Welcome to the Sandvine Corporation third quarter results conference call. (Operator Instructions) Certain information presented in this presentation by management of Sandvine that is not historical factual information may constitute forward-looking information within the meaning of securities laws. Actual results could differ materially from a conclusion, forecast or projection contained in such forward-looking information. Certain material factors or assumptions were also applied in drawing a conclusion or making a forecast or projection as reflected in such forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusions, forecasts or projections in the forward-looking information and details regarding the material factors or assumptions that were applied in drawing such conclusions or making such forecasts or projections are contained the company's annual information form and in other filings made by the company with applicable securities regulators from time to time, all of which are available through SEDAR at www.SEDAR.com. I will now turn the conference over to Rick Wadsworth, Director of Investor Relations for Sandvine.

Welcome to Sandvine's Q3 2008 results conference call. During the call we will walk though a slide presentation that you can download from the Investor Relations section of our website, Sandvine.com. For those of you following along, we are currently on Slide 2. We will let you know when to change slides. On the call today are Dave Caputo, President and Chief Executive Officer, and Scott Hamilton, our Chief Financial Officer. I'll now turn the call over to Dave for some introductory remarks.

We're on Slide 3. For Q3 2008 we grew revenues 18% quarter-over-quarter to $13.1 million. While our Q3 results continue to reflect a slow North American market, we are very pleased with our progress in other aspects of our business. As you know, we are currently focused on winning new customers, particularly the world's largest service providers. We have also identified the development of the DSL and wireless markets, international markets and the development of our reseller channel as key components of our long-term growth strategy. Our accomplishments in the third quarter represent significant milestones along these strategic paths. For example, we won 15 new service providers in Q3, the most ever in a quarter. We now have more DSL service providers than cable cos in our customer base. We had our strongest revenue quarter ever in the DSL market, our EMEA sales region, the Latin American sales region and from our reseller partners. We also had our best quarter ever if you backed out revenues from Comcast, who has been our largest customer by annual revenue in each year since 2005. With respect to North America, we believe that the August 1st FCC decision in the U.S. will be seen as a positive catalyst for traffic optimization in that market. Since that decision, Comcast has once again selected Sandvine solutions to help them improve their subscribers' online experience. I am pleased to report that we have recently finalized our agreement with Comcast with respect to Congestion Management for FairShare. We expect deployment to be in this quarter. While this is a good order for us, there is a more important big picture. First, we have retained Comcast's traffic optimization business, which we believe positions us well for future opportunities there, whether in service creation, network security, operations management or additional traffic optimization opportunities. Second, many U.S. service providers are looking for new traffic optimization solutions. Comcast's investment in Sandvine's Congestion Management for FairShare offers the entire U.S. market a clear new viable direction for congestion management. The fact that we have established a footprint at many large U.S. ISPs also helps. Eleven of the top 20 largest DSL or cable broadband service providers in the U.S. are currently Sandvine's customers. Now I'll ask Scott to elaborate on the financial results for the third quarter.

