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Vecima Reports Q2 Fiscal 2020 Results
[February 06, 2020]

Vecima Reports Q2 Fiscal 2020 Results


Vecima Networks Inc. (TSX:VCM) today reported financial results for the three months ended December 31, 2019.

FINANCIAL HIGHLIGHTS



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

Q2FY20

Q1FY20

 

Q2FY19

Revenue

$25.1

$20.1

 

$22.7

Gross Margin

64%

52%

 

57%

Net Income/(Loss)

$3.6

$(1.4)

 

$2.1

Earnings/(Loss) Per Share1

$0.16

$(0.06)

 

$0.09

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

$0.15

$(0.06)

 

$0.08

Adjusted EBITDA2

$7.0

$1.8

 

$5.5

Cash and Short-term Investments

$40.2

$41.3

 

$44.5

Employees

368

366

 

389

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 second quarter of fiscal 2020.

"The second quarter was a pivotal one for Vecima as we initiated sales of our new Entra™ family of DAA products, and in our Content Delivery and Storage segment, achieved significant new customer wins and record quarterly revenue and bottom-line performance," said Sumit Kumar, Vecima's President and Chief Executive Officer. "While these were noteworthy milestones for Vecima, as we have highlighted previously, we remain cautious in our expectations for Entra sales in the second half due to ongoing timing uncertainties related to the cable industry's transition to the new network architecture."

"In our Content Delivery and Storage segment, we generated quarterly revenues of $15.4 million as demand for our MediaScaleX™ IPTV solutions continued to grow. We advanced the rollout of a major software upgrade with a world top-five multiple system operator (MSO), while attracting new IPTV customers in the Caribbean and Latin America (CALA) region, where we are expanding quickly. Building on this strength, a premier Tier 1 national broadcaster in Latin America chose our MediaScaleX//Storage™ solution to begin converting archival tape storage to online storage. This deployment represents our first entry into the large worldwide broadcast market and is a highly strategic win for us."

"In our Video and Broadband Solutions segment, we drove deployment volume license sales of our new Entra Remote PHY Monitor to a Tier 1 customer in Q2. This was followed by initial Entra node sales to the same customer subsequent to the quarter end. We also produced initial sales of our new Entra Video QAM Manager and Entra Interactive Video Controller (IVC) during the second quarter. All told, we achieved $1.1 million in Entra family sales in the second quarter, reflecting our first material revenue results in the new DAA market which represents strong strategic growth potential for the Company. These advances in Entra mark a significant milestone for Vecima."

"Financially, we turned in our best quarterly performance in over three years. Second quarter consolidated revenues climbed to $25.1 million, up 11% year-over-year. We also increased Adjusted EBITDA by 27% to $7.0 million and grew earnings per share to $0.16, from $0.09 in the same period last year. Our improved bottom-line performance reflects our increased sales and a gross margin of 64% as a result of significant software sales in our revenue mix."

"We are pleased with the significant progress made on both the DAA and IPTV fronts in the second quarter," said Mr. Kumar.

Q2FY20 BUSINESS HIGHLIGHTS

Video and Broadband Solutions

  • Increased segment sales by 20% year-over-year and 12% quarter-over-quarter, reflecting strong demand for TerraceQAM and initial sales of next generation Entra products
  • Entra family:
    • Achieved first $1.1 million of sales of next generation Entra family products as operators began to purchase our new DAA platforms and products
    • Won first DAA solution order covering deployment volume licenses of our Entra Remote PHY Monitor in Q2, along with an initial Entra Remote PHY access node order subsequent to quarter-end, from a Tier 1 North American customer. The Entra Remote PHY Monitor is Vecima's industry-leading DAA monitoring and management tool and has been chosen as a critical service assurance platform for the lead Tier 1's DAA network program
    • Advanced field trial for Remote PHY Access Nodes with a Canadian MSO
    • Achieved initial sales of Entra Interactive Video Controller (IVC) and Entra Video QAM Manager
    • Launched the Entra EN8124 access node, an industry-leading and innovative high-density DAA node, supporting two Remote PHY Devices (RPD) in a single node to double both downstream and upstream capacity, heightening customer engagements for our differentiated portfolio of Entra family products
    • Advanced IPTV and DAA engagement with a Tier 1 MSO, progressing lab qualifications for both MediaScaleX and Entra Remote PHY node
  • Terrace family
    • Achieved significant increase in TerraceQAM sales uptake at a Tier 1 MSO as the customer expands its extensive hospitality footprint while preparing for migration to the next generation TerraceIQ platform
    • Progressed development of the next generation Terrace IQ platform and delivered functional proof of concept demonstration to a Tier 1 US MSO supporting the customer's aim to upgrade its network wide deployment of the Terrace and TerraceQAM products

