Vecima Reports Q3 Fiscal 2020 Results and
Provides COVID-19 Business Update

  • Revenue increased 23.5% year-over-year from $20.3M to $25.1M
  • Adjusted EBITDA significantly increased year-over-year from $0.4M to $5.6M
  • Content Storage and Delivery revenues of $14.2M, up 119% year-over-year
  • Sales of next generation Entra family products grew to $1.8M
  • Gross Margin - 52%, EPS - $0.03, Cash Balance - $36.2M

VICTORIA, British Columbia--()--Vecima Networks Inc. (TSX:VCM) today reported financial results for the three and nine months ended March 31, 2020 and provided a COVID-19 business update.

FINANCIAL HIGHLIGHTS

(Canadian dollars in millions except percentages, employees, and per share data)

Q3FY20

Q2FY20

 

Q3FY19

Revenue

$25.1

$25.1

 

$20.3

Gross Margin

52%

64%

 

53%

Net Income/(Loss)

$0.7

$3.6

 

$(1.5)

Earnings/(Loss) Per Share1

$0.03

$0.16

 

$(0.07)

Adjusted Earnings/(Loss) Per Share1, 2, 3

$0.03

$0.15

 

$(0.07)

Adjusted EBITDA2

$5.6

$7.0

 

$0.4

Cash and Short-term Investments

$36.2

$40.2

 

$47.2

Employees

375

368

 

390

1Based on weighted average number of shares outstanding.

2Adjusted 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 / (Loss) Per Share” below.

3Starting in Q4 fiscal 2019, we have changed our definition and calculation of Adjusted Earnings Per Share. For a reconciliation of Adjusted Earnings / (Loss) Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the third quarter of fiscal 2020.

Navigating COVID-19

“We delivered a very strong quarter while navigating the COVID-19 pandemic, and I want to thank all of our employees for helping us to fulfill our essential role in the telecommunications supply chain through these unprecedented times,” said Sumit Kumar, Vecima Network’s President and CEO.

“Around the globe, social distancing and stay-at-home mandates related to the COVID-19 situation are driving incredible utilization across our customers’ cable and IPTV networks. This, in turn, has driven increased need for the solutions we provide to bring additional capacity to our customers’ networks. We have quickly adapted our ways of doing business so that we can protect the health and safety of our teams while responding to this growing demand.”

“More than 80% of our workforce is now working from home, and we have implemented strict practices and protocols for the small number of employees whose presence is required on site to perform their job functions. This includes social distancing, increased cleaning and availability of personal protective equipment where it is required. Our employees have continued to do exceptional work amidst these changes and we are deeply proud of the entire Vecima team,” said Mr. Kumar.

Third Quarter Financial Performance

Third quarter 2020 results reflect the accelerating demand for Vecima’s solutions. Consolidated sales grew 23.5% year-over-year, led by the Content Delivery and Storage Segment where new customer wins and significant demand for the Company’s MediaScaleX™ solutions resulted in a 119% year-over-year increase in segment sales. Vecima remains on track to deliver 20% or better growth in Content Delivery and Storage sales in fiscal 2020.

In the Video and Broadband Solutions segment, Vecima’s next generation Entra family of products continued to gain momentum with sales growing to $1.8 million, led by orders for the Entra Interactive Video Controller (IVC) and also reflecting purchases of Vecima’s broader portfolio of Entra distributed access architecture (DAA) products by a diverse group of MSOs. While demand for legacy products in this segment is generally tailing off as customers move to next-generation platforms, sales of Terrace and TerraceQAM hospitality industry products were solid through the third quarter.

“The robust demand for our products and platforms not only helped us generate $25.1 million of revenues during the third quarter, but also contributed to improved bottom-line performance,” added Mr. Kumar. “Adjusted EBITDA grew to $5.6 million, from $0.4 million in the same period last year, and we increased earnings per share to $0.03 from a loss of $0.07 in Q3 fiscal 2019. We also ended the quarter in a very strong financial position with $36.2 million in cash and working capital of $56.3 million,” said Mr. Kumar.

