Sandvine reports Q4 2012 results

WATERLOO, ON, Jan. 10, 2013 /CNW/ - Sandvine, (TSX: SVC); (AIM: SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $27.5 million in revenue for its fourth quarter of 2012, non-IFRS income of $6.9 million and net income of $6.5 million. During the quarter 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.

Full year results included revenue of $87.9 million and a non-IFRS loss of $2.7 million (net loss of $5.0 million). All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS), unless otherwise specified.

Q4 2012 highlights:

  • Revenue by access technology market: wireless 48%; DSL 35%; cable 17%
  • Revenue by geography: NA 44%; APAC 26%; EMEA 18%; CALA 12%
  • Revenue by sales channel: reseller 78%; direct 22%
  • Gross margin: 71%
  • Cash, cash equivalents and short-term investments balance: $74.6 million
  • Announced significant initial orders from new Tier 1 customers:
    • A converged North American operator deploying service creation, business intelligence and traffic optimization solutions in the fixed and mobile networks
    • A converged, multinational, Western European operator group deploying business intelligence and traffic optimization in the fixed line network of its home country
  • Since its Q3 results announcement, Sandvine has announced over $18.0 million in expansion orders from major existing customers
  • Won nine new service provider customers.

"We are pleased with fourth quarter results as they demonstrate ongoing progress in revenue growth and profitability," said Dave Caputo, Sandvine's President and CEO. "Total revenue and wireless market revenue were at record levels, driven by large initial orders from two new Tier 1 customers and large expansion orders from major existing customers, which has been a key area of focus for us in 2012."

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

           
Millions of dollars, except per share data and where otherwise indicated Q4
2012
Q3
2012
Change Q4
2011
Change
Revenue 27.5 21.8 26% 20.9 31%
Gross Margin percent 71% 70% 1pp 72% -1pp
Expenses 12.9 16.8 -23% 17.6 -27%
Net Income (Loss) 6.5 (0.9)   (2.1)  
Diluted Income (Loss) Per Share 0.046 (0.006)   (0.015)  
Non-IFRS Income (Loss)1 6.9 (0.4)   (1.4)  
Non-IFRS Diluted Income (Loss) Per Share1 0.049 (0.003)   (0.010)  

1 See Table 1 below regarding non-IFRS financial measures

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.

   
Toll-free North America (888) 771-4371
Toll-free United Kingdom 0808 238 9578

A replay of the call will be available at (888) 843-7419 (passcode 33987244#) from approximately 11:00 a.m. Eastern time today through January 20.

ABOUT SANDVINE
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 200 networks in over 85 countries, serving hundreds of millions of data subscribers worldwide, 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.  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;
  • 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 has increased its dependence on certain third party sub-assembly manufacturers 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
2012
$
August 31
2012
$
November 30
2011
$
November 30
2012
$
November 30
2011
$
  Amounts in US$ thousands
Net income (loss) 6,466 (851) (2,111) (5,038) (1,429)
  Adjustment for          
     Stock based compensation expense 433 437 489 1,909 2,096
    Amortization of intangible assets acquired through business acquisitions - 61 185 431 754
Non-IFRS Net income (loss) 6,899 (353) (1,437) (2,698) 1,421

           
  Three month period ended Twelve month period ended
  November 30
2012
$
August 31
2012
$
November 30
2011
$
November 30
2012
$
November 30
2011
$
           
Diluted earnings (loss) per share 0.046 (0.006) (0.015) (0.036) (0.010)
Impact on diluted earnings (loss) per share of Non-IFRS measures 0.003 0.003 0.005 0.016 0.020
Non-IFRS Diluted earnings (loss) per share 0.049 (0.003) (0.010) (0.020) 0.010

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

  As at
  November 30,
2012
$
November 30,
2011
$
December 1,
2010
$
Assets      
       
Current assets      
Cash and cash equivalents 3,957 2,952 87,949
Short term investments 70,679 71,030 -
Accounts receivable  32,169 28,194 25,485
Inventory  6,378 18,230 11,268
Other current assets 2,868 3,586 3,201
  116,051 123,992 127,903
Non current assets      
       
Plant and equipment 10,654 11,560 11,866
Intangible assets 4,443 5,813 5,516
Grant receivable 4,343 - -
Deferred tax asset 212 - -
Other assets 511 511 511
  20,163 17,884 17,893
       
