Sandvine reports Q4 and fiscal year 2011 results

WATERLOO, ON, Jan. 12, 2012 /CNW/ - Sandvine, (TSX: SVC) (AIM: SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported revenue of $20.6 million and a GAAP net loss of 3.6 million (non-GAAP¹ loss of $2.8 million) for its fourth quarter of 2011. Fiscal year 2011 revenue was $89.3 million and the GAAP net loss was 5.8 million (non-GAAP¹: $2.2 million loss). All results are reported in U.S. dollars.

Q4 2011 highlights:

• Revenue by access technology market: DSL 21% (FY '11: 41%); wireless 37% (FY '11: 34%); cable 40% (FY '11: 23%); other 2% (FY '11: 2%)
• Revenue by geography: NA 51% (FY '11: 40%); EMEA 23% (FY '11: 30%); APAC 10% (FY '11: 19%); CALA 16% (FY '11: 11%)
• Revenue by sales channel: reseller 44% (FY'11: 54%) direct 56% (FY'11: 46%)
• 7 new customers: 4 wireless; 2 DSL ; 1 fibre-to-the-home.
• Awarded $4.5 million expansion order for Network Analytics by Tier 1 US MSO
• Won industry award for "Best Implementation of Tiered Data Pricing" for its Usage Management product and another industry award for its Network Analytics product
• David Thomson, strategy consultant and bestselling author of Blueprint to a Billion joined Sandvine's Board of Directors

"We added 44 new customers in 2011 and have the largest and most diversified customer base in our industry. We also offer the broadest portfolio of Network Policy Control solutions in the market. In 2012 our goal is to return to revenue growth and profitability by leveraging the value of our newest solutions for existing customers and continuing to add new customers across markets," 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	Q4 2011		Q3 2011		Change		Q4 2010		Change
Revenue	20.6		25.6		-19.4%		24.2		-14.7%
Gross Margin percent	72%		76%		-4pp		72%		Nil
R&D, SG&A	15.8		16.6		-4.5%		14.7		7.6%
Net Income (Loss)	-3.6		0.5		-		0.6		-
Diluted Earnings (Loss) Per Share	-0.026		0.004		-		0.004		-
Non-GAAP^1 Income (Loss)	-2.8		1.5		-		1.4		-
Non-GAAP^1 Diluted Income (Loss) Per Share	-0.020		0.010		-		0.010		-

Sandvine's cash, cash equivalents and short term investments balance at the end of the fourth quarter remained strong at $74 million (August 31, 2011: $75.1 million).

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 Toll-free North America Toll-free United Kingdom

416 644 3415 877 974 0445 0800 358 5256

A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4499834#) from approximately 10:30 a.m. Eastern time today through January 19.

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 well 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 and New Israeli Shekels. The Company's earnings are impacted by fluctuations in the exchange rates between the U.S. dollar and these currencies.

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 2011 $	August 31 2011 $	November 30 2010 $	November 30 2011 $	November 30 2010 $
	Amounts in US$ thousands
Net income (loss)	(3,635)	522	603	(5,763)		4,713
Excluded Expenses
Stock based compensation expense	650	752	631	2,760		2,631
Amortization of intangible assets acquired through business acquisitions	185	185	187	754		1,072
Intangible impairment	-	-	-	-		643
Net income (loss) excluding the impact of Excluded Expenses	(2,800)	1,459	1,421	(2,249)		9,059

	Three month period ended			Twelve month period ended
	November 30 2011 $	August 31 2011 $	November 30 2010 $	November 30 2011 $	November 30 2010 $
Diluted earnings (loss) per share	(0.026)	0.004	0.004	(0.042)	0.033
Impact on diluted earnings (loss) per share of Excluded Expenses	0.006	0.006	0.006	0.026	0.034
Diluted earnings (loss) per share excluding the impact of Excluded Expenses	(0.020)	0.010	0.010	(0.016)	0.068

Sandvine Corporation
Consolidated Balance Sheets
As at November, 2011
(in U.S. dollars, amounts in thousands)