Q3FY20 BUSINESS HIGHLIGHTS

Video and Broadband Solutions

  • Segment sales of $9.6 million increased 14% on a sequential quarterly basis, reflecting higher sales of Entra family and TerraceQAM products, but were lower year-over-year as a result of the anticipated decrease in legacy product sales
  • Entra Family:
    • Achieved $1.8 million of next generation Entra family product sales, an increase of 63% from $1.1 million in Q2 fiscal 2020 and up by $1.5 million compared to $0.3 million in Q3 fiscal 2019, led by uptake of the Entra Interactive Video Controller (IVC) by Tier 1 and Tier 2 MSO customers
    • Multiple products within Vecima’s broad Entra DAA ecosystem were purchased by a wide group of MSOs as the industry initiates the network evolution to distributed access architecture
    • Expanded a key field trial with a lead Tier 1 customer, moving to fully operationalized node field trials in multiple footprint locations where Entra nodes are providing live broadband internet service into a number of homes with paying subscribers
    • Remote-PHY Monitoring software application purchased in Q2 by a Tier 1 customer enabled flawless installation and activation of nodes in the field
  • Terrace Family
    • Increased TerraceQAM sales by 125% year-over-year and 5% quarter-over-quarter as the lead Tier 1 MSO widened its extensive hospitality services platform, while preparing for migration to the next generation TerraceIQ system
    • Progressed development of the next generation TerraceIQ platform, supporting the intent of customers to upgrade their widely deployed ecosystems of the Terrace and TerraceQAM products as networks move to IPTV
    • Sales of TC600E increased by 35% quarter-over-quarter as a Tier 1 extended MPEG 4 upgrade-related purchases and a second Tier 1 customer initiated MPEG 4 upgrade-related purchases

Content Delivery and Storage

  • Generated strong segment sales of $14.2 million, with revenue increasing 119% year-over-year
  • Achieved further advances in the burgeoning IPTV market with the win of four new customers for Vecima’s MediaScaleX IPTV products, including three new wins during the third quarter and an additional customer win subsequent to quarter-end
  • Further increased deployments of IPTV solutions with cable operators, telcos and broadcasters around the world, servicing over 130 million subscribers and managing 30 petabytes of content worldwide
  • Ongoing feature enhancements to our MediaScaleX IPTV products aimed at amplifying the seamless user experience delivered while streaming content to the consumer

Telematics

  • Furthered roll out of previously announced City of Saskatoon fleet management solution, which involves monitoring a fleet of over 1,000 powered and unpowered vehicles and assets
  • Expanded penetration in the moveable assets market, adding six new restoration industry customers with vehicles being monitored with GPS beacons and valuable moveable assets being monitored through Vecima’s Bluetooth Low Energy (BLE) tags

“As we enter the fourth quarter, the industry’s overall plan of record to move to DAA and IPTV, together with the current climate of unprecedented consumer demands on networks, are translating into opportunities aligned with Vecima’s strategic product offerings. Working with our blue-chip customers, we are progressing field and lab trials of our next generation family of Entra and MediaScaleX products to respond,” added Mr. Kumar.

“Longer term it is difficult to predict what the full economic, supply chain and network development impacts of the COVID-19 pandemic will be given the evolving and uncertain nature of this crisis. However, with product offerings that respond to essential communication needs and our very strong financial position, we believe we are well positioned to manage the challenges of the COVID-19 business environment in the months ahead.”

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 15, 2020 to shareholders of record as at May 22, 2020.

CONFERENCE CALL

A conference call and live audio webcast will be held today, May 14, 2020 at 1 p.m. ET to discuss the Company’s third quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three and nine months ended March 31, 2020 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 http://services.choruscall.ca/links/vecima20200514.html and will be archived on the Vecima website at https://vecima.com/investor-relations/earnings-call-archive/

About Vecima Networks

Vecima Networks Inc. is a global leader focused on developing integrated hardware and scalable software solutions for broadband access, content delivery, and telematics. We enable the world's leading innovators to advance, connect, entertain, and analyze. We build technologies that transform content delivery and storage, enable high‑capacity broadband network access, and streamline data analytics. For more information, please visit our website at www.vecima.com.

