Vecima Reports Q3 Fiscal 2016 Results
Adjusted EBITDA climbs 38% YOY to $10.3M
Gross Margin of 58%
Cash balance of $69.9 million
VICTORIA – (May 12, 2016) – 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 nine months ended March 31, 2016.
“We turned in an outstanding quarter with the highest quarterly revenue and Adjusted EBITDA in recent history,” said Sumit Kumar, Vecima Networks’ President and CEO. “Our remarkable cash generation during the period allowed us to finance a strategic acquisition, increase our investment in R&D and support our capital expenditures, while we maintained a cash balance of nearly $70 million.”
The third quarter was particularly strong for the Converged Wired Solutions product segment, with sales increasing 45% year-over-year due to strong demand and the positive foreign exchange impact of a stronger US dollar. Sales of Terrace Family products this quarter reached the highest level ever for the product line as deployment of the MPEG4 capable TC600E continued. Digital Video Access Platform (DVAP) sales also rose sharply as Vecima continued to fulfill the previously announced USD$19 million contract with its OEM customer. The Company has now fulfilled USD$14 million of this contract and expects to complete deliveries by year-end.
Vecima also acquired the assets of Contigo Systems Inc. (“Contigo”) in the third quarter in an all cash transaction. Contigo is a leading provider of turn-key GPS solutions for fleet management, asset tracking and personal safety for small-to-medium sized fleets. The acquisition provides Vecima with approximately $5.0 million in recurring annual revenues and is complementary to the Company’s existing FleetLynx business. The integration of the Contigo operations is proceeding smoothly.
“In anticipation of the coming industry transition to DOCSIS 3.1, we are engaged in a period of intense focus to capitalize on this next wave,” said Mr. Kumar. “Development of our next-generation, gigabit speed broadband access platform is well underway and our new platform will be demonstrated at INTX in mid-May. We also recently announced our new Bravura platform for multi-screen IP-based delivery of SD, HD and 4K Ultra-HD Premium content.”
“Now that the timing of the transition to gigabit speeds and distributed architectures is becoming clearer to the industry, we are highly confident that our product timelines and feature sets are well aligned with customer needs for this evolution,” Mr. Kumar added.
“Going forward, we expect continued sales of our current generation platforms but recognize that they will approach maturity in domestic markets as the industry shifts toward next-generation platforms. Our very strong cash position and operating performance enables us to continue making investments in our business as we navigate through this product cycle transition,” said Mr. Kumar. “We are in excellent financial shape as we enter the final quarter of this exceptional fiscal year.”
As previously reported, the Board of Directors declared a quarterly dividend of $0.055 per share for the period. The dividend will be payable on June 20, 2016 to shareholders of record on May 26, 2016.
OUTLOOK FOR FISCAL 2016
In Q2, the Company provided the following updated outlook for fiscal 2016:
- sales in the higher-end of the range of $100.0 million to $108.0 million;
- gross margins in the 52% to 57% range; and
- Adjusted EBITDA in the range of $32.0 million and $37.0 million.
In Q3, the Company made the following additional revision:
- The company now expects both sales and Adjusted EBITDA, to be in the top end of their previously guided ranges.
A conference call and live audio webcast will be held today, May 12, 2016 at 1 p.m. ET to discuss the Company’s third quarter results. Vecima’s unaudited consolidated financial statements and management’s discussion and analysis for the three and nine months ended March 31, 2016 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 services.choruscall.ca/links/vecima20160512.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 and Broadband Wireless Solutions. 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 third 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 include the following statements: expects to complete deliveries of the remainder of the $19 Million contract by year-end; in anticipation of the coming industry transition to DOCSIS 3.1, we are engaged in a period of intense focus to capitalize on this next wave; development of our next-generation, gigabit speed broadband access platform is well underway and our new platform will be demonstrated at INTX in mid-May; we are highly confident that our product timelines and feature sets are well aligned with customer needs for this evolution; going forward, we expect continued sales of our current generation platforms but recognize that they will approach maturity in domestic markets as the industry shifts toward next-generation platforms; our very strong cash position and operating performance enables us to continue making investments in our business as we navigate through this product cycle transition; the dividend payable on June 20, 2016 to shareholders of record as at May 26, 2016; 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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