  136,214 141,876 145,796
       
Liabilities      
       
Current liabilities      
Trade and other payables 10,453 10,787 12,208
Current portion of deferred revenue 9,350 9,123 10,136
  19,803 19,910 22,344
Non current liabilities      
Deferred revenue 503 789 598
Other non current liabilities 3,808 6,819 9,280
  4,311 7,608 9,878
       
  24,114 27,518 32,222
Shareholders' equity      
       
Share capital  120,626 120,472 119,399
Contributed surplus 14,652 12,754 10,999
Accumulated other comprehensive income (loss)  113 (615) -
Deficit (23,291) (18,253) (16,824)
  112,100 114,358 113,574
       
  136,214 141,876 145,796

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,
2012
$
November 30,
2011
$
November 30,
2012
$
November 30,
2011
$
Revenue        
Product 19,958 13,972 58,590 65,581
Service 7,510 6,959 29,343 24,802
  27,468 20,931 87,933 90,383
Cost of Sales        
Product 5,110 3,985 19,102 16,520
Service 2,773 1,914 9,510 6,699
  7,883 5,899 28,612 23,219
         
Gross margin 19,585 15,032 59,321 67,164
         
Expenses        
Sales and marketing 6,151 6,591 26,159 24,701
Research and development 4,816 8,043 27,214 31,594
General and administrative 1,891 3,004 10,843 12,871
Other losses, net 39 - 606 -
  12,897 17,638 64,822 69,166
         
Income (loss) from operations 6,688 (2,606) (5,501) (2,002)
         
Finance income 41 35 147 129
Finance costs (104) (144) (484) (697)
Foreign exchange gains (losses) 60 338 (247) 355
Other finance gains, net - 332 1,229 976
Finance income (costs), net (3) 561 645 763
         
Income (loss) before income taxes 6,685 (2,045) (4,856) (1,239)
         
Current provision for income taxes 219 66 394 190
Deferred recovery of income taxes - - (212) -
  219 66 182 190
         
Net income (loss) for the period 6,466 (2,111) (5,038) (1,429)
         
Net income (loss) per share        
Basic income (loss) per share 0.047 (0.015) (0.036) (0.010)
Diluted income (loss) per share 0.046 (0.015) (0.036) (0.010)

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

  For the three month period ended   For the twelve month period ended
  November 30,
2012
$
November 30,
2011
$
  November 30,
2012
$
November 30,
2011
$
Cash provided by (used in)          
           
Operating activities          
Net income (loss) for the period 6,466 (2,111)   (5,038) (1,429)
Items not affecting cash          
   Amortization of intangible assets 307 541   1,721 2,027
   Depreciation of plant and equipment 1,120 1,319   4,601 4,585
   Unrealized foreign exchange (gains) losses (21) (37)   (39) 274
  Finance costs 104 144   484 697
  Other finance (gains) - (332)   (1,229) (976)
   Stock-based compensation 433 489   1,909 2,096
  Deferred tax recovery - -   (212) -
   Other 18 (27)   572 (90)
  8,427 (14)   2,769 7,184
           
Changes in non-cash working capital balances (6,515) (366)   4,391 (12,836)
  1,912 (380)   7,160 (5,652)
           
Investing activities          
Purchase of plant, equipment and intangible software assets (487) (774)   (4,272) (6,603)
Purchase of short term investments (6) (8,245)   (5,885) (243,913)
Sale of short term investments 962 10,502   6,237 172,864
  469 1,483   (3,920) (77,652)
           
Financing activities          
Repayment of government grants (103) -   (2,427) (2,477)
Proceeds from the issuance of share capital 86 183   344 833
Payment to cancel warrant - -   (80) -
  (17) 183   (2,163) (1,644)
           
Effect of foreign exchange on cash and cash equivalents 27 (130)   (72) (49)
           
Net increase (decrease) in cash during period 2,391 1,156   1,005 (84,997)
           
Cash and cash equivalents - Beginning of period 1,566 1,796   2,952 87,949
           
Cash and cash equivalents - End of period 3,957 2,952   3,957 2,952

 

 

 

SOURCE: Sandvine Incorporated

For further information:

INVESTOR RELATIONS CONTACT
Rick Wadsworth
Sandvine
+1 519 880 2400 ext. 3503
rwadsworth@sandvine.com

MEDIA CONTACT
Sacha DeGroot
Sandvine
+1 519 880 2400 x 2232
sdegroot@sandvine.com

AIM NOMAD
Andrew Chubb/Simon Bridges
Canaccord Genuity Limited
+44 0207 523 8000