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Press release from Marketwire

Sandvine Reports Q4 and Fiscal Year 2010 Results

Thursday, January 13, 2011

Sandvine Reports Q4 and Fiscal Year 2010 Results07:00 EST Thursday, January 13, 2011WATERLOO, ONTARIO--(Marketwire - Jan. 13, 2011) -Attention: Technology Editors Sandvine, (TSX:SVC)(AIM:SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported record quarterly revenue of $25.0 million and GAAP net income of $0.9 million (non-GAAP1: $1.7 million) for its fourth quarter of 2010. Fiscal 2010 revenue was $93.8 million, 36% higher than the $68.8 million reported for fiscal 2009. GAAP net income for fiscal 2010 was $5.6 million (non-GAAP1: $10.1 million), compared to a loss of $19.5 million (non-GAAP1: $10.5 million loss) in fiscal 2009."The DSL market and the Asia Pacific sales region were exceptionally strong for us in both the fourth quarter and full year. For the year, revenue from the DSL market almost doubled and revenue from Asia Pacific grew by over 160%," said Dave Caputo, Sandvine's President and Chief Executive Officer. "We grew revenue in every sales region, thanks in part to our reseller revenue almost doubling for the year. We now work with over 20 resellers globally, including four strategic relationships with major network equipment providers."For the fourth quarter, approximately 60% of the Company's revenue was derived from the DSL access market (FY 2010: 47%), 22% from the mobile access market (FY 2010: 30%) and 18% from cable network operators (FY 2010: 23%). During the fourth quarter, approximately 72% of total revenues came from outside North America (FY 2010: 58%) and 64% of the Company's revenue was earned through reseller partners (FY 2010: 50%). FINANCIAL HIGHLIGHTS (All amounts are in Canadian dollars)Millions of dollars, except per share data and where otherwise indicatedQ4 2010Q4 2009ChangeQ3 2010ChangeRevenue25.019.032%24.42%Gross Margin percent72%73%-1pp 74%-2pp R&D, SG&A15.014.54%13.89%Net Income (Loss)0.9(4.7)-2.2-60%Diluted Earnings (Loss) Per Share0.006(0.035)-0.016-63%Non-GAAP1 Income (Loss)1.7(1.8)-3.1-44%Non-GAAP1 Diluted Income (Loss) Per Share0.012(0.013)-0.022-45%Sandvine's cash, cash equivalents and marketable securities balance at the end of the fourth quarter remained strong at $90.3 million (August 31: $89.4 million; November 30, 2009: $85.8 million) and increased by $4.5 million since November 30, 2009.Sandvine's fiscal 2010 non-GAAP1 net income was $10.1 million, or $0.072 per diluted share (GAAP basis: $5.6 million, or $0.040 per diluted share) compared to a $10.5 million loss, or $0.077 loss per diluted share for fiscal 2009 (GAAP basis: $19.5 million loss, or 0.144 per diluted share).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 more than 90 million fixed line broadband subscribers and more than 250 million mobile subscribers, a rapidly growing number of whom use broadband data services. In the fourth quarter of 2010 Sandvine won five new customers.By access technology: two DSL service providers, two mobile service providers and one cable operator. By geography: three from EMEA, one from Asia Pacific and one from North America. Sales channel: two customers were won through reseller partners, including one through a strategic relationship with a global network equipment vendor. Change in Functional and Reporting Currency As a result of the continuing shift experienced in the proportion of Sandvine's revenues, expenses, assets and liabilities that are denominated in U.S. dollars (USD), and its expectation that this shift will continue in future periods, effective December 1, 2010 Sandvine has adopted the USD as its functional and reporting currency. In conjunction with adopting the US dollar as the Company's reporting currency, certain historical USD denominated financial results have been included in the Company's Management's Discussion and Analysis, filed on SEDAR. This information is provided for the purpose of assisting readers in comparing such results with results to be reported after December 1, 2010.CONFERENCE CALLThe 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 number416 644 3416Toll-free North America877 974 0446Toll-free United Kingdom0800 358 5263A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4398340#) from approximately 10:30 a.m. Eastern time today through January 20.ABOUT SANDVINESandvine'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 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 INFORMATIONCertain 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 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 intelligent broadband network management 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 while its revenues and cost of sales are generally denominated in U.S. dollars. The Company's earnings are impacted by