Vecima Q3 Fiscal 2022 Results Soar As Entra Sales Continue to Mount

  • Revenue reaches another all-time high of $50.9M (up 60% YoY and 17% QoQ)
  • Gross Profit grows 67% YoY to a record $24.0M
  • Gross Margin: 47%, Cash Balance: $10.6M
  • Entra sales surge to $30.8M (up 142% YoY and 67% QoQ), lifting Video and Broadband Solutions sales to $37.0M
  • Employee Count Increases 10% QoQ

VICTORIA, BC – (May 12, 2022) – Vecima Networks Inc. (TSX: VCM) today reported financial results for the three and nine months ended March 31, 2022.

“Vecima’s remarkable growth trajectory continued in the third quarter, with sales surging 60% year-over-year to $50.9 million and gross profit climbing 67% to $24.0 million – once again, the best quarterly sales and gross profit results in our history,” said Sumit Kumar, Vecima’s President and Chief Executive Officer.

“Our record Q3 sales performance was led by our Video and Broadband Solutions segment and another quarter of rapid growth for our Entra Distributed Access Architecture (DAA) portfolio. At $30.8 million, Entra quarterly sales were up 142% year-over-year and 67% quarter-over-quarter, as we drew from all across the comprehensive Entra portfolio to support multiple customers ramping up broadband access network deployment. Remarkably, quarterly sales of Entra products have now surpassed what Vecima was achieving on a total company-wide sales basis just five quarters ago, and we are still in the early days of DAA adoption. There is much more to come from Entra.”

“Our topline results were further supported by a very solid quarter for our Content Delivery and Storage segment, which grew sales 43% year-over-year to $12.5 million,” added Mr. Kumar.

“Our third quarter results were achieved in the midst of unprecedented worldwide supply chain challenges. While we remain highly effective in managing our supply chain to meet burgeoning customer demand, higher expediting costs, together with foreign exchange headwinds and a different product mix, constrained our gross margin to 47%, slightly below our target range of 48%-52%, but right in line with our guided short-term expectations as we navigate the supply chain realities. With topline momentum providing lift, we were successful in achieving adjusted EBITDA of $8.1 million and EPS of $0.13 in a challenging environment.”

“We ended the quarter in a very strong financial position with cash of $10.6 million and working capital of $54.9 million. Our significant financial resources are playing an important role in helping us build the inventories we need to respond to our rapidly growing backlog and meet very sharply rising demand for broadband in partnership with our customers. Importantly, our strong balance sheet also supports Vecima’s continued investment in innovation, including our recent industry-leading work in demonstrating multi-gig speed DOCSIS 4.0 and SVA standards-compliant Open Caching. Not only are we fuelling the needs of customers today, we are investing in the preeminent broadband and IPTV networks of tomorrow,” said Mr. Kumar.

BUSINESS HIGHLIGHTS

Video and Broadband Solutions (VBS)

The VBS segment delivered exceptional growth and revenue performance of $37.0 million, up 70% year-over-year and 36% sequentially quarter-over-quarter as customers continued to scale their transitions to next-generation networks using Vecima’s platforms.

