Vecima Networks Inc.
TSX : VCM

Vecima Networks Inc.

May 15, 2006 16:06 ET

VCom Reports 30% Earnings Growth in Third Quarter

VICTORIA, BRITISH COLUMBIA--(CCNMatthews - May 15, 2006) - VCom Inc. (TSX:VCM) today announced that its 2006 fiscal year third quarter interim financial and operating results for the three months and nine months ended March 31, 2006 have been filed on the SEDAR system. The highlights provided in this press release should be read in conjunction with the Company's final prospectus dated November 3, 2005, relating to our initial public offering of shares, and our unaudited interim financial statement and Management Discussion and Analysis for the third quarter, which are available at: http://www.vcom.com/invest/latest_finan.html.

All dollar amounts are in Canadian dollars. As quarterly reports were not prepared in the previous fiscal year, it is impracticable to present prior-period information on a basis consistent with the results for the three months and nine months ended March 31, 2006.

FINANCIAL HIGHLIGHTS

- Net income after tax for the third quarter was $3.1 million as compared to $2.4 million in the second quarter representing quarter over quarter growth of 30%. Total revenue for the same periods was $21.4 million and $19.1 million respectively, representing quarter over quarter growth of 12%.

- Sales for the nine months ended March 31, 2006 were $58.1 million. Excluding the effect of a non-recurring event last year, our nine-month revenue this fiscal year was 27% higher than three-quarters of our fiscal 2005 operating revenue. The company increased productivity and experienced economies of scale in the period that allowed it to substantially increase sales and maintain gross margin in spite of the 770 basis point appreciation in the average value of the Canadian dollar during this period as compared to the same period last year.

- Gross margin was 37% for both the third quarter and the first nine months of our 2006 fiscal year, within our model of 35 to 39%.

- The company continues to record expenses for options granted under our stock option plan. Non-cash stock-based compensation expense of $200,000 was incurred in the third quarter. Including the effects of non-cash stock-based compensation expense, VCom's net income for the third quarter was $3.1 million or $0.14 per share as compared to $2.4 million, or $0.12 per share in the second quarter. Including the effects of non-cash stock-based compensation expense, our net income for the nine months ended March 31, 2006 was $7.9 million or $0.38 per share. The diluted weighted number of shares outstanding was 22.5 million for the third quarter, 20.7 million for the second quarter and 20.7 million for the nine months ended March 31, 2006.

- Excluding the effects of non-cash stock-based compensation and the non-recurring event from last year, our net income would have been approximately $8.4 million for the first three-quarters of the 2006 fiscal year. This represents an increase of 28% over 75% of the adjusted net income for the year ended June 30, 2005.

- Shareholders' equity increased to $72.8 million at March 31, 2006 as compared to $38.5 million at June 30, 2005 as a result of operating profits and successful completion of our IPO.

- OEM module shipments in quarter three showed increases that were higher than expected. Customers pulled some quarter four shipments into quarter three to complete end-of-version manufacturing before the July 1st prohibition on lead-based solder in Europe. This will affect fourth quarter shipments but we expect our revenue to be $75 million to $80 million, within previous projections for the fiscal year ended June 30, 2006.

OPERATIONAL HIGHLIGHTS

- Operating expenses as a percentage of total revenue in the third quarter were 18%, excluding the 1% of sales in non-cash stock-based compensation. This compares to operating expenses of 19% of total revenue for our fiscal year ended June 30, 2005.

- VCom ended the third quarter with 569 employees representing a 7% increase from the 531 employees at the end of the second quarter and an increase of 21% from the 470 personnel at March 31, 2005.

- Using funds provided by the IPO, we retired $5.0 million in operating line debt in the second quarter and $3.6 million in long term debt in the third quarter. VCom no longer has debt other than trade payables.

- YourLink Inc., VCom's service provision company, was EBITDA positive in the third quarter, contributing to an improvement in consolidated EBITDA.

- VCom has successfully tested for interoperability under the provided guidelines at the WiMAX Forum 3rd Plugfest in Sophia Antipolis, France in March 2006.

About VCom

VCom Inc. (TSX:VCM) designs, manufactures and sells products that enable broadband access to cable, wireless and telephony networks. VCom's hardware products incorporate embedded software developed by it to meet the complex requirements of next-generation, high-speed digital networks. Service providers use VCom's solutions to deliver services to a converging worldwide broadband market, including what are commonly known as "triple play" (voice, video and data) and "quadruple play" (voice, video, data and wireless) services. VCom's solutions allow service providers to rapidly and cost-effectively bridge the final network segment that connects the system directly to end users, commonly referred to as "the last mile", by overcoming the bottleneck resulting from insufficient carrying capacity in legacy, last mile infrastructures. VCom's products are directed at three principal markets: Data over Cable, Broadband Wireless and Digital Video. The Company has also developed and continues to focus on developing products to address emerging markets such as Voice over Internet Protocol, fibre to the home and IP video.

VCom is a Principal Member of the WiMAX Forum that has developed the international open standard for this new technology. Certification to the IEEE 802.16 standard under the WiMAX certification process requires interoperability of equipment manufactured by different vendors. Operators demand interoperability to ensure that economies of mass production will be achieved by aggregating production for all manufacturers. VCom's VistaMAX Time Division Duplexing (TDD) Base Station was successfully tested for interoperability under the provided guidelines at the WiMAX Forum 3rd Plugfest in Sophia Antipolis, France in March 2006.

Contact Information

  • VCom Headquarters and Executive Offices
    Mike Barry
    CFO
    (250) 881-1982
    or
    VCom Headquarters and Executive Offices
    Alan Brick
    Investor Relations
    (250) 881-1982
    alan.brick@vcom.com
    www.vcom.com