SOURCE: Vecima Networks Inc.

Vecima Networks Inc.

September 28, 2017 06:00 ET

Vecima Reports Q4 and Fiscal 2017 Results

Fiscal 2017 Financial Results In Line with Guidance

Cash climbs to $89.2M

VICTORIA, BC--(Marketwired - September 28, 2017) - Vecima Networks Inc. (TSX: VCM), an experienced designer and manufacturer of innovative technology in the broadband equipment market, today reported annual financial results for the three and twelve months ended June 30, 2017.

 
 
FINANCIAL HIGHLIGHTS
(Canadian dollars in millions except percentages,  Q4FY17  Q4FY16  FY2017  FY2016
employees, and per share data)            
Revenue  $14.6  $21.9  $71.5  98.3
Gross margin  51%  55%  52%  55%
Net Income  $(0.1)  $3.4  $18.0  $22.0
Earnings per share  $(0.01)  $0.15  $0.81  $0.98
(based on weighted average number shares outstanding)            
Adjusted earnings per share1  $0.03  $0.17  $0.35  $0.99
(based on weighted average number shares outstanding)            
Adjusted EBITDA1  $2.4  $7.7  $20.3  $37.8
Cash and short-term investments  $89.2  $74.1  $89.2  $74.1
Employees  352  509  352  509
1Adjusted 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 Per
Share" below.            
         
         

BUSINESS HIGHLIGHTS

  • Lab trial for Entra Distributed Access Node initiated at first Tier 1 MSO
  • Entra Remote-PHY Distributed Access Node shortlisted in RFP at second Tier 1 MSO with interoperability testing underway
  • Entra family grows to include Access Switch, Remote-PHY and Remote MAC-PHY

"Fiscal 2017 was a year of major development as Vecima prepared for the cable industry's upcoming industry-wide transition to DOCSIS 3.1 Distributed Access Architecture (DAA)," said Sumit Kumar, Vecima Networks' President and CEO. "We made significant progress on Entra, our DOCSIS 3.1 DAA solution, and two related family products which add DOCSIS Remote PHY and direct 10GbE Ethernet Access Switching to the Entra ecosystem. The Entra family is attracting industry attention and gaining momentum to reach into different segments of the vast new global market that is emerging for DOCSIS 3.1 solutions."

In fiscal 2017, Vecima also continued to enhance its legacy lines to respond to near-term customer needs. During the year, Vecima:

  • completed an upgrade to TerraceQAM that adds additional audio transcode functionality;
  • commenced lab trials with a large European MSO for the Terrace DVB Commercial Video Gateway, a global version of Terrace QAM; and
  • concluded lab trials with a lead customer for an upgrade to our Digital Video Access Platform (DVAP), which prepares this platform to support distributed access architecture.

These developments are intended to support revenue opportunities for legacy product sales in fiscal 2018.

"Our Telematics business continued to benefit from our acquisition of Contigo Systems, growing the segment into a contributor of strong recurring revenue and earnings. Consistent with our strategy to monetize non-core assets, we also completed the divestiture of our YourLink business in both B.C. and Saskatchewan, which we sold for collective proceeds of $30.2 million."

"We ended the year within our revised guidance for fiscal 2017, achieving revenues of $71.5 million, gross margin of 52% and Adjusted EBITDA of $20.3 million. In addition, with the successful sale of our YourLink business, we achieved cash balances of $89.2 million at the end of the year. Subsequent to year end, a further $8.73 million in cash was received as we completed the second closing of the YourLink sale. Cash balances are available to fund development as well as potential future acquisitions."

"Our revenue results were particularly significant given that our target was based on fourth quarter customer acceptance of the new DVAP product upgrade, which did not ultimately occur by year-end. As a result of the slower than forecast industry adoption of the new generation technology, legacy products out-performed expectations, enabling us to overcome this delay and meet our revenue target for the year," said Mr. Kumar.

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 November 3, 2017 to shareholders of record as at October 13, 2017.

