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Vecima Reports Q3 Fiscal 2021 Results

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·17-min read
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  • Revenue - $31.9M, Cash Balance - $23.0M

  • Gross profit grew to $14.3M, a year-over-year increase of 12%

  • Entra DAA sales continued to accelerate, climbing six times to $12.7M year-over-year, and growing 58% quarter-over-quarter

  • Customer engagements and order flow for Entra family significantly ramped once more

  • TerraceQAM sales increased 49% to $5.2M year-over-year

Vecima Networks Inc. (TSX: VCM) today reported financial results for the three months ended March 31, 2021.

FINANCIAL HIGHLIGHTS

(Canadian dollars in millions except percentages,
employees and per share data)

Q3FY21

Q2FY21

Q3FY20

Revenue

$31.9

$29.7

$24.7

Gross Margin

45%

50%

52%

Net Income (Loss)

$2.2

$(3.1)

$0.7

Earnings (Loss) Per Share1

$0.10

$(0.14)

$0.03

Adjusted Earnings (Loss) Per Share1, 2,3,4,5

$0.02

$(0.14)

$0.03

Adjusted EBITDA2

$2.0

$2.5

$5.6

Cash and Short-term Investments

$23.0

$20.8

$36.2

Employees

469

466

375

1 Based on weighted average number of shares outstanding.

2 Adjusted Earnings Per Share and Adjusted EBITDA do not have a standardized meaning under IFRS and therefore
may not be comparable to similar measures provided by other issuers. See "Adjusted EBITDA and Adjusted Earnings (Loss)
Per Share" below.

3 Starting in Q4 fiscal 2019, we have changed our definition and calculation of Adjusted Earnings Per Share. For a reconciliation
of Adjusted Earnings (Loss) Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis

for the third quarter of fiscal 2021.

4 Adjusted Earnings Per Share includes non-cash share-based compensation of $0.3 million or $0.01 per share for the three months
ended March 31, 2021, and $1.7 million or $0.08 per share for the nine months ended March 31, 2021. The non-cash
share-based compensation primarily reflects certain performance-based vesting thresholds achieved under the Company’s
Performance Share Unit Plan.

5 Adjusted Earnings Per Share includes foreign exchange loss of $0.8 million or $0.04 per share for the three months ended
March 31, 2021, and $2.3 million or $0.10 per share for the nine months ended March 31, 2021.

"Vecima grew total sales by 29% year-over-year to $31.9 million in the third quarter as customer deployments accelerated across our broad portfolio of next-generation Entra Distributed Access Architecture (DAA) products," said Sumit Kumar, Vecima’s President and Chief Executive Officer. "Additionally, we generated gross profit of $14.3 million and adjusted EBITDA of $2.0 million, which we achieved despite pronounced lumpiness in third quarter Content Delivery and Storage sales, continued foreign exchange headwinds related to the strengthening Canadian dollar, and an atypical product mix in the period that in combination temporarily reduced gross margin."

"In our Video and Broadband Solutions (VBS) segment, sales were up an impressive 128% year-over-year to $21.8 million, led by very strong demand for our leading Entra Remote-PHY, Remote MAC-PHY and 10G EPON DAA solutions. Entra sales of $12.7 million reflected multiple additional Tier 1 and other customer deployments during the quarter, including expanded engagements with several of our customers. The VBS segment also benefited from an excellent quarter for our TerraceQAM commercial video solutions, with sales up 49% year-over-year. The continued strong deployment of TerraceQAM provides benefits both now and for the future, with the entire population of TerraceQAM platforms upgradable to our new TerraceIQ solution when operators are ready."

"In our Content Delivery and Storage (CDS) segment, revenue of $8.8M reflected the type of quarterly revenue fluctuation that can affect this segment and which relates to the size and timing of project-oriented orders. Our CDS business also faced impacts related to the COVID-19 pandemic, which has slowed our and our customers’ ability to conduct onsite systems integration, bring-up and expansion in some regions. Based on our visibility today, CDS sales are expected to normalize in the quarters ahead as we continue to consolidate the record new customer wins of fiscal 2020, while safely navigating COVID-19 operating restrictions."