  • DAA (Entra Family)
    • Deployments of next-generation Entra DAA products grew to a record $30.8 million, up $142% year-over-year and 67% quarter-over-quarter
    • Total customer engagements for Entra increased to 83 MSOs worldwide, from 80 at the end of Q2 fiscal 2022. Forty-five of these customers have now ordered Entra products, up from 43 last quarter
      • Liberty Latin America, a Tier 1 MSO operating across Latin America and the Caribbean, chose to deploy Vecima’s Entra Remote MACPHY DAA solution to deliver enhanced next-generation ultra-broadband services to its customers
      • Bluepeak, a cable operator providing faster, more reliable internet to customers in the U.S. Midwest, selected Vecima to provide next-generation Entra Remote MACPHY solutions for its network
      • Additional wins for the Entra Remote MACPHY DAA solution included a Top 10 MSO in North America, in addition to other operators
      • Also won a new Entra Remote PHY deployment with a Tier 1 MSO in the APAC region, in addition to continued scale deployment of our Entra Remote PHY solution with multiple customers
    • Continued to accelerate Vecima’s DAA technology lead
      • On May 2, 2022, Vecima demonstrated greater than 8.9 Gbps downstream and 6.2 Gbps upstream in a multi-vendor, real-world network environment at CableLabs’ 10G Showcase. A first for the cable industry, this significant achievement leverages the next-generation DOCSIS 4.0 standard and Vecima’s Entra Remote MACPHY node technology to provide multi-gig speeds bi-directionally on an existing Hybrid Fiber Coax (HFC) network, paving the way for cable operators to offer a true 10G service on existing networks with a natural and cost-effective upgrade
      • Together with Bluepeak, announced industry’s first cloud-based DAA controller, another step in the journey to a cloud-driven, intelligent and cost-effective set of virtualized services for access networks
      • Announced flexible MAC architecture (FMA) interoperability with state-of-the-art Entra Remote MACPHY cable access solution. Vecima continues to lead the industry in interoperability, which is crucial to the success of DAA across cable and fiber access
      • Continued innovation across the entire cable access, fiber access, and commercial video product portfolio with the introduction of several new software releases. The new releases focus on broadening Vecima’s technology leadership as the Company rapidly expands its footprint and fast-growing roster of DAA-deploying customers and magnify the many benefits provided by Vecima DAA
    • Commercial Video (Terrace Family)
      • Achieved Commercial Video sales of $6.2 million, as compared to $8.6 million in Q3 2021 and $8.7 million in Q2 fiscal 2022
        • Terrace QAM sales remained strong at $5.0 million as the lead Tier 1 customer continued its scale hospitality program with the platform while preparing for migration to TerraceIQ
        • Terrace family sales contributed Q3 fiscal 2022 revenue of $1.1 million, compared to $3.8 million in Q2 fiscal 2022 and $1.4 million in Q1 fiscal 2022, as customers continued to transition from Vecima’s legacy products to next-generation platforms, and in some cases, completed multi-year densification projects with the prior-generation solutions

Content Delivery and Storage (CDS)

    • Generated strong CDS sales of $12.5 million, up 43% from $8.8 million in Q3 fiscal 2021, but below the record-setting $15.0 million achieved in Q2 fiscal 2022 when many deferred customer projects started to accelerate
    • Continued system expansion with multiple customers as operators ramp up deployments to reap the benefits of IP video while rolling out to more subscribers
      • Breezeline (formerly Altantic Broadband), a Top 10 U.S. cable operator, chose MediaScaleX to power its IPTV video delivery solution and accelerate the next-generation TV experience to its customers
      • Secured four significant IPTV expansions with operators in the U.S.
      • Won an additional new Media ScaleX customer in the southeastern U.S.
    • Demonstrated Vecima’s Streaming Video Alliance (SVA) standards-compliant Open Caching solution and significantly progressed an engagement with a globally-leading Tier 1 streaming customer. By leveraging Open Caching’s immense potential for cable operators to broadly distribute internet-delivered streaming video traffic from prominent streaming providers, Vecima is laying the groundwork for a major shift to enhance the cable industry’s video monetization model. Vecima can supply a combined technology, software and business solution, all while materially improving the quality of experience for viewers
    • Extended support for ingest of Ultra-HD 4K high resolution entertainment content, including live, time-shift and Video-on-Demand content
    • Added support for the latest, state-of-the-art NVMe flash drives within Vecima’s MediaScaleX Storage solution, supporting industry-leading speed and recording throughput efficiency per watt and per dollar
    • Shipped MediaScaleX Origin on new, more efficient servers, further solidifying Vecima’s total cost of ownership advantage

Telematics

  • Multiple additional deployments in high-value verticals, such as municipal government and moveable asset customers
  • Added nine new customers for the NERO asset tracking platform, with the number of moveable assets being monitored rising significantly to over 20,000 units

“As we move into the fourth quarter, we see continued escalation of demand for our DAA solutions across both  fiber and cable access. The increasing number of customers ramping to scale deployment, including those involved in the massive rural 10G broadband expansion underway in the U.S., is contributing to a rapidly growing backlog and giving us excellent visibility into future demand levels for our DAA products. We expect our Entra momentum and sales pace will continue to build, supported by the massive capital investment currently being deployed by operators worldwide as they seek to expand their network capacity and offerings,” added Mr. Kumar.

