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Press release from Marketwire

Sandvine Reports Q1 2011 Results

Wednesday, April 06, 2011

Sandvine Reports Q1 2011 Results07:00 EDT Wednesday, April 06, 2011WATERLOO, ONTARIO--(Marketwire - April 6, 2011) - 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 otherwise indicatedQ1 2011Q1 2010ChangeQ4 2010ChangeRevenue19.220.7-7%24.2-20%Gross Margin percent71%75%-4pp72%-1ppR&D, SG&A14.312.910%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-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 CurrencyEffective 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 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 0447Toll-free United Kingdom0800 358 5263A 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 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 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 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 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 11. 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 endedFebruary 28 2011 $November 30 2010 $February 28 2010 $Amounts in US$ thousandsNet income (loss)(2,713)603464Excluded ExpensesStock based compensation expense634631634Amortization of intangible assets acquired through business acquisitions192187374Net income (loss) excluding the impact of Excluded Expenses(1,887)1,4211,472Three month period endedFebruary 28 2011 $November 30 2010 $February 28 2010 $Diluted earnings (loss) per share(0.020)0.0040.003Impact on diluted earnings (loss) per share of Excluded Expenses0.0060.0060.008Diluted earnings (loss) per share excluding the impact of Excluded Expenses (0.014) 0.010 0.011Sandvine CorporationConsolidated Interim Balance SheetsAs at February 28, 2011 (in U.S. dollars, amounts in thousands) (unaudited) February 28 2011 $November 30 2010 $AssetsCurrent assetsCash and cash equivalents16,78587,949Short term investments73,237-Accounts receivable17,99725,485Inventory12,13611,268Other3,9793,201124,134127,903Non current assetsPlant and equipment12,02012,341Intangible assets6,3825,125Other assets51151118,91317,977143,047145,880LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities9,52912,005Current portion of deferred revenue11,45310,25720,98222,262Non current liabilitiesDeferred revenue62070362070321,60222,965Shareholders' equityShare capital120,169119,570Contributed surplus10,46210,007Accumulated other comprehensive income20,40720,218Deficit(29,593)(26,880)121,445122,915143,047145,880Sandvine CorporationConsolidated Interim Statements of OperationsFor the three month period ended February 28, 2011 (in U.S. dollars, amounts in thousands, except share and per share data) (unaudited) February 28 2011 $February 28 2010 $RevenueProduct13,49217,797Service5,7232,89519,21520,692Cost of salesProduct4,2324,390Service1,4078785,6395,268Gross margin13,57615,424ExpensesSales and marketing5,0034,377Research and development6,8356,210General and administrative2,4362,349Stock based compensation634634Amortization of intangible assets356477Depreciation1,02992616,29314,973Income (loss) from operations(2,717)451Interest and other income4247Income (loss) before provision for income taxes(2,675)498Provision for income taxesCurrent38343834Net income (loss) for the period(2,713)464Earnings (loss) per shareBasic(0 .020)0.003Diluted(0 .020)0.003Basic weighted average number of shares outstanding137,076,308135,829,754Diluted weighted average number of shares outstanding137,076,308139,591,777Sandvine CorporationConsolidated Interim Statements of Cash FlowsFor the three month period ended February 28, 2011 (in U.S. dollars, amounts in thousands) (unaudited) February 28 2011 $February 28 2010 $Cash provided by (used in)Operating activitiesNet income (loss) for the period(2,713)464Items not affecting cashAmortization of intangible assets356477Depreciation1,082993Foreign exchange loss (gain)14120Stock-based compensation634634Other(51)-(678)2,688Changes in non-current balances(83)(69)Changes in non-cash working capital balances4,6561,0203,8953,639Investing activitiesPurchase of plant, equipment and intangible software assets(2,356)(1,163)Purchase of short term investments(113,218)(28,038)Sale of short term investments39,98131,297(75,593)2,096Financing activitiesProceeds from the issuance of share capital45352Effect of foreign exchange gain (loss) on cash and cash equivalents8113Net increase in cash during the period(71,164)5,800Cash and cash equivalents – Beginning of period87,9492,218Cash and cash equivalents – End of period16,7858,018Cash and cash equivalents are represented byBalances with banks16,4663,718Cash equivalents3194,300FOR FURTHER INFORMATION PLEASE CONTACT: Rick WadsworthINVESTOR RELATIONS CONTACT: Sandvine+1 519 880 2400 ext. 3503rwadsworth@sandvine.comORSacha DeGrootMEDIA CONTACT: Sandvine+1 519 880 2232sdegroot@sandvine.comwww.sandvine.comORAndrew Chubb/Simon BridgesAIM NOMAD: Canaccord Adams Limited+44 0207 050 6500