Vecima Networks Inc.
TSX : VCM

Vecima Networks Inc.

May 15, 2014 08:00 ET

Vecima Reports Q3 Fiscal 2014 Results

Highest Gross Margin and Cash Balance in the Company's History

VICTORIA, BRITISH COLUMBIA--(Marketwired - May 15, 2014) - 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 March 31, 2014.

"We have delivered exceptional financial performance in Q3 and are extremely pleased that our investments in the best products to meet our customer's needs are paying dividends," stated Sumit Kumar, President and CEO. "With our business services and other solutions continuing to lead important market segments, we've driven our margins and cash balance to new highs as we capitalize on the market strength of these solutions."

FINANCIAL HIGHLIGHTS

(CAD dollars in millions except percentages, headcount, and per share data) Q3
FY2014
Q2
FY2014
Q3
FY2013
Revenue 22.6 21.6 21.5
Gross margin 52 % 46 % 44 %
Adjusted EBITDA(1) 6.2 4.9 4.5
Net income 3.4 11.4 2.0
Earnings per share (based on weighted average number shares outstanding) $ 0.15 $ 0.51 $ 0.09
Cash and short-term investments 42.1 36.5 25.0
Headcount 520 538 596
(1) Adjusted EBITDA does 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 should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of our financial performance or as a measure of our liquidity and cash flows. For a reconciliation of Adjusted EBITDA, investors should refer to Management's Discussion and Analysis for the current quarter.

MSO BUSINESS SERVICES

Terrace Family

  • Sales in the third quarter were $8.1 million compared to $6.6 million in the previous quarter. Results continue to demonstrate the intimate connection the Terrace product line has to the ongoing digitization of the world's cable networks. The new MSO win, announced in Q1, further ramped its uptake in the quarter. Further, in Q3, Vecima captured a new national deployment win at another prominent US cable MSO that is now launching its nationwide all-digital upgrade.

Terrace QAM

  • Sales in Q3 were $4.1 million. The reduction in sales was largely attributed to the need to prioritize other products that were time sensitive to ship in Q3. Bookings for Terrace QAM were strong leading into Q4. Hospitality remains an exciting new market segment for the cable MSOs. Though an initial deployment ramp in earlier quarters is behind us, we expect customer demand to remain robust as cable operators work to provide upgrades to HD service across the major hotel brands.

CABLE HEADEND

Digital Video Access Platform

  • During the third quarter, further feedback received from our OEM partner for the solution again reinforced the pressing market need for the product. As a reminder, the platform is required to provide two-way communications to a very widely deployed base of video equipment in residential customer premises. Field trials at most of the top MSOs in North America approached their final stages during our fiscal third quarter. Vecima believes that all final software refinements are complete.

"Because of the ongoing strength of our current product portfolio that squarely solves the needs of cable operators as they upgrade networks today, we are investing in the development of a new suite of platform products. Those new platforms are finely tuned to address the market dynamics that will lead cable MSOs to invest in long term network evolution that maintains their leadership in the digital world," said Sumit Kumar.

CONFERENCE CALL

A conference call and live audio webcast will be held on May 15, 2014 at 1 p.m. ET to discuss the Company's third quarter results. Vecima's unaudited condensed interim consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2014 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 1-604-638-5340. The webcast will be available in real time at http://services.choruscall.ca/links/vecima140515.html and will be archived on the Vecima website at www.vecima.com/shareholder-events/.

About Vecima Networks

Vecima Networks Inc. (TSX:VCM) designs, manufactures and sells products that enable broadband access to cable, wireless and telephony networks. Vecima's hardware products incorporate original embedded software to meet the complex requirements of next-generation, high-speed digital networks. Service providers use Vecima'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. Vecima'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. Vecima's products are directed at two principal markets: Converged Wired Solutions and Broadband Wireless. 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. More information is available at our website at www.vecima.com.

Forward-Looking Statements

Certain statements in this press release may constitute forward-looking statements within the meaning of applicable securities laws. All statements other than statements of historical fact are forward-looking statements. These statements include but are not limited to statements regarding management's intentions, belief or current expectations with respect to market and general economic conditions, future sales, future shipping volumes, future cash position, revenue expectations, future costs, future operating performance, plans to sell non-core assets, and plans to continue to explore opportunities to maximize shareholder value, including the possibility of future cash dividends and distributions. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or are beyond our control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include, but are not limited to, the current significant general economic uncertainty and credit and financial market volatility and the distinctive characteristics of Vecima's operations and industry and customer demand that may have a material impact on, or constitute risk factors in respect of Vecima's future financial performance, as set forth under the heading "Risk Factors" in the Company's Annual Information Form dated September 26, 2013, a copy of which is available at www.sedar.com. In addition, although the forward-looking statements in this press release are based on what management believes are reasonable assumptions, such assumptions may prove to be incorrect. Consequently, readers should not place undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Vecima disclaims any intention or obligation to update or revise any forward-looking statements, as a result of new information, future events or otherwise, except as required by law.

VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited - in thousands of Canadian Dollars)
March 31,
2014
June 30,
2013
Assets
Current assets
Cash and cash equivalents $ 7,942 $ 7,148
Short-term investments 34,141 24,699
Accounts receivable 15,580 13,442
Income tax receivable - 4,762
Inventories 24,622 28,264
Prepaid expenses 1,105 936
83,390 79,251
Non-current assets
Property, plant and equipment 21,477 25,006
Assets held for resale - 342
Intangible assets 12,463 12,176
Investment tax credit 32,902 30,286
Deferred tax asset 3,839 7,729
$ 154,071 $ 154,790
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 11,063 $ 9,973
Provisions 956 957
Income tax payable 292 281
Deferred revenue 1,881 1,331
Current portion of long-term debt 250 250
14,442 12,792
Non-current liabilities
Other long-term liabilities 179 306
Provisions 1,315 1,314
Long-term debt 3,021 3,229
18,957 17,641
Shareholders' equity
Share capital 153 12,183
Reserves 2,821 2,803
Retained earnings 132,140 122,163
135,114 137,149
$ 154,071 $ 154,790
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
March 31,
Nine months ended
March 31,
2014 2013 2014 2013
Sales $ 22,592 $ 21,509 $ 65,835 $ 69,630
Cost of sales 10,782 11,956 33,877 40,449
Gross margin 11,810 9,553 31,958 29,181
Operating expenses
Research and development 2,135 1,823 6,183 5,976
Sales and marketing 1,402 1,487 4,014 4,118
General and administrative 3,983 4,269 12,159 12,826
Stock-based compensation 5 9 18 39
Other (income) (50 ) (258 ) (14,433 ) (13,595 )
7,475 7,330 7,941 9,364
Operating income 4,335 2,223 24,017 19,817
Finance costs 48 52 134 333
Finance income 383 556 1,203 894
Income before income taxes 4,670 2,727 25,086 20,378
Income tax expense 1,272 711 4,838 3,944
Net income and total comprehensive income $ 3,398 $ 2,016 $ 20,248 $ 16,434
Net income per share
Basic $ 0.15 $ 0.09 $ 0.91 $ 0.74
Diluted $ 0.15 $ 0.09 $ 0.91 $ 0.74
Weighted average number of common shares
Shares outstanding - basic 22,328,159 22,322,328 22,328,159 22,322,328
Shares outstanding - diluted 22,349,701 22,333,304 22,349,701 22,333,304
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, 2012 $ 34,482 $ 2,761 $ 103,001 $ 140,244
Net income and total comprehensive income - - 19,162 19,162
Shares issued by exercising options 23 - - 23
Return of capital (22,322 ) - - (22,322 )
Share-based payment expense - 42 - 42
Balance as at June 30, 2013 12,183 2,803 122,163 137,149
Net income and total comprehensive income - - 20,248 20,248
Dividends - - (10,271 ) (10,271 )
Shares issued by exercising options 27 - - 27
Return of capital to shareholders (12,057 ) - - (12,057 )
Share-based payment expense - 18 - 18
Balance as at March 31, 2014 $ 153 $ 2,821 $ 132,140 $ 135,114
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited - in thousands of Canadian dollars)
Three months ended
March 31,
Nine months ended
March 31,
2014 2013 2014 2013
Cash flows from operating activities
Net income and total comprehensive income $ 3,398 $ 2,016 $ 20,248 $ 16,434
Add (deduct) items not requiring cash
Loss (gain) on sale of property, plant and equipment 20 (44 ) 7 (30 )
Gain on sale of assets held for resale - - (14,027 ) (3,604 )
Gain on sale of intangible assets - - - (9,358 )
Depreciation of property, plant and equipment 816 1,201 2,433 3,621
Amortization of deferred development costs 617 559 1,819 1,676
Amortization of finite-life intangible assets 20 37 96 110
Stock-based compensation 5 9 18 39
Income tax expense 174 (109 ) 948 1,128
Deferred income tax expense 1,098 820 3,890 2,816
Interest expense 48 52 134 156
Interest income (133 ) (220 ) (522 ) (325 )
(Decrease) increase in other long-term liabilities (39 ) (53 ) (127 ) 13
(Decrease) increase in provisions (6 ) (64 ) 175 (257 )
Increase in investment tax credit (207 ) (125 ) (762 ) (3,401 )
Net change in non-cash working capital relating to operations 2,477 (1,505 ) 2,888 8,114
Interest paid (43 ) (40 ) (113 ) (129 )
Interest received 134 224 508 336
Income tax received 16 6,148 4,695 6,148
Income tax paid (238 ) (242 ) (955 ) (1,371 )
8,157 8,664 21,353 22,116
Cash flows (used in) provided by investing activities
Purchase of property, plant and equipment (796 ) (469 ) (2,097 ) (1,725 )
Proceeds from the sale of property, plant and equipment 26 71 79 132
Proceeds from the sale of assets held for resale - - 17,465 3,989
Proceeds from the sale of intangible assets - - - 9,738
Purchase of short-term investments (3,630 ) (26,276 ) (33,627 ) (42,250 )
Proceeds on sale of short-term investments - 31,673 24,185 31,673
Deferred development costs (1,682 ) (2,255 ) (4,015 ) (6,245 )
Purchase of indefinite and finite-life intangible assets (19 ) (12 ) (40 ) (20 )
(6,101 ) 2,732 1,950 (4,708 )
Cash flows (used in) provided by financing activities
Proceeds from shares issued through exercised options - 18 27 23
Return of capital to shareholders - (22,322 ) (12,057 ) (22,322 )
Dividends paid - - (10,271 ) -
Repayment of long-term debt (62 ) (41 ) (208 ) (187 )
(62 ) (22,345 ) (22,509 ) (22,486 )
Increase (decrease) in cash during the year 1,994 (10,949 ) 794 (5,078 )
Cash and cash equivalents, beginning of period 5,948 25,420 7,148 19,549
Cash and cash equivalents, end of period $ 7,942 $ 14,471 $ 7,942 $ 14,471

Contact Information