Attention: Technology Editors
Sandvine, (TSX:SVC)(AIM:SAND) a leading provider of intelligent network policy
control solutions for fixed and mobile operators, today reported record
quarterly revenue of $25.0 million and GAAP net income of $0.9 million
(non-GAAP(1): $1.7 million) for its fourth quarter of 2010. Fiscal 2010 revenue
was $93.8 million, 36% higher than the $68.8 million reported for fiscal 2009.
GAAP net income for fiscal 2010 was $5.6 million (non-GAAP(1): $10.1 million),
compared to a loss of $19.5 million (non-GAAP(1): $10.5 million loss) in fiscal
2009.
"The DSL market and the Asia Pacific sales region were exceptionally strong for
us in both the fourth quarter and full year. For the year, revenue from the DSL
market almost doubled and revenue from Asia Pacific grew by over 160%," said
Dave Caputo, Sandvine's President and Chief Executive Officer. "We grew revenue
in every sales region, thanks in part to our reseller revenue almost doubling
for the year. We now work with over 20 resellers globally, including four
strategic relationships with major network equipment providers."
For the fourth quarter, approximately 60% of the Company's revenue was derived
from the DSL access market (FY 2010: 47%), 22% from the mobile access market (FY
2010: 30%) and 18% from cable network operators (FY 2010: 23%). During the
fourth quarter, approximately 72% of total revenues came from outside North
America (FY 2010: 58%) and 64% of the Company's revenue was earned through
reseller partners (FY 2010: 50%).
FINANCIAL HIGHLIGHTS (All amounts are in Canadian dollars)
----------------------------------------------------------------------------
Millions of dollars, except per
share data and where otherwise Q4 Q4 Q3
indicated 2010 2009 Change 2010 Change
----------------------------------------------------------------------------
Revenue 25.0 19.0 32% 24.4 2%
Gross Margin percent 72% 73% -1pp 74% -2pp
R&D, SG&A 15.0 14.5 4% 13.8 9%
Net Income (Loss) 0.9 (4.7) - 2.2 -60%
Diluted Earnings (Loss) Per Share 0.006 (0.035) - 0.016 -63%
Non-GAAP(1) Income (Loss) 1.7 (1.8) - 3.1 -44%
Non-GAAP(1) Diluted Income (Loss)
Per Share 0.012 (0.013) - 0.022 -45%
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Sandvine's cash, cash equivalents and marketable securities balance at the end
of the fourth quarter remained strong at $90.3 million (August 31: $89.4
million; November 30, 2009: $85.8 million) and increased by $4.5 million since
November 30, 2009.
Sandvine's fiscal 2010 non-GAAP(1) net income was $10.1 million, or $0.072 per
diluted share (GAAP basis: $5.6 million, or $0.040 per diluted share) compared
to a $10.5 million loss, or $0.077 loss per diluted share for fiscal 2009 (GAAP
basis: $19.5 million loss, or 0.144 per diluted share).
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 more than 90 million fixed line broadband subscribers and more
than 250 million mobile subscribers, a rapidly growing number of whom use
broadband data services. In the fourth quarter of 2010 Sandvine won five new
customers.
-- By access technology: two DSL service providers, two mobile service
providers and one cable operator.
-- By geography: three from EMEA, one from Asia Pacific and one from North
America.
-- Sales channel: two customers were won through reseller partners,
including one through a strategic relationship with a global network
equipment vendor.
Change in Functional and Reporting Currency
As a result of the continuing shift experienced in the proportion of Sandvine's
revenues, expenses, assets and liabilities that are denominated in U.S. dollars
(USD), and its expectation that this shift will continue in future periods,
effective December 1, 2010 Sandvine has adopted the USD as its functional and
reporting currency. In conjunction with adopting the US dollar as the Company's
reporting currency, certain historical USD denominated financial results have
been included in the Company's Management's Discussion and Analysis, filed on
SEDAR. This information is provided for the purpose of assisting readers in
comparing such results with results to be reported after December 1, 2010.
CONFERENCE CALL
The 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 number 416 644 3416
Toll-free North America 877 974 0446
Toll-free United Kingdom 0800 358 5263
A replay of the call will be available at 416-640-1917 or toll-free at
877-289-8525 (passcode 4398340#) from approximately 10:30 a.m. Eastern time
today through January 20.
ABOUT SANDVINE
Sandvine'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.
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. 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
intelligent broadband network management 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 while its
revenues and cost of sales are generally denominated in U.S. dollars.
The Company's earnings are impacted by fluctuations in the exchange
rates between these and other currencies in which the Company trades.