Content Delivery and Storage

  • Generated record segment sales of $15.4M, with revenue up 8% year-over-year and 36.3% quarter-over-quarter
  • Achieved further advances in the burgeoning IPTV market with expansion across new and existing customers for Vecima's portfolio of MediaScaleX IPTV products
  • Robust sales uptake of a major software release upgrade by a world top-five MSO where MediaScaleX is deployed to provide on-demand video across over 75% of the operator's footprint
  • Built further momentum in CALA with highest-ever region CDS revenue, surpassing $1M USD in Q2FY20, led by deployments from a Tier 1 MSO win announced in Q1
  • Selected by and received initial orders from a Tier 1 broadcaster in the CALA region to replace legacy tape-based archives, which are heavily deployed in the industry, with online MediaScaleX object storage. This represents Vecima's first significant conversion in the broadcaster sector, a major strategic growth area for our state-of-the-art Storage platform
  • Completed major enhancements to MediaScaleX, adding CMAF common streaming and encryption to CDN products and additional virtualization elements to Storage product, driving sizeable hardware and network efficiency increases

Telematics

  • Awarded contract by the City of Saskatoon for a fleet management solution covering 1,000 municipal vehicles and moveable assets and initiated fleet-wide rollout in December
  • Continued penetration in the moveable assets market bringing in five additional restoration industry customers with assets being monitored through Vecima's Bluetooth Low Energy (BLE) tags

"Looking forward, we have established an industry lead with our growing line of independent, agnostic and future-proof Entra DAA products and platforms and are nearing scale commercial deployment of these next generation products," stated Mr. Kumar. "While we are encouraged by the breadth of our engagements with customers for our Entra products and expect momentum will build as additional customers move closer to deployment, we remain cautious in our expectations for the industry pace of DAA deployments in fiscal 2020. We also anticipate that the DAA market may be subject to significant quarter-to-quarter sales variations based on the timing of large customer infrastructure projects."

"In our Content Delivery and Storage segment, we expect demand for our MediaScaleX product family will remain strong through the balance of fiscal 2020 as a result of product enhancements, the build-up of new customers, and higher levels of capital spending on IP video technologies by MSOs," added Mr. Kumar. "We continue to see the potential for year-over-year segment sales growth of over 20% in fiscal 2020 based on our pipeline of IPTV opportunities, but as always, note that this part of our business is prone to significant revenue variations quarter-to-quarter, relating to the timing of large customer orders."

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 23, 2020 to shareholders of record as at February 21, 2020.

CONFERENCE CALL

A conference call and live audio webcast will be held today, February 6, 2020 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 months ended December 31, 2019 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/vecima20200206.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 second 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: The second quarter was a pivotal one for Vecima; while these were noteworthy milestones for Vecima, as we have highlighted previously, we remain cautious in our expectations for Entra sales in the second half due to ongoing timing uncertainties related to the cable industry's transition to the new network architecture; this deployment represents our first entry into the large worldwide broadcast market and is a highly strategic win for us; initial sales of our new Entra Video QAM Manager and Entra Interactive Video Controller (IVC), marked a significant milestone for Vecima; we achieved Entra family sales during the quarter, reflecting our first material revenue results in the new DAA market which reflects strong strategic growth potential for the company; Looking forward, we have established an industry lead with our growing line of independent, agnostic and future-proof Entra DAA products and platforms and are nearing scale commercial deployment of these next generation products; while we are encouraged by the breadth of our engagements with customers for our Entra products and expect momentum will build as additional customers move closer to deployment, we remain cautious in our expectations for the industry pace of DAA deployments in fiscal 2020; we also anticipate that the DAA market may be subject to significant quarter-to-quarter sales variations based on the timing of large customer infrastructure projects; in our Content Delivery and Storage segment, we expect demand for our MediaScaleX product family will remain strong through the balance of fiscal 2020 as a result of product enhancements, the build-up of new customers, and higher levels of capital spending on IP video technologies by MSOs; We continue to see the potential for year-over-year segment sales growth of over 20% in fiscal 2020 based on our pipeline of IPTV opportunities, but as always, note that this part of our business is prone to significant revenue variations quarter-to-quarter, relating to the timing of large customer orders.