Adjusted EBITDA and Adjusted Earnings / (Loss) Per Share

Adjusted EBITDA and Adjusted Earnings / (Loss) 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 / (Loss) 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 / (Loss) Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the third quarter of fiscal 2020.

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: We delivered a very strong quarter while navigating the COVID-19 pandemic; around the globe, social distancing and stay-at-home mandates related to the COVID-19 situation are driving incredible utilization across our customers’ cable and IPTV networks; this, in turn, has driven increased need for the solutions we provide to bring additional capacity to our customers’ networks; third quarter 2020 results reflect the accelerating demand for Vecima’s solutions; Vecima remains on track to deliver 20% or better growth in Content Delivery and Storage sales in fiscal 2020; Vecima’s next generation Entra family of products continued to gain momentum; demand for legacy products in this segment is generally tailing off as customers move to next-generation platforms; the industry’s overall plan of record to move to DAA and IPTV, together with the current climate of unprecedented consumer demands on networks, are translating into opportunities aligned with Vecima’s strategic product offerings; working with our blue-chip customers, we are progressing field and lab trials of our next generation family of Entra and MediaScaleX products to respond; longer term it is difficult to predict what the full economic, supply chain and network development impacts of the COVID-19 pandemic will be given the evolving and uncertain nature of this crisis; with product offerings that respond to essential communication needs and our very strong financial position, we believe we are well positioned to manage the challenges of the COVID-19 business environment in the months ahead.

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, 2019, 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.

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Financial Position

(unaudited – in thousands of Canadian dollars)

As at

 

 

 

March 31, 2020

 

 

June 30, 2019

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

19,167

 

$

19,834

Short-term investments

 

 

 

17,009

 

 

24,569

Accounts receivable

 

 

 

25,270

 

 

15,154

Income tax receivable

 

 

 

432

 

 

437

Inventories

 

 

 

14,454

 

 

12,724

Prepaid expenses

 

 

 

2,195

 

 

2,235

Contract assets

 

 

 

377

 

 

187

Asset held for sale

 

 

 

490

 

 

-

 

 

 

 

79,394

 

 

75,140

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

 

 

 

12,099

 

 

12,526

Right-of-use assets

 

 

 

4,474

 

 

-

Goodwill

 

 

 

15,850

 

 

15,131

Intangible assets

 

 

 

69,791

 

 

67,887

Other long-term assets

 

 

 

1,492

 

 

1,017

Investment tax credits

 

 

 

25,177

 

 

24,355

Deferred tax assets

 

 

 

4,287

 

 

4,714

 

 

 

$

212,564

 

$

200,770

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

$

14,949

 

$

11,699

Provisions

 

 

 

418

 

 

804

Income tax payable

 

 

 

108

 

 

55

Deferred revenue

 

 

 

5,875

 

 

4,046

Current portion of long-term debt

 

 

 

1,756

 

 

250

 

 

 

 

23,106

 

 

16,854

Non-current liabilities

 

 

 

 

 

 

 

Provisions

 

 

 

387

 

 

332

Deferred revenue

 

 

 

628

 

 

763

Deferred tax liability

 

 

 

351

 

 

324

Long-term debt

 

 

 

5,151

 

 

1,729

 

 

 

 

29,623

 

 

20,002

Shareholders’ equity

 

 

 

 

 

 

 

Share capital

 

 

 

2,677

 

 

1,916

Reserves

 

 

 

3,952

 

 

4,104

Retained earnings

 

 

 

173,089

 

 

173,738

Accumulated other comprehensive income

 

 

 

3,223

 

 

1,010

 

 

 

 

182,941

 

 

180,768

 

 

 

$

212,564

 

$

200,770

 

 

 

 

 

 

 

 

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited – in thousands of Canadian dollars, except per share amounts)

 

 

Three months

 

Nine months

Periods ended March 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

Sales

 

$

25,093

 

