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Press release from CNW Group

Sandvine Reports Q3 2012 Results

Thursday, October 04, 2012

Sandvine Reports Q3 2012 Results07:00 EDT Thursday, October 04, 2012WATERLOO, ON, Oct. 4, 2012 /CNW/ - Sandvine, (TSX: SVC) (AIM: SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $21.8 million in revenue for its third quarter of 2012, a non-IFRS loss of $0.4 million and a net loss of $0.9 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS).Q3 2012 highlights:Revenue by access technology market: DSL 46%; wireless 42%; cable 11%; other 1%Revenue by geography: NA 18%; EMEA 18%; APAC 37%; CALA 27%Revenue by sales channel: reseller 78%; direct 22%Gross margin: 70%Cash, cash equivalents and short-term investments balance: $73.2 millionConcluded a new supply arrangement for sales to a multinational operator group customer, and received significant follow-on orders from the groupWon over $5 million in expansion orders for a tier-1 customer in the Asia Pacific sales regionWon seven new service provider customers."While we acknowledge that more work is needed to better leverage our market opportunity, we believe that our Q3 results are an indication of progress," said Dave Caputo, Sandvine's President and CEO. "We received some very significant follow-on orders from Tier-1 customers, which has been our main area of focus in 2012 and will be an important aspect of returning to strong growth."FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars) Millions of dollars, except per share data and where otherwise indicatedQ32012Q22012ChangeQ32011ChangeRevenue21.818.617%25.8-15%Gross Margin percent70%74%-4pp76%-6ppExpenses16.817.9-6%18.2-8%Net (Loss) Income(0.9)(4.2) 1.7 Diluted (Loss) Income Per Share(0.006)(0.030) 0.012 Non-IFRS (Loss)1 Income(0.4)(3.5) 2.5 Non-IFRS Diluted (Loss) Income Per Share1(0.003)(0.025) 0.018 1 See Table 1 below regarding non-IFRS financial measuresCONFERENCE 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 numberToll-free North AmericaToll-free United Kingdom416 644 3414800 814 48590800 358 5256A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4565803#) from approximately 10:30 a.m. Eastern time today through October 11.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 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 85 countries serving hundreds of millions of broadband and mobile data subscribers, Sandvine is enhancing the Internet experience worldwide. For more information, please visit 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 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 Company has increased its dependence on certain third party sub-assembly manufacturers and any disruption in the operations or quality of those suppliers or any increase in expected lead times from those suppliers could result in lost or delayed revenue and/or reduced profits;The majority of the Company's operating expenses are denominated in Canadian dollars, U.S. dollars, New Israeli Shekels and Indian rupees. The Company's earnings are impacted by fluctuations in the exchange rates between the U.S. dollar and these currencies.Table 11. Non-IFRS Financial MeasuresThe following table provides a reconciliation of net income (loss) and related per share amounts to non-IFRS net income (loss) and the related per share amounts for the periods indicated.  These non-IFRS financial measures, which are used internally by management to evaluate the Company's ongoing performance, exclude the impact of stock based compensation and amortization of intangible assets acquired through business acquisitions (collectively referred to as "Non-IFRS Expenses").  The Company provides these non-IFRS financial measures as it is the Company's view that the Non-IFRS Expenses either (i) affect the comparability of results from period to period as the Non-IFRS Expenses are not part of its normal day-to-day operations or only impact the current or comparable period 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.  These non-IFRS measures are not recognized under IFRS and do not have standardized meanings prescribed by IFRS.  Therefore it is unlikely to be comparable to similarly titled measures reported by other issuers. Non-IFRS financial measures should be considered in the context of the Company's IFRS results.       