Sandvine Reports Q2 2012 Results

WATERLOO, ON, July 6, 2012 /CNW/ - Sandvine, (TSX:SVC; AIM:SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $18.6 million in revenue for its second quarter of 2012, a non-IFRS loss of $3.5 million and a net loss of $4.2 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS).

Q2 2012 highlights:

• Revenue by access technology market: DSL 43%; wireless 30%; cable 25%; other 2%
• Revenue by geography: NA 48%; EMEA 18%; APAC 22%; CALA 12%
• Revenue by sales channel: reseller 47%; direct 53%
• Gross margin was 74%
• Cash, cash equivalents and short-term investments balance grew by $2.8 million to $77.0 million
• Won three new customers, including a Tier-1 Asian telco and a Top-10 US telecom provider
• Won an additional expansion order of over $1.5 million from a Tier 1 US cable operator

"Our second quarter revenue was consistent with the estimate that we provided in June," said Dave Caputo, Sandvine's President and CEO. "We continue to believe that we will soon be able to win some initial business related to opportunities with Tier 1 operators, globally, and conclude a global supply arrangement for a major multinational operator customer."

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

Millions of dollars, except per share data and where otherwise indicated		Q2 2012		Q1 2012		Change		Q2 2011		Change
Revenue		18.6		20.1		-8%		24.5		-24%
Gross Margin percent		74%		54%^2		20pp		77%		-3pp
Expenses		17.9		17.2		4%		17.5		3%
Net (Loss) Income		(4.2)		(6.5)^2				1.7
Diluted (Loss) Income Per Share		(0.030)		(0.047)^2				0.012
Non-IFRSExpenses^1		17.2		16.5		5%		16.8		3%
Non-IFRS (Loss)^1Income		(3.5)		(5.8)^2				2.4
Non-IFRS Diluted (Loss) Income Per Share^1		(0.025)		(0.042)^2				0.017

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	800 814 4859
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 4545032#) from approximately 10:30 a.m. Eastern time today through July 13.

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 forecasted demand or opportunity with any particular customer is subject to change and is not in any way guaranteed or committed and the ultimate timing of receipt of any orders from any such customer is uncertain as is the timing of when any such order may translate to revenue for the Company;
  
  
• 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			Six month period ended
			May 31 2012 $	February 29 2012 $	May 31 2011 $	May 31 2012 $	May 31 2011 $
			Amounts in US$ thousands
Net income (loss)			(4,166)	(6,487)	1,652	(10,653)	(1,042)
	Adjustment for
		Stock based compensation expense	505	534	531	1,039	1,008
		Amortization of intangible assets acquired through business acquisitions	185	185	192	370	384
Non-IFRS Net income (loss)			(3,476)	(5,768)	2,375	(9,244)	350
			Three month period ended			Six month period ended
			May 31 2012 $	February 29 2012 $	May 31 2011 $	May 31 2012 $	May 31 2011 $
Diluted earnings (loss) per share			(0.030)	(0.047)	0.012	(0.077)	(0.008)
Impact on diluted earnings (loss) per share of Non-IFRS measures			0.005	0.005	0.005	0.010	0.011
Non-IFRS Diluted earnings (loss) per share			(0.025)	(0.042)	0.017	(0.067)	0.003

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

		As at
		May 31, 2012 $	November 30, 2011 $
Assets
Current assets
Cash and cash equivalents		5,370	2,952
Short term investments		71,597	71,030
Accounts receivable		19,418	28,194
Inventory		12,303	18,230
Other current assets		2,434	3,586
		111,122	123,992
Non current assets
Plant and equipment		12,173	11,560
Intangible assets		4,777	5,813
Deferred tax asset		212	-
Other assets		511	511
		17,673	17,884
		128,795	141,876
Liabilities
Current liabilities
Trade and other payables		9,437	10,787
Current portion of deferred revenue		9,626	9,123
		19,063	19,910
Non current liabilities
Deferred revenue		755	789
Other non current liabilities		4,193	6,819
		4,948	7,608
		24,011	27,518
Shareholders' equity
Share capital		120,411	120,472
Contributed surplus		13,903	12,754
Accumulated comprehensive loss		(624)	(615)
Retained deficit		(28,906)	(18,253)
		104,784	114,358
		128,795	141,876

