Sandvine reports Q4 2013 results

WATERLOO, ON, Jan. 9, 2014 /CNW/ - Sandvine, (TSX:SVC) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported record revenue of $30.8 million for its fourth quarter of 2013, net income of $5.6  million and non-IFRS income of $5.9 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS), unless otherwise specified.

Other Q4 2013 highlights:

• Revenue growth: up 12% compared to Q4 2012
• Revenue by access technology market: wireless 40%; DSL 30%; cable 29%
• Revenue by geography: NA 38%; EMEA 34%; CALA 17%; APAC 11%
• Revenue by sales channel: reseller 63%; direct 37%
• Gross margin: 75%
• Cash: Cash, cash equivalents and short-term investments balance: $89.3 million
• Major wins: Announced over $9 million in orders from Tier 1 operators, including $4 million in initial orders from several properties of a Tier 1 operator group in Latin America and a $5 million follow-on order from a Tier 1 North American fixed line operator that first became a customer in 2007
• Customers: Won 25 new service provider customers, including 18 wireless operators
• Products: Advanced the company's Network Functions Virtualization strategy by being the first vendor to demonstrate a completely virtualized Network Policy Control solution.

Sandvine's revenue for fiscal 2013 increased by 21% to $106.5 million (FY 2012: $87.9 million) and net income grew to $12.9 million (FY 2012: loss of $5.0 million).

"We grew revenue more than 20% for the year, generated over $14 million in cash and were profitable in every quarter. As a result of our success, Infonetics Research once again named Sandvine as the leader in our market." said Dave Caputo, Sandvine's President and CEO.  "Orders for Sandvine's Service Creation products, which help service providers quickly define and implement innovative new subscriber service tiers, continued to grow, and were the largest part of our business. These products represent a significant differentiator for us in the market."

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

Millions of dollars, except per share data and where otherwise indicated	Q4 2013	Q4 2012	Change	Q3 2013	Change
Revenue	30.8	27.5	12%	27.2	13%
Gross Margin percent	75%	71%	4pp	76%	-1pp
Expenses^2	12.6	12.9	-2%	15.8	-21%
Net Income	5.6	6.5	-13%	4.7	15%
Diluted Earnings Per Share	0.040	0.046	-13%	0.033	21%
Non-IFRS Income^1	5.9	6.9	-14%	5.1	16%
Non-IFRS Diluted Earnings Per Share^1	0.042	0.049	-14%	0.036	17%

¹ See Table 1 below regarding non-IFRS financial measures

² During the fourth quarter of 2013, the Company recognized the benefits of $4.3 million of
non-cash investment tax credits, or ITCs, earned in previous years. The benefit was recognized
as a reduction in research and development expenses with a corresponding increase in current
income tax expense. Excluding the impact of this adjustment, operating expenses were $16.9
million. The adjustment had no impact on net income. During Q4 2012 the Company recorded
a one-time, $3.8 million reduction in operating expenses for Ontario government funding
related to its ongoing project under the Next Generation of Jobs Fund.

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			(866)-215-5508 | Confirmation Number: 36322226
Webcast			www.sandvine.com/investors

A replay of the call will be available at [phone] (passcode 36322226) from approximately 11:00 a.m. Eastern time today through January 19.

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;
• By selling its products in certain markets through resellers, the Company is able to avoid certain costs relating to operating in those markets including but not limited to local support costs, costs of maintaining a local legal entity, administration costs, and logistics. Should the Company chose or be required to sell direct in these markets (due to customer preference, termination of a reseller relationship or other reasons)  the cost advantages described will no longer be available to the Company which could results in an increase in operating costs;
• 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 is dependent on certain third party sub-assembly manufacturers in its supply chain 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			Twelve month period ended
			November 30, 2013 $	August 31, 2013 $	November 30, 2012 $	November 30, 2013 $	November 30, 2012 $
			Amounts in US$ thousands
Net income (loss)			5,641	4,652	6,466	12,883	(5,038)
	Adjustment for
		Stock based compensation expense	281	457	433	1,762	1,909
		Amortization of intangible assets acquired through business acquisitions	-	-	-	-	431
Non-IFRS net income (loss)			5,922	5,109	6,899	14,645	(2,698)

		Three month period ended			Twelve month period ended
		November 30, 2013 $	August 31, 2013 $	November 30, 2012 $	November 30, 2013 $	November 30, 2012 $
Diluted earnings (loss) per share		0.040	0.033	0.046	0.091	(0.036)
Impact on diluted earnings (loss) per
	share of non-IFRS measures	0.002	0.003	0.003	0.013	0.016
Non-IFRS diluted earnings (loss) per share		0.042	0.036	0.049	0.104	(0.020)