I remind listeners that unless otherwise specified, all amounts referred to on this call are in Canadian dollars. Slide 4. Revenue for the third quarter of 2008 was $13.1 million as compared to $11.1 million for the second quarter of 2008 and $21.2 million for the third quarter of 2007. The decline in revenue from Q3 2007 primarily results from a slowdown in business with our existing customers, in particular the North American cable market. Excluding revenue generated from Comcast, Q3 2008 was our highest revenue quarter ever. As a percentage of total revenue for Q3 '08, Product and Service revenue were 78% and 22%, respectively. For both Q3 and year-to-date, the proportion of Service revenue was high due to the relatively low level of product revenue experienced during these periods. Over the longer term, the company expects Service revenue will be closer to historical levels of 10% to 15% of total revenue. During the third quarter, our revenue base continued to diversify in many respects, including geographically, by end customer market, by sales channel, and in terms of customer concentration. I'll review each in turn. Slide 5. Historically, North America has been our largest geographical market. In Q3 of '07, 89% of revenue came from North America. However, for the third quarter of 2008, 47% of our revenue was derived from the North American region and for the year-to-date approximately 60% of our revenues came from that region. In the third quarter of 2008, EMEA and CALA had their strongest quarters ever, both in absolute dollars and percents of revenue terms, contributing 38% and 11% of revenues respectively. Historically, cable companies represented our largest end customer market. In Q3 of '07, over 90% of our revenue came from the cable market, however in the third quarter and year-to-date 2008, approximately 53% of revenue came from the cable market while the DSL market had its strongest quarter ever, contributing 40% of revenue. Wireless and other markets contributed 7% of revenue in the third quarter of '08. Slide 6. Historically, the vast majority of our sales have come through our direct sales force. In Q3 of '07, 96% of our sales came through our direct sales team. However, in Q3 of '08 approximately 74% of our revenue came from the direct sales channel, 26% through our retail and partners. For year-to-date. Approximately 80% of our sales have come through the direct sales channel and the indirect sales channel has contributed approximately 20% of revenue. In terms of customer concentration, for the first time since the second quarter of 2005 Comcast represented less than 10% of quarterly revenue. We had four 10% plus customers in the third quarter of 2008 which together represented 51% of revenues as compared to two customers in the third quarter of 2007 that comprised 78% of revenue. While these results show diversification improvement, we continue to expect that a significant portion of our revenues will be derived from a small number of customers. The decline in our revenue in 2008 has occurred largely due to external factors and has [masked] some positive underlying trends in our business. Third quarter and year-to-date results demonstrate the beginning of a significant diversification of our revenue base. We are seeing more revenue from customers outside of North America. We're seeing more revenue from end customers outside of the cable market. We are seeing more revenue through our indirect sales channel, which is being driven by our large global reseller partners, and we are spreading the concentration of our revenues among a larger group of significant customers. Slide 7. Our blended gross margin for the quarter was 75% compared to 77% last quarter. We are pleased we continue to maintain a gross margin that is consistent with our 70% plus target range. The blended gross margin will fluctuate based on quarterly product mix, sales channel mix, as well as other factors. For the third quarter of 2008, sales and marketing expenditures were $4.4 million, which represents a 5% increase from the $4.2 million reported last quarter. The increase is consistent with the company's strategy to continue to invest in its sales and marketing initiatives. Research and development expenses for the third quarter were $6.3 million, which included approximately $200,000 of net repayments of government assistance, compared to $500,000 of net assistance received last quarter. Excluding the impact of government assistance and repayments, R&D expenses in Q3 were $6.1 million, which is consistent with the $6.2 million reported last quarter. For the third quarter of 2008, general and administrative expenses were $1.9 million, down $300,000 from last quarter due primarily to a foreign exchange gain. Total R&D and SG&A expenses for the quarter were $12.6 million, up 4% from last quarter. Our focus remains on investing in the long-term opportunity, but in a manner that is mindful of current market conditions. Total operating expenses for the quarter were $15.6 million, which included $3 million of non-cash expenses as follows: Depreciation of $1.1 million, which is up from $900,000 last quarter, amortization of intangible assets of $0.4 million, which is equal to last quarter, and share-based compensation of $1.5 million, which is up from $0.8 million in [Q2] 2008. During the quarter we recorded a non-cash charge of approximately $800,000 related to [inaudible] arrangement associated with an acquisition we made last year. The amount reported is determined based on our best estimate of the outcome of certain performance targets to November 30, 2008. In all, our non-cash operating expenses increased by $900,000, up 44% over the Q2 2008 level. In addition, during Q3 we increased our valuation allowance in respect of our Canadian future tax assets, resulting in a $1.1 million non-cash charge as the amount no longer met the standard required for recognition under GAAP. Net loss for the third quarter of 2008 was $6.3 million or $0.05 per diluted share as compared to a net loss of $4.6 million last quarter. As a reminder, included in the loss is $3 million of non-cash charges related to non-cash acquisition-related expenses, share-based compensation, and a one-time future income tax provision. Slide 8. Sandvine continues to have a strong balance sheet. As of August 31, 2008, Sandvine had $96 million in cash and cash equivalents as compared to $100 million last quarter. The decrease in cash and cash equivalents over the quarter is consistent with our operating performance and the use of $1.1 million to purchase and cancel approximately 1 million common shares under our normal-course issuer bid. For the year-to-date, we have used $1.8 million to buyback approximately 1.6 million shares. The company's DSO has decreased 79 days from 90 days last quarter. The company also assesses its DSOs on a pro forma basis which excludes accounts receivable associated with deferred revenue. The company's pro forma DSOs were 62 days at the end of the third quarter as compared to 66 days at the end of Q2 2008. Historically, the company has communicated that it expects its DSOs to be in the range of 50 to 60 days. However, as the proportion of revenue generated from markets outside of North America and through the company's indirect sales channel increases, as experienced in the current quarter, it is expected that pro forma DSOs will be in the range of [60] to 75 days. As on all of our previous calls, we caution investors that due to the nature of our business we expect significant variability in the company's quarterly results. This variability may manifest itself in many ways, including but not limited to customer concentration, including the buying patterns of our largest customers; product mix; geographical concentration; market segment concentration; sales channel mix; and, most noticeably, recognized revenue. I would also like to remind investors that the accounting rules surrounding revenue recognition are restrictive concerning the timing and manner that certain revenue is recognized. In the event that this materially impacts our revenue, investors may need to look to the company's deferred revenue balance to more fully understand performance for a given period. I'll now return the call to Dave.

