VICTORIA, BRITISH COLUMBIA--(Marketwired - Sept. 25, 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 and year ended June 30, 2014.
"Fiscal 2014 was a banner year for earnings performance. We delivered a 26% annual growth in adjusted EBITDA," indicated Sumit Kumar, President and CEO. "Our excellent performance was driven by the ongoing success of our platform products which are used by world leading cable operators to provide desirable services to their commercial customers. Our cash balance is now $48.5 million compared to $31.8 million after distribution of $22.3 million to shareholders in December 2013. We generated approximately $39.0 million in cash in fiscal 2014."
As announced on September 24th, Vecima's board of directors has adopted a dividend policy to pay an annual dividend to its common shareholders of $0.18 per share, payable quarterly. The first dividend of $0.045 is payable on October 28, 2014 to shareholders of record as at October 6, 2014. Future quarterly dividends are subject to board approval.
FINANCIAL HIGHLIGHTS
| (Canadian dollars in millions except percentages, headcount, and per share data) | Q4FY14 | Q3FY14 | FY2014 | FY2013 | |
| Revenue | $24.9 | $22.6 | $90.7 | $91.2 | |
| Gross margin | 52% | 52% | 49% | 43% | |
| Adjusted EBITDA(1) | $7.5 | $6.2 | $23.1 | $18.3 | |
| Net income | $4.4 | $3.4 | $24.6 | $19.1 | |
| Earnings per share (based on weighted average number shares outstanding) | $0.20 | $0.15 | $1.10 | $0.86 | |
| Cash and short-term investments | $48.5 | $42.1 | $48.5 | $31.8 | |
| Headcount | 507 | 520 | 507 | 571 | |
| (1)Adjusted EBITDA does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures provided by other issuers. See "Adjusted EBITDA" below. | |||||
MULTIPLE SYSTEM OPERATOR (MSO) BUSINESS SERVICES
Terrace Family
- Sales of Terrace Family products in the fourth quarter were $7.9 million compared to $8.1 million in the previous quarter. The uptake of Terrace Family products remained strong due to the addition of a tier 1 US cable MSO early in the first quarter that went on to deploy heavily throughout the year.
- Our Terrace Family of products remain essential in the business services vertical as operators transition their networks to all-digital. Management expects ongoing deployments that coincide with initiation of these network upgrades which are critical for every MSO going forward in order to create capacity for next generation services.
Terrace QAM
- Sales of Terrace QAM in Q4 were $5.2 million. The product provides an elegant platform over which cable operators can deliver a leading high definition service offering to hospitality customers. Beyond our lead customer in the US, management is now seeing early interest in Terrace QAM by international MSOs.
CABLE HEADEND
Digital Video Access Platform
- After completing our final software refinements in the third quarter, Vecima has shipped $3.7 million of the Digital Video Access Platform in fiscal 2014. Although some of the shipping represented stocking inventory, the product is now in production deployment at multiple MSOs. As approval testing is concluded at additional MSOs, management expects some variability in quarterly revenue for the remainder of calendar 2014.
Subsequent to quarter end, management announced a new Terrace QAM platform will be developed for a major MSO to support network capacity upgrades. The new platform will support MPEG-4 video format which is more efficient than traditional MPEG-2 format. This enhancement allows Terrace QAM to support a broader spectrum of network architectures including MPEG-4, a key capacity driver for MSOs.
During the quarter, as expected, Vecima received confirmation from our chip manufacturer partner that the agreement announced in March 2012 to develop a cable broadband transmitter chip has been terminated. Although the program was terminated by the end customer due to changes in the market, the intellectual property Vecima has developed is highly applicable to products currently in development and planned next generation platforms.
"Vecima's solutions have enjoyed significant market success because of their high relevancy to the needs of our customers. As we, along with our customers, see continuous evolution in both service offerings and the technology needed, the ongoing provision of platform products will continue. Over the course of the next several quarters, Vecima plans to introduce products that enable essential network capacity improvements (e.g. MPEG-4 compression) as well as platforms that fuel the long-term objective to provide gigabit class Internet speeds and IP based video broadly," indicated Sumit Kumar, President and CEO.
OUTLOOK FOR FISCAL 2015
For fiscal 2015, management expects:
- sales to be in the range of $90 to $100 million;
- gross margin to be in the range of 46% to 51%;
- adjusted EBITDA to be in the range of $21 to $26 million; and
- to continue to monetize non-core assets when we believe it will support shareholder value maximization.
