Vecima Reports Q4 and Fiscal 2017 Results

Fiscal 2017 Financial Results In Line with Guidance

Cash climbs to $89.2M

VICTORIA – (September 28, 2017) – Vecima Networks Inc. (TSX:VCM), an experienced designer and manufacturer of innovative technology in the broadband equipment market, today reported annual financial results for the three and twelve months ended June 30, 2017.

FINANCIAL HIGHLIGHTS

BUSINESS HIGHLIGHTS

• Lab trial for Entra Distributed Access Node initiated at first Tier 1 MSO
• Entra Remote-PHY Distributed Access Node shortlisted in RFP at second Tier 1 MSO with interoperability testing underway
• Entra family grows to include Access Switch, Remote-PHY and Remote MAC-PHY

“Fiscal 2017 was a year of major development as Vecima prepared for the cable industry’s upcoming industry-wide transition to DOCSIS 3.1 Distributed Access Architecture (DAA),” said Sumit Kumar, Vecima Networks’ President and CEO. “We made significant progress on Entra, our DOCSIS 3.1 DAA solution, and two related family products which add DOCSIS Remote PHY and direct 10GbE Ethernet Access Switching to the Entra ecosystem. The Entra family is attracting industry attention and gaining momentum to reach into different segments of the vast new global market that is emerging for DOCSIS 3.1 solutions.”

In fiscal 2017, Vecima also continued to enhance its legacy lines to respond to near-term customer needs. During the year, Vecima:

• completed an upgrade to TerraceQAM that adds additional audio transcode functionality;
• commenced lab trials with a large European MSO for the Terrace DVB Commercial Video Gateway, a global version of Terrace QAM; and
• concluded lab trials with a lead customer for an upgrade to our Digital Video Access Platform (DVAP), which prepares this platform to support distributed access architecture.

These developments are intended to support revenue opportunities for legacy product sales in fiscal 2018.

“Our Telematics business continued to benefit from our acquisition of Contigo Systems, growing the segment into a contributor of strong recurring revenue and earnings. Consistent with our strategy to monetize non-core assets, we also completed the divestiture of our YourLink business in both B.C. and Saskatchewan, which we sold for collective proceeds of $30.2 million.”

“We ended the year within our revised guidance for fiscal 2017, achieving revenues of $71.5 million, gross margin of 52% and Adjusted EBITDA of $20.3 million. In addition, with the successful sale of our YourLink business, we achieved cash balances of $89.2 million at the end of the year. Subsequent to year end, a further $8.73 million in cash was received as we completed the second closing of the YourLink sale. Cash balances are available to fund development as well as potential future acquisitions.”

“Our revenue results were particularly significant given that our target was based on fourth quarter customer acceptance of the new DVAP product upgrade, which did not ultimately occur by year-end. As a result of the slower than forecast industry adoption of the new generation technology, legacy products out-performed expectations, enabling us to overcome this delay and meet our revenue target for the year,” said 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 November 3, 2017 to shareholders of record as at October 13, 2017.

Vecima’s fourth quarter 2017 sales by business segment were as follows:

• Video and Broadband Solutions sales were $13.5 million, in line with expectations, but lower than the $20.5 million achieved in Q4 2016. A significant increase in TerraceQAM sales was offset by lower sales of Terrace family and DVAP products year-over-year. Q4 2016 sales benefitted from the closeout ($7.5M) of a contract purchase commitment for DVAP.
• Fourth quarter Telematics sales were $1.2 million, compared to $1.4 million in the same period last year. The reduction in sales reflects an adjustment made to defer and amortize installation fees over the life of the contract. Had the adjustment in the period not been made, Q4 fiscal 17 sales would have been comparable to both the prior quarter and the prior year quarter.

OUTLOOK FOR FISCAL 2018

Vecima anticipates a year of ongoing transition in fiscal 2018 as the North American cable industry prepares for the new DOCSIS 3.1 standard. Based on current customer feedback, field trials of various components of Vecima’s new Entra family of DOCSIS 3.1 products are expected to commence in calendar year 2018. Management notes, however, that the plans and priorities of major MSOs continue to evolve, making it difficult to project timelines with certainty.

While demand for some of Vecima’s legacy products are expected to continue to taper off as market saturation is reached and customers focus on next generation products and technologies, the Company sees areas of continued strength:

• Sales of TC600E products are expected to pick up in the first half of fiscal 2018 as a key customer resumes ordering activity following completion of a significant merger.
• The update to our DVAP platform to support DAA has progressed and the OEM customer has taken delivery of their first set of upgrade licenses.
• The recent introduction of the Terrace DVB provides new opportunities in international markets; and,
• Vecima sees opportunities to supply new network video platforms in support of key customers’ transition to IP centric platforms.

Overall, management expects fiscal 2018 to be a year of continued investment and development as it positions Vecima for industry leadership in both its existing markets and the emerging DOCSIS 3.1 space. With a strong financial foundation, Vecima is well positioned to pursue its product strategies, while also continuing to assess attractive acquisition opportunities that could provide rapid access to technologies and help drive the Company’s growth and success.

CONFERENCE CALL

A conference call and live audio webcast will be held today, Thursday, September 28, 2017 at 1 p.m. ET to discuss the Company’s fourth quarter and year-end results. Vecima’s audited consolidated financial statements and management’s discussion and analysis for the three months and year ended June 30, 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/vecima20170928.html and will be archived on the Vecima website at www.vecima.com/shareholder-events.