Sandvine reports Q3 2013 results

WATERLOO, ON, Oct. 3, 2013 /CNW/ - Sandvine, (TSX:SVC) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $27.2 million in revenue for its third quarter of 2013, non-IFRS income of $5.1 million and net income of $4.7 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS), unless otherwise specified.

Other Q3 2013 highlights:

• Revenue growth: up 25% compared to Q3 2012, and up 25% year-to-date
• Revenue by access technology market: wireless 39%; DSL 32%; cable 29%
• Revenue by geography: EMEA 40%; NA 37%; APAC 12%; CALA 12%
• Revenue by sales channel: reseller 75%; direct 25%
• Gross margin: 76%
• Cash: Cash, cash equivalents and short-term investments balance: $91.4 million
• Major wins: Announced over $7 million in expansion orders from Tier 1 operators, including a North American converged operator and two European mobile properties that belong to a major multinational operator group
• Customers: Won eight new service provider customers, including two new EMEA customers placing initial orders totaling more than $4 million, and named C Spire, one of the top 10 wireless operators in the US, as a customer
• Products: Launched the Service Delivery Engine version 7, a 3GPP Release 11-compliant PCRF, and announced new relationships with Dell and Juniper that demonstrate the Company's first-mover advantage in Software Defined Networking and Network Functions Virtualization for the network policy control space.

"We are pleased to have recorded another strong quarter and believe that these results solidify Sandvine's position as the leader in the best-of-breed network policy control market," said Dave Caputo, Sandvine's President and CEO. "This represents our fourth consecutive quarter of year-over-year revenue growth, profitability, and growth in our cash and short term investments balance."

FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)
Millions of dollars, except per share data and where otherwise indicated		Q3 2013		Q3 2012		Change		Q2 2013		Change
Revenue		27.2		21.8		25%		23.5		15%
Gross Margin percent		76%		70.0%		6pp		74%		2pp
Expenses		15.8		16.8		-6%		14.3		11%
Net Income (Loss)		4.7		(0.9)				0.9		422%
Diluted Earnings (Loss) Per Share		0.033		(0.006)				0.006		450%
Non-IFRS Income (Loss)^1		5.1		(0.4)				1.4		266%
Non-IFRS Diluted Earnings (Loss) Per Share^1		0.036		(0.003)				0.010		260%

¹ See Table 1 below regarding non-IFRS financial measures

Please join Sandvine at the SDN & OpenFlow World Congress, October 15-18 in Bad Homburg, Frankfurt, Germany, where we will discuss how extending OpenFlow with subscriber and application awareness enables an SDN architecture to effectively support complex network service chaining.

CONFERENCE CALL
The Company will discuss the financial results and business outlook on a conference call at 8:30 a.m. Eastern time today.

Toll-free North America				[phone], confirmation number 35727243
Webcast				www.sandvine.com/investors

A replay of the call will be available at [phone] (passcode 35727243#) from approximately 11:00 a.m. Eastern time on the day of the call through October 13.

ABOUT SANDVINE
Sandvine's network policy control solutions add intelligence to fixed, mobile and converged communications service provider networks to enable services that can increase revenue and reduce network costs. Powered by Sandvine's Policy Engine and SandScript policy language, Sandvine's networking equipment provides end-to-end policy control functions including traffic classification, and policy decision and enforcement across the data, control and business planes.  Sandvine's products provide actionable business insight, the ability to deploy new subscriber services and tools to optimize traffic while enhancing subscriber Internet quality of experience.

Sandvine's network policy control solutions are deployed in more than 250 networks in over 90 countries, serving hundreds of millions of data subscribers worldwide, 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.  In addition, the Company extends credit to its customers and resellers by virtue of agreed upon payment terms and could be exposed to collection risk on its receivables particularly if any key customer or key reseller were to face financial challenges. The Company's reseller partners may also 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 Company has increased its dependence on certain third party sub-assembly manufacturers and any disruption in the operations or quality of those suppliers or any increase in expected lead times from those suppliers could result in lost or delayed revenue and/or reduced profits;
• 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 either (i) affect 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						Nine month period ended
			August 31 2013 $		May 31 2013 $		August 31 2012 $		August 31 2013 $		August 31 2012 $
			Amounts in US$ thousands
Net income (loss)			4,652		892		(851)		7,242		(11,504)
	Adjustment for
		Stock based compensation expense	457		505		437		1,481		1,476
		Amortization of intangible assets acquired through business acquisitions	-		-		61		-		431
Non-IFRS Net income (loss)			5,109		1,397		(353)		8,723		(9,597)
			Three month period ended						Nine month period ended
			August 31 2013 $		May 31 2013 $		August 31 2012 $		August 31 2013 $		August 31 2012 $
Diluted earnings (loss) per share			0.033		0.006		(0.006)		0.051		(0.083)
Impact on diluted earnings (loss) per share of Non-      IFRS measures			0.003		0.004		0.003		0.011		0.014
Non-IFRS Diluted earnings (loss) per share			0.036		0.010		(0.003)		0.062		(0.069)