Slide 9. We continue to measure Sandvine's progress by the growth in our service provider customer base and the number of subscribers they represent. At the end of the quarter, our customer base included over 130 service providers in over 50 countries. Combined, these service providers represent over 60 million broadband subscribers. In all, we won a record 15 new customers in the quarter. We won 11 DSL providers, two wireless operators, one fiber to the home operator, and one new cable co. By customer count, DSL providers are now the largest component of our customer base. Clearly, we are getting a return from investments in the DSL and wireless markets, both key to our future growth. We won six new customers from EMEA, three from Asia-Pac, three from the Caribbean and Latin America, and three from North America. In all, we expanded into seven new countries in the quarter. This success comes directly from our increased investments in our international sales and marketing efforts. One of our new customers in Q3 was a service provider with over 1 million broadband subscribers located in Peru. It is a regional property of a major global service provider. In the quarter, we also won business from a regional wireless property owned by this same carrier, which is a top 100 global wireless provider by subscriber count. Winning large customers is key to our future growth. These customers were won through our global reseller relationship with [Wawa], who, for the first time, represented more than 10% of our revenues in the quarter. We also had wins through our relationships with Alcatel-Lucent and Mitsubishi in Q3. In all, more than a quarter of our revenue came from our global and regional resellers this quarter. We view continued traction with these partners as key to Sandvine's future growth and are pleased to see our investments in this area continue to pay off. We will continue to pursue additional global reseller partner opportunities. Overall, we see a number of trends evolving in our business. First, based on RFP and RFI activity, we are seeing as much or more interest in products from our service creation, operations support, and network integrity solution suites combined as we are for traffic optimization solutions, the traditional driver of our business. Second, we are seeing more diversified interest by end market. We have received more RFPs and RFIs from each of the wireless and DSL markets than we have for cable, which was the early adopter in our space. Third, we are seeing more diversified interest globally. Whereas the North America titer used to dominate our efforts, so far in 2008 EMEA has been the largest source of RFPs and RFIs from among our four sales regions. Fourth, we are much more actively engaged with our global reseller partners. Finally, the PTS 14000, our 10-gigabyte Ethernet offering, now dominates our platform sales. We were the first to market with a 10-gig product by at least 18 months, which was not without risks, but clearly it was the right strategic move. We have by far the most proven solution on the market today and the resources to continue to lead technological innovation. In short, Sandvine is evolving into a more diversified solutions provider for service providers of all access types globally. Slide 10. While our other solutions are gaining broader appeal, we expect traffic optimization to continue to be a significant part of our business. Congestion Management for FairShare is our latest solution in that product suite. During Q3 the solution was named a finalist for the highly competitive and prestigious IEC InfoVision Awards in the category of access network technologies and services. This honor, plus Comcast's selection of the solution, offered tremendous validation of our ongoing leadership and innovation in building intelligent broadband networks that protect and improve the quality of experience on the Internet. Slide 11. We firmly believe that Sandvine is in an emerging market that will grow significantly over the long term. All the trends I've previously identified to support this conviction remain. The global broadband market is still growing rapidly. All service providers are investing in next-generation networks capable of delivering all services over IP. There is a steady proliferation of popular new Internet applications that will require intelligence in the network for consistent successful delivery. Service providers are migrating their networks to 10gigabyte Ethernet and data traffic on mobile wireless networks is experiencing extraordinary growth in major networks around the world. Slide 12. Last month Sandvine was honored to be named the seventh-fastest growing technology company in Canada in the Deloitte & Touche Technology Fast 50. You can't achieve that kind of performance without excellent people so, as always, I would like to extend my heartfelt thanks to the Sandvine team. They are responsible for the growth that Sandvine has experienced, and they are the ones that make Sandvine a great place to work. We will now take questions.

(Operator Instructions) Your first question comes from Dushan Batrovic - Canaccord Adams.

