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Press release from CNW Group

Sandvine reports Q4 2013 results

Thursday, January 09, 2014

Sandvine reports Q4 2013 results

07:00 EST Thursday, January 09, 2014

WATERLOO, ON, Jan. 9, 2014 /CNW/ - Sandvine, (TSX:SVC) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported record revenue of $30.8 million for its fourth quarter of 2013, net income of $5.6  million and non-IFRS income of $5.9 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS), unless otherwise specified.

Other Q4 2013 highlights:

  • Revenue growth: up 12% compared to Q4 2012
  • Revenue by access technology market: wireless 40%; DSL 30%; cable 29%
  • Revenue by geography: NA 38%; EMEA 34%; CALA 17%; APAC 11%
  • Revenue by sales channel: reseller 63%; direct 37%
  • Gross margin: 75%
  • Cash: Cash, cash equivalents and short-term investments balance: $89.3 million
  • Major wins: Announced over $9 million in orders from Tier 1 operators, including $4 million in initial orders from several properties of a Tier 1 operator group in Latin America and a $5 million follow-on order from a Tier 1 North American fixed line operator that first became a customer in 2007
  • Customers: Won 25 new service provider customers, including 18 wireless operators
  • Products: Advanced the company's Network Functions Virtualization strategy by being the first vendor to demonstrate a completely virtualized Network Policy Control solution.

Sandvine's revenue for fiscal 2013 increased by 21% to $106.5 million (FY 2012: $87.9 million) and net income grew to $12.9 million (FY 2012: loss of $5.0 million).

"We grew revenue more than 20% for the year, generated over $14 million in cash and were profitable in every quarter. As a result of our success, Infonetics Research once again named Sandvine as the leader in our market." said Dave Caputo, Sandvine's President and CEO.  "Orders for Sandvine's Service Creation products, which help service providers quickly define and implement innovative new subscriber service tiers, continued to grow, and were the largest part of our business. These products represent a significant differentiator for us in the market."

FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)

Millions of dollars, except per share data and where
otherwise indicated
Change Q3
Revenue 30.8 27.5 12% 27.2 13%
Gross Margin percent 75% 71% 4pp 76% -1pp
Expenses2 12.6 12.9 -2% 15.8 -21%
Net Income 5.6 6.5 -13% 4.7 15%
Diluted Earnings Per Share 0.040 0.046 -13% 0.033 21%
Non-IFRS Income1 5.9 6.9 -14% 5.1 16%
Non-IFRS Diluted Earnings Per Share1 0.042 0.049 -14% 0.036 17%

1 See Table 1 below regarding non-IFRS financial measures
2 During the fourth quarter of 2013, the Company recognized the benefits of $4.3 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. Excluding the impact of this adjustment, operating expenses were $16.9
million. The adjustment had no impact on net income. During Q4 2012 the Company recorded
a one-time, $3.8 million reduction in operating expenses for Ontario government funding
related to its ongoing project under the Next Generation of Jobs Fund.

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     (866)-215-5508 | Confirmation Number: 36322226

A replay of the call will be available at (888) 843-7419 (passcode 36322226) from approximately 11:00 a.m. Eastern time today through January 19.

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 250 networks in over 90 countries, serving hundreds of millions of data subscribers worldwide,

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

  • 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;
  • By selling its products in certain markets through resellers, the Company is able to avoid certain costs relating to operating in those markets including but not limited to local support costs, costs of maintaining a local legal entity, administration costs, and logistics. Should the Company chose or be required to sell direct in these markets (due to customer preference, termination of a reseller relationship or other reasons)  the cost advantages described will no longer be available to the Company which could results in an increase in operating costs;
  • 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 is dependent on certain third party sub-assembly manufacturers in its supply chain 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 Twelve month period ended
  November 30,
August 31,
November 30,
November 30,
November 30,
  Amounts in US$ thousands
Net income (loss) 5,641 4,652 6,466 12,883 (5,038)
  Adjustment for          
     Stock based compensation expense 281 457 433 1,762 1,909
    Amortization of intangible assets
acquired through business
- - - - 431
Non-IFRS net income (loss) 5,922 5,109 6,899 14,645 (2,698)

  Three month period ended Twelve month period ended
  November 30,
August 31,
November 30,
November 30,
November 30,
Diluted earnings (loss) per share 0.040 0.033 0.046 0.091 (0.036)
Impact on diluted earnings (loss) per          
  share of non-IFRS measures 0.002 0.003 0.003 0.013 0.016
Non-IFRS diluted earnings (loss) per
0.042 0.036 0.049 0.104 (0.020)

Sandvine Corporation
Consolidated Statements of Financial Position
(in thousands of United States dollars, except share and per share data)

