Sandvine, (TSX:SVC)(AIM:SAND) a leading provider of intelligent network policy
control solutions for fixed and mobile operators, today reported revenue of
$19.2 million and a GAAP loss of $2.7 million (non-GAAP(1): $1.9 million loss)
for its first quarter of 2011. All results are reported in U.S. dollars.
"Since last quarter Sandvine has continued to expand the role we play in
broadband networks," said Dave Caputo, Sandvine's President and Chief Executive
Officer. "Our new Policy Traffic Switch 22000 platform is ideal for network edge
deployments, where there are unique opportunities to help service providers
manage traffic to increase revenue opportunities and run their networks more
efficiently. Also, our new joint solution with Citrix gives mobile operators an
excellent tool to enhance subscribers' quality of experience, reduce traffic in
the busy mobile packet core network and create innovative new data roaming
plans."
For the first quarter, approximately 59% of the Company's revenue was derived
from the DSL access market, 19% from the mobile access market and 22% from cable
network operators. During the first quarter, approximately 71% of total revenues
came from outside North America and 64% of the Company's revenue was earned
through reseller partners.
FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)
----------------------------------------------------------------------------
Millions of dollars, except
per share data and where Q1 Q1 Q4
otherwise indicated 2011 2010 Change 2010 Change
----------------------------------------------------------------------------
Revenue 19.2 20.7 -7% 24.2 -20%
Gross Margin percent 71% 75% -4pp 72% -1pp
R&D, SG&A 14.3 12.9 10% 14.7 -3%
Net (Loss) Income (2.7) 0.5 - 0.6 -
Diluted (Loss) Earnings Per
Share (0.020) 0.003 - 0.004 -
Non-GAAP(1) Income (Loss) (1.9) 1.5 - 1.4 -
Non-GAAP(1) Diluted Income
(Loss) Per Share (0.014) 0.011 - 0.010 -
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Sandvine's cash, cash equivalents and marketable securities balance at the end
of the first quarter remained strong at $90.0 million (November 30, 2010: $87.9
million).
Sandvine is focused on growing its fixed and mobile service provider customer
base and the number of broadband subscribers they represent. The Company has
over 200 service provider customers in over 80 countries. Together these
customers serve hundreds of millions of subscribers. In the first quarter of
2011 Sandvine had thirteen new customer wins -the highest level in over two
years.
-- By access technology: five DSL service providers, four mobile service
providers and four cable operators.
-- By geography: six from North America, five from EMEA, one two from Asia
Pacific.
-- Sales channel: four customers were won through reseller partners,
including three through a strategic relationship with a global network
equipment vendor.
Change in Functional and Reporting Currency
Effective December 1, 2010 (the "Conversion Date"), the Company adopted the U.S.
dollar ("USD") as its functional currency. This is the result of the continuing
shift that the Company has experienced in the proportion of its revenues,
expenses, assets and liabilities which are denominated in USD, and its
expectation that this shift will continue in future periods. Prior to the
Conversion Date, the Company's operations were measured in Canadian dollars
("CAD"). In conjunction with this change in functional currency, the Company
chose the USD as the Company's reporting currency. For further discussion on
this, including the manner in which historical financial information has been
converted from CAD to USD please see the Company Management Discussion and
Analysis filed at www.sedar.com.
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 3416
Toll-free North America 877 974 0447
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 4427721#) from approximately 10:30 a.m. Eastern time
today through April 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 80 countries
serving hundreds of millions of broadband and mobile data subscribers, Sandvine
is enhancing the Internet experience worldwide.
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 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.
-- The Company currently has numerous business dealings, both directly and
indirectly, with various entities based in Japan and those relationships
could be impacted by the current environmental situation being faced in
Japan. The Company does have, several suppliers within its supply chain
that source sub-components and other materials from suppliers in Japan
and to the extent that events in Japan interfere with the normal
operations of those sub-suppliers it could result in an impact to the
Company's ability to source materials and components used within the
Company's products. In addition, the Company has historically generated
a meaningful level of revenue from sales to customers and resellers
within Japan. Although the Company has not been advised of any projected
changes to network investment plans or projects of its target customers
in Japan, it is possible that the current events in Japan could impact
the future demand for the Company's products in Japan and thereby impact
the Company's reported revenues in future periods.