Table 1
1. Non-GAAP Financial Measures
The 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 Twelve month
period ended period ended
----------------------------------------------------------------------------
November August November November November
30 31 30 30 30
2010 2010 2009 2010 2009
$ $ $ $ $
Amounts in thousands
Net income
(loss) 874 2,200 (4,729) 5,590 (19,517)
Excluded
Expenses
Stock based
compensation
expense 645 666 2,519 2,721 4,982
Amortization of
intangible
assets acquired
through
business
acquisitions 191 192 400 1,113 1,600
Goodwill
impairment - - - - 2,425
Intangible
impairment - - - 669 -
----------------------------------------------------------------------------
Net income
(loss)
excluding the
impact of
Excluded
Expenses 1,710 3,058 (1,810) 10,093 (10,510)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three month Twelve month
period ended period ended
----------------------------------------------------------------------------
November August November November November
30 31 30 30 30
2010 2010 2009 2010 2009
$ $ $ $ $
Diluted earnings
(loss) per
share 0.006 0.016 (0.035) 0.040 (0.144)
Impact on
diluted
earnings (loss)
per share of
Excluded
Expenses 0.006 0.006 0.022 0.032 0.067
----------------------------------------------------------------------------
Diluted earnings
(loss) per
share excluding
the impact of
Excluded
Expenses 0.012 0.022 (0.013) 0.072 (0.077)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sandvine Corporation
Consolidated Balance Sheets
As at November 30, 2010
(in Canadian dollars, amounts in thousands)
2010 2009
$ $
Assets
Current assets
Cash and cash equivalents 90,287 2,341
Marketable securities - 83,423
Accounts receivable 26,163 20,741
Inventory 11,568 9,744
Other 3,286 1,773
-----------------------
131,304 118,022
-----------------------
Non current assets
Plant and equipment 12,669 13,026
Intangible assets 5,261 5,221
Other assets 525 -
-----------------------
18,455 18,247
-----------------------
149,759 136,269
-----------------------
-----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 12,324 10,732
Current portion of deferred revenue 10,530 7,513
-----------------------
22,854 18,245
-----------------------
Non current liabilities
Deferred revenue 722 790
-----------------------
23,576 19,035
-----------------------
Shareholders' equity
Share capital 147,707 146,820
Contributed surplus 11,382 9,000
Accumulated other comprehensive loss - (90)
Deficit (32,906) (38,496)
-----------------------
126,183 117,234
-----------------------
149,759 136,269
-----------------------
-----------------------
Sandvine Corporation
Consolidated Statements of Operations
For the three and twelve month periods ended November 30, 2010
(in Canadian dollars, amounts in thousands, except share and per share
data)
Three months ended Fiscal year ended
----------------------------------------------------
November 30 November 30 November 30 November 30
2010 2009 2010 2009
$ $ $ $
Revenue
Product 19,433 14,913 73,847 51,958
Service 5,615 4,119 19,915 16,890
----------------------------------------------------
25,048 19,032 93,762 68,848
----------------------------------------------------
Cost of sales
Product 5,478 4,164 19,383 14,375
Service 1,584 1,019 5,455 3,362
----------------------------------------------------
7,062 5,183 24,838 17,737
----------------------------------------------------
Gross margin 17,986 13,849 68,924 51,111
----------------------------------------------------
Expenses
Sales and marketing 5,405 5,271 19,330 20,584
Research and
development 7,193 6,997 26,002 27,681
General and
administrative 2,434 2,250 8,875 8,828
Stock based
compensation 645 2,519 2,721 4,982
Amortization of
intangible assets 353 560 1,625 2,130
Depreciation 1,260 1,246 4,441 4,691
Intangible impairment - - 669 -
Goodwill impairment - - - 2,425
----------------------------------------------------
17,290 18,843 63,663 71,321
----------------------------------------------------
Income (loss) from
operations 696 (4,994) 5,261 (20,210)
Interest and other
income 227 82 479 662
----------------------------------------------------
Income (loss) before
provision for income
taxes 923 (4,912) 5,740 (19,548)
----------------------------------------------------
Provision for
(recovery of) income
taxes
Current 49 70 150 165
Future - (253) - (196)
----------------------------------------------------
49 (183) 150 (31)
----------------------------------------------------
Net income (loss) for
the year 874 (4,729) 5,590 (19,517)
----------------------------------------------------
----------------------------------------------------
Earnings (loss) per
share
Basic 0.006 (0.035) 0.041 (0.144)
----------------------------------------------------
Diluted 0.006 (0.035) 0.040 (0.144)
----------------------------------------------------
Basic weighted average
number of shares
outstanding 136,724,475 135,757,373 136,256,258 135,636,736
----------------------------------------------------
----------------------------------------------------
Diluted weighted
average number of
shares outstanding 141,248,727 135,757,373 140,715,500 135,636,736
----------------------------------------------------
----------------------------------------------------
Sandvine Corporation
Consolidated Statements of Cash Flows
For the three and twelve month periods ended November 30, 2010
(in Canadian dollars, amounts in thousands)
Three months ended Fiscal year ended
-------------------------------------------------
November 30 November 30 November 30 November 30
2010 2009 2010 2009
$ $ $ $
Cash provided by (used in)
Operating activities
Net income (loss) for the
year 874 (4,729) 5,590 (19,517)
Items not affecting cash
Amortization of
intangible assets 353 560 1,625 2,130
Depreciation 1,352 1,290 4,771 4,818
Foreign exchange loss 109 133 93 127
Stock-based compensation 645 2,519 2,721 4,982
Goodwill impairment - - - 2,425
Future income tax
recovery - (253) - (196)
Intangible impairment - - 669 -
-------------------------------------------------
3,333 (480) 15,469 (5,231)
Changes in non-current
balances 261 268 (68) 605
Changes in non-cash
working capital balances (419) (237) (3,981) 3,521
-------------------------------------------------
3,175 (449) 11,420 (1,105)
-------------------------------------------------
Investing activities
Purchase of plant,
equipment and intangible
software assets (2,470) (1,354) (7,541) (5,789)
Purchase of marketable
securities (208) - (82,897) (470,411)
Sale of marketable
securities 84,472 1,413 166,291 475,647
-------------------------------------------------
81,794 59 75,853 (553)
-------------------------------------------------
Financing activities
Proceeds from the issuance
of share capital 228 63 673 127
-------------------------------------------------
Net increase (decrease) in
cash during year 85,197 (327) 87,946 (1,531)
Cash and cash equivalents
- beginning of year 5,090 2,668 2,341 3,872
-------------------------------------------------
Cash and cash equivalents
- end of year 90,287 2,341 90,287 2,341
-------------------------------------------------
-------------------------------------------------
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