Vecima Reports Q1 Fiscal 2024 Results

• • • Revenue: $61.5M, Gross Profit: $28.8M, Adjusted EBITDA: $8.1M
    • Gross Margin: 47%, Adjusted Gross Margin: 48%
    • Content Delivery and Storage Segment Grows Revenue 43% YoY to $15.7M
    • Engagements for Entra Cable & Fiber Access now span 158 unique program opportunities across 108 service provider customers globally
    • Highly successful showcase at SCTE Cable-Tec Expo 2023, the industry’s largest tradeshow, with Entra ERM3 winning 5 Diamonds, the highest rating, at BTR’s Diamond Technology Awards

VICTORIA, BC – (November 9, 2023) – Vecima Networks Inc. (TSX: VCM) today reported financial results for the three months ended September 30, 2023.

FINANCIAL HIGHLIGHTS

“Vecima performed well in the first quarter as we achieved positive operating results and generated year-over-year revenue growth in our Content Delivery and Storage and Telematics segments, while weathering the anticipated temporary slowdown in Entra distributed access architecture (DAA) product deliveries,” said Sumit Kumar, Vecima’s President and Chief Executive Officer.

“As we noted in our fourth quarter report, we successfully managed major constraints in the supply chain during fiscal 2023 to fulfill strong DAA deliveries in support of our customers’ ongoing major network upgrade projects. Correspondingly, customers have now temporarily shifted from building up their product pipelines to managing their DAA rollout logistics, expanding field deployment activity, and working through existing inventories. We anticipate renewed Entra sales growth in the second half of fiscal 2024 as customers bring inventories into balance while initiating new programs and deployments alike. These encompass additional DAA launches and project ramp-ups with key customers, including a major ERM3 rollout to support a Tier 1 customer’s network evolution to 10G.”

“In our Content Delivery and Storage segment, first quarter sales grew 43% to $15.7 million, reflecting both the growing base of customers for our IPTV solutions and expansions with a number of these customers during the period. Paired with strong gross margin performance of 58.5%, our CDS segment enjoyed an excellent start to fiscal 2024,” added Mr. Kumar.

“Operationally, we continued to focus on tightly managing the business to achieve efficiently lower operating expenses while continuing to advance our technologies and industry leadership with robust R&D investment. We ended the first quarter in a strong financial position, with an unparalleled portfolio of next-generation solutions, a veritable war chest of customer program-aligned DAA product inventory, and a growing base of customers that are effecting a widescale migration to next-generation networks globally using our products. While the timing of our customers’ rollouts may naturally vary, we see multiple pathways for growth coalescing as the year progresses and translating into the next wave of revenue momentum in the latter half of fiscal 2024,” said Mr. Kumar. 

BUSINESS HIGHLIGHTS

Financial and Corporate

• • • First quarter revenue of $61.5 million as compared to $73.4 million in Q1 fiscal 2023.
    • Achieved gross profit of $28.8 million, as compared to $33.7 million in Q1 fiscal 2023.
    • Gross margin and adjusted gross margin increased to 46.9% and 47.9%, respectively, from 45.9% in the prior-year period.
    • Adjusted EBITDA was $8.1 million, as compared to $17.2 million in Q1 fiscal 2023.
    • EPS and Adjusted EPS were $0.07 and $0.09 per share, respectively, as compared to EPS and Adjusted EPS of $0.41 per share in Q1 fiscal 2023.
    • Ended the first quarter in strong financial position with working capital of $79.0 million at September 30, 2023, compared to $83.7 million at June 30, 2023.

Video and Broadband Solutions (VBS)

The Video and Broadband Solutions segment contributed first quarter sales of $44.1 million, as compared to $61.0 million in Q1 fiscal 2023 and $57.0 million in Q4 fiscal 2023.

DAA (Entra Family)

• • • • • Next-generation Entra product sales of $38.8 million were in line with expectations and compared to $53.0 million in Q1 fiscal 2023 and $50.7 million in Q4 fiscal 2023.

Notable first quarter DAA achievements:

• • • • • An increase in total customer engagements to 108 MSOs worldwide, from 95 a year earlier. Fifty-one of these customers are ordering Entra products, with order sizes increasing as broader DAA deployment continues.
          • Customers engaged for cable access now number 62.
          • Customers engaged for fiber access or both access technologies now number 46.
        • Vecima supported Orion Cable’s broadband expansion with a scalable, quick-to-deploy and turnkey remote MACPHY solution that drives value through partnership with the customer and supports unique needs for flexible, open, and interoperable broadband access networks.
        • Executed warrant agreement with Charter Communications Holding Company, LLC as disclosed and further discussed in our press release dated September 11, 2023.