BUSINESS HIGHLIGHTS

Video and Broadband Solutions (VBS)

  • The VBS segment delivered exciting revenue growth of 128% year-over-year and 32% quarter-over-quarter, generating $21.8 million in sales as customers continued to transition to next generation networks using Vecima’s platforms

DAA (Entra Family)

  • Deployments of next generation Entra DAA products continued to accelerate rapidly, climbing six times to $12.7 million in Q3 fiscal 2021 from $1.8 million in Q3 fiscal 2020, and up 58% sequentially from $8.0 million in Q2 fiscal 2021. Entra results for the quarter included $6.0 million of sales from the cable access portfolio acquired from Nokia in Q1FY2021, a 76% increase from $3.4 million in Q2 fiscal 2021

  • Carried out multiple additional Tier 1 customer deployments for Entra Remote-PHY, Remote MAC-PHY nodes and 10G EPON solutions during the quarter, and expanded engagements with a number of existing customers

  • Thirty-three customers on six continents have now ordered Entra solutions, a sizeable jump from 24 in the previous quarter, and total customer engagements for Entra have grown to include 61 MSOs worldwide, including several Tier 1 operators. Fifty of these operators are in lab trial, field trial or live deployment phases

  • Initiated deployments of Vecima’s Entra EN8124, the industry’s first fully segmentable, double-density Remote PHY node, with lead Tier 1 MSO customer

  • Received significant order for EN2112 compact Remote PHY node from a CALA-based Tier 1 MSO and initiated deliveries in the third quarter

  • Released numerous software enhancements to the Remote PHY family of products, including customer-desired features such as additional video injection, interoperability, and spectrum capture modes

  • Delivered major new software release for Entra Remote MAC-PHY and 10G EPON FTTH platforms, which provides significant operational and performance enhancements, and a cloud native deployment roadmap with support for virtual machine environments

  • Expanded 10G EPON fiber-to-the-home ecosystem by incorporating interoperability with multiple additional third-party vendors of Optical Network Units (ONUs), which serve as in-home modems in a FTTH deployment

  • Acquired and progressed development of unique access node housing technology from ATX Networks, continuing Vecima’s DAA industry stewardship with a forward-looking, standardized, and modular DAA node platform for future generations of DAA

  • Furthered development of a new, next generation of Cable Access modules and nodes, which are expected to further cement Vecima’s unique leadership position in DAA technology for years to come

Commercial Video (Terrace Family)

  • Generated a solid $3.5 million of Terrace family revenue in the third quarter, following particularly strong second quarter sales of $5.2 million

  • Significantly increased TerraceQAM sales to $5.2 million, up 49% from $3.5 million in the same period last year, and up 61% from $3.2 million in Q2 2021 with the lead Tier 1 customer continuing its scale hospitality program with the platform

  • Following recent Tier 1 customer win for Vecima’s next generation TerraceIQ commercial video gateway solution, further expanded this platform’s software feature set in preparation for broader customer adoption, including features that enhance the platform’s leading capabilities for management, monitoring, network resiliency and deployment velocity in the hospitality vertical

Content Delivery and Storage (CDS)

  • CDS sales were $8.8 million, with segment service revenues growing by 6% year-over-year

  • Sold ContentAgent workflow management business on March 31, 2021 to Telestream for US$2.1 million, resulting in a pre-tax gain of approximately US$1.6 million

  • Expanded subscriber uptake at existing IP video customers, demonstrating the inherent scalability of Vecima’s content delivery technology and products

  • Developed additional audio/video profile capability for the MediaScaleX//Origin platform, offering a market-unique ability to utilize unified content libraries distributed to both OTT media player devices and legacy set-top boxes

  • Expanded broad partner integrations to add another leading middleware provider integration with MediaScaleX//Origin and Storage products for cloud DVR and digital rights management

  • Added enhanced Dynamic Ad Insertion features to the MediaScaleX portfolio software

Telematics

  • Continued deployments with municipal government customers, with expansion adding 330 new subscribers

  • Further penetration in the moveable assets market, adding five new customers representing an additional 1,000 moveable asset tags. Total number of moveable assets being monitored has now increased to over 10,000 units

"Operators worldwide are prioritizing broadband access network investments as they seek to expand bandwidth across their networks, creating rapidly increasing demand for our industry-leading portfolio of DAA products. We expect to see our Entra momentum continue to escalate through the balance of fiscal 2021 and into fiscal 2022," added Mr. Kumar.

"Demand for IPTV and open caching solutions also remains strong and we expect to carry out integration of the many new CDS design wins from last year while safely managing customer site activity in the midst of the pandemic environment."

