Sandvine, (TSX:SVC)(AIM:SAND) a leading provider of intelligent network policy
control solutions for fixed and mobile operators, today reported that revenue
grew to a record $25.6 million in its third quarter of 2011. Revenue was up by
7% compared to the previous quarter (Q2 2011: $24.0 million) and up by 10%
compared to Q3 2010 (Q3 2010: $23.3 million). The Company recorded GAAP net
income of $522,000 (non-GAAP(1) net income: $1.5 million). All results are
reported in U.S. dollars.
The DSL and wireless markets, which represented 48% and 32% of revenues
respectively (cable: 18%), continue to fuel Sandvine's revenue growth. During
the third quarter, the Company also achieved record revenue of $10.7 million
from the EMEA region, which represented 42% of revenue (NA: 33%; CALA: 13%;
APAC: 12%).
Sandvine added 12 new service provider customers in the third quarter, including
eight wireless customers. Year-to-date, Sandvine has added 37 customers
(including 19 wireless customers), well ahead of the 26 total customers added in
FY 2010.
"In a given quarter approximately 80% of our order value typically comes from
follow-on business from existing customers. The accelerated pace of new customer
wins this year gives us an excellent opportunity to drive follow-on business in
the future," said Dave Caputo, Sandvine's President and CEO.
FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)
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Millions of dollars, except per
share data and where otherwise Q3 Q2 Q3
indicated 2011 2011 Change 2010 Change
----------------------------------------------------------------------------
Revenue 25.6 24.0 7% 23.3 10%
Gross Margin percent 76% 77% -1pp 74% 2pp
R&D, SG&A 16.6 16.1 3% 13.2 25%
Net Income (Loss) 0.5 0.1 729% 1.9 -73%
Diluted Earnings (Loss) Per
Share 0.004 0.000 900% 0.014 -71%
Non-GAAP(1) Income (Loss) 1.5 1.0 49% 2.8 -47%
Non-GAAP(1) Diluted Income
(Loss) Per Share 0.010 0.007 43% 0.020 -50%
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Sandvine's cash, cash equivalents and short term investments balance at the end
of the second quarter remained strong at $75.1 million, which was down from
comparable periods primarily due to changes in working capital and capital asset
additions.
Other highlights of Sandvine's third quarter include:
- Launched a Real-Time Entertainment Dashboard for its Network Analytics product;
- Released version 4 of its Usage Management product;
- Demonstrated LTE-readiness through work with four existing customers on the
LTE path.
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 800 814 4859
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 4474688#) from approximately 10:30 a.m. Eastern time
today through October 13.
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 well 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 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 period ended Nine month period ended
----------------------------------------------------------------------------
August 31 May 31 August 31 August 31 August 31
2011 2011 2010 2011 2010
$ $ $ $ $
Amounts in US$ thousands
Net income (loss) 522 63 1,949 (2,128) 4,110
Excluded Expenses
Stock based
compensation
expense 752 724 639 2,110 2,000
Amortization of
intangible assets
acquired through
business
acquisitions 185 192 184 569 883
Intangible
impairment - - - - 643
----------------------------------------------------------------------------
Net income (loss)
excluding the
impact of Excluded
Expenses 1,459 979 2,772 551 7,636
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three month period ended Nine month period ended
----------------------------------------------------------------------------
August 31 May 31 August 31 August 31 August 31
2011 2011 2010 2011 2010
$ $ $ $ $
Diluted earnings
(loss) per share 0.004 0.000 0.014 (0.015) 0.029
Impact on diluted
earnings (loss)
per share of
Excluded Expenses 0.006 0.007 0.006 0.019 0.025
----------------------------------------------------------------------------
Diluted earnings
(loss) per share
excluding the
impact of Excluded
Expenses 0.010 0.007 0.020 0.004 0.054
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sandvine Corporation
Consolidated Interim Balance Sheets
As at August 31, 2011
(in U.S. dollars, amounts in thousands) (unaudited)
August 31 November 30
2011 2010
$ $
Restated
Assets
Current assets
Cash and cash equivalents 1,796 87,949
Short term investments 73,302 -
Accounts receivable 29,781 25,485
Inventory 17,484 11,268
Other 4,334 3,201
---------------------------
126,697 127,903
---------------------------
Non current assets
Plant and equipment 12,598 12,341
Intangible assets 5,938 5,125
Other assets 511 511
---------------------------
19,047 17,977
---------------------------
145,744 145,880
---------------------------
---------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 9,718 12,005
Current portion of deferred revenue 11,773 10,257
---------------------------
21,491 22,262
Non current liabilities
Deferred revenue 849 703
---------------------------