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

	As at
	November 30, 2013 $	November 30, 2012 $
Assets
Current assets
Cash and cash equivalents	5,454	3,957
Short term investments	83,856	70,679
Accounts receivable	36,662	32,169
Inventory	7,481	6,378
Grant receivable	6,853	859
Other current assets	3,171	2,009
	143,477	116,051
Non current assets
Plant and equipment	10,405	10,654
Intangible assets	3,477	4,443
Grant receivable	-	4,343
Deferred tax asset	212	212
Other assets	511	511
	14,605	20,163
	158,082	136,214
Liabilities
Current liabilities
Trade and other payables	16,566	10,453
Current portion of deferred revenue	14,214	9,350
	30,780	19,803
Non current liabilities
Deferred revenue	1,571	503
Other non current liabilities	-	3,808
	1,571	4,311
	32,351	24,114
Shareholders' equity
Share capital	121,509	120,626
Contributed surplus	15,784	14,652
Accumulated comprehensive income (loss)	(485)	113
Retained deficit	(11,077)	(23,291)
	125,731	112,100
	158,082	136,214

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

	Three month period ended		Twelve month period ended
	November 30, 2013 $	November 30, 2012 $	November 30, 2013 $	November 30, 2012 $
	Amounts in US$ thousands, except share and per share data
Consolidated Statement of Income Data:
Revenue
Product	21,445	19,958	72,782	58,590
Service	9,346	7,510	33,758	29,343
	30,791	27,468	106,540	87,933
Cost of Sales
Product	4,949	5,110	16,455	19,102
Service	2,863	2,773	11,171	9,510
	7,812	7,883	27,626	28,612
Gross margin	22,979	19,585	78,914	59,321
Expenses
Sales and marketing	8,220	6,151	29,700	26,159
Research and development	1,082	4,816	17,265	27,214
General and administrative	3,207	1,891	11,691	10,843
Other losses, net	74	39	153	606
	12,583	12,897	58,809	64,822
Income (loss) from operations	10,396	6,688	20,105	(5,501)
Finance income	63	41	176	147
Finance costs	(62)	(104)	(366)	(484)
Foreign exchange gains (losses)	(132)	60	(199)	(247)
Other finance gains (losses), net	(151)	-	(151)	1,229
Finance income (costs), net	(282)	(3)	(540)	645
Income (loss) before income taxes	10,114	6,685	19,565	(4,856)
Current provision for income taxes	4,473	219	6,682	394
Deferred recovery of income taxes	-	-	-	(212)
Provision for (recovery of) income taxes	4,473	219	6,682	182
Net income (loss) for the period	5,641	6,466	12,883	(5,038)
Basic earnings (loss) per share	0.041	0.047	0.093	(0.036)
Diluted earnings (loss) per share	0.040	0.046	0.091	(0.036)

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

		For the three month period ended			For the twelve month period ended
		November 30, 2013 $	November 30, 2012 $		November 30, 2013 $	November 30, 2012 $
Cash provided by (used in)
Operating activities
Net income (loss) for the period		5,641	6,466		12,883	(5,038)
Items not affecting cash
	Amortization of intangible assets	283	307		1,133	1,721
	Depreciation of plant and equipment	937	1,120		4,288	4,601
	Unrealized foreign exchange (gains)	32	(21)		(76)	(39)
	Finance costs	(6)	104		298	484
	Other finance (gains)	151	-		151	(1,229)
	Stock-based compensation	281	433		1,762	1,909
	Deferred tax recovery	-	-		-	(212)
	Other	293	18		457	572
		7,612	8,427		20,896	2,769
Changes in non-cash working capital balances		(9,506)	(6,515)		(195)	4,391
		(1,894)	1,912		20,701	7,160
Investing activities
Purchase of plant, equipment and intangible
	software assets	(663)	(487)		(3,390)	(4,272)
Purchase of short term investments		(48)	(6)		(13,177)	(5,885)
Sale of short term investments		-	962		-	6,237
		(711)	469		(16,567)	(3,920)
Financing activities
Repayment of government grants		(103)			(2,373)	(2,427)
Proceeds from the issuance of share capital		580	(103)		962	344
Payment to cancel warrant		-	86		-	(80)
Common share repurchase		-	-		(1,230)	-
		477	(17)		(2,641)	(2,163)
Effect of foreign exchange on cash and cash
	equivalents	33	27		4	(72)
Net increase (decrease) in cash during period		(2,095)	2,391		1,497	1,005
Cash and cash equivalents - Beginning of
	period	7,549	1,566		3,957	2,952
Cash and cash equivalents - End of period		5,454	3,957		5,454	3,957
Cash and cash equivalents are represented by
Balances with banks		5,454	3,957		5,454	3,957

 

 

SOURCE: Sandvine

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

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