"Overall, we anticipate a very strong finish to this pivotal fiscal year with VBS sales in their ramp and CDS revenues stabilizing. While we may be subject to further foreign exchange headwinds related to a stronger Canadian dollar, we expect gross margins to increase as our product mix shifts to include a larger proportion of higher-margin products and license sales. Moving beyond year-end, we see realization ahead of the vast potential for our growing portfolios of DAA and IPTV solutions and that will propel us to the exciting future we have been planning for Vecima."

As previously reported, Vecima’s Board of Directors declared a quarterly dividend of $0.055 per share for the period. The dividend will be payable on June 14, 2021 to shareholders of record as at May 21, 2021.

CONFERENCE CALL

A conference call and live audio webcast will be held today, May 13, 2021 at 1 p.m. ET to discuss the Company’s third quarter results. Vecima’s unaudited condensed interim consolidated financial statements and management’s discussion and analysis for the three and nine months ended March 31, 2021 are available under the Company’s profile at www.SEDAR.com, and at www.vecima.com/financials/.

To participate in the teleconference, dial 1-800-319-4610 or 1-604-638-9020. The webcast will be available in real time at http://services.choruscall.ca/links/vecima20210513.html and will be archived on the Vecima website at https://vecima.com/investor-relations/earnings-call-archive/



About Vecima Networks

Vecima Networks Inc. is a global leader focused on developing integrated hardware and scalable software solutions for broadband access, content delivery, and telematics. We enable the world's leading innovators to advance, connect, entertain, and analyze. We build technologies that transform content delivery and storage, enable high‑capacity broadband network access, and streamline data analytics. For more information, please visit our website at www.vecima.com.

Adjusted EBITDA and Adjusted Earnings / (Loss) Per Share

Adjusted EBITDA and Adjusted Earnings / (Loss) Per Share do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures provided by other issuers. Accordingly, investors are cautioned that Adjusted EBITDA or Adjusted Earnings / (Loss) Per Share should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of the Company’s financial performance or as a measure of its liquidity and cash flows. For a reconciliation of Adjusted EBITDA or Adjusted Earnings / (Loss) Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the third quarter of fiscal 2021.

Forward-Looking Statements

This news release contains "forward-looking information" within the meaning of applicable securities laws. Forward-looking information is generally identifiable by use of the words "believes", "may", "plans", "will", "anticipates", "intends", "could", "estimates", "expects", "forecasts", "projects" and similar expressions, and the negative of such expressions. Forward-looking information in this news release includes the following statements: sales were led by very strong demand for our leading Entra Remote-PHY, Remote MAC-PHY and 10G EPON DAA solutions; [our CDS segment] revenue reflected the type of quarterly revenue fluctuation that can affect this segment and which relates to the size and timing of project-oriented orders; our CDS business also faced impacts related to the COVID-19 pandemic, which has slowed our and our customers’ ability to conduct onsite systems integration, bring-up and expansion in some regions; based on our visibility today, CDS sales are expected to normalize in the quarters ahead as we continue to consolidate the record new customer wins of fiscal 2020, while safely navigating COVID-19 operating restrictions; the VBS segment delivered exciting revenue growth as customers continued to transition to next generation networks using Vecima’s platforms; acquired and progressed development of unique access node housing technology, continuing Vecima’s DAA industry stewardship with a forward-looking, standardized, and modular DAA node platform for future generations of DAA; furthered development of a new, next generation of Cable Access modules and nodes, which is expected to further cement Vecima’s unique leadership position in DAA technology for years to come; operators worldwide are prioritizing broadband access network investments as they seek to expand bandwidth across their networks, creating rapidly increasing demand for our industry-leading portfolio of DAA products; we expect to see our Entra momentum continue to escalate through the balance of fiscal 2021 and into fiscal 2022; demand for IPTV and open caching solutions also remains strong and we expect to carry out integration of the many new CDS design wins from last year while safely managing customer site activity in the midst of the pandemic environment; overall, we anticipate a very strong finish to this pivotal fiscal year with VBS sales in their ramp and CDS revenues stabilizing; while we may be subject to further foreign exchange headwinds related to a stronger Canadian dollar, we expect gross margins to return to the target range as our product mix shifts to include a larger proportion of higher-margin products and license sales; moving beyond year-end, we see realization ahead of the vast potential for our growing portfolios of DAA and IPTV solutions and that will propel us to the exciting future we have been planning for Vecima.

