Sandvine Reports Q3 2008 Results
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WATERLOO, ONTARIO -- (MARKET WIRE) -- 10/08/08 -- Sandvine Corporation, (TSX: SVC)(AIM: SAND) a leading provider of intelligent broadband network solutions for DSL, cable, FTTx, fixed wireless and mobile operators, today reported third quarter revenue of $13.1 million. Net loss was $6.3 million, or $0.046 per diluted share, which includes a $1.1 million non-cash charge related to the Company's future tax assets, and $1.9 million attributable to non-cash acquisition-related expenses and stock-based compensation.
Sandvine won a record 15 new customers in the third quarter and continued to successfully diversify its revenue base. The Company realized record revenues from the DSL, EMEA and CALA markets, and from reseller partners - each strategic to Sandvine's growth plans.
"By customer count, DSL service providers worldwide have become the largest part of Sandvine's customer base, and more than a quarter of our revenue in Q3 came from reseller partners," said Dave Caputo, Sandvine's president and chief executive officer. "We have increasingly focused on expanding our business into new access technologies, new geographies and with new reseller partners. The results this quarter and in the year to date demonstrate our ongoing success with this diversification."
While the historically-strong North American market remained slow in the quarter, the FCC decision announced on August 1st may lift some of the regulatory uncertainty concerning reasonable network management practices that the Company believes has been impacting its market.
Dave Caputo said, "Subsequent to the FCC's decision, Comcast once again selected Sandvine's solutions to help improve their subscribers' online experience. The FCC's statements offered U.S. service providers some measure of clarity, but Comcast's decision to stick with Sandvine shows the industry a viable direction."
FINANCIAL HIGHLIGHTS (All amounts are in Canadian dollars unless otherwise specified) ---------------------------------------------------------------------------- Millions of dollars, except per share data and where otherwise indicated Q3 2008 Q3 2007 Change Q2 2008 Change ---------------------------------------------------------------------------- Revenue 13.1 21.2 -38% 11.1 18% Gross Margin percent 75% 74% 1 pp 77% -2 pp R&D, SG&A 12.6 10.9 15% 12.1 4% Other Operating Expenses(i) 3.0 1.4 119% 2.1 44% Net (Loss) Income(ii) (6.3) 2.7 (4.6) Diluted (Loss) Earnings Per Share (0.046) 0.020 (0.034) ---------------------------------------------------------------------------- (i) Includes $1.9 million attributable to non-cash acquisition-related expenses and stock-based compensation (Q3 2007: $0.7 million ; Q2 2008 $1.2 million). (ii) Includes a $1.1 million non-cash charge related to an increase in the valuation allowance related to the Company's future tax assets (Q3 2007 and Q2 2008: nil).
STRATEGIC UPDATE
Sandvine is focused on growing its service provider customer base and the number of broadband subscribers those customers represent. The Company has well over 100 customers serving more than 60 million broadband subscribers in over 50 countries.
In the third quarter Sandvine won 15 new customers.
- By access technology: 11 DSL providers, two mobile data operators, one fibre-to-the- home operator and one cable company.
- By geography: six from EMEA, three from Asia Pacific, three from the Caribbean and Latin America, and three from North America.
- Large customers: initial orders from a new DSL customer with over one million broadband subscribers and a new wireless customer, which by subscriber count is one of the Top 100 worldwide.
- Strategic partners: won four customers through global resellers.
In August, Sandvine's Congestion Management for Fairshare solution was named as a finalist for the highly competitive and prestigious International Engineering Consortium (IEC) InfoVision Awards in the category of Access Network Technologies and Services.
CONFERENCE CALL
The Company will discuss the results and business outlook on a conference call at 8:30 a.m. Eastern time (1:30 BST) today. A webcast will also be available from the Investor Relations section of Sandvine's website.
