- Revenue: $62.0M, Gross Profit: $29.6M, Adjusted EBITDA:
$12.5M
- Gross margin increased to 47.8%
- Engagements for Entra Cable & Fiber Access now span 184
unique program opportunities across 110 service provider customers
globally
- Next-generation ERM3 program rollout launched with Charter
Communications
- Announced availability of Vecima’s DOCSIS 4.0-Ready and 1.8 GHz
‘Forever Nodes’
Vecima Networks Inc. (TSX: VCM) today reported financial results
for the three months ended December 31, 2023.
FINANCIAL HIGHLIGHTS
(Canadian dollars in millions except
percentages, employees, and per share data)
Q2FY24
Q1FY24
Q2FY23
Revenue
$62.0
$61.5
$76.2
Gross Margin
47.8%
46.9%
47.3%
Net Income
$3.6
$1.7
$8.1
Earnings Per Share1
$0.15
$0.07
$0.35
Adjusted Earnings Per Share1,2,3,4,5
$0.15
$0.09
$0.35
Adjusted EBITDA2
$12.5
$8.1
$15.8
Employees
585
591
627
1 Based on weighted average number of
shares outstanding.
2 Adjusted Earnings Per Share and Adjusted
EBITDA do not have a standardized meaning under IFRS and therefore
may not be comparable to similar measures provided by other
issuers. See “Adjusted EBITDA and Adjusted Earnings Per Share”
below.
3 Starting in Q4 fiscal 2019, we have
changed our definition and calculation of Adjusted Earnings Per
Share. For a reconciliation of Adjusted Earnings Per Share,
investors should refer to Vecima’s Management’s Discussion and
Analysis for the second quarter of fiscal 2024.
4 Adjusted earnings per share includes
non-cash share-based compensation of $0.3 million or $0.01 per
share for the three months ended December 31, 2023, and $0.8
million or $0.03 per share for the three months ended December 31,
2022. The non-cash share-based compensation primarily reflects
certain performance-based vesting thresholds achieved under the
Company’s Performance Share Unit Plan.
5 Adjusted earnings per share includes
foreign exchange gain of $1.8 million or $0.08 per share for the
three months ended December 31, 2023, and a loss of $(0.1) million
or $(0.01) per share for the three months ended December 31,
2022.
“Vecima achieved strong operating performance and margins in the
second quarter while we continued to successfully manage through a
challenging macro-environment at the same time as launching a major
new program into production deployment," said Sumit Kumar, Vecima’s
President and Chief Executive Officer. "An excellent product mix
and gross margin of 47.8% in the higher end of our target range was
a highlight and was executed in conjunction with tight operating
management and higher service revenues from our growing, deployed
base of next-generation platforms. This in turn contributed to
adjusted EBITDA of $12.5 million or 20.1% of sales and EPS of $0.15
for the period."
“As expected, the first half of fiscal 2024 was a transition
period for our Entra distributed access architecture (DAA) business
with key customers refining their rollout logistics and drawing
down existing inventories in advance of new DAA launches and
project ramp-ups. Moving into the second half, we anticipate a
significant increase in DAA sales velocity as multiple pathways for
growth begin to converge. The rollout of our next-generation ERM3
Remote PHY devices with Charter Communications, significant new
fiber access opportunities becoming available via the US$42.5
billion BEAD program, which represents the largest injection of
federal funding into broadband network deployment in U.S. history,
and the launch of our new Generic Access Platform (GAP) node and
its recent certification with the lead Tier 1 customer are just
some of the major growth opportunities ahead for Entra and our VBS
segment."
"In the Content Delivery and Storage segment, demand for our
IPTV solutions remains strong despite project timing shifts which
contributed to softer-than-expected revenue results in the second
quarter. On a full-year basis, we now expect CDS revenues to be
similar to the strong performance achieved in fiscal 2023."
“Overall, we are anticipating renewed momentum in the second
half as we execute on the multiple, multi-year opportunities in our
markets and pursue new highs in sales. We are on the cusp of our
next major wave of revenue growth and are moving forward with a
large and growing backlog, an unparalleled portfolio of
next-generation DAA and IPTV technologies and solutions, strong
partnerships with a number of the world's largest Tier 1 operators,
and a solid financial position. We are excited about what lies
ahead for Vecima in the second half of fiscal 2024 and beyond,"
said Mr. Kumar.
BUSINESS HIGHLIGHTS
Financial and Corporate
- Second quarter revenue of $62.0 million, compared to $76.2
million in Q2 fiscal 2023 and $61.5 million in Q1 fiscal 2024.
- Gross profit of $29.6 million, compared to $36.0 million in Q2
fiscal 2023 and $28.8 million in Q1 fiscal 2024.
