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Sandvine Reports Q3 2014 Results(Canada Newswire Via Acquire Media NewsEdge) WATERLOO, ON, Oct. 9, 2014 /CNW/ - Sandvine, (TSX:SVC) a leading provider of intelligent network policy control solutions for fixed and mobile operators, today reported revenue of $27.9 million for its third quarter of 2014, net income of $3.1 million and non-IFRS income of $3.3 million. All results are reported in U.S. dollars under International Financial Reporting Standards (IFRS), unless otherwise specified. Other Q3 2014 highlights: Revenue growth: up 3% compared to Q3 2013 Revenue by access technology market: wireless 49%; DSL 35%; cable 15% Revenue by geography: EMEA 43%; NA 20%; CALA 19%; APAC 18% Revenue by sales channel: reseller 68%; direct 32% Gross margin: 78% Cash, cash equivalents and short-term investments: $150.6 million Customers: Won 5 new service provider customersFINANCIAL HIGHLIGHTS (All amounts are in U.S. dollars) Millions of dollars, except per share data and where otherwise indicated Q32014 Q32013 Change Revenue 27.9 27.2 3% Gross Margin percent 78% 76% 2pp Expenses2 15.0 15.8 -5% Net Income 3.1 4.7 -34% Diluted Earnings Per Share 0.020 0.033 -39% Non-IFRS Income1 3.3 5.1 -35% Non-IFRS Diluted Earnings Per Share1 0.021 0.036 -42% 1 See Table 1 below regarding non-IFRS financial measures2 During the third quarter of 2014, the Company recognized the benefits of $3.2 million of non-cash investment tax credits ("ITCs"), earned in previous years. The benefit was recognized as a reduction in research and development expenses with a corresponding increase in current income tax expense. This accounting adjustment had no impact on net income and does not represent current cash taxes. Q3 2013 expenses included $1.5 million of government assistance of which $1.0 million related to provincial government funding and $0.5 million to ITCs. Sandvine's year-to-date revenue grew by 18% over the comparable nine-month period of 2013 to $89.2 million, while year-to-date net income grew by 106% to $14.9 million. "This is our eighth consecutive quarter of year-over-year revenue growth and profitability, and our 2014 earnings growth has been strong. I am also pleased that we recently won one of the larger opportunities that we had originally anticipated closing in the third quarter," said Dave Caputo, Sandvine's President and CEO. Since the September 9th announcement of estimated Q3 2014 revenue, Sandvine has: Received approximately $7 million in orders from two tier 1 cable operators in the United States, including follow-on orders from a long-time customer and an initial win and competitive displacement at a top-ten North American cable company Received acceptance from the TSX for the company's Normal Course Issuer Bid, as announced on September 9. Sandvine has entered into an automatic share purchase plan with a broker to facilitate repurchases of its Shares under its NCIB Launched the latest version of Sandvine OutReach, a subscriber communications and interaction product that provides operators with a powerful set of subscriber-friendly, device-agnostic tools to interact with subscribers to satisfy a range of use cases Won an award for its Managed Business Services offering in the Network Appliances category of the Intel® Network Builders Network Transformation Contest, hosted at the Intel Developers Forum in San Francisco Presented at the Federal Communications Commission's Roundtable on the Technological Aspects of an Open Internet, as one of seven expert panelists invitedCONFERENCE CALLThe Company will discuss the financial results and business outlook on a conference call at 8:30 a.m. Eastern time today. Toll-free North America: (866)-215-5508 | Confirmation Number: 38176827Webcast: www.sandvine.com/investors A replay of the Q3 2014 results call will be available at: (888)-843-7419 (passcode 38176827#) today at 11:00 a.m. ET through October 19, 2014. ABOUT SANDVINESandvine'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 250 networks in over 90 countries, serving hundreds of millions of data subscribers worldwide, www.sandvine.com. CAUTION REGARDING FORWARD LOOKING INFORMATIONCertain statements in this press release constitute "forward-looking information" within the meaning of applicable Canadian securities laws and are based on expectations, estimates and projections as of the date of this press release. Forward-looking statements include, without limitation, statements with respect to projected revenues, earnings, growth rates, targets, revenue mix and product plans and the Company's future growth, results of operations, performance and business prospects and opportunities. Forward-looking statements are necessarily based upon management's perceptions of historical trends, current conditions and expected future developments, as well as a number of specific factors and assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies which could result in the forward-looking statements ultimately being incorrect. In addition to the various factors and assumptions set forth in this press release, the material factors and assumptions used to develop the forward-looking information include, but are not limited to the overall network policy control market; the requirement for increasingly innovative product solutions; its growth strategy and the need for increasing investment in sales and marketing efforts; the demand for the Company's products and fluctuations in future revenues; expectations of growth in the DSL and Wireless markets; future levels of Arrears Maintenance revenue; blended gross margin targets; the levels of operating expenses in fiscal 2014; the sufficiency of current operating expenses to support revenue growth; expectations for DSO; sufficiency of current working capital to support future operating and working capital requirements and foreign exchange hedging, and that the risk factors noted below, collectively, do not have a material impact on the Company. Such risk factors include, but are not limited to 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; By selling its products in certain markets through resellers, the Company is able to avoid certain costs relating to operating in those markets including but not limited to local support costs, costs of maintaining a local legal entity, administration costs, and logistics. Should the Company chose or be required to sell direct in these markets (due to customer preference, termination