fluctuations in the exchange rates between these and other currencies in which the Company trades. Table 1 1. Non-GAAP Financial MeasuresThe 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 endedTwelve month period endedNovember 30 2010 $August 31 2010 $November 30 2009 $November 30 2010 $November 30 2009 $Amounts in thousandsNet income (loss)8742,200(4,729)5,590(19,517)Excluded ExpensesStock based compensation expense6456662,5192,7214,982Amortization of intangible assets acquired through business acquisitions1911924001,1131,600Goodwill impairment----2,425Intangible impairment---669-Net income (loss) excluding the impact of Excluded Expenses1,7103,058(1,810)10,093(10,510)Three month period endedTwelve month period endedNovember 30 2010 $August 31 2010 $November 30 2009 $November 30 2010 $November 30 2009 $Diluted earnings (loss) per share0.0060.016(0.035)0.040(0.144)Impact on diluted earnings (loss) per share of Excluded Expenses0.0060.0060.0220.0320.067Diluted earnings (loss) per share excluding the impact of Excluded Expenses0.0120.022(0.013)0.072(0.077)Sandvine CorporationConsolidated Balance SheetsAs at November 30, 2010(in Canadian dollars, amounts in thousands) 2010 $2009 $AssetsCurrent assetsCash and cash equivalents90,2872,341Marketable securities-83,423Accounts receivable26,16320,741Inventory11,5689,744Other3,2861,773131,304118,022Non current assetsPlant and equipment12,66913,026Intangible assets5,2615,221Other assets525-18,45518,247149,759136,269LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities12,32410,732Current portion of deferred revenue10,5307,51322,85418,245Non current liabilitiesDeferred revenue72279023,57619,035Shareholders' equityShare capital147,707146,820Contributed surplus11,3829,000Accumulated other comprehensive loss-(90)Deficit(32,906)(38,496)126,183117,234149,759136,269Sandvine CorporationConsolidated Statements of OperationsFor the three and twelve month periods ended November 30, 2010(in Canadian dollars, amounts in thousands, except share and per share data)Three months endedFiscal year endedNovember 30 2010 $November 30 2009 $November 30 2010 $November 30 2009 $RevenueProduct19,43314,91373,84751,958Service5,6154,11919,91516,89025,04819,03293,76268,848Cost of salesProduct5,4784,16419,38314,375Service1,5841,0195,4553,3627,0625,18324,83817,737Gross margin17,98613,84968,92451,111ExpensesSales and marketing5,4055,27119,33020,584Research and development7,1936,99726,00227,681General and administrative2,4342,2508,8758,828Stock based compensation6452,5192,7214,982Amortization of intangible assets3535601,6252,130Depreciation1,2601,2464,4414,691Intangible impairment--669-Goodwill impairment---2,42517,29018,84363,66371,321Income (loss) from operations696(4,994)5,261(20,210)Interest and other income22782479662Income (loss) before provision for income taxes923(4,912)5,740(19,548)Provision for (recovery of) income taxesCurrent4970150165Future-(253)-(196)49(183)150(31)Net income (loss) for the year874(4,729)5,590(19,517)Earnings (loss) per shareBasic0.006(0.035)0.041(0.144)Diluted0.006(0.035)0.040(0.144)Basic weighted average number of shares outstanding136,724,475135,757,373136,256,258135,636,736Diluted weighted average number of shares outstanding141,248,727135,757,373140,715,500135,636,736Sandvine CorporationConsolidated Statements of Cash FlowsFor the three and twelve month periods ended November 30, 2010(in Canadian dollars, amounts in thousands) Three months endedFiscal year endedNovember 30 2010 $November 30 2009 $November 30 2010 $November 30 2009 $Cash provided by (used in)Operating activitiesNet income (loss) for the year874(4,729)5,590(19,517)Items not affecting cashAmortization of intangible assets3535601,6252,130Depreciation1,3521,2904,7714,818Foreign exchange loss10913393127Stock-based compensation6452,5192,7214,982Goodwill impairment---2,425Future income tax recovery-(253)-(196)Intangible impairment--669-3,333(480)15,469(5,231)Changes in non-current balances261268(68)605Changes in non-cash working capital balances(419)(237)(3,981)3,5213,175(449)11,420(1,105)Investing activitiesPurchase of plant, equipment and intangible software assets(2,470)(1,354)(7,541)(5,789)Purchase of marketable securities(208)-(82,897)(470,411)Sale of marketable securities84,4721,413166,291475,64781,7945975,853(553)Financing activitiesProceeds from the issuance of share capital22863673127Net increase (decrease) in cash during year85,197(327)87,946(1,531)Cash and cash equivalents – beginning of year5,0902,6682,3413,872Cash and cash equivalents – end of year90,2872,34190,2872,341FOR FURTHER INFORMATION PLEASE CONTACT: SandvineINVESTOR RELATIONS CONTACTRick Wadsworth+1 519 880 2400 ext. 3503rwadsworth@sandvine.comORSandvineMEDIA CONTACTSacha DeGroot+1 519 880 2232sdegroot@sandvine.comORCanaccord Adams LimitedAIM NOMADAndrew Chubb/Simon Bridges+44 0207 050 6500