- Gross margin increased to 47.8% from 47.3% in Q2 fiscal 2023
and 46.9% in Q1 fiscal 2024.
- Adjusted EBITDA of $12.5 million, compared to $15.8 million in
Q2 fiscal 2023 and $8.1 million in Q1 fiscal 2024.
- EPS and Adjusted EPS of $0.15, as compared to $0.35 and $0.35
respectively in Q2 fiscal 2023, and $0.07 and $0.09 respectively in
Q1 fiscal 2024.
- Ended the second quarter in a solid financial position with
working capital of $80.4 million at December 31, 2023, compared to
$83.7 million at June 30, 2023.
Video and Broadband Solutions (VBS)
The Video and Broadband Solutions segment generated second
quarter sales of $49.1 million (Q2 fiscal 2023: $62.3 million; Q1
fiscal 2024: $44.1 million).
DAA (Entra Family)
- Achieved next-generation Entra product sales of $43.8 million,
in line with expectations (Q2 fiscal 2023: $55.7 million; Q1 fiscal
2024: $38.8 million).
Notable second quarter DAA achievements:
- Increased total customer engagements to 110 MSOs worldwide,
from 101 a year earlier. Fifty-five of these customers are ordering
Entra products, with order sizes increasing as broader DAA
deployment continues.
- Customers engaged for cable access now number 63
- Customers engaged for fiber access or both access technologies
now number 47
- Won a new MACPHY deployment with a broadband provider serving
75,000 customers across 22 states.
- Initiated deliveries of the new Entra ERM3 Remote PHY device to
Charter Communications. The award-winning ERM3 RPD helps operators
upgrade legacy HFC nodes to DAA quickly and cost-effectively, while
dramatically increasing broadband capacity. Volume deliveries began
in December 2023.
- Announced availability of Vecima’s series of 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. Subsequent to
quarter-end, achieved certification of the EN9000 GAP (Generic
Access Platform) node with a leading Tier 1 customer.
- 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™ 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
(the highest rating) in the 2023 BTR Diamond Technology Reviews
Awards.
Commercial Video (Terrace
Family)
- Generated Commercial Video product sales of $5.3 million (Q2
fiscal 2023: $6.5 million; Q1 fiscal 2024: $5.3 million). The
year-over-year change in sales was anticipated and 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)
The CDS segment generated sales of $11.3 million (Q2 2023: $12.4
million; Q1 fiscal 2024: $15.7 million).
- Achieved a strong CDS gross margin of 54.5% (Q2 fiscal 2023:
50.5%; Q1 fiscal 2024: 58.5%).
- Increased service revenue by 18% year-over-year as the base of
deployed MediaScale platforms continues to grow.
- Announced an engagement with Blue Ridge Communications to
support its video expansion and subsequently expanded subscriber
deployments with this customer.
- Released new versions of Media Scale Origin and Dynamic Content
products with additional Dynamic Ad Insertion features, including
advances in asset insertion workflows, scaling of ingest throughput
for dynamic versus static ad assets, and enhanced stitching
capability for frame accurate ad insertion in highly variable ad
window duration scenarios.
- Continued IPTV expansion at multiple customers, growing network
footprints to give a larger subscriber base access to
state-of-the-art live, on-demand, and cloud DVR streaming services
on the IPTV fabric, including:
- a Tier 2 US operator that increased MediaScale Cache capacity
for on-demand streaming;
- expansion of Mediascale cloud DVR storage at an operator in the
southeastern U.S.;
- a new phase of network capacity expansion with a fiber service
provider in the southeastern U.S. encompassing a multi-tiered
MediaScale Cache architecture over enterprise and micro caches;
and
- capacity growth of a large Tier 2 operator’s deployment of the
full portfolio of MediaScale IPTV solutions.
Telematics
- Telematics segment sales grew approximately 7% to $1.6 million
(Q2 fiscal 2023: $1.5 million; Q1 fiscal 2024: $1.6 million).
- Generated additional deployments in high-value verticals,
including municipal government and moveable asset customers in
restoration and emergency medical services.
- Added 10 new customers to the NERO asset tracking platform and
significantly increased the number of moveable assets being
monitored to over 59,000 units.
- Achieved strong gross margin percentage of 65.8%.
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 March 18, 2024 to shareholders of record as at
February 23, 2024.
