SOURCE: Vecima Networks Inc.

Vecima Networks Inc.

November 10, 2016 06:00 ET

Vecima Reports Q1 Fiscal 2017 Results

VICTORIA, BC--(Marketwired - November 10, 2016) - Vecima Networks Inc. (TSX: VCM)

  • Net Income and EPS Increase Sequentially from Q4 2016
  • Entra receives 4.5 out of 5 diamonds from Broadband Technology Report

Vecima Networks Inc. (TSX: VCM), an experienced designer and manufacturer of innovative technology in the broadband equipment market, today reported financial results for the three months ended September 30, 2016.

"We achieved solid first quarter operating performance with bottom line results exceeding Q4 2016 levels and our cash balance growing by $8.7 million to a record $82.8 million," said Sumit Kumar, Vecima Networks' President and CEO. "As anticipated, while our industry remains in transition, our current products continue to perform well. Of particular note, Terrace QAM sales significantly exceeded Q4 2016 levels after rebounding from the timing related pull back in Q4. Entra, our next generation broadband platform, received a 4.5 diamond rating by the Broadband Technology Report in September, an accolade that reinforces the positive feedback we have received from customers and the industry at large."

FINANCIAL HIGHLIGHTS

           
(Canadian dollars in millions except percentages, employees, and per share data)  Q1FY17  Q4FY16   Q1FY16
Revenue  $23.4  $24.4   $25.8
Gross margin   54%   56%    57%
Adjusted EBITDA1  $7.1  $7.7   $9.6
Net income  $4.0  $3.4   $6.0
Earnings per share
(based on weighted average number shares outstanding)
 $0.18  $0.15   $0.27
Adjusted earnings per share1
(based on weighted average number shares outstanding)
 $0.17  $0.17   $0.27
Cash and short-term investments  $82.8  $74.1   $66.3
Employees   451   509    470
1Adjusted 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. See "Adjusted EBITDA and Adjusted Earnings Per Share" below.
 

In line with expectations, total sales of $23.4 million, were down 9% from $25.8 million in Q1 2016. Sequentially, total sales decreased by $1.0 million from Q4 2016.

  • Video and Broadband Solutions sales of $19.5 million were 16% lower year-over-year.
  • YourLink sales were unchanged at $2.5 million in the first quarter of fiscal 2017, compared to Q1 2016.
  • First quarter Telematics sales increased significantly to $1.4 million, from $0.2 million in Q1 2016, reflecting the positive impact of the Contigo Systems acquisition.

Entra Developments
Vecima continues to make excellent progress on Entra, its new DOCSIS 3.1 distributed access solution, which positions Vecima for the cable industry's upcoming major shift in network architecture. Initial feedback from Tier One customers has been encouraging with Entra's high Ethernet capacity, full support for legacy digital video, and distributed architectural approach generating significant customer interest. In September, Vecima for the first time demonstrated multi-gigabit broadband speeds using DOCSIS 3.1 at the SCTE Cable-Tec Expo. Vecima remains on track to move Entra into lab and field trials in 2017.

Normal Course Issuer Bid and Dividend
Subsequent to the quarter end, on October 25th, Vecima filed a notice of intention with the Toronto Stock exchange (the "TSX") to acquire for cancellation, by way of normal course issuer bid, up to 600,000 Common Shares of the Company. This represents approximately 2.7% of the issued and outstanding Shares and approximately 9.7% of the total public float of Vecima. "Given our book value of $172 million, $82.8 million of cash, our pristine balance sheet, proven product portfolio and highly promising R&D direction, Vecima's significant underlying value is not accurately reflected in our current share price in our view and caused us to take this action," said Mr. Kumar.

As previously reported, Vecima's Board of Directors have declared a quarterly dividend of $0.055 per share. The dividend will be payable on December 20, 2016 to shareholders of record on November 24, 2016.

OUTLOOK FOR FISCAL 2017

Based on current visibility into customer demand both domestically and internationally, Vecima's outlook for fiscal 2017 remains unchanged and anticipates:

  • Sales in the range of $85.0 million to $95.0 million
  • Gross margins in the range of 54% to 58%
  • Adjusted EBITDA in the range of $23 million to $28 million

CONFERENCE CALL

A conference call and live audio webcast will be held today, November 10, 2016 at 1 p.m. ET to discuss the Company's first quarter results. Vecima's unaudited consolidated financial statements and management's discussion and analysis for the three months ended September 30, 2016 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/vecima20161110.html and will be archived on the Vecima website at www.vecima.com/shareholder-events/.