  As at
  November 30,
November 30,
Current assets    
Cash and cash equivalents 5,454 3,957
Short term investments 83,856 70,679
Accounts receivable  36,662 32,169
Inventory  7,481 6,378
Grant receivable  6,853 859
Other current assets 3,171 2,009
  143,477 116,051
Non current assets    
Plant and equipment 10,405 10,654
Intangible assets 3,477 4,443
Grant receivable - 4,343
Deferred tax asset 212 212
Other assets 511 511
  14,605 20,163
  158,082 136,214
Current liabilities    
Trade and other payables 16,566 10,453
Current portion of deferred revenue 14,214 9,350
  30,780 19,803
Non current liabilities    
Deferred revenue 1,571 503
Other non current liabilities - 3,808
  1,571 4,311
  32,351 24,114
Shareholders' equity    
Share capital  121,509 120,626
Contributed surplus 15,784 14,652
Accumulated comprehensive income (loss)  (485) 113
Retained deficit (11,077) (23,291)
  125,731 112,100
  158,082 136,214

Sandvine Corporation
Consolidated Statements of Income
(in thousands of United States dollars, except share and per share data)

  Three month period ended Twelve month period ended
  November 30,
November 30,
November 30,
November 30,
  Amounts in US$ thousands, except share and per share data
Consolidated Statement of Income Data:        
Product 21,445 19,958 72,782 58,590
Service 9,346 7,510 33,758 29,343
  30,791 27,468 106,540 87,933
Cost of Sales        
Product 4,949 5,110 16,455 19,102
Service 2,863 2,773 11,171 9,510
  7,812 7,883 27,626 28,612
Gross margin 22,979 19,585 78,914 59,321
Sales and marketing 8,220 6,151 29,700 26,159
Research and development 1,082 4,816 17,265 27,214
General and administrative 3,207 1,891 11,691 10,843
Other losses, net 74 39 153 606
  12,583 12,897 58,809 64,822
Income (loss) from operations 10,396 6,688 20,105 (5,501)
Finance income 63 41 176 147
Finance costs (62) (104) (366) (484)
Foreign exchange gains (losses) (132) 60 (199) (247)
Other finance gains (losses), net (151) - (151) 1,229
Finance income (costs), net (282) (3) (540) 645
Income (loss) before income taxes 10,114 6,685 19,565 (4,856)
Current provision for income taxes 4,473 219 6,682 394
Deferred recovery of income taxes - - - (212)
Provision for (recovery of) income taxes 4,473 219 6,682 182
Net income (loss) for the period 5,641 6,466 12,883 (5,038)
Basic earnings (loss) per share 0.041 0.047 0.093 (0.036)
Diluted earnings (loss) per share 0.040 0.046 0.091 (0.036)

Sandvine Corporation
Consolidated Statements of Cash Flows
(in thousands of United States dollars, except share and per share data)

  For the three month period
  For the twelve month period
  November 30,
November 30,
  November 30,
November 30,
Cash provided by (used in)          
Operating activities          
Net income (loss) for the period 5,641 6,466   12,883 (5,038)
Items not affecting cash          
   Amortization of intangible assets 283 307   1,133 1,721
   Depreciation of plant and equipment 937 1,120   4,288 4,601
   Unrealized foreign exchange (gains) 32 (21)   (76) (39)
  Finance costs (6) 104   298 484
  Other finance (gains) 151 -   151 (1,229)
   Stock-based compensation 281 433   1,762 1,909
  Deferred tax recovery - -   - (212)
   Other 293 18   457 572
  7,612 8,427   20,896 2,769
Changes in non-cash working capital balances (9,506) (6,515)   (195) 4,391
  (1,894) 1,912   20,701 7,160
Investing activities          
Purchase of plant, equipment and intangible          
  software assets (663) (487)   (3,390) (4,272)
Purchase of short term investments (48) (6)   (13,177) (5,885)
Sale of short term investments - 962   - 6,237
  (711) 469   (16,567) (3,920)
Financing activities          
Repayment of government grants (103)     (2,373) (2,427)
Proceeds from the issuance of share capital 580 (103)   962 344
Payment to cancel warrant - 86   - (80)
Common share repurchase - -   (1,230) -
  477 (17)   (2,641) (2,163)
Effect of foreign exchange on cash and cash          
  equivalents 33 27   4 (72)
Net increase (decrease) in cash during period (2,095) 2,391   1,497 1,005
Cash and cash equivalents - Beginning of          
  period 7,549 1,566   3,957 2,952
Cash and cash equivalents - End of period 5,454 3,957   5,454 3,957
Cash and cash equivalents are represented by          
Balances with banks 5,454 3,957   5,454 3,957



SOURCE Sandvine

For further information:

Rick Wadsworth
+1 519 880 2400 ext. 3503

Dan Deeth
+1 519 880 2232

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