Achievements subsequent to the quarter-end:

• • • • • Participated in the SCTE Cable-Tec Expo 2023, a major industry show, demonstrating recent innovations in Vecima’s Remote PHY, Access Nodes, PON, Open CDN, Dynamic Content and TruLive^TM product lines. Vecima’s technology was a key focus for industry decision-makers where interest in our expansive portfolio was prominent and unparalleled.
        • Entra ERM3 Remote PHY device was honoured with five diamonds in the 2023 BTR Diamond Technology Reviews Awards. The ERM3 RPD helps operators upgrade legacy HFC nodes to DAA quickly and cost-effectively, while dramatically increasing broadband capacity.
        • Announced availability of Vecima’s DOCSIS 4.0-Ready and 1.8 GHz ‘Forever Nodes’ which provide a clear and cost-effective path to 10G by supporting DAA today while also supporting future technologies, including DOCSIS 4.0 and Remote Optical Line Terminal (OLT) applications.

Commercial Video (Terrace Family)

• • • • • Commercial Video products contributed $5.3 million to first quarter VBS sales, as compared to $7.3 million in Q1 fiscal 2023 and $6.3 million in Q4 fiscal 2023. The year-over-year change reflects the transition to next-generation platforms and the impact of some of Vecima’s newer DAA-driven Commercial Video solutions being accounted for as part of Entra family sales.

 Content Delivery and Storage (CDS)

• • • First quarter CDS segment sales grew 43% to $15.7 million, from $11.0 million in Q1 fiscal 2023. This included a 56% increase in product sales and a 24% increase in services revenue. On a sequential quarterly basis, CDS sales were 8% lower than the record $17.1 million performance achieved in Q4 fiscal 2023.
    • CDS gross margin increased to 58.5%, from 54.5% in Q1 fiscal 2023 and 53.8% in Q4 fiscal 2023.
    • Subsequent to the quarter-end, announced an engagement with Blue Ridge Communications to support this customer’s video expansion. Blue Ridge has engaged Vecima’s professional services team to provide assisted operations support utilizing proprietary tools to remotely monitor Blue Ridge’s IP video network for issues, while maximizing system up-time and operating efficiency.

Telematics

• • • First quarter Telematics sales grew approximately 14% to $1.6 million, from $1.4 million in both Q1 fiscal 2023 and Q4 fiscal 2023.
    • Generated additional deployments in high-value verticals, including municipal government and moveable asset customers.
    • Achieved our best quarter to date for additions of new moveable asset subscriptions, adding 14 new customers to the NERO asset tracking platform, and significantly increasing the number of moveable assets being monitored to over 57,000 units.
    • Achieved strong gross margin percentage of 64.9%.

“Moving forward, Vecima’s long-term outlook remains exceptionally compelling,” added Mr. Kumar. “We are continuing to demonstrate the full deployment potential of our technologies as we support our customers’ wide-scale network transformations and repeatedly break new ground in ultra-high-speed connectivity. We are advancing further from a global leadership position and remain highly confident in our ability to capture the major and multi-year opportunities in the large DAA and IPTV markets.”

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 December 18, 2023 to shareholders of record as at November 24, 2023.

 CONFERENCE CALL

A conference call and live audio webcast will be held today, November 9, 2023 at 1 p.m. ET to discuss the Company’s first quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three months ended September 30, 2023 are available under the Company’s profile at www.sedarplus.ca, 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/vecima2024q1.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. There is power in connectivity – it enables people, businesses, and communities to grow and thrive. Learn more at www.vecima.com.

Adjusted Gross Margin, Adjusted EBITDA, and Adjusted Earnings Per Share

Adjusted Gross Margin, 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 Gross Margin, 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 Gross Margin, Adjusted EBITDA, or Adjusted Earnings (Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the first quarter of fiscal 2024.

 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 performed well in the first quarter as we achieved positive operating results and generated year-over-year revenue growth in our Content Delivery and Storage and Telematics segments, while weathering the anticipated temporary slowdown in Entra distributed access architecture (DAA) product deliveries; we anticipate renewed Entra sales growth in the second half of fiscal 2024 as customers bring inventories into balance while initiating new programs and deployments alike; while the timing of our customers’ rollouts may naturally vary, we see multiple pathways for growth coalescing as the year progresses and translating into the next wave of revenue momentum in the latter half of fiscal 2024; moving forward, Vecima’s long-term outlook remains exceptionally compelling; we are advancing further from a global leadership position and remain highly confident in our ability to capture the major and multi-year opportunities in the large 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 21, 2023, as well as the Company’s continuous disclosure filings with Canadian securities regulatory authorities available at www.sedarplus.ca. 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