About Vecima Networks
Vecima Networks Inc. (TSX: VCM) is a globally recognized leader in creating breakthrough technology solutions that empower network service providers to connect people and enterprises to information and entertainment worldwide. Vecima products for the cable industry allow service providers a cost-effective Last Mile Solution® for both video and broadband access, especially in the demanding business services market segment. Vecima also provides fleet managers the key information and analytics they require to optimally manage their business under the Contigo, NEROglobal, and Fleetlynx brands. More information is available at our website 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 first quarter of fiscal 2017.

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 include the following statements: Vecima continues to make excellent progress on Entra; positions Vecima for the cable industry's upcoming major shift in network architecture; initial feedback on Entra is encouraging and has generated significant customer interest; Vecima remains on track to move Entra into lab and field trails in 2017; Vecima's significant underlying value is not accurately reflected in our current share price; the dividend payable on December 20, 2016 to shareholders of record as at November 24, 2016; current visibility into customer demand both domestically and internationally; and the financial outlook for 2017.

In connection with the forward-looking information contained in this news release, Vecima has made numerous assumptions, regarding, among other things: we will continue to pay dividends; that MSOs continue to upgrade to their infrastructure; that Vecima is able to continue its relationships with its few large customers; we are able to develop new products for customers; competition that serves the same market(s) will not have an adverse effect on the business; we are able to adapt to technological changes -- designing to new standards and competing with new products; third party contractors are able to deliver on time and budget; we will be able to deliver based on the terms of our key contracts; currency fluctuations do not adversely affect Vecima; larger cable operator budgets are not static; suppliers will provide parts in a timely fashion; Vecima manages its business and its growth successfully; Vecima does not experience production capacity constraints; and the rationalization of operations could cause our operating results to fluctuate. While Vecima considers these assumptions to be reasonable, these assumptions are inherently subject to significant uncertainties and contingencies. Additionally, there are known and unknown risk factors which could cause Vecima's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained herein. Known risk factors include, among others: future quarterly dividends will be subject to approval of the Board of Directors; Vecima derives a substantial part of its revenue from a few large customers; Vecima may be unable to deliver products associated with key contracts; failure to manage Vecima's business or its growth successfully may adversely affect its operating results; if Vecima cannot meet customers' requirements for manufacturing capacity, sales may suffer; our inability to adapt to technological change, new products and standards could harm our business; if Vecima is required to change its pricing models to compete successfully, Vecima's margins and operating results may be adversely affected; competition from new or existing technologies may adversely affect Vecima's business; Vecima's reliance on third-party suppliers and contract manufacturers reduces its control over its performance; currency fluctuations may adversely affect Vecima; the budgeting cycles of larger cable operators can also result in quarter-to-quarter variability in customer orders, while availability of parts and production capacity can influence the timing of product deliveries; and our operating results are expected to fluctuate.

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, 2016, 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.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited - in thousands of Canadian Dollars)
 
   September 30, 
2016
 June 30, 
2016
Assets        
Current assets        
 Cash and cash equivalents  $21,699  $22,222
 Short-term investments   61,125   51,872
 Accounts receivable   4,571   4,674
 Income tax receivable   9   3,009
 Inventories   19,756   22,172
 Assets held for sale   -   1,486
 Prepaid expenses   1,479   1,359
    108,639   106,794
Non-current assets        
 Property, plant and equipment   20,524   20,214
 Goodwill   6,210   6,210
 Intangible assets   27,477   26,724
 Investment tax credit   20,101   20,031
 Deferred tax asset   5,618   6,272
   $188,569  $186,245
Liabilities        
Current liabilities        
 Accounts payable and accrued liabilities  $8,472  $8,746
 Dividends payable   1,232   -
 Provisions   913   927
 Deferred revenue   2,167   2,942
 Liabilities associated with assets held for sale   -   707
 Current portion of long-term debt   250   250
    13,034   13,572
Non-current liabilities        
 Other long-term liabilities   -   5
 Provisions   1,214   1,167
 Long-term debt   2,396   2,458
    16,644   17,202
Shareholders' equity        
 Share capital   743   739
 Reserves   3,729   3,662
 Retained earnings   167,453   164,642
    171,925   169,043
   $188,569  $186,245
       