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			For the six month period ended
	May 31, 2012 $	May 31, 2011 $		May 31, 2012 $	May 31, 2011 $
Revenue
Product	10,975	18,652		24,005	32,144
Service	7,599	5,853		14,667	11,544
	18,574	24,505		38,672	43,688
Cost of sales
Product	2,696	3,865		9,904	8,105
Service	2,185	1,694		4,280	3,124
	4,881	5,559		14,184	11,229
Gross margin	13,693	18,946		24,488	32,459
Expenses
Sales and marketing	6,931	5,927		13,229	12,097
Research and development	7,795	8,268		15,101	14,746
General and administrative	3,179	3,284		6,204	6,457
Other losses, net	20	-		557	-
	17,925	17,479		35,091	33,300
Income (loss) from operations	(4,232)	1,467		(10,603)	(841)
Finance income (costs), net
Finance income	28	37		72	79
Finance costs	(122)	(180)		(254)	(374)
Foreign exchange gains (losses)	-	1		(126)	(195)
Other finance gains (losses), net	-	369		146	369
Finance income (costs), net	(94)	227		(162)	(121)
Income (loss) before provision for income taxes	(4,326)	1,694		(10,765)	(962)
Provision for (recovery of) income taxes
Current	52	42		100	80
Deferred	(212)	-		(212)	-
Provision for (recovery of) income taxes	(160)	42		(112)	80
Net income (loss) for the period	(4,166)	1,652		(10,653)	(1,042)
Net income (loss) per share
Basic earnings (loss) per share	(0.030)	0.012		(0.077)	(0.008)
Diluted earnings (loss) per share	(0.030)	0.012		(0.077)	(0.008)

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			For the six month period ended
		May 31, 2012 $	May 31, 2011 $		May 31, 2012 $	May 31, 2011 $
Cash provided by (used in)
Operating activities
Net income (loss) for the period		(4,166)	1,652		(10,653)	(1,042)
Items not affecting cash
	Amortization of intangible assets	528	569		1,066	930
	Depreciation of plant and equipment	1,180	1,075		2,276	2,136
	Unrealized foreign exchange (gains) losses	318	(71)		81	352
	Finance costs	122	180		254	374
	Other finance gains (losses)	-	(369)		(146)	(369)
	Stock-based compensation	505	531		1,039	1,008
	Deferred tax recovery	(212)	-		(212)	-
	Other	(9)	(34)		574	(85)
		(1,734)	3,533		(5,721)	3,304
Changes in non current balances		(304)	160		(2,669)	95
Changes in non-cash working capital balances		6,501	(11,760)		16,794	(5,198)
		4,463	(8,067)		8,404	(1,799)
Investing activities
Purchase of plant, equipment and intangible software assets		(1,353)	(1,724)		(3,081)	(4,080)
Purchase of short term investments		(2,795)	(84,697)		(5,841)	(197,915)
Sale of short term investments		275	79,659		5,275	119,640
		(3,873)	(6,762)		(3,647)	(82,355)
Financing activities
Repayment of government grants		(122)	(19)		(2,324)	(2,392)
Proceeds from the issuance of share capital		112	149		192	602
Payment to cancel warrant		-	-		(80)	-
		(10)	130		(2,212)	(1,790)
Effect of foreign exchange on cash and cash equivalents		(256)	28		(127)	109
Net increase (decrease) in cash during period		324	(14,671)		2,418	(85,835)
Cash and cash equivalents - Beginning of period		5,046	16,785		2,952	87,949
Cash and cash equivalents - End of period		5,370	2,114		5,370	2,114
Cash and cash equivalents are represented by
Balances with banks		5,351	1,795		5,351	1,795
Cash equivalents		19	319		19	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 Genuity Limited
[phone]