Sandvine Corporation Consolidated Statements of Financial Position (in thousands of United States dollars, except share and per share data) (unaudited)
	As at
	August 31, 2013 $	November 30, 2012 $
Assets
Current assets
Cash and cash equivalents	7,549	3,957
Short term investments	83,809	70,679
Accounts receivable	23,165	32,169
Inventory	8,039	6,378
Grant receivable	6,099	859
Other current assets	3,363	2,009
	132,024	116,051
Non current assets
Plant and equipment	9,538	10,654
Intangible assets	3,811	4,443
Grant receivable	-	4,343
Deferred tax asset	212	212
Other assets	511	511
	14,072	20,163
	146,096	136,214
Liabilities
Current liabilities
Trade and other payables	10,814	10,453
Current portion of deferred revenue	13,922	9,350
	24,736	19,803
Non current liabilities
Deferred revenue	879	503
Other non current liabilities	1,245	3,808
	2,124	4,311
	26,860	24,114
Shareholders' equity
Share capital	120,673	120,626
Contributed surplus	15,800	14,652
Accumulated comprehensive income (loss)	(519)	113
Retained deficit	(16,718)	(23,291)
	119,236	112,100
	146,096	136,214

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 nine month period ended
	August 31, 2013 $		August 31, 2012 $			August 31, 2013 $		August 31, 2012 $
Revenue
Product	17,838		14,627			51,337		38,632
Service	9,345		7,166			24,412		21,833
	27,183		21,793			75,749		60,465
Cost of sales
Product	3,607		4,088			11,506		13,992
Service	2,932		2,457			8,308		6,737
	6,539		6,545			19,814		20,729
Gross margin	20,644		15,248			55,935		39,736
Expenses
Sales and marketing	7,238		6,779			21,480		20,008
Research and development	5,815		7,297			16,183		22,398
General and administrative	2,786		2,748			8,484		8,952
Other losses, net	7		10			79		567
	15,846		16,834			46,226		51,925
Income (loss) from operations	4,798		(1,586)			9,709		(12,189)
Finance income (costs), net
Finance income	43		34			113		106
Finance costs	(63)		(125)			(304)		(379)
Foreign exchange losses	(18)		(182)			(67)		(308)
Other finance gains, net	-		1,083			-		1,229
Finance income (costs), net	(38)		810			(258)		648
Income (loss) before provision for      income taxes	4,760		(776)			9,451		(11,541)
Provision for (recovery of) income taxes
Current	108		75			2,209		175
Deferred	-		-			-		(212)
Provision for (recovery of) income taxes	108		75			2,209		(37)
Net income (loss) for the period	4,652		(851)			7,242		(11,504)
Earnings (loss) per share
Basic earnings (loss) per share	0.034		(0.006)			0.052		(0.083)
Diluted earnings (loss) per share	0.033		(0.006)			0.051		(0.083)

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 nine month period ended
		August 31, 2013 $		August 31, 2012 $			August 31, 2013 $		August 31, 2012 $
Cash provided by (used in)
Operating activities
Net income (loss) for the period		4,652		(851)			7,242		(11,504)
Items not affecting cash
	Amortization of intangible assets	287		348			850		1,414
	Depreciation of plant and equipment	1,150		1,205			3,351		3,481
	Unrealized foreign exchange (gains)	(27)		(99)			(108)		(18)
	Finance costs	63		125			304		379
	Other finance (gains)	-		(1,083)			-		(1,229)
	Stock-based compensation	457		437			1,481		1,476
	Deferred tax recovery	-		-			-		(212)
	Other	(6)		(20)			164		554
		6,576		62			13,284		(5,659)
Changes in non-cash working capital balances		(1,518)		(3,218)			9,311		10,907
		5,058		(3,156)			22,595		5,248
Investing activities
Purchase of plant, equipment and intangible software
	assets	(905)		(704)			(2,727)		(3,785)
Purchase of short term investments		(4,546)		(38)			(13,129)		(5,879)
Sale of short term investments		-		-			-		5,275
		(5,451)		(742)			(15,856)		(4,389)
Financing activities
Repayment of government grants		-		-			(2,270)		(2,324)
Proceeds from the issuance of share capital		65		66			382		258
Payment to cancel warrant		-		-			-		(80)
Common share repurchase		(218)		-			(1,230)		-
		(153)		66			(3,118)		(2,146)
Effect of foreign exchange on cash and cash
	equivalents	4		28			(29)		(99)
Net increase (decrease) in cash during period		(542)		(3,804)			3,592		(1,386)
Cash and cash equivalents - Beginning of period		8,091		5,370			3,957		2,952
Cash and cash equivalents - End of period		7,549		1,566			7,549		1,566
Cash and cash equivalents are represented by
Balances with banks		7,549		1,566			7,549		1,566

 

SOURCE: Sandvine

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

MEDIA CONTACT
Dan Deeth
Sandvine
[phone]
[email protected]