	2011 $	2010 $
Assets		Restated
Current assets
Cash and cash equivalents	2,952	87,949
Short term investments	71,030	-
Accounts receivable	28,194	25,485
Inventory	18,230	11,268
Other	3,586	3,201
	123,992	127,903
Non current assets
Plant and equipment	11,942	12,341
Intangible assets	5,454	5,125
Other assets	511	511
	17,907	17,977
	141,899	145,880
Liabilities
Current liabilities
Accounts payable and accrued liabilities	10,688	12,005
Current portion of deferred revenue	10,269	10,257
	20,957	22,262
Non current liabilities
Deferred revenue	913	703
	21,870	22,965
Shareholders' equity
Share capital	120,711	119,570
Contributed surplus	12,358	10,007
Accumulated other comprehensive income	19,603	20,218
Deficit	(32,643)	(26,880)
	120,029	122,915
	141,899	145,880

Sandvine Corporation
Consolidated Statements of Operations
For the three and twelve month periods ended November 30, 2011
(in U.S. dollars, amounts in thousands, except share and per share data)

	(unaudited) Three month period ended		Twelve month period ended
	November 30 2011 $	November 30 2010 $	November 30 2011 $			November 30 2010 $
		Restated				Restated
Revenue
Product	13,407	18,658	64,085			70,442
Service	7,190	5,500	25,254			19,217
	20,597	24,158	89,339			89,659
Cost of sales
Product	3,976	5,274	16,493			18,526
Service	1,890	1,549	6,605			5,273
	5,866	6,823	23,098			23,799
Gross margin	14,731	17,335	66,241			65,860
Expenses
Sales and marketing	5,285	5,285	20,252			18,682
Research and development	7,748	7,033	31,669			25,093
General and administrative	2,776	2,380	10,782			8,560
Stock based compensation	650	631	2,760			2,631
Amortization of intangible assets	552	345	1,998			1,563
Depreciation	1,324	1,232	4,482			4,295
Intangible impairment	-	-	-			643
	18,335	16,906	71,943			61,467
Income (loss) from operations	(3,604)	429	(5,702)			4,393
Interest and other income	35	222	129			465
Income (loss) before provision for income taxes	(3,569)	651	(5,573)			4,858
Provision for income taxes
Current	66	48	190			145
Net income (loss) for the period	(3,635)	603	(5,763)			4,713
Earnings (loss) per share
Basic	(0.026)	0.004	(0.042)			0.035
Diluted	(0.026)	0.004	(0.042)			0.033
Basic weighted average number of shares outstanding	137,802,512	136,724,475	137,566,098			136,256,258
Diluted weighted average number of shares outstanding	137,802,512	141,248,727	137,566,098			140,715,500

Sandvine Corporation
Consolidated Interim Statements of Cash Flows
For the three and twelve month periods ended November 30, 2011
(in U.S. dollars, amounts in thousands)

		(unaudited) Three month period ended				Twelve month period ended
		November 30 2011 $		November 30 2010 $ Restated		November 30 2011 $		November 30 2010 $ Restated
Cash provided by (used in)
Operating activities
Net income (loss) for the year		(3,635)		603		(5,763)		4,713
Items not affecting cash
	Amortization of intangible assets	552		345		1,998		1,563
	Depreciation	1,363		1,322		4,678		4,615
	Unrealized foreign exchange loss	286		107		180		279
	Stock-based compensation	650		631		2,760		2,631
	Intangible impairment					-		643
	Other	(27)		-		(90)		-
		(811)		3,008		3,763		14,444
Changes in non-current balances		64		271		210		(45)
Changes in non-cash working capital balances		367		(480)		(12,102)		(3,627)
		(380)		2,799		(8,129)		10,772
Investing activities
Purchase of plant, equipment and intangible software assets		(774)		(2,426)		(6,603)		(7,313)
Purchase of short term investments		(8,245)		(203)		(243,913)		(79,871)
Sale of short term investments		10,502		82,597		172,864		161,326
		1,483		79,968		(77,652)		74,142
Financing activities
Proceeds from the issuance of share capital		183		222		833		652
Effect of foreign exchange gain on cash and cash equivalents		(130)		188		(49)		165
Net increase (decrease) in cash during year		1,156		83,177		(84,997)		85,731
Cash and cash equivalents - beginning of year		1,796		4,772		87,949		2,218
Cash and cash equivalents - end of year		2,952		87,949		2,952		87,949
Cash and cash equivalents are represented by		28		9,334		28		9,334
Balances with banks		2,924		78,615		2,924		78,615
Cash equivalents