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Press release from CNW Group

Sandvine reports Q2 2013 results

Wednesday, July 03, 2013

Sandvine reports Q2 2013 results

07:00 EDT Wednesday, July 03, 2013

WATERLOO, ON, July 3, 2013 /CNW/ - Sandvine, (TSX:SVC) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $23.5 million in revenue for its second quarter of 2013, non-IFRS income of $1.4 million and net income of $0.9 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS), unless otherwise specified.

Q2 2013 highlights:

  • Revenue growth compared to Q2 2012: 27%
  • Revenue by access technology market: wireless 37%; DSL 37%; cable 25%
  • Revenue by geography: NA 36%; APAC 26%; EMEA 26%; CALA 12%
  • Revenue by sales channel: reseller 61%; direct 39%
  • Gross margin: 74%
  • Cash, cash equivalents and short-term investments balance: $87.4 million
  • Announced over $3 million in follow-on orders from a leading North American cable operator that has been a Sandvine customer since 2005
  • Announced over $4 million in orders from a new nationwide South East Asian operator
  • Won eleven new service provider customers
  • Year-to-date revenue growth: 26%

"Year-to-date revenue is up more than 25% and we continue to believe that we are well-positioned for a year of strong revenue growth," said Dave Caputo, Sandvine's President and CEO. "While we had anticipated additional significant orders during the second quarter, some have arrived in the month of June. We are also pleased to have remained profitable in the second quarter and to have grown our cash balance again."

FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)            
Millions of dollars, except per share data and where
otherwise indicated
    Q2
2013
    Q2
2012
    Change     Q1
2013
    Change
Revenue     23.5     18.6     27%     25.0     -6%
Gross Margin percent     74%     74%     nil     72%     2pp
Expenses2     14.3     17.9     -20%     16.1     -11%
Net Income (Loss)     0.9     (4.2)           1.7     -47%
Diluted Earnings (Loss) Per Share     0.006     (0.030)           0.012     -50%
                               
Non-IFRS Income (Loss)1     1.4     (3.5)           2.2     -37%
Non-IFRS Diluted Earnings (Loss) Per Share1     0.010     (0.025)           0.016     -38%

1 See Table 1 below regarding non-IFRS financial measures
2 During the second quarter of 2013, the Company recognized the benefits of $1.9 million of non-cash investment tax credits, or ITCs, earned in previous years. The benefit was recognized as a reduction in research and development expenses with a corresponding increase in current income tax expense. This is an accounting adjustment related to tax planning and does not represent current cash taxes. Excluding the impact of this adjustment, operating expenses were $16.1 million, unchanged from the first quarter of 2013. The adjustment had no impact on net income.

CONFERENCE CALL
The Company will discuss the financial results and business outlook on a conference call at 8:30 a.m. Eastern time today.

Toll-free North America       (888) 771-4371, confirmation number 35125484
Webcast       www.sandvine.com/investors

A replay of the call will be available at (888) 843-7419 (passcode 35125484#) from approximately 11:00 a.m. Eastern time today through July 14.

ABOUT SANDVINE
Sandvine's network policy control solutions add intelligence to fixed, mobile and converged communications service provider networks to enable services that can increase revenue and reduce network costs. Powered by Sandvine's Policy Engine and SandScript policy language, Sandvine's networking equipment provides end-to-end policy control functions including traffic classification, and policy decision and enforcement across the data, control and business planes.  Sandvine's products provide actionable business insight, the ability to deploy new subscriber services and tools to optimize traffic while enhancing subscriber Internet quality of experience.

Sandvine's network policy control solutions are deployed in more than 200 networks in over 85 countries, serving hundreds of millions of data subscribers worldwide, www.sandvine.com.

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.  In addition, the Company extends credit to its customers and resellers by virtue of agreed upon payment terms and could be exposed to collection risk on its receivables particularly if any key customer or key reseller were to face financial challenges. The Company's reseller partners may also 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 1

  1. Non-IFRS Financial Measures

The 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 ended     Six month period ended
      May 31
2013
$
    February 28
2013
$
    May 31
2012
$
    May 31
2013
$
    May 31
2012
$
                               
      Amounts in US$ thousands
Net income (loss)     892     1,698     (4,166)     2,590     (10,653)
  Adjustment for                              
    Stock based compensation expense     505     519     505     1,024     1,039
    Amortization of intangible assets acquired through business acquisitions     -     -     185     -     370
Non-IFRS Net income (loss)     1,397     2,217     (3,476)     3,614     (9,244)
                               
      Three month period ended     Six month period ended
      May 31
2013
$
    February 28
2013
$
    May 31
2012
$
    May 31
2013
$
    May 31
2012
$
                               
Diluted earnings (loss) per share     0.006     0.012     (0.030)     0.018     (0.077)
Impact on diluted earnings (loss) per share of Non-IFRS measures     0.004     0.004     0.005     0.008     0.010
Non-IFRS Diluted earnings (loss) per share     0.010     0.016     (0.025)     0.026     (0.067)



       
Sandvine Corporation
Consolidated Statements of Financial Position
(in thousands of United States dollars, except share and per share data) (unaudited)
       
