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Press release from Marketwire

Sandvine Reports Q2 2011 Results

Thursday, July 07, 2011

Sandvine Reports Q2 2011 Results07:00 EDT Thursday, July 07, 2011WATERLOO, ONTARIO--(Marketwire - July 7, 2011) - Sandvine, (TSX:SVC)(AIM:SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported that revenue grew by 25% to $24.0 million in its second quarter of 2011 (Q1 2011: $19.2 million). The Company recorded GAAP net income of $63,000 (non-GAAP(1) net income: $1 million). Year-to-date revenue was $43.2 million, up 2% to from the comparable period of 2010. All results are reported in U.S. dollars.Sandvine achieved record wireless revenue of $11.1 million, representing 46% of the Company's revenue for the quarter (DSL: 36%, Cable: 16%)."We won seven new wireless customers in the quarter," said Dave Caputo, Sandvine's President and Chief Executive Officer. "We have built our base of over 50 wireless service provider customers largely over the last two and a half years and those efforts are paying off with new wins and several significant follow-on orders."During the second quarter, approximately 52% of total revenues came from outside North America (EMEA: 27%; APAC: 16%; CALA: 9%) and 49% of the Company's revenue was earned through reseller partners. Sandvine's second quarter results also reflect the success of recent investments in new products. "During the quarter, demand for our Service Creation solutions, which allow customers to offer differentiated services to their subscribers, was higher than for our traditional Traffic Management solutions. We are also seeing the benefit of our investment in new hardware products as the PTS 24000 and PTS 22000 products have become our customers' platforms of choice," added Caputo. "Sandvine is the market share leader in network policy control thanks to unmatched R&D efforts in the space. Our new products continue to be rewarded with orders, and we have only begun to explore how policy can unlock value for broadband network operators and subscribers."FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)Millions of dollars, except per share data and where otherwise indicatedQ2 2011Q1 2011ChangeQ2 2010ChangeRevenue24.019.225%21.511%Gross Margin percent77%71%6pp74%3ppR&D, SG&A16.114.313%11.540%Net Income (Loss)0.1(2.7)-1.7-96%Diluted Earnings (Loss) Per Share0.000(0.020)-0.012-Non-GAAP(1) Income (Loss)1.0(1.9)-3.4-71%Non-GAAP(1) Diluted Income (Loss) Per Share0.007(0.014)-0.024-71%Sandvine's cash, cash equivalents and short term investments balance at the end of the second quarter remained strong at $80.4 million, though down from comparable periods. The current quarter decline related to a use of cash from changes in working capital balances, primarily driven by a $5.7 million increase in accounts receivable.Other highlights of Sandvine's second quarter include:Won 12 new customers across network topologies, sales regions and product categories; Launched a Traffic Management Dashboard for its Network Analytics product; Published its latest Global Internet Phenomena Report, in which the Company broke the news that Netflix is now 29.7% of peak downstream traffic in North America, where it has become the largest source of Internet traffic overall. 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 3414Toll-free North America877 974 0445Toll-free United Kingdom0800 358 5263A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4450263#) from approximately 10:30 a.m. Eastern time today through July 14.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. For more information, please visit www.sandvine.com.