“In our Content Delivery and Storage segment, demand for our IPTV solutions remains robust and we anticipate another solid quarter in Q4. On a full-year basis, we now anticipate single-digit revenue growth from this segment in fiscal 2022.”

“We reiterate our caution that global supply chain challenges have the potential to constrain our revenue growth and put continued pressure on gross margins in the near-term. We have significantly increased our inventories of finished goods and raw material and boosted our investments in expediting working capital to help us respond to our growing order backlog, and we are leveraging our strong financial postion and excellent supplier relationships to ensure we can continue translating demand into results. This is a tremendously exciting time for Vecima as we embark on the extraordinary and lengthy runway for growth we see in the booming DAA and IPTV markets,” said Mr. Kumar.

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 13, 2022 to shareholders of record as at May 20, 2022

CONFERENCE CALL

A conference call and live audio webcast will be held today, May 12, 2022 at 1 p.m. ET to discuss the Company’s third quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three and nine months ended March 31, 2022 are available under the Company’s profile at www.SEDAR.com, and at https://vecima.com/investor-relations/financial-reports/.

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/vecima20220512.html and will be archived on the Vecima website at https://vecima.com/investor-relations/earnings-call-archive/

About Vecima Networks

Vecima Networks Inc. (TSX: VCM) is leading the global evolution to the multi-gigabit, content-rich networks of the future. Our talented people deliver future-ready software, services, and integrated platforms that power broadband and video streaming networks, monitor and manage transportation, and transform experiences in homes, businesses, and everywhere people connect. We help our customers evolve their networks with cloud-based solutions that deliver ground-breaking speed, superior video quality, and exciting new services to their subscribers. Learn more at 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 2022.

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: Vecima’s remarkable growth trajectory continued in the third quarter, once again, the best quarterly sales and gross profit results in our history; we are still in the early days of DAA adoption, there is much more to come from Entra; our significant financial resources are playing an important role in helping us build the inventories we need to respond to our rapidly growing backlog and meet very sharply rising demand for broadband in partnership with our customers; not only are we fuelling the needs of customers today, we are investing in the preeminent broadband and IPTV networks of tomorrow; Vecima is paving the way for cable operators to offer a true 10G service; Vecima continues to lead the industry in interoperability, which is crucial to the success of DAA across cable and fiber access; continued innovation across the entire cable access, fiber access, and commercial video product portfolio with the introduction of several new software releases; the new releases focus on broadening Vecima’s technology leadership as the Company rapidly expands its footprint and fast-growing roster of DAA-deploying customers and magnify the many benefits provided by Vecima DAA; by leveraging open caching’s immense potential for cable operators to broadly distribute internet-delivered streaming video traffic from prominent streaming providers, Vecima is laying the groundwork for a major shift to enhance the cable industry’s video monetization model; Vecima can supply a combined technology, software and business solution, all while materially improving the quality of experience for viewers; we see continued escalation of demand for our DAA solutions across both  fiber and cable access; the increasing number of customers ramping to scale deployment is giving us excellent visibility into future demand levels for our DAA products; we expect our Entra momentum and sales pace will continue to build, supported by the massive capital investment currently being deployed by operators worldwide as they seek to expand their network capacity and offerings; demand for our IPTV solutions remains robust and we anticipate another solid quarter in Q4; on a full-year basis, we now anticipate single digit revenue growth from this segment in fiscal 2022; we reiterate our caution that global supply chain challenges have the potential to constrain our revenue growth and put continued pressure on gross margins in the near-term; we have significantly increased our inventories of finished goods and raw material and boosted our investments in expediting working capital to help us respond to our growing order backlog, and we are leveraging our strong financial postion and excellent supplier relationships to ensure we can continue translating demand into results; this is a tremendously exciting time for Vecima as we embark on the extraordinary and lengthy runway for growth we see in the booming DAA and IPTV markets.

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 23, 2021, 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

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