$

20,328

 

$

70,328

 

$

64,317

Cost of Sales

 

 

12,069

 

 

9,642

 

 

30,822

 

 

29,600

Gross Profit

 

 

13,024

 

 

10,686

 

 

39,506

 

 

34,717

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,714

 

 

4,797

 

 

15,316

 

 

13,967

Sales and marketing

 

 

3,698

 

 

4,029

 

 

10,871

 

 

10,481

General and administrative

 

 

4,087

 

 

4,247

 

 

12,210

 

 

12,256

Restructuring costs

 

 

-

 

 

-

 

 

-

 

 

757

Share-based compensation

 

 

13

 

 

28

 

 

47

 

 

102

Other expense (income)

 

 

25

 

 

(69)

 

 

(130)

 

 

(435)

 

 

 

13,537

 

 

13,032

 

 

38,314

 

 

37,128

Operating (loss) income

 

 

(513)

 

 

(2,346)

 

 

1,192

 

 

(2,411)

Finance (expense) income

 

 

(238)

 

 

301

 

 

524

 

 

550

Foreign exchange gain (loss)

 

 

1,972

 

 

(619)

 

 

1,793

 

 

457

Income (loss) before income taxes

 

 

1,221

 

 

(2,664)

 

 

3,509

 

 

(1,404)

Income tax expense (recovery)

 

 

555

 

 

(1,203)

 

 

666

 

 

(898)

Net income (loss)

 

$

666

 

$

(1,461)

 

$

2,843

 

$

(506)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Item that may be subsequently reclassed to net income

   

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

2,416

 

 

(584)

 

 

2,213

 

 

393

Comprehensive income (loss)

 

$

3,082

 

$

(2,045)

 

$

5,056

 

$

(113)

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

$

(0.07)

 

$

0.13

 

$

(0.02)

Diluted

 

$

0.03

 

$

(0.07)

 

$

0.13

 

$

(0.02)

Weighted average number of common shares

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding – basic

 

 

22,435,234

 

 

22,355,705

 

 

22,403,397

 

 

22,378,195

Shares outstanding - diluted

 

22,474,692

 

 

22,355,705

 

 

22,432,319

 

 

22,378,195

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Change in Equity

(unaudited – in thousands of Canadian dollars)

 

 

Share
capital

 

 

Reserves

 

 

Retained
earnings

 

 

Accumulated
other
comprehensive
income

 

Total

Balance as at June 30, 2018

$

1,756

 

$

4,041

 

$

182,309

 

$

1,077

 

$

189,183

Net loss

 

-

 

 

-

 

 

(506)

 

 

-

 

 

(506)

Other comprehensive income

 

-

 

 

-

 

 

-

 

 

393

 

 

393

Dividends

 

-

 

 

-

 

 

(3,690)

 

 

-

 

 

(3,690)

Shares repurchased and cancelled

 

(2)

 

 

-

 

 

(192)

 

 

-

 

 

(194)

Share-based payment expense

 

-

 

 

102

 

 

-

 

 

-

 

 

102

Balance as at March 31, 2019

$

1,754

 

$

4,143

 

$

177,921

 

$

1,470

 

$

185,288

Balance as at June 30, 2019

$

1,916

 

$

4,104

 

$

173,738

 

$

1,010

 

$

180,768

IFRS 16 transition impact

 

-

 

 

-

 

 

206

 

 

-

 

 

206

Adjusted balance, June 30, 2019

$

1,916

 

$

4,104

 

$

173,944

 

$

1,010

 

$

180,974

Net income

 

-

 

 

-

 

 

2,843

 

 

-

 

 

2,843

Other comprehensive income

 

-

 

 

-

 

 

-

 

 

2,213

 

 

2,213

Dividends

 

-

 

 

-

 

 

(3,698)

 

 

-

 

 

(3,698)

Shares issued by exercising options

 

761

 

 

(199)

 

 

-

 

 

-

 

 

562

Share-based payment expense

 

-

 

 

47

 

 

-

 

 

-

 

 

