Vecima Reports Q2 Fiscal 2020 Results

• Revenue – $25.1M, Gross Margin – 64%, EPS – $0.16, Adjusted EBITDA – $7.0M, Cash Balance – $40.2M
• Favorable product mix led to Adjusted EBITDA increase of 27% year-over-year
• Record quarter for Content Delivery and Storage segment with $15.4M in revenue and 36.3% growth quarter-over quarter
• First deployment volume order for Entra Remote PHY Monitor
• Entra family product sales surpass $1.1M

VICTORIA, BC – (February 6, 2020) – Vecima Networks Inc. (TSX:VCM) today reported financial results for the three months ended December 31, 2019.

FINANCIAL HIGHLIGHTS

“The second quarter was a pivotal one for Vecima as we initiated sales of our new Entra™ family of DAA products, and in our Content Delivery and Storage segment, achieved significant new customer wins and record quarterly revenue and bottom-line performance,” said Sumit Kumar, Vecima’s President and Chief Executive Officer. “While these were noteworthy milestones for Vecima, as we have highlighted previously, we remain cautious in our expectations for Entra sales in the second half due to ongoing timing uncertainties related to the cable industry’s transition to the new network architecture.”

“In our Content Delivery and Storage segment, we generated quarterly revenues of $15.4 million as demand for our MediaScaleX™ IPTV solutions continued to grow. We advanced the rollout of a major software upgrade with a world top-five multiple system operator (MSO), while attracting new IPTV customers in the Caribbean and Latin America (CALA) region, where we are expanding quickly. Building on this strength, a premier Tier 1 national broadcaster in Latin America chose our MediaScaleX//Storage™ solution to begin converting archival tape storage to online storage. This deployment represents our first entry into the large worldwide broadcast market and is a highly strategic win for us.”

“In our Video and Broadband Solutions segment, we drove deployment volume license sales of our new Entra Remote PHY Monitor to a Tier 1 customer in Q2. This was followed by initial Entra node sales to the same customer subsequent to the quarter end. We also produced initial sales of our new Entra Video QAM Manager and Entra Interactive Video Controller (IVC) during the second quarter. All told, we achieved $1.1 million in Entra family sales in the second quarter, reflecting our first material revenue results in the new DAA market which represents strong strategic growth potential for the Company. These advances in Entra mark a significant milestone for Vecima.”

“Financially, we turned in our best quarterly performance in over three years. Second quarter consolidated revenues climbed to $25.1 million, up 11% year-over-year. We also increased Adjusted EBITDA by 27% to $7.0 million and grew earnings per share to $0.16, from $0.09 in the same period last year. Our improved bottom-line performance reflects our increased sales and a gross margin of 64% as a result of significant software sales in our revenue mix.”

“We are pleased with the significant progress made on both the DAA and IPTV fronts in the second quarter,” said Mr. Kumar.

Q2FY20 BUSINESS HIGHLIGHTS

Video and Broadband Solutions

• Increased segment sales by 20% year-over-year and 12% quarter-over-quarter, reflecting strong demand for TerraceQAM and initial sales of next generation Entra products
• Entra family:
  • Achieved first $1.1 million of sales of next generation Entra family products as operators began to purchase our new DAA platforms and products
  • Won first DAA solution order covering deployment volume licenses of our Entra Remote PHY Monitor in Q2, along with an initial Entra Remote PHY access node order subsequent to quarter-end, from a Tier 1 North American customer. The Entra Remote PHY Monitor is Vecima’s industry-leading DAA monitoring and management tool and has been chosen as a critical service assurance platform for the lead Tier 1’s DAA network program
  • Advanced field trial for Remote PHY Access Nodes with a Canadian MSO
  • Achieved initial sales of Entra Interactive Video Controller (IVC) and Entra Video QAM Manager
  • Launched the Entra EN8124 access node, an industry-leading and innovative high-density DAA node, supporting two Remote PHY Devices (RPD) in a single node to double both downstream and upstream capacity, heightening customer engagements for our differentiated portfolio of Entra family products
  • Advanced IPTV and DAA engagement with a Tier 1 MSO, progressing lab qualifications for both MediaScaleX and Entra Remote PHY node
• Terrace family
  • Achieved significant increase in TerraceQAM sales uptake at a Tier 1 MSO as the customer expands its extensive hospitality footprint while preparing for migration to the next generation TerraceIQ platform
  • Progressed development of the next generation Terrace IQ platform and delivered functional proof of concept demonstration to a Tier 1 US MSO supporting the customer’s aim to upgrade its network wide deployment of the Terrace and TerraceQAM products

