Vecima Reports Q1 Fiscal 2016 Results
Adjusted EBITDA increases 37% to $9.6M
Gross Margin of 56%
Cash Balance Increases to $66.3M
VICTORIA – (November 13, 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 months ended September 30, 2015.
“Our momentum continued to build in the first quarter as we achieved the best quarterly adjusted EBITDA results in our history, generated a very strong gross margin, and increased our cash balance to $66.3 million,” said Sumit Kumar, Vecima Networks’ President and CEO.
“Our core Terrace and Terrace QAM product families helped to drive these results with our investments in product line extensions bearing fruit. In particular, first quarter performance was boosted by the rapid and widespread adoption of our new TC600E platform, which provides support for network wide all-digital conversions at MSOs (multiple system operators) and offers state-of-the-art MPEG-4 HD video capabilities.”
“Looking forward, we expect our 2016 product sales will continue to benefit from uptake of the TC600E, as well as from the addition of TransQAM, the new MPEG-4 HD enabled Terrace QAM. Ordering activity for our DVAP platform is also expected to increase in fiscal 2016.”
“Our Board of Directors also declared a quarterly dividend of $0.055 per share, as previously reported. The dividend will be payable on December 21, 2015 to shareholders of record on November 27, 2015.”
“Our business is performing well, thanks in large part to our investments in products and technologies that align with our customers’ network evolutions and help them to enhance their service offerings. This will remain our priority as we develop next-generation broadband access solutions that optimally support the MSOs’ need to offer gigabit speeds to their subscribers. We are investing in our future by building platforms for our customers’ success and growth,” said Mr. Kumar.
MULTIPLE SYSTEM OPERATOR (MSO) BUSINESS SERVICES
- First quarter sales of Terrace family products increased 51% to $11.9 million, from $7.9 million during the same period in fiscal 2015. On a sequential quarterly basis, Terrace family sales increased 78% from $6.7 million in Q4 2015. The substantial increase in first quarter sales reflects deployment of the MPEG-4 capable TC600E, which is enjoying rapid market acceptance and wide adoption. Terrace family products as a whole remain the leading choice of MSO’s undertaking all-digital network conversions, and to date have been selected by five Tier 1 MSOs.
- First quarter sales of Terrace QAM increased 30% to $8.2 million, from $6.3 million in the same period in fiscal 2015, supported by continued strong demand from Vecima’s lead customer. On a sequential quarterly basis, sales of Terrace QAM were down from the very strong $9.7 million sales level achieved in Q4 2015, reflecting typical quarterly fluctuations related to the timing of product orders and deliveries. After increased velocity of deployments in recent quarters, we expect our lead customer to return to its prior run rate while other operators increase deployment leading to overall growth in fiscal 2016. 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.
Digital Video Access Platform (DVAP)
- Vecima reported DVAP sales of $0.6 million in the first quarter, compared to $1.8 million in Q1 fiscal 2015. On a sequential quarterly basis, DVAP sales increased from $0.4 million in Q1 2015. Fluctuations in quarterly volumes were anticipated as part of the OEM customer’s USD$19 million take-or-pay contract. To date, Vecima has fulfilled USD$8.6M of this contract and expects to fulfill the balance in fiscal 2016.
- Sales in the Broadband Wireless segment increased 12% to $0.6 million in Q1 2016, from $0.5 million in the same quarter in fiscal 2015. On a sequential quarterly basis, sales decreased from $0.9 million in Q4 2015. Sales in both the first quarter of fiscal 2016 and the fourth quarter of fiscal 2015 largely reflect last-time purchases prior to the discontinuation of certain software-defined radio products. Vecima continues with the restructuring of operations related to its software-defined radio products in response to continued weakness in this market.
OUTLOOK FOR FISCAL 2016
The Company’s outlook for fiscal 2016 remains substantially unchanged from that provided in the Vecima’s annual Management Discussion and Analysis (MD&A) on September 24, 2015.