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 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 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 endedSix month period endedMay 31 2011 $February 28 2011 $May 31 2010 $May 31 2011 $May 31 2010 $Amounts in US$ thousandsNet income (loss)63(2,713)1,697(2,650)2,162Excluded ExpensesStock based compensation expense7246347271,3581,361Amortization of intangible assets acquired through business acquisitions 192 192 325 384 699Intangible impairment--643-643Net income (loss) excluding the impact of Excluded Expenses979(1,887)3,392(908)4,865Three month period endedSix month period endedMay 31 2011 $February 28 2011 $May 31 2010 $May 31 2011 $May 31 2010 $Diluted earnings (loss) per share0.000(0.020)0.012(0.019)0.015Impact on diluted earnings (loss) per share of Excluded Expenses0.0070.0060.0120.0120.020Diluted earnings (loss) per share excluding the impact of Excluded Expenses0.007(0.014)0.024(0.007)0.035Sandvine CorporationConsolidated Interim Balance SheetsAs at May 31, 2011 (in U.S. dollars, amounts in thousands) (unaudited) May 31 2011 $November 30 2010 $RestatedAssetsCurrent assetsCash and cash equivalents2,11487,949Short term investments78,274-Accounts receivable23,65625,485Inventory13,92811,268Other4,7793,201122,751127,903Non current assetsPlant and equipment12,21912,341Intangible assets6,2845,125Other assets51151119,01417,977141,765145,880LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities7,44112,005Current portion of deferred revenue11,11010,25718,55122,262Non current liabilitiesDeferred revenue81470319,36522,965Shareholders' equityShare capital120,347119,570Contributed surplus11,12410,007Accumulated other comprehensive income20,45920,218Deficit(29,530)(26,880)122,400122,915141,765145,880Sandvine CorporationConsolidated Interim Statements of OperationsFor the three and six month periods ended May 31, 2011 (in U.S. dollars, amounts in thousands, except share and per share data) (unaudited) Three months endedSix months endedMay 31 2011 $May 31 2010 $May 31 2011 $May 31 2010 $RestatedRestatedRevenueProduct18,07516,38031,56734,177Service5,8865,16211,6098,05723,96121,54243,17642,234Cost of salesProduct3,8614,2348,0938,623Service1,6701,3563,0772,2345,5315,59011,17010,857Gross margin18,43015,95232,00631,377ExpensesSales and marketing4,8274,3929,8308,769Research and development8,4195,15515,25411,365General and administrative2,8191,9385,2554,287Stock based compensation7247271,3581,361Amortization of intangible assets546426902903Depreciation1,0271,0332,0561,959Intangible impairment-643-64318,36214,31434,65529,287Income (loss) from operations681,638(2,649)2,090Interest and other income378479131Income (loss) before provision for income taxes1051,722(2,570)2,221Provision for income taxesCurrent42258059Net income (loss) for the period631,697(2,650)2,162Earnings (loss) per shareBasic0.0000.012(0.019)0.016Diluted0.0000.012(0.019)0.015Basic weighted average number of shares outstanding137,614,545136,006,036137,347,444135,918,460Diluted weighted average number of shares outstanding142,104,108141,153,586137,347,444140,450,955Sandvine CorporationConsolidated Interim Statements of Cash FlowsFor the three and six month periods ended May 31, 2011 (in U.S. dollars, amounts in thousands) (unaudited) Three months endedSix months endedMay 31 2011 $May 31 2010 $May 31 2011 $May 31 2010 $RestatedRestatedCash provided by (used in)Operating activitiesNet income (loss) for the period631,697(2,650)2,162Items not affecting cashAmortization of intangible assets546426902903Depreciation1,0801,1112,1622,104Foreign exchange loss (gain)(94)154(80)274Stock-based compensation7247271,3581,361Other(34)643(85)6432,2854,7581,6077,447Changes in non-current balances19424111(45)Changes in non-cash working capital balances(10,565)(210)(5,909)806(8,086)4,572(4,191)8,208Investing activitiesPurchase of plant, equipment and intangible software assets(1,724)(1,622)(4,080)(2,785)Purchase of short term investments(84,697)(30,407)(197,915)(58,445)Sale of short term investments79,65926,370119,64057,667(6,762)(5,659)(82,355)(3,563)Financing activitiesProceeds from the issuance of share capital149174602226Effect of foreign exchange gain on cash and cash equivalents285910975Net increase (decrease) in cash during period(14,671)(854)(85,835)4,946Cash and cash equivalents – Beginning of period16,7858,01887,9492,218Cash and cash equivalents – End of period2,1147,1642,1147,164Cash and cash equivalents are represented byBalances with banks1,7955,6351,7955,635Cash equivalents3191,5293191,529FOR FURTHER INFORMATION PLEASE CONTACT: SandvineMEDIA CONTACTSacha DeGroot+1 519 880 2232sdegroot@sandvine.comORSandvineINVESTOR RELATIONS CONTACTRick Wadsworth+1 519 880 2400 ext. 3503rwadsworth@sandvine.comwww.sandvine.comORCanaccord Adams LimitedAIM NOMADAndrew Chubb/Simon Bridges+44 0207 050 6500