Date October 8 Time 8:30 a.m. Eastern (1:30 BST) Local dial-in number 416 644 3415 Toll-free North America 800 733 7571 Toll-free United Kingdom 00 800 2288 3501
A replay of the call will be available at 416-640-1917 or at 877-289-8525 (passcode 21284298#) from approximately 10:30 a.m. Eastern time today through October 15.
ABOUT SANDVINE
Sandvine is focused on protecting and improving the quality of experience on the Internet. Our award-winning network equipment helps DSL, FTTx, cable, fixed wireless and mobile operators better understand network traffic, increase customer satisfaction, mitigate the proliferation of malicious traffic, manage network congestion, and deliver QoS-prioritized multimedia services. With well over 100 customers in more than 50 countries, Sandvine is enhancing the Internet experience for millions of broadband and mobile subscribers worldwide. www.sandvine.com.
CAUTION REGARDING FORWARD LOOKING INFORMATION
Certain statements in this release which are not historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements") and are made pursuant to the "safe harbour" provisions of such laws. 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", "believe" 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 or achievements of Sandvine to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.
Many factors could cause the actual results of Sandvine to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, those factors discussed under the heading "Risk Factors" in Sandvine's most recent Annual Information Form ("AIF"), a copy of which is available on SEDAR at www.sedar.com, as well as each of the following.
- Sandvine's revenues may fluctuate from quarter to quarter and year to year depending upon sales cycles, customer demand and the timing of customer order purchase decisions.
- Sandvine'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.
- Sandvine is dependent upon and has derived a large percentage of its revenue from both a small number of key customers and customers who are predominantly cable based broadband service providers.
- Sandvine faces intense competition in markets where there are typically several different competing technologies and rapid technological changes.
- Sandvine'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 regulations and requirements in the area of broadband network management policies.
- Overall economic conditions and the availability of credit may negatively impact the Company's customers and suppliers.
- The majority of Sandvine's expenses are denominated in Canadian dollars while its 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 Sandvine trades.
- The introduction and sale of new products by Sandvine may impact the timing of revenue recognition which could raise greater revenue fluctuations from quarter to quarter than has been experienced historically.
Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and Sandvine does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.
Sandvine Corporation
Consolidated Balance Sheets
As at August 31, 2008
(in Canadian dollars, amounts in thousands, except share and per share data)
(unaudited)
August 31 November 30
2008 2007
$ $
Assets
Current assets
Cash and cash equivalents 8,716 7,878
Marketable securities 87,374 105,136
Accounts receivable 11,794 10,003
Inventory 15,658 13,874
Future tax asset - 1,075
Other 1,638 1,637
----------------------
125,180 139,603
----------------------
Non current assets
Property, plant and equipment 12,141 10,137
Intangible assets 6,100 7,300
Goodwill 2,425 2,425
----------------------
20,666 19,862
----------------------
145,846 159,465
----------------------
----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 5,854 6,094
Current portion of deferred revenue 6,751 4,028
----------------------
12,605 10,122
----------------------
Non current liabilities
Deferred revenue 36 57
Future tax liability 283 374
Other 335 342
----------------------
654 773
----------------------
13,259 10,895
----------------------
Shareholders' equity
Share capital 145,414 146,568
Contributed surplus 4,354 1,532
Accumulated other comprehensive income 27 69
Retained earnings (deficit) (17,208) 401
----------------------
132,587 148,570
----------------------
145,846 159,465
----------------------
----------------------
Sandvine Corporation
Consolidated Statements of Operations
For the three and nine month periods ended August 31, 2008
(in Canadian 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
2008 2007 2008 2007
$ $ $ $
Revenue
