Vecima Reports Second Quarter Results

Sales Increase 10% YOY, Gross Margin Climbs to 52%

VICTORIA – (February 12, 2015) – Vecima Networks Inc. (TSX:VCM), an experienced designer and manufacturer of innovative technology in the broadband equipment market, today reported financial results for the three and six months ended December 31, 2014.

FINANCIAL HIGHLIGHTS

“We achieved excellent results in the second quarter,” said Sumit Kumar, President and CEO. “Demand for our newer platform products continued to grow as we transition from our legacy products. This transition contributed to our very strong 52% gross margin. We also achieved a 10% year-over-year increase in sales, of which the strengthening US dollar contributed 7% and organic sales growth contributed 3%. In particular, uptake of our new digital video access platform (DVAP) products increased and we achieved higher sales of our Terrace QAM products. Cash flow and profitability remained strong with adjusted EBITDA of $6.3 million, up 29% year over year, and we recorded net income of $3.7 million. We also maintained a robust cash balance of $52.0 million, even while paying two dividends amounting to $2.0 million in the period, increasing our investment in R&D and working capital, and disbursing one extra payroll in December due to the timing of the New Year’s Day holiday.”

“Going forward we anticipate continued strong customer demand, but see the potential for quarter-to-quarter variation in orders based on the timing of new product approvals and possible impacts related to the proposed merger of two of North America’s largest cable multiple system operators (MSOs). If the merger proceeds, we believe it would prove highly beneficial for Vecima, but does have the potential to create short-term fluctuations in product orders.”

“Our near-term product focus will remain on completing development of our new Terrace TC600E and TransQAM platforms, which we announced in the first quarter. We are also investing in the longer-term development of products and platforms that enable our cable customers to support gigabit class Internet speeds and IP-based video delivery efficiently and cost effectively,” said Mr. Kumar.

Based on the Company’s continued favourable performance and positive outlook, Vecima’s Board of Directors declared a quarterly dividend of $0.045 on February 11, 2015. The dividend will be payable on March 20, 2015 to shareholders of record as at February 24, 2015.

MULTIPLE SYSTEM OPERATOR (MSO) BUSINESS SERVICES

Terrace Family

• Second quarter sales of Terrace family products decreased to $5.7 million, from $7.9 million in Q1 fiscal 2015 as a large MSO customer neared completion of its all-digital network conversion. The aggressive pace of the conversion had contributed appreciable sales of Terrace products in previous quarters. To date, Vecima has sold well in excess of $100 million of Terrace family products and continues to roll out this product line to customers. During the second quarter, Vecima completed early stage requirements for another large MSO customer and subsequently signed a supply agreement to support the anticipated ramp-up of this customer’s network conversion to all-digital.
• Development on the new Terrace TC600E platform continued through the second quarter, with launch expected in the second half of fiscal 2015. The TC600E, which provides support for MPEG-4 and high definition inputs, will enable cable operators to continue to support and enhance their commercial video businesses while freeing up valuable network capacity for additional revenue-generating services.

Terrace QAM

• Sales of Terrace QAM increased to $8.3 million in Q2, from $6.3 million in Q1 2015, driven by deliveries to Vecima’s lead customer and increased deployment activity from a second MSO customer. Terrace QAM is purpose designed for the hospitality industry, providing an elegant platform over which cable operators can deliver a leading high-definition service offering.
• Work continued on Vecima’s new TransQAM platform, which is being developed under agreement with a leading cable MSO customer. Targeted for commercial availability in the second half of fiscal 2015, the TransQAM will support a broader spectrum of network architectures including MPEG-4, which is a key capacity driver for MSOs.

CABLE HEADEND

Digital Video Access Platform

• Sales of Vecima’s new Digital Video Access Platform (DVAP) ramped up in the second quarter, climbing to $3.1 million, from $1.8 million in Q1 2015. Vecima is delivering this product under a USD $19 million two-year “take or pay” contract with an OEM customer and expects deliveries will slow for the next two quarters as the initial inventory take up is consumed and vary from quarter to quarter based on adoption rates among MSO end-users. Vecima has successfully completed approval for this platform with a number of the largest MSOs and expects to gradually transition to the deployment levels anticipated in the OEM contract.

OUTLOOK FOR FISCAL 2015

Vecima’s outlook for fiscal 2015 remains substantially unchanged from that provided in the Company’s annual MD&A for fiscal 2014.

CONFERENCE CALL

A conference call and live audio webcast will be held on February 12, 2015 at 1 p.m. ET to discuss the Company’s second quarter results. Vecima’s unaudited condensed interim consolidated financial statements and management’s discussion and analysis for the three months ended December 31, 2014 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 1-604-638-5340. The webcast will be available in real time at services.choruscall.ca/links/vecima150212.html and will be archived on the Vecima website at www.vecima.com/shareholder-events.