A conference call and live audio webcast will be held today, November 13, 2015 at 1 p.m. ET to discuss the Company’s fourth quarter and year-end results. Vecima’s unaudited consolidated financial statements and management’s discussion and analysis for the three months ended September 30, 2015 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/vecima20151113.html and will be archived on the Vecima website at www.vecima.com/shareholder-events.
About Vecima Networks
Vecima Networks Inc. (TSX:VCM) designs, manufactures and sells products that enable broadband access to cable, wireless and telephony networks. Vecima’s hardware products incorporate original embedded software to meet the complex requirements of next-generation, high-speed digital networks. Service providers use Vecima’s solutions to deliver services to a converging worldwide broadband market, including what are commonly known as “triple play” (voice, video and data) and “quadruple play” (voice, video, data and wireless) services. Vecima’s solutions allow service providers to rapidly and cost-effectively bridge the final network segment that connects the system directly to end-users, commonly referred to as “the last mile”, by overcoming the bottleneck resulting from insufficient carrying capacity in legacy, last mile infrastructures. Vecima’s products are directed at two principal markets: Converged Wired Solutions and Broadband Wireless. The Company has also developed and continues to focus on developing products to address emerging markets such as Voice over Internet Protocol, fiber to the home and IP video. More information is available at our website at www.vecima.com.
Adjusted EBITDA and Adjusted Earnings Per Share
Adjusted EBITDA and Adjusted Earnings 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 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 Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the first quarter of fiscal 2016.
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 statements about: the 2016 product sales continuing to benefit from uptake of the TC600E; the order activity for the DVAP platform is expected to increase in fiscal 2016; the dividend payable on December 21, 2015 to shareholders of record as at November 27, 2015; our priority will be to develop next-generation distributed broadband access solutions that optimally support MSOs’ need to offer gigabit speeds to their subscribers; after increased velocity of Terrace QAM deployments in recent quarters, we expect our lead customer to return to its prior run rate while other operators increase deployment leading to overall growth in fiscal 2016; Terrace family products remaining the leading choice of MSOs undertaking all-digital network conversions; Vecima continues with the restructuring of operations related to its software-defined radio products; Vecima has fulfilled USD$8.6M of the DVAP USD$19M contract and expects to fulfill the balance in fiscal 2016; Vecima continuing to execute on its growth strategy; and the financial outlook for 2016.
In connection with the forward-looking information contained in this news release, Vecima has made numerous assumptions, regarding, among other things: we will continue to pay dividends; that MSOs continue to upgrade to all-digital networks; that Vecima is able to continue its relationships with its few large customers; we are able to develop new products for customers; competition that serves the same market(s) will not have an adverse effect on the business; we are able to adapt to technological changes – designing to new standards and competing with new products; third party contractors are able to deliver on time and budget; we will be able to deliver based on the terms of our key contracts; currency fluctuations do not adversely affect Vecima; larger cable operator budgets are not static; suppliers will provide parts in a timely fashion; Vecima manages its business and its growth successfully; Vecima does not experience production capacity constraints; and the rationalization of operations could cause our operating results to fluctuate. While Vecima considers these assumptions to be reasonable, these assumptions are inherently subject to significant uncertainties and contingencies. Additionally, there are known and unknown risk factors which could cause Vecima’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained herein. Known risk factors include, among others: future quarterly dividends will be subject to approval of the Board of Directors; Vecima derives a substantial part of its revenue from a few large customers; Vecima may be unable to deliver products associated with key contracts; failure to manage Vecima’s business or its growth successfully may adversely affect its operating results; if Vecima cannot meet customers’ requirements for manufacturing capacity, sales may suffer; our inability to adapt to technological change, new products and standards could harm our business; if Vecima is required to change its pricing models to compete successfully, Vecima’s margins and operating results may be adversely affected; competition from new or existing technologies may adversely affect Vecima’s business; Vecima’s reliance on third-party suppliers and contract manufacturers reduces its control over its performance; currency fluctuations may adversely affect Vecima; the budgeting cycles of larger cable operators can also result in quarter-to-quarter variability in customer orders, while availability of parts and production capacity can influence the timing of product deliveries; and our operating results are expected to fluctuate.
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, 2015, 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.
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