CONFERENCE CALL
A conference call and live audio webcast will be held on September 25, 2014 at 1 p.m. ET to discuss the Company's fourth quarter and year end results. Vecima's audited condensed interim consolidated financial statements and management's discussion and analysis for the three months and year ended June 30, 2014 are available under the Company's profile at www.SEDAR.com, and at http://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/vecima140925.html and will be archived on the Vecima website at http://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.
Adjusted EBITDA
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 Vecima's Management's Discussion and Analysis for fiscal 2014.
Forward-Looking Information
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 statements about: future dividends; management's expectation regarding the ongoing deployments of Terrace Family products that coincide with initiation of network upgrades to all-digital networks; management expectation of some variability in quarterly revenue for the remainder of calendar 2014 as approval testing for Digital Video Access Platforms is concluded at additional MSOs; the development of a new Terrace QAM platform and its capabilities Vecima's plans to introduce products that enable essential network capacity improvements as well as platforms that fuel the long-term objective to provide gigabit class Internet speeds and IP based video broadly; and, the financial outlook for fiscal 2015.
In connection with the forward-looking information contained in this news release, Vecima has made numerous assumptions, regarding, among other things: that MSOs continue to upgrade to all-digital networks; that Vecima is able to continue its relationships with its few large customers; Vecima is able to deliver products associated with key contracts; Vecima can manage its business and its growth successfully; Vecima can meet its customers' requirements for manufacturing capacity; Vecima is able to develop new products and enhance its existing products; Vecima is not required to change its pricing models to compete successfully; Vecima's third-party suppliers and contract manufacturers upon which it relies continue to meet its needs; currency fluctuations do not adversely affect Vecima; and, Vecima is not subject to increased competition that has an adverse effect on its business. 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 may not identify any opportunities to monetize core assets on terms satisfactory to Vecima; 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; Vecima's success depends on its ability to develop new products and enhance its existing products; if Vecima is required to change its pricing models to compete successfully, Vecima's margins and operating results may be adversely affected; Vecima's reliance on third-party suppliers and contract manufacturers reduces its control over its performance; currency fluctuations may adversely affect Vecima; and, competition from new or existing technologies may adversely affect Vecima's business.
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, 2013, 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.
This news release contains information that constitutes a "financial outlook" within the meaning of applicable securities laws. The financial outlook has been approved by management of Vecima as of the date of this news release. The financial outlook is provided for the purpose of providing readers with an understanding of Vecima's expected financial performance for fiscal 2015. Readers are cautioned that the information contained in the financial outlook may not be appropriate for other purposes.
VECIMA NETWORKS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian Dollars)
June 30, 2014 | June 30, 2013 | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ 15,282 | $ 7,148 | ||
| Short-term investments | 33,197 | 24,699 | ||
| Accounts receivable | 11,736 | 13,442 | ||
| Income tax receivable | - | 4,762 | ||
| Inventories | 24,974 | 28,264 | ||
| Prepaid expenses | 824 | 936 | ||
| 86,013 | 79,251 | |||
| Non-current assets | ||||
| Property, plant and equipment | 21,459 | 25,006 | ||
| Assets held for resale | 7 | 342 | ||
| Intangible assets | 13,377 | 12,176 | ||
| Investment tax credit | 26,776 | 30,286 | ||
| Deferred tax asset | 9,643 | 7,729 | ||
| $ 157,275 | $ 154,790 | |||
| Liabilities | ||||
| Current liabilities | ||||
| Accounts payable and accrued liabilities | $ 9,697 | $ 9,973 | ||
| Provisions | 1,080 | 957 | ||
| Income tax payable | 123 | 281 | ||