      As at
      May 31
2013
$
    November 30
2012
$
Assets            
             
Current assets            
Cash and cash equivalents       8,091     3,957
Short term investments     79,263     70,679
Accounts receivable      20,681     32,169
Inventory      8,716     6,378
Grant receivable      5,817     859
Other current assets     2,783     2,009
      125,351     116,051
Non current assets            
Plant and equipment     9,879     10,654
Intangible assets     4,036     4,443
Grant receivable     -     4,343
Deferred tax asset     212     212
Other assets     511     511
      14,638     20,163
             
      139,989     136,214
             
Liabilities            
             
Current liabilities            
Trade and other payables     10,586     10,453
Current portion of deferred revenue     13,437     9,350
      24,023     19,803
Non current liabilities            
Deferred revenue     688     503
Other non current liabilities     1,342     3,808
      2,030     4,311
             
      26,053     24,114
Shareholders' equity            
             
Share capital      120,223     120,626
Contributed surplus     15,409     14,652
Accumulated comprehensive income (loss)      (446)     113
Retained deficit     (21,250)     (23,291)
      113,936     112,100
             
      139,989     136,214



           
Sandvine Corporation
Consolidated Statements of Income
(in thousands of United States dollars, except share and per share data) (unaudited)
           
    For the three month period
ended
    For the six month period
ended
                       
    May 31, 2013
$
    May 31, 2012
$
    May 31, 2013
$
    May 31, 2012
$
                       
Revenue                      
Product   15,450     10,975     33,499     24,005
Service   8,087     7,599     15,067     14,667
    23,537     18,574     48,566     38,672
Cost of sales                      
Product   3,375     2,696     7,899     9,904
Service   2,853     2,185     5,376     4,280
    6,228     4,881     13,275     14,184
                       
Gross margin   17,309     13,693     35,291     24,488
                       
Expenses                      
Sales and marketing   7,079     6,931     14,242     13,229
Research and development   4,303     7,795     10,368     15,101
General and administrative   2,920     3,179     5,698     6,204
Other losses, net   28     20     72     557
    14,330     17,925     30,380     35,091
                       
Income (loss) from operations   2,979     (4,232)     4,911     (10,603)
                       
Finance income (costs), net                      
Finance income   31     28     70     72
Finance costs   (130)     (122)     (241)     (254)
Foreign exchange gains (losses)   14     -     (49)     (126)
Other finance gains, net   -     -     -     146
Finance income (costs), net   (85)     (94)     (220)     (162)
                       
Income (loss) before provision
for income taxes
  2,894     (4,326)     4,691     (10,765)
                       
Provision for (recovery of) income taxes                      
Current   2,002     52     2,101     100
Deferred   -     (212)     -     (212)
Provision for (recovery of) income taxes   2,002     (160)     2,101     (112)
                       
Net income (loss) for the period   892     (4,166)     2,590     (10,653)
                       
Earnings (loss) per share                      
Basic earnings (loss) per share   0.006     (0.030)     0.019     (0.077)
Diluted earnings (loss) per share   0.006     (0.030)     0.018     (0.077)



           
Sandvine Corporation
Consolidated 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 six month period
ended  
    May 31,
2013
$
    May 31,
2012
$
    May 31,
2013
$
    May 31,
2012
$
Cash provided by (used in)                      
                       
Operating activities                      
Net income (loss) for the period   892     (4,166)     2,590     (10,653)
Items not affecting cash                      
  Amortization of intangible assets   286     528     563     1,066
  Depreciation of plant and equipment   1,130     1,180     2,201     2,276
  Unrealized foreign exchange (gains) losses   15     318     (81)     81
  Finance costs   130     122     241     254
  Other finance (gains)   -     -     -     (146)
  Stock-based compensation   505     505     1,024     1,039
  Deferred tax recovery   -     (212)     -     (212)
  Other   109     (9)     166     574
    3,067     (1,734)     6,704     (5,721)
                       
Changes in non-cash working capital balances   2,981     6,197     10,829     14,125
    6,048     4,463     17,533     8,404
                       
Investing activities                      
Purchase of plant, equipment and intangible software
assets
  (972)     (1,353)     (1,822)     (3,081)
Purchase of short term investments   (5,043)     (2,795)     (8,579)     (5,841)
Sale of short term investments   -     275     -     5,275
    (6,015)     (3,873)     (10,401)     (3,647)
                       
Financing activities                      
Repayment of government grants   (66)     (122)     (2,270)     (2,324)
Proceeds from the issuance of share capital   123     112     317     192
Payment to cancel warrant   -     -     -     (80)
Common share repurchase   (647)     -     (1,012)     -
    (590)     (10)     (2,965)     (2,212)
                       
Effect of foreign exchange on cash and cash
equivalents
  (19)     (256)     (33)     (127)
                       
Net increase (decrease) in cash during period   (576)     324     4,134     2,418
                       
Cash and cash equivalents - Beginning of period   8,667     5,046     3,957     2,952
                       
Cash and cash equivalents - End of period   8,091     5,370     8,091     5,370
                       
Cash and cash equivalents are represented by                      
Balances with banks   8,091     5,351     8,091     5,351
Cash equivalents   -     19     -     19

 

 

SOURCE: Sandvine

For further information:

INVESTOR CONTACT
Rick Wadsworth
Sandvine
+1 519 880 2400 ext. 3503
rwadsworth@sandvine.com 

MEDIA CONTACT
Dan Deeth
Sandvine
+1 519 880 2232
ddeeth@sandvine.com

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