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
----------------------------------------------------------------------------
February 28 November 30 February 28
2011 2010 2010
$ $ $
Amounts in US$ thousands
Net income (loss) (2,713) 603 464
Excluded Expenses
Stock based compensation expense 634 631 634
Amortization of intangible assets
acquired through business
acquisitions 192 187 374
----------------------------------------------------------------------------
Net income (loss) excluding the impact
of Excluded Expenses (1,887) 1,421 1,472
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three month period ended
----------------------------------------------------------------------------
February 28 November 30 February 28
2011 2010 2010
$ $ $
Diluted earnings (loss) per share (0.020) 0.004 0.003
Impact on diluted earnings (loss) per
share of Excluded Expenses 0.006 0.006 0.008
----------------------------------------------------------------------------
Diluted earnings (loss) per share
excluding the impact of Excluded
Expenses (0.014) 0.010 0.011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sandvine Corporation
Consolidated Interim Balance Sheets
As at February 28, 2011
(in U.S. dollars, amounts in thousands) (unaudited)
February 28 November 30
2011 2010
$ $
Assets
Current assets
Cash and cash equivalents 16,785 87,949
Short term investments 73,237 -
Accounts receivable 17,997 25,485
Inventory 12,136 11,268
Other 3,979 3,201
---------------------------------
124,134 127,903
---------------------------------
Non current assets
Plant and equipment 12,020 12,341
Intangible assets 6,382 5,125
Other assets 511 511
---------------------------------
18,913 17,977
---------------------------------
143,047 145,880
---------------------------------
---------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 9,529 12,005
Current portion of deferred revenue 11,453 10,257
---------------------------------
20,982 22,262
---------------------------------
Non current liabilities
Deferred revenue 620 703
---------------------------------
620 703
---------------------------------
21,602 22,965
---------------------------------
Shareholders' equity
Share capital 120,169 119,570
Contributed surplus 10,462 10,007
Accumulated other comprehensive income 20,407 20,218
Deficit (29,593) (26,880)
---------------------------------
121,445 122,915
---------------------------------
143,047 145,880
---------------------------------
---------------------------------
Sandvine Corporation
Consolidated Interim Statements of Operations
For the three month period ended February 28, 2011
(in U.S. dollars, amounts in thousands, except share and per share data)
(unaudited)
February 28 February 28
2011 2010
$ $
Revenue
Product 13,492 17,797
Service 5,723 2,895
--------------------------------
19,215 20,692
--------------------------------
Cost of sales
Product 4,232 4,390
Service 1,407 878
--------------------------------
5,639 5,268
--------------------------------
Gross margin 13,576 15,424
--------------------------------
Expenses
Sales and marketing 5,003 4,377
Research and development 6,835 6,210
General and administrative 2,436 2,349
Stock based compensation 634 634
Amortization of intangible assets 356 477
Depreciation 1,029 926
--------------------------------
16,293 14,973
--------------------------------
Income (loss) from operations (2,717) 451
Interest and other income 42 47
--------------------------------
Income (loss) before provision for income
taxes (2,675) 498
--------------------------------
Provision for income taxes
Current 38 34
--------------------------------
38 34
--------------------------------
Net income (loss) for the period (2,713) 464
--------------------------------
--------------------------------
Earnings (loss) per share
Basic (0 .020) 0.003
--------------------------------
Diluted (0 .020) 0.003
--------------------------------
Basic weighted average number of shares
outstanding 137,076,308 135,829,754
--------------------------------
--------------------------------
Diluted weighted average number of shares
outstanding 137,076,308 139,591,777
Sandvine Corporation
Consolidated Interim Statements of Cash Flows
For the three month period ended February 28, 2011
(in U.S. dollars, amounts in thousands) (unaudited)
February 28 February 28
2011 2010
$ $
Cash provided by (used in)
Operating activities
Net income (loss) for the period (2,713) 464
Items not affecting cash
Amortization of intangible assets 356 477
Depreciation 1,082 993
Foreign exchange loss (gain) 14 120
Stock-based compensation 634 634
Other (51) -
---------------------------------
(678) 2,688
Changes in non-current balances (83) (69)
Changes in non-cash working capital
balances 4,656 1,020
---------------------------------
3,895 3,639
---------------------------------
Investing activities
Purchase of plant, equipment and intangible
software assets (2,356) (1,163)
Purchase of short term investments (113,218) (28,038)
Sale of short term investments 39,981 31,297
---------------------------------
(75,593) 2,096
---------------------------------
Financing activities
Proceeds from the issuance of share capital 453 52
---------------------------------
Effect of foreign exchange gain (loss) on
cash and cash equivalents 81 13
---------------------------------
Net increase in cash during the period (71,164) 5,800
Cash and cash equivalents - Beginning of
period 87,949 2,218
---------------------------------
Cash and cash equivalents - End of period 16,785 8,018
---------------------------------
---------------------------------
Cash and cash equivalents are represented
by
Balances with banks 16,466 3,718
Cash equivalents 319 4,300
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