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited - in thousands of Canadian dollars except net income per share data)
 
   Three months ended 
September 30,
   2016  2015
         
Sales  $23,382  $25,815
Cost of sales   10,792   11,149
Gross profit   12,590   14,666
Operating expenses        
Research and development   2,849   2,398
Sales and marketing   1,385   1,292
General and administrative   3,641   3,375
Stock-based compensation   68   135
Other income   (32)   (6)
    7,911   7,194
Operating income   4,679   7,472
Finance income   214   182
Foreign exchange gain   483   600
Income before income taxes   5,376   8,254
Income tax expense   1,384   2,126
Net income and comprehensive income from continuing operations   3,992   6,128
Net income (loss) and comprehensive income (loss) from discontinued operations   51   (80)
Net income and comprehensive income  $4,043  $6,048
         
Net income per share        
Continuing operations   0.18   0.27
Discontinued operations   0.00   0.00
Total basic net income per share  $0.18  $0.27
Continuing operations  $0.18  $0.27
Discontinued operations  $0.00  $0.00
Total diluted net income per share  $0.18  $0.27
         
Weighted average number of common shares        
 Shares outstanding - basic   22,402,904   22,378,316
 Shares outstanding - diluted   22,449,479   22,415,544
        
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited - in thousands of Canadian dollars)
             
   Share
Capital
 Reserves  Retained
Earnings
 Total
Balance as at June 30, 2015  $488  $3,228  $147,608  $151,324
Net income and comprehensive income   -   -   6,048   6,048
Dividends   -   -   (1,231)   (1,231)
Shares issued by exercising options   14   (2)   -   12
Share-based payment expense   -   135   -   135
Balance as at September 30, 2015  $502  $3,361  $152,425  $156,288
                 
Balance as at June 30, 2016  $739  $3,662  $164,642  $169,043
Net income and comprehensive income   -   -   4,043   4,043
Dividends   -   -   (1,232)   (1,232)
Shares issued by exercising options   4   (1)   -   3
Share-based payment expense   -   68   -   68
Balance as at September 30, 2016  $743  $3,729  $167,453  $171,925
             
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited - in thousands of Canadian dollars)
    
   Three months ended 
September 30,
   2016  2015
Cash flows from operating activities        
Net income and comprehensive income  $3,992  $6,128
Adjustments to reconcile net income to cash from operating activities   3,152   3,337
Decrease in other long-term liabilities   (5)   (14)
Increase in provisions   33   72
Increase in investment tax credit   (17)   (29)
Net change in non-cash working capital relating to operations   4,192   671
Interest paid   (25)   (31)
Interest received   242   213
Income tax received   11   -
Income tax paid   (13)   (3)
Net cash provided by continuing operations   11,562   10,344
Net cash used by discontinued operations   (90)   (4)
Net cash provided by operations   11,472   10,340
Cash flows used in investing activities        
Purchase of property, plant and equipment   (1,457)   (379)
Proceeds from the sale of property, plant and equipment   -   6
Purchase of short-term investments   (10,253)   (4,201)
Proceeds on sale of short-term investments   1,000   -
Deferred development costs   (2,846)   (3,234)
Purchase of indefinite and finite-life intangible assets   (16)   (10)
Net cash used by continuing operations   (13,572)   (7,818)
Net cash provided (used) by discontinued operations   1,288   (13)
Net cash used in investing   (12,284)   (7,831)
Cash flows used in financing activities        
Proceeds from shares issued through exercised options   4   12
Proceeds from government grants   347   -
Repayment of long-term debt   (62)   (62)
Net cash used in financing   289   (50)
         
(Decrease) increase in cash and cash equivalents during the period   (523)   2,459
Cash and cash equivalents, beginning of period   22,222   12,777
Cash and cash equivalents, end of period  $21,699  $15,236

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