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

 

 

 

December 31, 2019

 

June 30, 2019

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

22,960

$

19,834

Short-term investments

 

 

 

17,247

 

24,569

Accounts receivable

 

 

 

16,357

 

15,154

Income tax receivable

 

 

 

397

 

437

Inventories

 

 

 

14,383

 

12,724

Prepaid expenses

 

 

 

1,910

 

2,235

Contract assets

 

 

 

161

 

187

Asset held for sale

 

 

 

490

 

-

 

 

 

 

73,905

 

75,140

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

11,909

 

12,526

Right-of-use assets

 

 

 

4,415

 

-

Goodwill

 

 

 

15,074

 

15,131

Intangible assets

 

 

 

67,666

 

67,887

Other long-term assets

 

 

 

854

 

1,017

Investment tax credits

 

 

 

25,224

 

24,355

Deferred tax assets

 

 

 

4,573

 

4,714

 

 

 

$

203,620

$

200,770

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

$

9,295

$

11,699

Provisions

 

 

 

710

 

804

Income tax payable

 

 

 

120

 

55

Deferred revenue

 

 

 

4,031

 

4,046

Current portion of long-term debt

 

 

 

1,631

 

250

 

 

 

 

15,787

 

16,854

Non-current liabilities

 

 

 

 

 

 

Provisions

 

 

 

344

 

332

Deferred revenue

 

 

 

834

 

763

Deferred tax liability

 

 

 

323

 

324

Long-term debt

 

 

 

5,255

 

1,729

 

 

 

 

22,543

 

20,002

Shareholders' equity

 

 

 

 

 

 

Share capital

 

 

 

2,674

 

1,916

Reserves

 

 

 

3,939

 

4,104

Retained earnings

 

 

 

173,657

 

173,738

Accumulated other comprehensive income

 

 

 

807

 

1,010

 

 

 

 

181,077

 

180,768

 

 

 

$

203,620

$

200,770

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,

 

 

2019

 

2018

 

2019

 

2018

Sales

 

$

25,123

$

22,654

$

45,235

$

43,989

Cost of Sales

 

 

9,115

 

9,814

 

18,753

 

19,958

Gross Profit

 

 

16,008

 

12,840

 

26,482

 

24,031

Operating expenses

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,534

 

4,567

 

9,602

 

9,171

Sales and marketing

 

 

3,427

 

3,252

 

7,173

 

6,452

General and administrative

 

 

4,142

 

4,006

 

8,123

 

8,009

Restructuring costs

 

 

-

 

-

 

-

 

757

Share-based compensation

 

 

17

 

40

 

34

 

74

Other (income) expense

 

 

(145)

 

(278)

 

(155)

 

(366)

 

 

 

11,975

 

11,587

 

24,777

 

24,097

Operating income (loss)

 

 

4,033

 

1,253

 

1,705

 

(66)

Finance income

 

 

554

 

27

 

762

 

249

Foreign exchange (loss) gain

 

 

(477)

 

1,593

 

(179)

 

1,076

Income before income taxes

 

 

4,110

 

2,873

 

2,288

 

1,259

Income tax expense

 

 

549

 

823

 

111

 

305

Net income

 

$

3,561

$

2,050

$

2,177

$

954

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

 

Item that may be subsequently reclassed to net income

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

 

(426)

 

1,395

 

(203)

 

977

Comprehensive income

 

$

3,135

$

3,445

$

1,974

$

1,931

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

$

0.09

$

0.10

$

0.04

Diluted

 

$

0.16

$

0.09

$

0.10

$

0.04

Weighted average number of common shares

 

 

 

 

 

 

 