CONFERENCE CALL
A conference call and live audio webcast will be held today,
February 14, 2024 at 1 p.m. ET to discuss the Company’s second
quarter results. Vecima’s unaudited interim condensed consolidated
financial statements and management’s discussion and analysis for
the three and six months ended December 31, 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/links/vecima2024q2.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 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 second 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: as expected, the first half of fiscal 2024
was a transition period for our Entra distributed access
architecture (DAA) business with key customers refining their
rollout logistics and drawing down existing inventories in advance
of new DAA launches and project ramp-ups; moving into the second
half, we anticipate a significant increase in DAA sales velocity as
multiple pathways for growth begin to converge; the rollout of our
next-generation ERM3 Remote PHY devices with Charter
Communications, significant new fiber access opportunities becoming
available via the US$42.5 billion BEAD program, which represents
the largest injection of federal funding into broadband network
deployment in U.S. history, and the launch of our new Generic
Access Platform (GAP) node and its recent certification with the
lead Tier 1 customer are just some of the major growth
opportunities ahead for Entra and our VBS segment; the
year-over-year change in sales was anticipated and 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; in the Content
Delivery and Storage segment, demand for our IPTV solutions remains
strong despite project timing shifts which contributed to
softer-than-expected revenue results in the second quarter; on a
full-year basis, we now expect CDS revenues to be similar to the
strong performance achieved in fiscal 2023; overall, we are
anticipating renewed momentum in the second half as we execute on
the multiple, multi-year opportunities in our markets and pursue
new highs in sales; we are on the cusp of our next major wave of
revenue growth and are moving forward with a large and growing
backlog, an unparalleled portfolio of next-generation DAA and IPTV
technologies and solutions, strong partnerships with a number of
the world's largest Tier 1 operators, and a solid financial
position; we are excited about what lies ahead for Vecima in the
second half of fiscal 2024 and beyond.
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 INC.
Interim Condensed Consolidated
Statements of Financial Position
(unaudited - in thousands of
Canadian dollars)
As at
December 31,
2023
June 30, 2023
Assets
Current assets
Cash and cash equivalents
$
2,586
$
2,278
Accounts receivable
62,690
57,662
Income tax receivable
1,854
530
Inventories
145,209
101,601
Prepaid expenses and other current
assets
3,290
13,695
Contract assets
1,452
2,707
Assets held for sale
1,405
–
Total current assets
218,486
178,473
Non-current assets
Property, plant and equipment
13,816
15,683
Right-of-use assets
1,896
2,364
Goodwill
15,039
15,049
Intangible assets
87,333
82,991
Investment tax credits
23,692
24,252
Deferred tax assets
14,677
11,576
Other long-term assets
1,685
1,298
Total assets
$
376,624
$
331,686
Liabilities and shareholders’
equity
Current liabilities
Revolving line of credit
$
44,066
$
20,513
Accounts payable and accrued
liabilities
77,142
47,162
Provisions
722
1,978
Income tax payable
555
7,808
Deferred revenue
13,028
15,086
Current portion of financial liability
496
–
Current portion of long-term debt
2,062
2,260
Total current liabilities
138,071
94,807
Non-current liabilities
Provisions
390
387
Deferred revenue
3,212
4,716
Long-term portion of financial
liability
1,060
–
Long-term debt
13,161
14,123
Total liabilities
155,894
114,033
Shareholders’ equity
Share capital
24,107
23,997
Reserves
3,601
3,111
Retained earnings
193,587
190,926
Accumulated other comprehensive loss
(565
)
(381
)
Total shareholders’ equity
220,730
217,653
Total liabilities and shareholders’
equity
$
376,624
$
331,686
VECIMA NETWORKS INC.
Interim Condensed Consolidated
Statements of Comprehensive Income
(unaudited - in thousands of Canadian
dollars, except per share amounts)
Three months
Six months
Periods ended December 31,
2023
2022
2023
2022
Sales
$
61,954
$
76,212
$
123,432
$
149,659
Cost of sales
32,354
40,167
65,019
79,873
Gross profit
29,600
36,045
58,413
69,786
Operating expenses
Research and development
11,551
10,341
21,847
21,046
Sales and marketing
6,605
6,619
14,034
12,923
General and administrative
6,431
7,522
14,404
13,116
Share-based compensation
257
815
513
913
Other expense
97
22
267
43
Total operating expenses
24,941
25,319
51,065
48,041
Operating income
4,659
10,726
7,348
21,745
Finance expense
(1,660
)
(554
)
(2,360
)
(755
)
Foreign exchange gain (loss)
1,837
(138
)
1,253
1,164
Income before income taxes
4,836
10,034
6,241
22,154
Income tax expense
1,247
1,895
907
4,503
Net income
$
3,589
$
8,139
$
5,334
$
17,651
Other comprehensive income:
Item that may be subsequently
reclassified to net income
Exchange differences on translation of
foreign operations
$
(1,157
)
$
(482
)
$
(184
)
$
1,887
Comprehensive income
$
2,432
$
7,657
$
5,150
$
19,538
Net income per share
Basic
$
0.15
$
0.35
$
0.22
$
0.76
Diluted
$
0.15
$
0.35
$
0.22
$
0.76
Weighted average number of common
shares
Shares outstanding – basic
24,310,794
23,312,997
24,303,312
23,208,753
Shares outstanding – diluted
24,318,211
23,341,563
24,311,772
23,237,020
VECIMA NETWORKS INC.
