Finance costs	132	194
Other finance gains (losses)	(146)	-
Stock-based compensation	534	477
Other	583	(51)
	(3,987)	(229)
Changes in non-current balances	(2,365)	(65)
Changes in non-cash working capital balances	10,293	6,562
	3,941	6,268
Investing activities
Purchase of plant, equipment and intangible software assets	(1,728)	(2,356)
Purchase of short term investments	(3,046)	(113,218)
Sale of short term investments	5,000	39,981
	226	(75,593)
Financing activities
Repayment of government grants	(2,202)	(2.373)
Proceeds from the issuance of share capital	80	453
Payment to cancel warrant	(80)	-
	(2,202)	(1,920)
Effect of foreign exchange on cash and cash equivalents	129	81
Net increase (decrease) in cash during period	2,094	(71,164)
Cash and cash equivalents - Beginning of period	2,952	87,949
Cash and cash equivalents - End of period	5,046	16,785
Cash and cash equivalents are represented by
Balances with banks	5,018	16,466
Cash equivalents	28	319

 

 

INVESTOR RELATIONS CONTACT
Rick Wadsworth
Sandvine
[phone] ext. 3503
[email protected] 

MEDIA CONTACT
Sacha DeGroot
Sandvine
[phone]
[email protected]

AIM NOMAD
Andrew Chubb/Simon Bridges
Canaccord Adams Limited
[phone]