Vecima Reports Q3 Fiscal 2017 Results
Shipped first Entra Distributed Access Node for customer lab testing
Significant progress on next generation Entra family of products
$92M in cash + $8.75 M from YourLink sale proceeds expected in Q4
VICTORIA – (May 11, 2017) – 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, 2017.
“Fiscal 2017 is shaping up to be a transition period as we anticipated. Tier One MSOs are nearing the end of their digital network upgrade programs and preparing for the industry’s upcoming shift in network architecture for gigabit access,” said Sumit Kumar, Vecima Networks’ President and CEO. “In addition, the recent merger of two large MSO customers contributed to further demand fluctuations.
While these events are making Vecima’s near-term results less predictable, the technology transition underway is widely viewed as a once-in-a-lifetime network transformation event for the cable industry. This evolution represents a major growth opportunity for Vecima and we are ensuring we are positioned at the forefront of it.”
During the third quarter, Vecima made excellent strides on its Entra DOCSIS 3.1 distributed access solution and related products, and recently shipped its first Entra Distributed Access Node for customer lab testing. Development also continued on two related family platforms which add DOCSIS Remote PHY and direct 10 GbE Ethernet access architectures to the Entra ecosystem.
“As our Tier One MSO customers work to refine their technology paths and timelines, we are being extremely agile in providing elegant technical solutions that respond to their evolving needs. Customer feedback has been highly positive and we view our progress as promising with respect to our entry into the vast and global market for distributed access solutions,” said Mr. Kumar.
Vecima also made strong progress on upgrades to legacy products during the third quarter. Achievements included:
- completing lab trials and customer approval on a TerraceQAM upgrade that adds additional audio transcode functionality that frees up further network bandwidth;
- completion of a software upgrade to Vecima’s Digital Video Access Platform (DVAP) that prepares the platform to support distributed access architecture. This upgrade has been delivered to our OEM partner and is expected to be rolled out for MSO customer approval starting in Q4; and,
- Vecima’s Telematics Division also released two product upgrades of its Fleet Management portal during the period. Key functionality added included PathView, a map-based winter operations module that visually provides updates on how recently roads have been cleared of snow, which is specifically targeted at the municipal government market.
“Going forward, our focus is squarely on growing our core technology businesses with innovative product offerings that capture the significant opportunities we see in our markets. With a very strong balance sheet, including a cash balance of $92.0 million, we are well positioned to support continued investment in next generation product development and to grow the Company both organically and through acquisitions as appropriate,” concluded 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 20, 2017 to shareholders of record on May 26, 2017.
Video and Broadband Solutions sales in the quarter were $14.3 million. This was lower than expected due to:
- OEM return path demodulator sales in the quarter were down $2.4 million from the prior quarter as a customer did not proceed with an anticipated project; and,
- a temporary slowdown in ordering activity as two large customers merged. We believe the requirement for our products with this customer remains strong.
Third quarter Telematics sales increased to $1.4 million, from $0.6 million in Q3 2016, reflecting a full quarter of operations for Contigo in the current year.
OUTLOOK FOR FISCAL 2017
Vecima’s outlook for fiscal 2017 has been updated to reflect timing uncertainty as the cable industry transitions to the new network architecture. The Outlook assumes that one of our new product upgrades receives customer acceptance in fiscal Q4. For the 2017 fiscal year, the Company anticipates:
- Sales in the range of $ 70.0 million to $ 72.0 million;
- Gross margins in the range of 51% to 54%; and
- Adjusted EBITDA in the range of $ 19.5 million to $21.5 million.
A conference call and live audio webcast will be held today, May 11, 2017 at 1 p.m. ET to discuss the Company’s third quarter results. Vecima’s unaudited condensed interim consolidated financial statements and management’s discussion and analysis for the three and nine months ended March 31, 2017 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/vecima20170511.html and will be archived on the Vecima website at www.vecima.com/shareholder-events.
About Vecima Networks
Vecima Networks Inc. (TSX: VCM) is a globally recognized leader in creating breakthrough technology solutions that empower network service providers to connect people and enterprises to information and entertainment worldwide. Vecima products for the cable industry allow service providers a cost-effective Last Mile Solution® for both video and broadband access, especially in the demanding business services market segment. Vecima also provides fleet managers the key information and analytics they require to optimally manage their business under the Contigo, NEROglobal, and Fleetlynx brands. 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 2017.
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: Fiscal 2017 is shaping up to be a transition period as we anticipated; tier one MSOs are nearing the end of their digital network upgrade programs and preparing for the industry’s upcoming shift in network architecture for gigabit access; the technology transition underway is widely viewed as a once-in-a-lifetime network transformation event for the cable industry; this evolution represents a major growth opportunity for Vecima and we are ensuring we are positioned at the forefront of it; we are being extremely agile in providing elegant technical solutions that respond to their evolving needs; we view our progress as promising with respect to our entry into the vast and global market for distributed access solutions; this upgrade is expected to be rolled out for MSO customer approval starting in Q4; our focus is squarely on growing our core technology businesses with innovative product offerings that capture the significant opportunities we see in our markets; we are well positioned to support continued investment in next generation product development and to grow the Company both organically and through acquisitions as appropriate; and the financial Outlook for 2017.
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 26, 2016, 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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