Sandvine reports Q4 2012 results

(Canada Newswire Via Acquire Media NewsEdge) 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 indicatedQ42012Q32012ChangeQ42011Change 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 endedTwelve month period ended November 302012$August 31 2012$November 302011$November 302012$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 endedTwelve month period ended November 302012$August 312012$November 302011$November 302012$November 302011$ 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 CorporationConsolidated 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$Assets Current assets Cash and cash equivalents 3,957 2,952 87,949 Short term investments 70,679 71,030 - Accounts receivable 32,169 28,194 25,485 Inventory 6,378 18,230 11,268 Other current assets 2,868 3,586 3,201 116,051 123,992 127,903 Non current assets Plant and equipment 10,654 11,560 11,866 Intangible assets 4,443 5,813 5,516 Grant receivable 4,343 - - Deferred tax asset 212 - - Other assets 511 511 511 20,163 17,884 17,893 136,214 141,876 145,796 Liabilities Current liabilities Trade and other payables 10,453 10,787 12,208 Current portion of deferred revenue 9,350 9,123 10,136 19,803 19,910 22,344 Non current liabilities Deferred revenue 503 789 598 Other non current liabilities 3,808 6,819 9,280 4,311 7,608 9,878 24,114 27,518 32,222 Shareholders' equity Share capital 120,626 120,472 119,399 Contributed surplus 14,652 12,754 10,999 Accumulated other comprehensive income (loss) 113 (615) - Deficit (23,291) (18,253) (16,824) 112,100 114,358 113,574 136,214 141,876 145,796 Sandvine CorporationConsolidated Statements of Income (in thousands of United States dollars, except share and per share data) Three month period endedTwelve month period ended November 30, 2012$November 30, 2011$November 30, 2012$November 30, 2011$Revenue Product 19,958 13,972 58,590 65,581 Service 7,510 6,959 29,343 24,802 27,468 20,931 87,933 90,383 Cost of Sales Product 5,110 3,985 19,102 16,520 Service 2,773 1,914 9,510 6,699 7,883 5,899 28,612 23,219 Gross margin 19,585 15,032 59,321 67,164 Expenses Sales and marketing 6,151 6,591 26,159 24,701 Research and development 4,816 8,043 27,214 31,594 General and administrative 1,891 3,004 10,843 12,871 Other losses, net 39 - 606 - 12,897 17,638 64,822 69,166 Income (loss) from operations 6,688 (2,606) (5,501) (2,002) Finance income 41 35 147 129 Finance costs (104) (144) (484) (697) Foreign exchange gains (losses) 60 338 (247) 355 Other finance gains, net - 332 1,229 976 Finance income (costs), net (3) 561 645 763 Income (loss) before income taxes 6,685 (2,045) (4,856) (1,239) Current provision for income taxes 219 66 394 190 Deferred recovery of income taxes - - (212) - 219 66 182 190 Net income (loss) for the period 6,466 (2,111) (5,038) (1,429) Net income (loss) per share Basic income (loss) per share 0.047 (0.015) (0.036) (0.010) Diluted income (loss) per share 0.046 (0.015) (0.036) (0.010) Sandvine CorporationConsolidated Statements of Cash Flows (in thousands of United States dollars, except share and per share data) For the three month period ended For the twelve month period ended November 30,2012$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

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