A more complete discussion of the risks and uncertainties facing Vecima is disclosed under the heading "Risk Factors" in the Company’s Annual Information Form dated September 24, 2020, as well as the Company’s continuous disclosure filings with Canadian securities regulatory authorities available at www.sedar.com. All forward-looking information herein is qualified in its entirety by this cautionary statement, and Vecima disclaims any obligation to revise or update any such forward-looking information or to publicly announce the result of any revisions to any of the forward-looking information contained herein to reflect future results, events or developments, except as required by law.

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Financial Position

(unaudited – in thousands of Canadian dollars)

As at

March 31, 2021

June 30, 2020

Assets

Current assets

Cash and cash equivalents

$

22,984

$

17,350

Short-term investments

-

17,165

Accounts receivable

34,235

24,908

Income tax receivable

331

333

Inventories

16,913

17,212

Prepaid expenses

3,336

2,051

Contract assets

425

646

Total current assets

78,224

79,665

Non-current assets

Property, plant and equipment

14,131

11,801

Right-of-use assets

3,711

4,010

Goodwill

14,650

15,487

Intangible assets

69,453

69,200

Other long-term assets

1,255

1,301

Investment tax credits

25,822

24,374

Deferred tax assets

7,453

4,460

Total assets

$

214,699

$

210,298

Liabilities and shareholders’ equity

Current liabilities

Accounts payable and accrued liabilities

$

19,642

$

17,105

Provisions

1,418

492

Income tax payable

493

130

Deferred revenue

8,947

4,960

Current portion of long-term debt

1,751

1,698

Total current liabilities

32,251

24,385

Non-current liabilities

Provisions

392

400

Deferred revenue

2,557

602

Deferred tax liability

6

536

Long-term debt

4,120

4,613

Total liabilities

39,326

30,536

Shareholders’ equity

Share capital

8,737

3,161

Reserves

2,197

3,838

Retained earnings

165,141

170,665

Accumulated other comprehensive (loss) income

(702)

2,098

Total shareholders’ equity

175,373

179,762

Total liabilities and shareholders’ equity

$

214,699

$

210,298

.

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited – in thousands of Canadian dollars, except per share amounts)

Three months

Nine months

Periods ended March 31,

2021

2020

2021

2020

Sales

$

31,861

$

24,728

$

88,857

$

69,168

Cost of Sales

17,535

11,953

47,187

30,401

Gross Profit

14,326

12,775

41,670

38,767

Operating expenses

Research and development

7,520

5,578

20,829

14,863

Sales and marketing

3,644

3,505

10,095

10,329

General and administrative

4,357

3,983

13,610

11,929

Share-based compensation

267

14

1,716

47

Other (income) expense

(50)

25

(50)

(130)

Total operating expenses

15,738

13,105

46,200

37,038

Operating (loss) income

(1,412)

(330)

(4,530)

1,729

Finance (expense) income

(45)

(236)

120

526

Foreign exchange (loss) gain

(830)

1,953

(2,269)

1,781

(Loss) income before income taxes

(2,287)

1,387

(6,679)

4,036

Income tax (recovery) expense

(2,692)

555

(3,059)

666

Net income (loss) from continuing operations

405

832

(3,620)

3,370

Net income (loss) from discontinued operations

1,784

(166)

1,854

(527)

Net income (loss)

$

2,189

$

666

$

(1,766)

$

2,843

Other comprehensive (loss) income

Item that may be subsequently reclassed to net income

Exchange differences on translating foreign operations

(650)

2,416

(2,800)

2,213

Comprehensive income (loss)

$

1,539

$

3,082

$

(4,566)

$

5,056

Net income (loss) per share

Continuing operations - basic

$

0.02

$

0.04

$

(0.16)

$

0.15

Discontinued operations - basic

0.08

(0.01)

0.08

(0.02)

Total basic net income (loss) per share

$

0.10

$

0.03

$

(0.08)

$

0.13

Continuing operations – diluted

$

0.02

$

0.04

$

(0.16)

$

0.15

Discontinued operations – diluted

0.08

(0.01)

0.08

(0.02)

Total diluted net income (loss) per share

$

0.10

$

0.03

$

(0.08)