Three month period endedNine month period ended August 312012$May 312012$August 312011$August 312012$August 312011$ Amounts in US$ thousandsNet income (loss)(851)(4,166)1,724(11,504)682 Adjustment for       Stock based compensation expense4375055991,4761,607  Amortization of intangible assets acquiredthrough business acquisitions61185185431569Non-IFRS Net income (loss)(353)(3,476)2,508(9,597)2,858       Three month period endedNine month period ended August 312012$May 31 2012$August 312011$August 312012$August 312011$      Diluted earnings (loss) per share(0.006)(0.030)0.012(0.083)0.005Impact on diluted earnings (loss) per share of Non-IFRS measures0.0030.0050.0060.0140.015Non-IFRS Diluted earnings (loss) per share (0.003)(0.025)0.018(0.069)0.020Sandvine CorporationConsolidated Statements of Financial Position(in thousands of United States dollars, except share and per share data) (unaudited)  As at  August 31,2012$November 30, 2011$Assets       Current assets   Cash and cash equivalents 1,5662,952Short term investments 71,63571,030Accounts receivable  25,44028,194Inventory  8,65518,230Other current assets 5,2283,586  112,524123,992Non current assets   Plant and equipment 11,62211,560Intangible assets 4,4705,813Deferred tax asset 212-Other assets 511511  16,81517,884      129,339141,876    Liabilities       Current liabilities   Trade and other payables 8,69010,787Current portion of deferred revenue 10,9649,123  19,65419,910Non current liabilities   Deferred revenue 642789Other non current liabilities 3,8176,819  4,4597,608      24,11327,518Shareholders' equity       Share capital   120,500120,472Contributed surplus 14,28812,754Accumulated comprehensive loss  195(615)Retained deficit (29,757)(18,253)  105,226114,358      129,339141,876Sandvine CorporationConsolidated Statements of Income(in thousands of United States dollars, except share and per share data) (unaudited) For the three month period ended For the nine month periodended August 31, 2012$August 31, 2011$ August 31,2012$August 31, 2011$      Revenue     Product14,62719,465 38,63251,609Service7,1666,299 21,83317,843 21,79325,764 60,46569,452Cost of sales     Product4,0884,430 13,99212,535Service2,4571,661 6,7374,785 6,5456,091 20,72917,320      Gross margin15,24819,673 39,73652,132      Expenses     Sales and marketing6,7796,013 20,00818,110Research and development7,2978,805 22,39823,551General and administrative2,7483,410 8,9529,867Other losses, net10- 567- 16,83418,228 51,92551,528      Income (loss) from operations(1,586)1,445 (12,189)604      Finance income (costs), net     Finance income3415 10694Finance costs(125)(179) (379)(553)Foreign exchange gains (losses)(182)212 (308)17Other finance gains, net1,083275 1,229644Finance income (costs), net810323 648202      Income (loss) before provision for income taxes(776)1,768 (11,541)806      Provision for (recovery of) income taxes     Current7544 175124Deferred-- (212)-Provision for (recovery of) income taxes7544 (37)124      Net income (loss) for the period(851)1,724 (11,504)682      Net income (loss) per share      Basic earnings (loss) per share(0.006)0.013 (0.083)0.005Diluted earnings (loss) per share(0.006)0.012 (0.083)0.005      Sandvine CorporationConsolidated Statements of Cash Flows(in thousands of United States dollars, except share and per share data) (unaudited) For the three month period ended For the nine month periodended August 31,2012$August 31,2011$ August 31,2012$August 31,2011$Cash provided by (used in)           Operating activities     Net income (loss) for the period(851)1,724 (11,504)682Items not affecting cash      Amortization of intangible assets348556 1,4141,486 Depreciation of plant and equipment1,2051,130 3,4813,266 Unrealized foreign exchange (gains) losses(99)(41) (18)311 Finance costs125179 379553 Other finance (gains) losses(1,083)(275) (1,229)(644) Stock-based compensation437599 1,4761,607 Deferred tax recovery-- (212)- Other(20)22 554(63) 623,894 (5,659)7,198      Changes in non current balances(489)59 (3,158)154Changes in non-cash working capital balances(2,729)(7,426) 14,065(12,624) (3,156)(3,473) 5,248(5,272)      Investing activities     Purchase of plant, equipment and intangible software assets(704)(1,749) (3,785)(5,829)Purchase of short term investments(38)(37,753) (5,879)(235,668)Sale of short term investments-42,722 5,275162,362 (742)3,220 (4,389)(79,135)      Financing activities     Repayment of government grants-(85) (2,324)(2,477)Proceeds from the issuance of share capital6648 258650Payment to cancel warrant-- (80)- 66(37) (2,146)(1,827)      Effect of foreign exchange on cash and cash equivalents28(28) (99)81      Net decrease in cash during period(3,804)(318) (1,386)(86,153)      Cash and cash equivalents - Beginning of period5,3702,114 2,95287,949      Cash and cash equivalents - End of period1,5661,796 1,5661,796      Cash and cash equivalents are represented by     Balances with banks1,5661,768 1,5661,768Cash equivalents-28 -28  SOURCE: Sandvine IncorporatedFor further information: INVESTOR RELATIONS CONTACT Rick Wadsworth Sandvine +1 519 880 2400 ext. 3503 MEDIA CONTACT Jennifer Ross Sandvine +1 519 880 2400 x 3605 AIM NOMAD Andrew Chubb/Simon Bridges Canaccord Genuity Limited +44 0207 523 8000