A question around Comcast. I'm wondering if you could go into a little more detail on the deployment itself. I know that there were pieces of that contract that have not yet been awarded. Are you bidding for those pieces? Have those decisions been made? And is it reasonable to assume that the deployment will finish in your fiscal Q4?

Well, we're obviously ecstatic to be selected by Comcast again in the strategies to deliver an excellent Internet experience to their subscribers. There are a number of different components to that solution, and our Congestion Management for FairShare is what we believe is the heart of that solution. The PTS which we also got deployed widely at Comcast plays a key role as well as it measures the effectiveness of any policy deployed in the network, including FairShare, and it of course runs other applications. With respect to FairShare, the PTS can be used to gather the subscriber usage data and is required if any aspect of the FairShare policy needs any application awareness. There are some other components of it, including the IPDR data collection and the policy server in that solution. Sandvine is in a position to deliver all those components to any service provider that's looking to roll out FairShare. In the Comcast case, they've had some existing relationships with other vendors in those areas and the complete deployment picture isn't firmly established yet, but we like our position in rolling out FairShare at Comcast.

And as far as timing, do you expect the majority of the deployment to be finished in your fiscal Q4?

Yes. In terms of deployment, Comcast has said they will do it by the end of the year, I believe. Our fiscal year ends at the end of November so there might be a bit of timing there. And then I think Scott will maybe speak to the revenue recognition aspects of that.

I'm guessing your question's probably more of when will we recognize the revenue. We've just completed the contract and are analyzing that. With it being a new revenue stream for us, we haven't quite concluded the timing of recognition, as the deployment itself is just starting to get under way. So we don't have any certainty as to the date that it will be finalized by. So we'll continue to look at that through the end of the quarter, and we'll see on our next results whether we recognize that revenue or not.

It's been, I guess, a little over two months now since the FCC came out with their decision on net neutrality. What kind of a response have you see from your customers? Are they still in wait and see mode or are they starting to become a little more active as far as engaging with you and possibly others in the industry?

The FCC decision has definitely provided some additional clarity in terms of being very upfront in terms of what your objectives are in managing congestion management, and we have some really good answers around that. The FCC also in their decision, Kevin Martin himself, has said things along the line of voice data potentially being more important than other traffic on the network. So it has provided some clarity and there's no question we've been actively engaged with many North American providers, both DSL and cable co, to help them understand it, but also show them that we have a real viable solution for managing congestion in their network. So it's been, while there was some uncertainty throughout the year here, it's provided some clarity and it's been really for helping us engage our customers in a very strategic way to talk about how to improve the quality of the experience for their subscribers.

Your next question comes from Michael Urlocker - GMP Securities.

Dave, you made an allusion to DSL being a larger part, and I think you said the largest part of the business in the quarter. I'm not sure whether you're referring to a revenue split or just a customer split. I just wonder if you could shed a little bit more light on that as a first question.

It's absolutely by customer account number. So we now have more DSL service providers than we do cable companies as customers of ours. And from a revenue split, this quarter I think it was 53% cable, 40% DSL, so it's starting to contribute meaningfully. For those who've been tracking the company for some time, I think it's just absolutely remarkable that we have more DSL customers now than we do cable guys. And I think it's a great leading indicator from the perspective of, while most of the DSL providers have been small, we've been winning some big ones as well. If we reflect back on the early days of Sandvine, you know, we used to win all small cable companies and then that translated into the larger guys later on. And so there's no question that the DSL guys have been a little bit slower to move to this technology, but, you know, we won - the lion's share of our business this quarter by new engagements was DSL.

In looking at the balance sheet, Sandvine does have a large cash balance. The cash burn in the quarter was, let's say, something like $0.03 per share, which is less than it had been in prior quarters. As a CEO, Dave, I wonder if you could just share your thoughts with us how you look at that cash balance, what it might afford Sandvine to do, whether there are different options in terms of strategic acquisitions or whether it's just a war chest for product development. How do you look at that?

Well, I guess I look at that cash balance very lovingly every day. And certainly we feel that it's positioned us well to be a very stable supplier to our customers. Some of our competition has had difficulty in this time, either raising money or keeping their cash liquid, I guess, and I think that's afforded us the luxury of being able to keep our eye on the final prize of becoming a very meaningful networking equipment solutions provider and to make the proper investments during this time of uncertainty that will enable us to come out stronger from this. Certainty from the acquisition side, we made a couple of acquisitions last year, both Cable Matrix and Simplicita. Both of those were pre-revenue. We now have revenue from both those acquisitions, and they've been successful by any measure of our own measures. And we continue to have many ideas pitched to us in terms of potential acquisitions. But we're really focused on making sure it's the right technology and, most importantly, the right people, and we haven't found any of those lately, although we're continuing to search for them.

