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Sandvine Reports Q3 2014 Results

Waterloo, Canada; October 9, 2014 – 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 customers

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

Millions of dollars, except per share data and where otherwise indicated

Q3
2014

Q3
2013

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 measures
2 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 invited

CONFERENCE CALL

The 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: 38176827
Webcast: 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.

To download the complete report in PDF format please click the link below:
[download release]

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 250 networks in over 90 countries, serving hundreds of millions of data subscribers worldwide, www.sandvine.com.

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

MEDIA CONTACT
Dan Deeth
Sandvine
+1 519 880 2232
ddeeth@sandvine.com

CAUTION REGARDING FORWARD LOOKING INFORMATION

Certain 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.

UPDATED : 2014-10-08 21:59:34