Content Delivery and Storage

• Generated record segment sales of $15.4M, with revenue up 8% year-over-year and 36.3% quarter-over-quarter
• Achieved further advances in the burgeoning IPTV market with expansion across new and existing customers for Vecima’s portfolio of MediaScaleX IPTV products
• Robust sales uptake of a major software release upgrade by a world top‑five MSO where MediaScaleX is deployed to provide on‑demand video across over 75% of the operator’s footprint
• Built further momentum in CALA with highest-ever region CDS revenue, surpassing $1M USD in Q2FY20, led by deployments from a Tier 1 MSO win announced in Q1
• Selected by and received initial orders from a Tier 1 broadcaster in the CALA region to replace legacy tape-based archives, which are heavily deployed in the industry, with online MediaScaleX object storage. This represents Vecima’s first significant conversion in the broadcaster sector, a major strategic growth area for our state-of-the-art Storage platform
• Completed major enhancements to MediaScaleX, adding CMAF common streaming and encryption to CDN products and additional virtualization elements to Storage product, driving sizable hardware and network efficiency increases

Telematics

• Awarded contract by the City of Saskatoon for a fleet management solution covering 1,000 municipal vehicles and moveable assets and initiated fleet-wide rollout in December
• Continued penetration in the moveable assets market bringing in five additional restoration industry customers with assets being monitored through Vecima’s Bluetooth Low Energy (BLE) tags

“Looking forward, we have established an industry lead with our growing line of independent, agnostic and future-proof Entra DAA products and platforms and are nearing scale commercial deployment of these next generation products,” stated Mr. Kumar. “While we are encouraged by the breadth of our engagements with customers for our Entra products and expect momentum will build as additional customers move closer to deployment, we remain cautious in our expectations for the industry pace of DAA deployments in fiscal 2020. We also anticipate that the DAA market may be subject to significant quarter‑to‑quarter sales variations based on the timing of large customer infrastructure projects.”

“In our Content Delivery and Storage segment, we expect demand for our MediaScaleX product family will remain strong through the balance of fiscal 2020 as a result of product enhancements, the build-up of new customers, and higher levels of capital spending on IP video technologies by MSOs,” added Mr. Kumar. “We continue to see the potential for year-over-year segment sales growth of over 20% in fiscal 2020 based on our pipeline of IPTV opportunities, but as always, note that this part of our business is prone to significant revenue variations quarter-to-quarter, relating to the timing of large customer orders.”

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 March 23, 2020 to shareholders of record as at February 21, 2020.

CONFERENCE CALL

A conference call and live audio webcast will be held today, February 6, 2020 at 1 p.m. ET to discuss the Company’s second quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three months ended December 31, 2019 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/vecima20200206.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 second quarter of fiscal 2020.

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: The second quarter was a pivotal one for Vecima; while these were noteworthy milestones for Vecima, as we have highlighted previously, we remain cautious in our expectations for Entra sales in the second half due to ongoing timing uncertainties related to the cable industry’s transition to the new network architecture; this deployment represents our first entry into the large worldwide broadcast market and is a highly strategic win for us; initial sales of our new Entra Video QAM Manager and Entra Interactive Video Controller (IVC), marked a significant milestone for Vecima; we achieved Entra family sales during the quarter, reflecting our first material revenue results in the new DAA market which reflects strong strategic growth potential for the company; Looking forward, we have established an industry lead with our growing line of independent, agnostic and future-proof Entra DAA products and platforms and are nearing scale commercial deployment of these next generation products; while we are encouraged by the breadth of our engagements with customers for our Entra products and expect momentum will build as additional customers move closer to deployment, we remain cautious in our expectations for the industry pace of DAA deployments in fiscal 2020; we also anticipate that the DAA market may be subject to significant quarter‑to‑quarter sales variations based on the timing of large customer infrastructure projects; in our Content Delivery and Storage segment, we expect demand for our MediaScaleX product family will remain strong through the balance of fiscal 2020 as a result of product enhancements, the build-up of new customers, and higher levels of capital spending on IP video technologies by MSOs; We continue to see the potential for year-over-year segment sales growth of over 20% in fiscal 2020 based on our pipeline of IPTV opportunities, but as always, note that this part of our business is prone to significant revenue variations quarter-to-quarter, relating to the timing of large customer orders.

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 26, 2019, 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
Investor Relations – 250-881-1982
invest@vecima.com