 

 

Shares outstanding - basic

 

22,404,999

22,368,234

22,420,018

22,370,641

Shares outstanding - diluted

 

22,444,540

 

22,371,522

22,442,995

22,376,886

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 income

 

-

 

-

 

954

 

-

 

954

Other comprehensive income

 

-

 

-

 

-

 

977

 

977

Dividends

 

-

 

-

 

(2,461)

 

-

 

(2,461)

Shares repurchased and cancelled

 

(1)

 

-

 

(116)

 

-

 

(117)

Share-based payment expense

 

-

 

74

 

-

 

-

 

74

Balance as at December 31, 2018

$

1,755

$

4,115

$

180,686

$

2,054

$

188,610

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

 

-

 

-

 

2,177

 

-

 

2,177

Other comprehensive loss

 

-

 

-

 

-

 

(203)

 

(203)

Dividends

 

-

 

-

 

(2,464)

 

-

 

(2,464)

Shares issued by exercising options

 

758

 

(199)

 

-

 

-

 

559

Share-based payment expense

 

-

 

34

 

-

 

-

 

34

Balance as at December 31, 2019

$

2,674

$

3,939

$

173,657

$

807

$

181,077

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands of Canadian dollars)

Three months

Six months

Periods ended December 31,

 

2019

 

2018

 

2019

 

2018

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

$

3,561

$

2,050

$

2,177

$

954

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

(Gain) loss on sale of property, plant and equipment

 

(135)

 

31

 

(121)

 

42

Gain on sale of intangible assets

 

-

 

(202)

 

-

 

(202)

Depreciation and amortization

 

2,972

 

2,766

 

6,469

 

5,487

Share-based compensation

 

17

 

40

 

34

 

74

Income tax expense (recovery)

 

82

 

817

 

(26)

 

391

Deferred income tax expense (recovery)

 

467

 

6

 

137

 

(86)

Interest expense

 

78

 

31

 

158

 

55

Interest income

 

(237)

 

(250)

 

(460)

 

(531)

Net change in working capital

 

(2,845)

 

(5,807)

 

(4,038)

 

(6,217)

Decrease (increase) in other long-term assets

 

154

 

(198)

 

160

 

(179)

Decrease in provisions

 

(78)

 

(241)

 

(78)

 

(137)

Increase in investment tax credits

 

(51)

 

(21)

 

(89)

 

(48)

Income tax received

 

173

 

147

 

173

 

409

Income tax paid

 

(46)

 

(106)

 

(68)

 

(457)

Interest received

 

237

 

250

 

460

 

531

Interest paid

 

(78)

 

(26)

 

(158)

 

(50)

Cash provided by (used in) operating activities

 

4,271

 

(713)

 

4,730

 

36

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures, net

 

(481)

 

(159)

 

(925)

 

(930)

Purchase of short-term investments

 

(578)

 

(1,212)

 

(778)

 

(1,418)

Proceeds from sale of short-term investments

 

6,700

 

5,900

 

8,100

 

11,627

Deferred development costs

 

(2,776)

 

(4,530)

 

(5,426)

 

(8,873)

Cash provided by (used in) investing activities

 

2,865

 

(1)

 

971

 

406

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from government grants

 

63

 

-

 

94

 

-

Principal payments of lease liabilities

 

(316)

 

-

 

(648)

 

-

Repayment of long-term debt

 

(63)

 

(84)

 

(146)

 

(146)

Repurchase and cancellation of shares

 

-

 

(61)

 

-

 

(117)

Dividends paid

 

(2,464)

 

(2,461)

 

(2,464)

 

(2,461)

Issuance of shares through exercised options

 

559

 

-

 

559

 

-

Cash used in financing activities

 

(2,221)

 

(2,606)

 

(2,605)

 

(2,724)

Net increase (decrease) in cash and cash equivalents

 

4,915

 

(3,320)

 

3,096

 

(2,282)

Effect of change in exchange rates on cash

 

82

 

(903)

 

30

 

(728)

Cash and cash equivalents, beginning of period

 

17,963

 

12,247

 

19,834

 

11,034

Cash and cash equivalents, end of period

$

22,960

$

8,024

$

22,960

$

8,024

 


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