of a reseller relationship or other reasons) the cost advantages described will no longer be available to the Company which could results in an increase in operating costs; 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 the emergence of new technologies and new approaches to network architecture 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. If the Company is unable to adapt its offerings in response to these trends it could have a material impact on the ability of the Company to market its solutions; 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 is dependent on certain third party sub-assembly manufacturers in its supply chain 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, and Indian rupees. The Company's earnings are impacted by fluctuations in the exchange rates between the U.S. dollar and these currencies; The Company operates in various jurisdictions throughout the world and generates revenues through its international sales efforts. The Company's financial results may be impacted by political and economic developments of a particular country or geography, including but not limited to the economic and political climate in Argentina. If the current economic and/or political climate in Argentina continues or deteriorates it may negatively impact the Company's financial results including the ultimate collection of outstanding receivables; and those factors which are discussed in the Company's 2013 Annual Information Form, a copy of which is available on SEDAR at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Table 1 1. Non-IFRS Financial Measures The following table provides a reconciliation of net income and related per share amounts to non-IFRS net income 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 expense related to the Company's stock option plan 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 that these measures will 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 Nine month period ended August 31, 2014 $ August 31, 2013 $ August 31, 2014 $ August 31, 2013 $ Amounts in US$ thousands Net income 3,055 4,652 14,925 7,242 Adjustment for Stock based compensation expense 262 457 1,080 1,481 Non-IFRS Net income 3,317 5,109 16,005 8,723 Three month period ended Nine month period ended August 31, 2014 $ August 31, 2013 $ August 31, 2014 $ August 31, 2013 $ Diluted earnings per share 0.020 0.033 0.098 0.051 Impact on diluted earnings per share of non-IFRS measures 0.001 0.003 0.007 0.011 Non-IFRS Diluted earnings per share 0.021 0.036 0.105 0.062 Sandvine CorporationConsolidated Statements of Financial Position(in thousands of United States dollars, except share and per share data) (unaudited) As at August 31,2014$ November 30,2013$ Assets Current assets Cash and cash equivalents 8,584 5,454 Short term investments 142,059 83,856 Accounts receivable 28,731 36,662 Inventory 8,167 7,481 Grant receivable - 6,853 Other current assets 2,546 3,171 190,087 143,477 Non current assets Plant and equipment 8,691 10,405 Intangible assets 3,081 3,477 Deferred tax asset 212 212 Other assets 511 511 12,495 14,605 202,582 158,082 Liabilities Current liabilities Trade and other payables 10,889 16,566 Current portion of deferred revenue 20,377 14,214 31,266 30,780 Non current liabilities Deferred revenue 1,537 1,571 32,803 32,351 Shareholders' equity Share capital 150,172 121,509 Contributed surplus 15,833 15,784 Accumulated comprehensive income (loss) (74) (485) Retained earnings (deficit) 3,848 (11,077) 169,779 125,731 202,582 158,082 Sandvine CorporationConsolidated Statements of Income(in thousands of United States dollars, except share and per share data) (unaudited) For the three month periodended For the nine month period ended August 31,2014$ August 31,2013$ August 31,2014$ August 31, 2013$ Revenue Product 15,911 17,838 57,950 51,337 Service 11,986 9,345 31,220 24,412 27,897 27,183 89,170 75,749 Cost of sales Product 2,640 3,607 10,310 11,506 Service 3,430 2,932 9,752 8,308 6,070 6,539 20,062 19,814 Gross margin 21,827 20,644 69,108 55,935 Expenses Sales and marketing 8,124 7,238 24,310 21,480 Research and development 3,208 5,815 15,562 16,183 General and administrative 3,674 2,786 9,915 8,484 Other losses, net 3 7 21 79 15,009 15,846 49,808 46,226 Income from operations 6,818 4,798 19,300 9,709 Finance income (costs), net Finance income 82 43 198 113 Finance costs - (63) - (304) Foreign exchange losses (13) (18) (325) (67) Finance income (costs), net 69 (38) (127) (258) Income before provision for income taxes 6,887 4,760 19,173 9,451 Current provision for income taxes 3,832 108 4,248 2,209 Net income for the period 3,055 4,652 14,925 7,242 Earnings per share Basic earnings per share 0.020 0.034 0.102 0.052 Diluted earnings per share 0.020 0.033 0.098 0.051 Sandvine CorporationConsolidated Statements of Cash Flows(in thousands of United States dollars, except share and per share data) (unaudited) For the three month periodended For the nine month periodended August 31,2014$ August 31,2013$ August 31,2014$ August 31, 2013$ Cash provided by (used in) Operating activities Net income for the period 3,055 4,652 14,925 7,242 Items not affecting cash Amortization of intangible assets 284 287 838 850 Depreciation of plant and equipment 1,080 1,150 3,350 3,351 Unrealized foreign exchange (gains) losses 16 (27) 98 (108) Finance costs - 63 - 304 Stock-based compensation 395 457 1,334 1,481 Other (33) (6) (21) 164 4,797 6,576 20,524 13,284 Changes in non-cash working capital balances 2,020 (1,518) 20,951 9,311 6,817 5,058 41,475 22,595 Investing activities Purchase of plant, equipment and intangible software assets (620) (905) (3,462) (2,727) Purchase of short term investments (5,087) (4,546) (58,203) (13,129) (5,707) (5,451) (61,665) (15,856) Financing activities Repayment of government grants - - (4,153) (2,270) Proceeds from the issuance of shares under the employee stock option plan 201 65 1,762 382 Common shares issued for cash - - 28,269 - Common share repurchase - (218) - (1,230) Common shares purchased under the share unit plan (353) - (2,531) - (152) (153) 23,347 (3,118) Effect of foreign exchange on cash and cash equivalents (33) 4 (27) (29) Net increase (decrease) in cash during period 925 (542) 3,130 3,592 Cash and cash equivalents – Beginning of period 7,659 8,091 5,454 3,957 Cash and cash equivalents – End of period 8,584 7,549 8,584 7,549 Cash and cash equivalents are represented by Balances with banks 8,584 7,549 8,584 7,549 SOURCE Sandvine |