47

Balance as at March 31, 2020

$

2,677

 

$

3,952

 

$

173,089

 

$

3,223

 

$

182,941

         

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Cash Flows

(unaudited – in thousands of Canadian dollars)

 

Three months

 

Nine months

Periods ended March 31,

 

2020

 

 

2019

 

 

2020

 

 

2019

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

666

 

$

(1,461)

 

$

2,843

 

$

(506)

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

 

 

 

Loss (gain) on sale of property, plant and equipment

 

16

 

 

13

 

 

(105)

 

 

55

Gain on sale of intangible assets

 

-

 

 

-

 

 

-

 

 

(202)

Depreciation and amortization

 

4,293

 

 

3,022

 

 

10,762

 

 

8,509

Share-based compensation

 

13

 

 

28

 

 

47

 

 

102

Income tax expense (recovery)

 

230

 

 

24

 

 

204

 

 

(53)

Deferred income tax expense (recovery)

 

325

 

 

(1,227)

 

 

462

 

 

(845)

Interest expense

 

74

 

 

24

 

 

232

 

 

79

Interest income

 

(162)

 

 

(242)

 

 

(622)

 

 

(773)

Net change in working capital

 

(1,577)

 

 

8,448

 

 

(5,615)

 

 

2,259

(Increase) decrease in other long-term assets

 

(571)

 

 

197

 

 

(411)

 

 

(10)

Decrease in provisions

 

(290)

 

 

(69)

 

 

(368)

 

 

(206)

Increase in investment tax credits

 

(34)

 

 

(30)

 

 

(123)

 

 

(78)

Income tax received

 

-

 

 

-

 

 

173

 

 

409

Income tax paid

 

(457)

 

 

(342)

 

 

(525)

 

 

(799)

Interest received

 

162

 

 

242

 

 

622

 

 

773

Interest paid

 

(74)

 

 

(23)

 

 

(232)

 

 

(74)

Cash provided by operating activities

 

2,614

 

 

8,604

 

 

7,344

 

 

8,640

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures, net

 

(597)

 

 

(734)

 

 

(1,522)

 

 

(1,664)

Purchase of short-term investments

 

(5,149)

 

 

(263)

 

 

(5,927)

 

 

(1,681)

Proceeds from sale of short-term investments

 

5,387

 

 

8,571

 

 

13,487

 

 

20,198

Deferred development costs

 

(3,428)

 

 

(4,322)

 

 

(8,854)

 

 

(13,195)

Cash (used in) provided by investing activities

 

(3,787)

 

 

3,252

 

 

(2,816)

 

 

3,658

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Proceeds from government grants

 

4

 

 

147

 

 

98

 

 

147

Principal payments of lease liabilities

 

(373)

 

 

-

 

 

(1,021)

 

 

-

Repayment of long-term debt

 

(63)

 

 

(41)

 

 

(209)

 

 

(187)

Repurchase and cancellation of shares

 

-

 

 

(77)

 

 

-

 

 

(194)

Dividends paid

 

(1,234)

 

 

(1,229)

 

 

(3,698)

 

 

(3,690)

Issuance of shares through exercised options

 

3

 

 

-

 

 

562

 

 

-

Cash used in financing activities

 

(1,663)

 

 

(1,200)

 

 

(4,268)

 

 

(3,924)

Net (decrease) increase in cash and cash equivalents

 

(2,836)

 

 

10,656

 

 

260

 

 

8,374

Effect of change in exchange rates on cash

 

(957)

 

 

353

 

 

(927)

 

 

(375)

Cash and cash equivalents, beginning of period

 

22,960

 

 

8,024

 

 

19,834

 

 

11,034

Cash and cash equivalents, end of period

$

19,167

 

$

19,033

 

$

19,167

 

$

19,033

 

Contacts

Vecima Networks
Investor Relations - 250-881-1982
invest@vecima.com

Release Summary

Vecima Reports Q3 Fiscal 2020 Results and Provides COVID-19 Business Update

Contacts

Vecima Networks
Investor Relations - 250-881-1982
invest@vecima.com