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TMCNet: Sandvine Reports Q1 2012 Results

[April 05, 2012]

Sandvine Reports Q1 2012 Results

(Canada Newswire Via Acquire Media NewsEdge) WATERLOO, ON, April 5, 2012 /CNW/ - Sandvine, (TSX: SVC) (AIM: SAND) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported $20.1 million in revenue for its first quarter of 2012 and a net loss of $6.5 million, which included a $3.7 million inventory write-down related to one of the Company's older hardware platforms. All results are reported in U.S.


dollars under International Financial Reporting Standards (IFRS).

Q1 2012 highlights: Revenue by access technology market: DSL 22%; wireless 26%; cable 48%; other 4% Revenue by geography: NA 58%; EMEA 17%; APAC 18%; CALA 7% Revenue by sales channel: reseller 39%; direct 61% Gross margin was 54%. The $3.7 million inventory write-down negatively impacted gross margin by 18 percentage points Cash, cash equivalents and short-term investments balance: $74.1 million Software order value for Business Intelligence solutions exceeded that for the Company's traditional Traffic Optimization solutions Launched the latest version of Fairshare Traffic Management Seven new customers: three fixed wireless; two converged operators, one mobile customer and one DSL operator Won expansion orders of over $7 million from a Tier 1 US cable operator "Business Intelligence was a major driver behind the multi-million dollar orders from Tier-1 US cable operators in the previous two quarters. We are focused on increasing our value to our installed base by continuing to lead the market with innovative solutions. We continue to expect revenue growth in 2012," said Dave Caputo, Sandvine's President and CEO.

FINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars)             Millions of dollars, except per share data and where otherwise indicatedQ12012Q42011ChangeQ12011Change Revenue 20.1 20.9 -4% 19.2 5% Gross Margin percent2 54% 72% -18pp 70% -16pp Expenses 17.2 17.6 -3% 15.8 9% Net Loss2 (6.5) (2.1) (4.4) (2.7) (3.8) Diluted Loss Per Share2 (0.047) (0.015)   (0.020)               Non-IFRSExpenses1 16.5 17.0 -3% 15.2 9% Non-IFRSLoss1, 2 (5.8) (1.4)   (2.0)   Non-IFRS Diluted Loss Per Share1, 2 (0.042) (0.010)   (0.015)   1 See Table 1 below regarding non-IFRS financial measures2 Q1 2012 figures include $3.7 million ($0.027 per diluted share) related to an inventory write-down 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 0446 Toll-free United Kingdom 0800 358 5256 A replay of the call will be available at 416-640-1917 or toll-free at 877-289-8525 (passcode 4524136#) from approximately 10:30 a.m. Eastern time today through April 12.

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 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, 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 are either (i) affecting 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       February 292012$November 302011$February 282011$   Amounts in US$ thousands         Net loss (6,487) (2,111) (2,694)    Adjustment for:            Stock compensation expense 534 489 477      Amortization of intangible assets acquired through business acquisitions 185 185 192 Non-IFRS Net loss (5,768) (1,437) (2,025)             Three month period ended       February 29 2012$November 302011$February 282011$             Diluted earnings (loss) per share     (0.047) (0.015) (0.020) Impact on diluted earnings (loss) per share of Non-IFRS   measures     0.005 0.005 0.005 Non-IFRS Diluted earnings (loss) per share     (0.042) (0.010) (0.015) Sandvine CorporationConsolidated Statements of Financial Position (in thousands of United States dollars, except share and per share data) (unaudited)     As at     February 29, 2012$November 30, 2011$December 1, 2010$Assets               Current assets       Cash and cash equivalents 5,046 2,952 87,949 Short term investments 69,077 71,030 - Accounts receivable  24,977 28,194 25,485 Inventory  14,062 18,230 11,268 Other current assets 3,646 3,586 3,201   116,808 123,992 127,903 Non current assets       Plant and equipment 12,028 11,560 11,866 Intangible assets 5,313 5,813 5,516 Other assets 511 511 511   17,852 17,884 17,893           134,660 141,876 145,796         Liabilities               Current liabilities       Trade and other payables 9,401 10,787 12,208 Current portion of deferred revenue 10,979 9,123 10,136   20,380 19,910 22,344 Non current liabilities       Deferred revenue 866 789 598 Other non current liabilities 4,377 6,819 9,280   5,243 7,608 9,878           25,623 27,518 32,222 Shareholders' equity               Share capital  120,246 120,472 119,399 Contributed surplus 13,480 12,754 10,999 Accumulated comprehensive income (loss)  51 (615) - Retained deficit (24,740) (18,253) (16,824)   109,037 114,358 113,574           134,660 141,876 145,796 Sandvine CorporationConsolidated Statements of Income (in thousands of United States dollars, except share and per share data) (unaudited)   For the three month period ended   February 292012$February 282011$       Revenue     Product 13,030 13,492 Service 7,068 5,691   20,098 19,183 Cost of sales     Product 7,208 4,240 Service 2,095 1,430   9,303 5,670       Gross margin 10,795 13,513       Expenses     Sales and marketing 6,298 6,170 Research and development 7,306 6,478 General and administrative 3,025 3,173 Other losses (gains), net 537 -   17,166 15,821       Loss from operations (6,371) (2,308)       Finance income (costs), net     Finance income 44 42 Finance costs (132) (194) Foreign exchange gains (losses) (126) (196) Other finance gains (losses), net 146 - Finance income (costs), net (68) (348)       Loss before provision for income taxes (6,439) (2,656)       Provision for income taxes     Current 48 38       Net loss for the period (6,487) (2,694)       Net loss per share     Basic earnings per share (0.047) (0.020) Diluted earnings per share (0.047) (0.020) Sandvine CorporationConsolidated Statements of Cash Flows (in thousands of United States dollars, except share and per share data) (unaudited)   For the three month period ended   February 292012$February 282011$Cash provided by (used in)           Operating activities     Net loss for the period (6,487) (2,694) Items not affecting cash        Amortization of intangible assets 538 361    Depreciation of plant and equipment 1,096 1,061    Unrealized foreign exchange (gains) losses (237) 423    Finance costs 132 194    Other finance gains (losses) (146) -    Stock-based compensation 534 477    Other 583 (51)   (3,987) (229)       Changes in non-current balances (2,365) (65) Changes in non-cash working capital balances 10,293 6,562         3,941 6,268       Investing activities     Purchase of plant, equipment and intangible software assets (1,728) (2,356) Purchase of short term investments (3,046) (113,218) Sale of short term investments 5,000 39,981         226 (75,593)       Financing activities     Repayment of government grants (2,202) (2.373) Proceeds from the issuance of share capital 80 453 Payment to cancel warrant (80) -         (2,202) (1,920)       Effect of foreign exchange on cash and cash equivalents 129 81       Net increase (decrease) in cash during period 2,094 (71,164)       Cash and cash equivalents - Beginning of period 2,952 87,949       Cash and cash equivalents - End of period 5,046 16,785       Cash and cash equivalents are represented by     Balances with banks 5,018 16,466 Cash equivalents 28 319

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