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 Q2 Q1 Q2
otherwise indicated 2011 2011 Change 2010 Change
----------------------------------------------------------------------------
Revenue 24.0 19.2 25% 21.5 11%
Gross Margin percent 77% 71% 6pp 74% 3pp
R&D, SG&A 16.1 14.3 13% 11.5 40%
Net Income (Loss) 0.1 (2.7) - 1.7 -96%
Diluted Earnings (Loss) Per
Share 0.000 (0.020) - 0.012 -
Non-GAAP(1) Income (Loss) 1.0 (1.9) - 3.4 -71%
Non-GAAP(1) Diluted Income
(Loss) Per Share 0.007 (0.014) - 0.024 -71%
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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 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 3414
Toll-free North America 877 974 0445
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 4450263#) from approximately 10:30 a.m. Eastern time
today through July 14.
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. For more
information, please visit 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. 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 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 Six month
period ended period ended
----------------------------------------------------------------------------
May 31 February 28 May 31 May 31 May 31
2011 2011 2010 2011 2010
$ $ $ $ $
Amounts in US$ thousands
Net income (loss) 63 (2,713) 1,697 (2,650) 2,162
Excluded Expenses
Stock based compensation
expense 724 634 727 1,358 1,361
Amortization of intangible
assets acquired through
business acquisitions 192 192 325 384 699
Intangible impairment - - 643 - 643
----------------------------------------------------------------------------
Net income (loss) excluding
the impact of Excluded
Expenses 979 (1,887) 3,392 (908) 4,865
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three month Six month
period ended period ended
----------------------------------------------------------------------------
May 31 February 28 May 31 May 31 May 31
2011 2011 2010 2011 2010
$ $ $ $ $
Diluted earnings (loss) per
share 0.000 (0.020) 0.012 (0.019) 0.015
Impact on diluted earnings
(loss) per share of
Excluded Expenses 0.007 0.006 0.012 0.012 0.020
----------------------------------------------------------------------------
Diluted earnings (loss) per
share excluding the impact
of Excluded Expenses 0.007 (0.014) 0.024 (0.007) 0.035
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sandvine Corporation
Consolidated Interim Balance Sheets
As at May 31, 2011
(in U.S. dollars, amounts in thousands) (unaudited)
May 31 November 30
2011 2010
$ $
Restated
Assets
Current assets
Cash and cash equivalents 2,114 87,949
Short term investments 78,274 -
Accounts receivable 23,656 25,485
Inventory 13,928 11,268
Other 4,779 3,201
---------------------------------
122,751 127,903
---------------------------------
Non current assets
Plant and equipment 12,219 12,341
Intangible assets 6,284 5,125
Other assets 511 511
---------------------------------
19,014 17,977
---------------------------------
141,765 145,880
---------------------------------
---------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 7,441 12,005
Current portion of deferred revenue 11,110 10,257
---------------------------------
18,551 22,262
Non current liabilities
Deferred revenue 814 703
---------------------------------
19,365 22,965
---------------------------------
Shareholders' equity
Share capital 120,347 119,570
Contributed surplus 11,124 10,007
Accumulated other comprehensive income 20,459 20,218
Deficit (29,530) (26,880)
---------------------------------
122,400 122,915
---------------------------------
141,765 145,880
---------------------------------
---------------------------------
Sandvine Corporation
Consolidated Interim Statements of Operations
For 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 ended Six months ended
--------------------------------------------------
May 31 May 31 May 31 May 31
2011 2010 2011 2010
$ $ $ $
Restated Restated
Revenue
Product 18,075 16,380 31,567 34,177
Service 5,886 5,162 11,609 8,057
--------------------------------------------------
23,961 21,542 43,176 42,234
--------------------------------------------------
Cost of sales
Product 3,861 4,234 8,093 8,623
Service 1,670 1,356 3,077 2,234
--------------------------------------------------
5,531 5,590 11,170 10,857
--------------------------------------------------
Gross margin 18,430 15,952 32,006 31,377
--------------------------------------------------
Expenses
Sales and marketing 4,827 4,392 9,830 8,769
Research and development 8,419 5,155 15,254 11,365
General and administrative 2,819 1,938 5,255 4,287
Stock based compensation 724 727 1,358 1,361
Amortization of intangible
assets 546 426 902 903
Depreciation 1,027 1,033 2,056 1,959
Intangible impairment - 643 - 643
--------------------------------------------------
18,362 14,314 34,655 29,287
--------------------------------------------------
Income (loss) from
operations 68 1,638 (2,649) 2,090
Interest and other income 37 84 79 131
--------------------------------------------------
Income (loss) before
provision for income
taxes 105 1,722 (2,570) 2,221
--------------------------------------------------
Provision for income taxes
Current 42 25 80 59
--------------------------------------------------
Net income (loss) for the
period 63 1,697 (2,650) 2,162
--------------------------------------------------
--------------------------------------------------
Earnings (loss) per share
Basic 0.000 0.012 (0.019) 0.016
--------------------------------------------------
Diluted 0.000 0.012 (0.019) 0.015
--------------------------------------------------
Basic weighted average
number of shares
outstanding 137,614,545 136,006,036 137,347,444 135,918,460
--------------------------------------------------
--------------------------------------------------
Diluted weighted average
number of shares
outstanding 142,104,108 141,153,586 137,347,444 140,450,955
--------------------------------------------------
--------------------------------------------------
Sandvine Corporation
Consolidated Interim Statements of Cash Flows
For the three and six month periods ended May 31, 2011
(in U.S. dollars, amounts in thousands) (unaudited)
Three months ended Six months ended
-----------------------------------------------
May 31 May 31 May 31 May 31
2011 2010 2011 2010
$ $ $ $
Restated Restated
Cash provided by (used in)
Operating activities
Net income (loss) for the
period 63 1,697 (2,650) 2,162
Items not affecting cash
Amortization of intangible
assets 546 426 902 903
Depreciation 1,080 1,111 2,162 2,104
Foreign exchange loss (gain) (94) 154 (80) 274
Stock-based compensation 724 727 1,358 1,361
Other (34) 643 (85) 643
-----------------------------------------------
2,285 4,758 1,607 7,447
Changes in non-current
balances 194 24 111 (45)
Changes in non-cash working
capital balances (10,565) (210) (5,909) 806
-----------------------------------------------
(8,086) 4,572 (4,191) 8,208
-----------------------------------------------
Investing activities
Purchase 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
investments 79,659 26,370 119,640 57,667
-----------------------------------------------
(6,762) (5,659) (82,355) (3,563)
-----------------------------------------------
Financing activities
Proceeds from the issuance of
share capital 149 174 602 226
-----------------------------------------------
Effect of foreign exchange
gain on cash and cash
equivalents 28 59 109 75
-----------------------------------------------
Net increase (decrease) in
cash during period (14,671) (854) (85,835) 4,946
Cash and cash equivalents -
Beginning of period 16,785 8,018 87,949 2,218
-----------------------------------------------
Cash and cash equivalents -
End of period 2,114 7,164 2,114 7,164
-----------------------------------------------
-----------------------------------------------
Cash and cash equivalents are
represented by
Balances with banks 1,795 5,635 1,795 5,635
Cash equivalents 319 1,529 319 1,529
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