| Deferred revenue | 2,171 | 1,331 | ||
| Current portion of long-term debt | 250 | 250 | ||
| 13,321 | 12,792 | |||
| Non-current liabilities | ||||
| Other long-term liabilities | 143 | 306 | ||
| Provisions | 1,380 | 1,314 | ||
| Long-term debt | 2,958 | 3,229 | ||
| 17,802 | 17,641 | |||
| Shareholders' equity | ||||
| Share capital | 153 | 12,183 | ||
| Reserves | 2,826 | 2,803 | ||
| Retained earnings | 136,494 | 122,163 | ||
| 139,473 | 137,149 | |||
| $ 157,275 | $ 154,790 | |||
VECIMA NETWORKS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars except net income per share data)
Year ended June 30, | ||||
| 2014 | 2013 | |||
| Sales | $ 90,705 | $ 91,249 | ||
| Cost of sales | 45,831 | 52,335 | ||
| Gross margin | 44,874 | 38,914 | ||
| Operating expenses | ||||
| Research and development | 8,481 | 7,663 | ||
| Sales and marketing | 5,855 | 5,248 | ||
| General and administrative | 15,802 | 17,143 | ||
| Stock-based compensation | 23 | 42 | ||
| Other (income) | (15,175) | (13,977) | ||
| 14,986 | 16,119 | |||
| Operating income | 29,888 | 22,795 | ||
| Finance costs | 214 | 393 | ||
| Finance income | 941 | 1,451 | ||
| Income before income taxes | 30,615 | 23,853 | ||
| Income tax expense | 6,013 | 4,691 | ||
| Net income and total comprehensive income | $ 24,602 | $ 19,162 | ||
| Net income per share | ||||
| Basic | $ 1.10 | $ 0.86 | ||
| Diluted | $ 1.10 | $ 0.86 | ||
| Weighted average number of common shares | ||||
| Shares outstanding - basic | 22,328,348 | 22,322,422 | ||
| Shares outstanding - diluted | 22,353,550 | 22,332,602 | ||
VECIMA NETWORKS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(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 to shareholders | (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 | - | - | 24,602 | 24,602 |
| 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 | - | 23 | - | 23 |
| Balance as at June 30, 2014 | $ 153 | $ 2,826 | $ 136,494 | $ 139,473 |
VECIMA NETWORKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
| Year ended June 30, | ||||
| 2014 | 2013 | |||
| Cash flows from operating activities | ||||
| Net income and total comprehensive income | $ 24,602 | $ 19,162 | ||
| Add (deduct) items not requiring cash | ||||
| Gain on sale of property, plant and equipment | (10,293) | (104) | ||
| Gain on sale of assets held for resale | (3,736) | (3,604) | ||
| Gain on sale of intangible assets | - | (9,694) | ||
| Impairment loss on deferred development costs | 295 | - | ||
| Impairment loss on property, plant and equipment | - | 316 | ||
| Depreciation of property, plant and equipment | 3,317 | 4,830 | ||
| Amortization of deferred development costs | 2,565 | 2,271 | ||
| Amortization of finite-life intangible assets | 107 | 148 | ||
| Stock-based compensation | 23 | 42 | ||
| Income tax expense | 7,927 | 7,291 | ||
| Deferred income tax expense | (1,914) | (2,600) | ||
| Interest expense | 214 | 216 | ||
| Interest income | (672) | (410) | ||
| Decrease in other long-term liabilities | (163) | (36) | ||
| Increase (decrease) in provisions | 189 | (225) | ||
| Increase in investment tax credit | 6,308 | 2,874 | ||
| Net change in non-cash working capital relating to operations | (1,353) | 3,553 | ||
| Interest paid | (189) | (159) | ||
| Interest received | 657 | 421 | ||
| Income tax received | 4,695 | 7,269 | ||
| Income tax paid | (1,003) | (1,613) | ||
| 31,576 | 29,948 | |||
| Cash flows used in investing activities | ||||
| Purchase of property, plant and equipment | (2,979) | (2,261) | ||
| Proceeds from the sale of property, plant and equipment | 13,502 | 293 | ||
| Proceeds from the sale of assets held for resale | 4,078 | 3,989 | ||
| Proceeds from the sale of intangible assets | - | 10,090 | ||
| Purchase of short-term investments | (38,958) | (60,522) | ||
| Proceeds on sale of short-term investments | 30,460 | 35,823 | ||
| Deferred development costs | (6,929) | (7,171) | ||
| Purchase of indefinite and finite-life intangible assets | (44) | (41) | ||
| (870) | (19,800) | |||
| Cash flows used in financing activities | ||||
| Proceeds from shares issued through exercised options | 27 | 23 | ||
| Return of capital to shareholders | (12,057) | (22,322) | ||
| Dividends paid | (10,271) | - | ||
| Repayment of long-term debt | (271) | (250) | ||
| (22,572) | (22,549) | |||
| Increase (decrease) in cash during the year | 8,134 | (12,401) | ||
| Cash and cash equivalents, beginning of period | 7,148 | 19,549 | ||
| Cash and cash equivalents, end of period | $ 15,282 | $ 7,148 | ||
Contact Information:
Investor Relations
250-881-1982
invest@vecima.com
www.vecima.com