Your next question comes from Todd Coupland - CIBC World Markets.

Just wondering if you could comment on near-term visibility relative to where it was this quarter and last quarter. Can you fill in on that a bit?

I think the biggest thing that's changed is the FCC decision coming down. And with North America, it's just a simple fact that engineers don't like to have to talk to lawyers before deploying a piece of equipment in their network, and that's sort of the situation we found ourselves through most of this year in North America. And so that created a whole bunch of uncertainty. Now that we're sort of more firmly established, having conversations around what rollouts might look like and what new solutions might look like and, you know, what our road map looks like, it just feels - the visibility feels better from the perspective of all the activities you have to do that eventually lead up to a sale. And so from a qualitative perspective, there's definitely a greater sense of confidence in visibility.

And you've added all these smaller DSL players as customers. What does the pipeline look like for those DSL carriers that have, you know, 5 million plus subs? Are those decisions looking like they're loosening up as well or is that still a fairly long road until we start to see some rollouts in their networks?

Yes. I hesitate to predict and I won't predict when those guys will rollout, but what I will say is  and you see it in our progress in Europe and our progress in Latin and South America  that there are things progressing there, and there's no question that we're getting the meetings and there's no question that people believe that, as they deliver more services over IP that a intelligence layer's required. And so I feel there's as much conviction as there ever has been, if not more, to roll out these types of solutions. You know, we obviously won a Tier 1 in the quarter as well, but it's no longer a question of if we will do it, it's a question of when they will do it and what's the right architecture and how it fits into their next-generation network plan.

And when we think about sort of the market opportunity, I mean, in the past we've talked about X number of dollars per broadband sub, you know, pick your number. How has that changed with the barriers now shifting away from focusing on specific applications post the FCC decision? Can we still think about it in the context of a few dollars of Capex per sub or is the market opportunity shifting around? Maybe just give us a little color on that.

I guess there's a couple things there. So the application awareness is still alive and well in all other parts of the world. In the U.S. market in particular, I'll remind you in the FCC decision and in Kevin Martin, the FCC chair's, remarks, he also spoke of how voice traffic might be more important than data traffic for successful delivery. And so the ruling per se wasn't saying that application visibility or application policy is not allowed. It's just make sure you know what your objectives are and make sure you're articulating what your objectives are to your subscriber base. And so I just wanted to make sure that there's some clarity around that. And in terms of dollars per sub, you know, the numbers are still all over the map. And on the wireless side it depends on whether you're looking actually just at the data subs and then you're looking at active data subs; that's going to drive those numbers. But we still feel reasonably confident that the number should be in the area of $10 per sub over three years.

And then just lastly, your deferred revenue pickup in the quarter, is that basic? Are you booking any of the FairShare at this point there? So is that going to - does that give us a little indication on what we might expect in the fourth quarter in Q1?

We didn't complete the FairShare agreement until Q4 after our announcement time, so none of that is in the deferred revenue.

Your next question comes from Gus Papageorgiou - Scotia Capital.

Just quickly on the economic environment, your quarter ended in August and in September it appears that economic conditions have deteriorated. I'm wondering if you're seeing any reaction from the carrier partners in terms of their capital spending budgets as a result of that environment?

We just had our EMEA sales conference and our North American sales conference this past week, and we did probe on that. There was some early discussions early in the year about an economic downturn, but it really just hasn't been the focus of our engagements with our customers of late. It's been, particularly in North America, it's been discussing plans moving forward post the FCC decision. And so we haven't seen any very specific Capex reduction announcements, although we've certainly read all the things that the analysts and the press have been writing about it recently. But I can't say that it's been at all the focus of our discussions with our customers.

And just, I mean, I know you're not providing guidance - that's fair - but in terms of seasonality, do you think there's any specific seasonal pattern to the final quarter, positive or negative, that we should take into account?

We haven't heard the typical types of comments of budget flush at the end of the year at this stage of the game, which might be one of the more traditional seasonality things in this business. But I would say right now we haven't seen any early indications of that.

There are no further questions at this time.

On behalf of Scott and Dave, thank you very much for your questions and for attending Sandvine's conference call, and we look forward to speaking with you again soon.