Product 10,263 19,016 22,977 50,371
Service 2,862 2,160 9,523 6,202
---------------------------------------------------
13,125 21,176 32,500 56,573
---------------------------------------------------
Cost of sales
Product 2,682 5,143 6,221 11,055
Service 629 377 1,667 1,091
---------------------------------------------------
3,311 5,520 7,888 12,146
---------------------------------------------------
Gross margin 9,814 15,656 24,612 44,427
Expenses
Sales and marketing 4,408 4,264 12,580 10,728
Research and development 6,283 4,764 18,142 11,230
General and administrative 1,886 1,872 6,386 4,200
Stock based compensation 1,538 423 3,036 827
Amortization of intangible
assets 400 267 1,200 267
Depreciation 1,055 674 2,755 1,836
---------------------------------------------------
15,570 12,264 44,099 29,088
---------------------------------------------------
Income (loss) from
operations (5,756) 3,392 (19,487) 15,339
Interest and other income 706 1,244 2,686 2,541
---------------------------------------------------
Income (loss) before
provision for income
taxes (5,050) 4,636 (16,801) 17,880
---------------------------------------------------
Provision for (recovery
of) income taxes
Current 40 (35) 79 135
Future 1,166 1,971 984 (1,147)
---------------------------------------------------
1,206 1,936 1,063 (1,012)
---------------------------------------------------
Net income (loss) for
the period (6,256) 2,700 (17,864) 18,892
---------------------------------------------------
---------------------------------------------------
Earnings (loss) per
share
Basic (0.046) 0.021 (0.131) 0.151
---------------------------------------------------
Diluted (0.046) 0.020 (0.131) 0.143
---------------------------------------------------
Basic weighted average
number of shares
outstanding 136,191,095 130,392,708 136,654,074 125,514,727
---------------------------------------------------
---------------------------------------------------
Diluted weighted average
number of shares
outstanding 136,191,095 137,837,689 136,654,074 132,519,583
---------------------------------------------------
---------------------------------------------------
Sandvine Corporation
Consolidated Statements of Cash Flows
For the three and nine month periods ended August 31, 2008
(in Canadian 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
2008 2007 2008 2007
$ $ $ $
Cash provided by (used in)
Operating activities
Net income (loss) for the
period (6,256) 2,700 (17,864) 18,892
Items not affecting cash
Amortization of intangible
assets 400 267 1,200 267
Depreciation 1,081 674 2,818 1,836
Foreign exchange (gain) loss (129) 259 (161) 267
Stock-based compensation 1,538 423 3,036 827
Future income tax provision
(recovery) 1,166 1,971 984 (1,147)
Other - 1 (328) 52
--------------------------------------------
(2,200) 6,295 (10,315) 20,994
Changes in non-current
balances (31) 192 (21) (8)
Changes in non-cash working
capital balances 1,573 (392) (472) (3,911)
--------------------------------------------
(658) 6,095 (10,808) 17,075
--------------------------------------------
Investing activities
Purchase of property, plant
and equipment (1,951) (1,850) (4,494) (5,270)
Business acquisitions, net of
cash acquired - (5,030) - (5,030)
Purchase of marketable
securities (140,179) (126,673) (571,185) (309,327)
Sale of marketable securities 144,990 84,626 588,906 242,956
--------------------------------------------
2,860 (48,927) 13,227 (76,671)
--------------------------------------------
Financing activities
Proceeds from the issuance of
share capital 66 50,005 240 50,825
Common shares repurchased (1,069) - (1,821) -
--------------------------------------------
(1,003) 50,005 (1,581) 50,825
--------------------------------------------
Net increase (decrease) in
cash during period 1,199 7,173 838 (8,771)
Cash and cash equivalents -
Beginning of period 7,517 3,620 7,878 19,564
--------------------------------------------
Cash and cash equivalents -
End of period 8,716 10,793 8,716 10,793
--------------------------------------------
--------------------------------------------
Cash and cash equivalents are
represented by
Balances with banks 5,941 713 5,941 713
Cash equivalents 2,775 10,080 2,775 10,080
Contacts: INVESTOR RELATIONS Sandvine Rick Wadsworth (519) 880-2400 ext. 3503 Email: rwadsworth@sandvine.com MEDIA CONTACT Sandvine Jennifer Ross (519) 880-2232 Email: jross@sandvine.com Website: www.sandvine.com AIM NOMAD Canaccord Adams Limited Neil Johnson/Andrew Chubb +44 0207 050 6500
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