22,340 22,965
---------------------------
Shareholders' equity
Share capital 120,425 119,570
Contributed surplus 11,849 10,007
Accumulated other comprehensive income 20,138 20,218
Deficit (29,008) (26,880)
---------------------------
123,404 122,915
---------------------------
145,744 145,880
---------------------------
---------------------------
Sandvine Corporation
Consolidated Interim Statements of Operations
For the three and nine month periods ended August 31, 2011
(in U.S. dollars, amounts in thousands, except share and per share data)
(unaudited)
Three months ended Nine months ended
--------------------------------------------------
August 31 August 31 August 31 August 31
2011 2010 2011 2010
$ $ $ $
Restated Restated
Revenue
Product 19,111 17,607 50,678 51,784
Service 6,455 5,660 18,064 13,717
--------------------------------------------------
25,566 23,267 68,742 65,501
--------------------------------------------------
Cost of sales
Product 4,424 4,628 12,517 13,252
Service 1,638 1,490 4,715 3,724
--------------------------------------------------
6,062 6,118 17,232 16,976
--------------------------------------------------
Gross margin 19,504 17,149 51,510 48,525
--------------------------------------------------
Expenses
Sales and marketing 5,137 4,628 14,967 13,397
Research and development 8,667 6,695 23,921 18,060
General and administrative 2,751 1,893 8,006 6,180
Stock based compensation 752 639 2,110 2,000
Amortization of intangible
assets 544 315 1,446 1,218
Depreciation 1,102 1,104 3,158 3,063
Intangible impairment - - - 643
--------------------------------------------------
18,953 15,274 53,608 44,561
--------------------------------------------------
Income (loss) from
operations 551 1,875 (2,098) 3,964
Interest and other income 15 112 94 243
--------------------------------------------------
Income (loss) before
provision for income
taxes 566 1,987 (2,004) 4,207
--------------------------------------------------
Provision for income taxes
Current 44 38 124 97
--------------------------------------------------
Net income (loss) for the
period 522 1,949 (2,128) 4,110
--------------------------------------------------
--------------------------------------------------
Earnings (loss) per share
Basic 0.004 0.014 (0.015) 0.030
--------------------------------------------------
Diluted 0.004 0.014 (0.015) 0.029
--------------------------------------------------
Basic weighted average
number of shares
outstanding 137,760,777 136,466,457 137,490,171 136,101,292
--------------------------------------------------
--------------------------------------------------
Diluted weighted average
number of shares
outstanding 141,448,165 140,729,379 137,490,171 140,557,024
--------------------------------------------------
--------------------------------------------------
Sandvine Corporation
Consolidated Interim Statements of Cash Flows
For the three and nine month periods ended August 31, 2011
(in U.S. dollars, amounts in thousands) (unaudited)
Three months ended Nine months ended
---------------------------------------------------
August 31 August 31 August 31 August 31
2011 2010 2011 2010
$ $ $ $
Restated Restated
(note 2) (note 2)
Cash provided by (used
in)
Operating activities
Net income (loss) for the
period 522 1,949 (2,128) 4,110
Items not affecting cash
Amortization of
intangible assets 544 315 1,446 1,218
Depreciation 1,153 1,189 3,315 3,293
Foreign exchange loss
(gain) (26) (102) (106) 172
Stock-based
compensation 752 639 2,110 2,000
Other 22 - (63) 643
---------------------------------------------------
2,967 3,990 4,574 11,436
Changes in non-current
balances 35 (271) 146 (316)
Changes in non-cash
working capital balances (6,560) (3,953) (12,469) (3,147)
---------------------------------------------------
(3,558) (234) (7,749) 7,973
---------------------------------------------------
Investing activities
Purchase of plant,
equipment and intangible
software assets (1,749) (2,102) (5,829) (4,887)
Purchase of short term
investments (37,753) (21,223) (235,668) (79,668)
Sale of short term
investments 42,722 21,062 162,362 78,729
---------------------------------------------------
3,220 (2,263) (79,135) (5,826)
---------------------------------------------------
Financing activities
Proceeds from the
issuance of share
capital 48 204 650 430
---------------------------------------------------
Effect of foreign
exchange gain on cash
and cash equivalents (28) (99) 81 (23)
---------------------------------------------------
Net increase (decrease)
in cash during period (318) (2,392) (86,153) 2,554
Cash and cash equivalents
- Beginning of period 2,114 7,164 87,949 2,218
---------------------------------------------------
Cash and cash equivalents
- End of period 1,796 4,772 1,796 4,772
---------------------------------------------------
---------------------------------------------------
Cash and cash equivalents
are represented by
Balances with banks 1,768 3,269 1,768 3,269
Cash equivalents 28 1,503 28 1,503
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