$

0.13

Weighted average number of common shares

Shares outstanding – basic

22,867,226

22,435,234

22,806,145

22,403,397

Shares outstanding - diluted

22,905,761

22,474,692

22,806,145

22,432,319

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Change in Equity

(unaudited – in thousands of Canadian dollars)

Share
capital

Reserves

Retained
earnings

Accumulated
other
comprehensive
(loss) income

Total

Balance as at June 30, 2019

$

1,916

$

4,104

$

173,944

$

1,010

$

180,974

Net income

-

-

2,843

-

2,843

Other comprehensive income

-

-

-

2,213

2,213

Dividends

-

-

(3,698)

-

(3,698)

Shares issued by exercising options

761

(199)

-

-

562

Share-based payment expense

-

47

-

-

47

Balance as at March 31, 2020

$

2,677

$

3,952

$

173,089

$

3,223

$

182,941

Balance as at June 30, 2020

$

3,161

$

3,838

$

170,665

$

2,098

$

179,762

Net loss

-

-

(1,766)

-

(1,766)

Other comprehensive loss

-

-

-

(2,800)

(2,800)

Dividends

-

-

(3,758)

-

(3,758)

Shares issued by exercising options

3,066

(793)

-

-

2,273

Subscription for common shares

713

-

-

-

713

PSUs settled in common shares

1,797

(2,564)

-

-

(767)

Share-based payment expense

-

1,716

-

-

1,716

Balance as at March 31, 2021

$

8,737

$

2,197

$

165,141

$

(702)

$

175,373

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Cash Flows

(unaudited – in thousands of Canadian dollars)

Three months

Nine months

Periods ended March 31,

2021

2020

2021

2020

OPERATING ACTIVITIES

Net income (loss) from continuing operations

$

405

$

832

$

(3,620)

$

3,370

Adjustments for non-cash items:

(Gain) loss on sale of property, plant and equipment

(40)

16

(32)

(105)

Depreciation and amortization

3,891

4,245

11,174

10,655

Share-based compensation

267

14

1,716

47

Income tax (recovery) expense

(125)

230

(471)

204

Deferred income tax (recovery) expense

(2,567)

325

(2,588)

462

Interest expense

56

72

169

231

Interest income

(10)

(162)

(157)

(622)

Net change in working capital

2,111

(2,043)

1,084

(6,256)

Decrease (increase) in other long-term assets

175

(490)

(119)

(330)

Decrease in provisions

(147)

(290)

(104)

(368)

Increase in investment tax credits

(42)

(34)

(112)

(123)

Income tax received

-

-

174

173

Income tax paid

(252)

(457)

(746)

(525)

Interest received

9

162

157

622

Interest paid

(3)

(72)

(22)

(230)

Cash provided by (used in) discontinued operations

482

95

651

(28)

Cash provided by operating activities

4,210

2,443

7,154

7,177

INVESTING ACTIVITIES

Capital expenditures, net

(979)

(567)

(2,261)

(1,492)

Purchase of short-term investments

(154)

(5,149)

(295)

(5,927)

Proceeds from sale of short-term investments

10,039

5,387

17,460

13,487

Deferred development costs

(3,845)

(3,344)

(10,916)

(8,677)

Business acquisition

530

-

(5,871)

-

Cash provided by (used in) discontinued operations

2,533

(109)

2,323

(193)

Cash provided by (used in) investing activities

8,124

(3,782)

440

(2,802)

FINANCING ACTIVITIES

Proceeds from government grants

-

4

-

98

Principal repayments of lease liabilities

(352)

(345)

(1,177)

(993)

Repayment of long-term debt

(63)

(63)

(188)

(209)

Dividends paid

(1,258)

(1,234)

(3,758)

(3,698)

Proceeds from issuing shares

713

-

713

-

Issuance of shares through exercised options

40

3

2,273

562

Cash used in discontinued operations

(22)

(28)

(64)

(28)

Cash used in financing activities

(942)

(1,663)

(2,201)

(4,268)

Net increase (decrease) in cash and cash equivalents

11,392

(3,002)

5,393

107

Effect of change in exchange rates on cash

723

(791)

241

(774)

Cash and cash equivalents, beginning of period

10,869

22,960

17,350

19,834

Cash and cash equivalents, end of period

$

22,984

$

19,167

$

22,984

$

19,167

View source version on businesswire.com: https://www.businesswire.com/news/home/20210513005391/en/

Contacts

Vecima Networks
Investor Relations - 250-881-1982
invest@vecima.com