Interim Condensed Consolidated
Statements of Equity
(unaudited - in thousands of
Canadian dollars)
Share capital
Reserves
Retained earnings
Accumulated
other
comprehensive
(loss) income
Total
Balance as at June 30, 2022
$
7,935
$
3,141
$
168,923
$
(267
)
$
179,732
Net income
–
–
17,651
–
17,651
Other comprehensive income
–
–
–
1,887
1,887
Dividends
–
–
(2,542
)
–
(2,542
)
Common share issuance
15,926
–
–
–
15,926
Shares issued by exercising options
60
(12
)
–
–
48
PSUs settled in common shares
1,014
(1,014
)
–
–
–
Withholding taxes on PSUs
(1,453
)
–
–
–
(1,453
)
Share-based payment expense
–
913
–
–
913
Balance as at December 31, 2022
$
23,482
$
3,028
$
184,032
$
1,620
$
212,162
Balance as at June 30, 2023
$
23,997
$
3,111
$
190,926
$
(381
)
$
217,653
Net income
–
–
5,334
–
5,334
Other comprehensive loss
–
–
–
(184
)
(184
)
Dividends
–
–
(2,673
)
–
(2,673
)
Shares issued by exercising options
110
(23
)
–
–
87
Share-based payment expense
–
513
–
–
513
Balance as at December 31, 2023
$
24,107
$
3,601
$
193,587
$
(565
)
$
220,730
VECIMA NETWORKS INC.
Interim Condensed Consolidated
Statements of Cash Flows
(unaudited - in thousands of Canadian
dollars)
Three months
Six months
Periods ended December 31,
2023
2022
2023
2022
OPERATING ACTIVITIES
Net income
$
3,589
$
8,139
$
5,334
$
17,651
Adjustments for non-cash items:
Loss on sale of property, plant and
equipment
18
18
19
27
Depreciation and amortization
5,480
4,416
10,603
9,166
Share-based compensation
257
815
513
913
Warrant expense
217
–
855
–
Income tax expense
1,270
700
3,981
2,648
Deferred income tax expense (recovery)
(23
)
1,195
(3,074
)
1,855
Interest expense
1,662
557
2,362
769
Interest income
(2
)
(2
)
(4
)
(12
)
Net change in working capital
(14,603
)
(26,635
)
(10,369
)
(51,001
)
Increase in other long-term assets
299
4
311
146
Decrease in provisions
(47
)
(76
)
(1,265
)
(60
)
Increase in investment tax credits
(35
)
(32
)
(68
)
(72
)
Income tax paid
(9,647
)
(806
)
(11,597
)
(776
)
Interest received
2
5
4
15
Interest paid
(1,633
)
(524
)
(2,360
)
(699
)
Cash used in operating
activities
(13,196
)
(12,226
)
(4,755
)
(19,430
)
INVESTING ACTIVITIES
Capital expenditures, net
(631
)
(364
)
(1,394
)
(1,251
)
Deferred development costs
(7,079
)
(5,226
)
(13,310
)
(10,807
)
Cash used in investing
activities
(7,710
)
(5,590
)
(14,704
)
(12,058
)
FINANCING ACTIVITIES
Net draws of the revolving line of
credit
24,389
4,559
23,553
11,391
Principal repayments of lease
liabilities
(503
)
(443
)
(908
)
(822
)
Principal repayments of long-term debt
(320
)
(100
)
(600
)
(167
)
Dividends paid
(2,673
)
(2,542
)
(2,673
)
(2,542
)
Proceeds from common share issuance
–
15,926
–
15,926
Issuance of shares through exercised
options
87
–
87
49
Withholding taxes on PSUs
–
(1,409
)
–
(1,453
)
Cash provided by financing
activities
20,980
15,991
19,459
22,382
Net increase (decrease) in cash and
cash equivalents
74
(1,825
)
–
(9,106
)
Effect of change in exchange rates on
cash
220
748
308
(529
)
Cash and cash equivalents, beginning of
period
2,292
4,344
2,278
12,902
Cash and cash equivalents, end of
period
$
2,586
$
3,267
$
2,586
$
3,267
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