Vecima's fourth quarter 2017 sales by business segment were as follows:

  • Video and Broadband Solutions sales were $13.5 million, in line with expectations, but lower than the $20.5 million achieved in Q4 2016. A significant increase in TerraceQAM sales was offset by lower sales of Terrace family and DVAP products year-over-year. Q4 2016 sales benefitted from the closeout ($7.5M) of a contract purchase commitment for DVAP.
  • Fourth quarter Telematics sales were $1.2 million, compared to $1.4 million in the same period last year. The reduction in sales reflects an adjustment made to defer and amortize installation fees over the life of the contract. Had the adjustment in the period not been made, Q4 fiscal 17 sales would have been comparable to both the prior quarter and the prior year quarter.

OUTLOOK FOR FISCAL 2018

Vecima anticipates a year of ongoing transition in fiscal 2018 as the North American cable industry prepares for the new DOCSIS 3.1 standard. Based on current customer feedback, field trials of various components of Vecima's new Entra family of DOCSIS 3.1 products are expected to commence in calendar year 2018. Management notes, however, that the plans and priorities of major MSOs continue to evolve, making it difficult to project timelines with certainty.

While demand for some of Vecima's legacy products are expected to continue to taper off as market saturation is reached and customers focus on next generation products and technologies, the Company sees areas of continued strength:

  • Sales of TC600E products are expected to pick up in the first half of fiscal 2018 as a key customer resumes ordering activity following completion of a significant merger.
  • The update to our DVAP platform to support DAA has progressed and the OEM customer has taken delivery of their first set of upgrade licenses.
  • The recent introduction of the Terrace DVB provides new opportunities in international markets; and,
  • Vecima sees opportunities to supply new network video platforms in support of key customers' transition to IP centric platforms.

Overall, management expects fiscal 2018 to be a year of continued investment and development as it positions Vecima for industry leadership in both its existing markets and the emerging DOCSIS 3.1 space. With a strong financial foundation, Vecima is well positioned to pursue its product strategies, while also continuing to assess attractive acquisition opportunities that could provide rapid access to technologies and help drive the Company's growth and success.

CONFERENCE CALL

A conference call and live audio webcast will be held today, Thursday, September 28, 2017 at 1 p.m. ET to discuss the Company's fourth quarter and year-end results. Vecima's audited consolidated financial statements and management's discussion and analysis for the three months and year ended June 30, 2017 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/vecima20170928.html and will be archived on the Vecima website at https://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 Annual Management's Discussion and Analysis for the fiscal year ended 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: Entra family is attracting industry attention and gaining momentum to reach into different segments of the vast new global market that is emerging for DOCSIS 3.1 solutions; upgrades to Vecima's legacy products are intended to support revenue opportunities for legacy product sales in fiscal 18; Vecima anticipates a year of transition in fiscal 2018 as the North American cable industry prepares for the new DOCSIS 3.1 standard; field trials of various components of Vecima's new Entra family of DOCSIS 3.1 products are expected to commence in calendar year 2018; the plans and priorities of major MSOs continue to evolve, making it difficult to project timelines with certainty; demand for some of Vecima's legacy products are expected to continue to taper off as market saturation is reached and customers focus on next generation products and technologies, the Company sees areas of continued strength; sales of TC600E products are expected to pick up in the first half of fiscal 2018 as a key customer resumes ordering activity following completion of a significant merger; the update to our DVAP platform to support DAA has progressed and the OEM customer has taken delivery of their first set of upgrade licenses; the recent introduction of the Terrace DVB provides new opportunities in international markets; Vecima sees opportunities to supply new network video platforms in support of key customers' transition to IP centric platforms; management expects fiscal 2018 to be a year of continued investment and development as it positions Vecima for industry leadership in both its existing markets and the emerging DOCSIS 3.1 space; Vecima is well positioned to pursue its product strategies, while also continuing to assess attractive acquisition opportunities that could provide rapid access to technologies and help drive the Company's growth and success.

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 all-digital networks; 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.

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 25, 2017, 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.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
 
   June 30,  June 30,
   2017  2016
     
Assets        
Current assets        
 Cash and cash equivalents  $3,517  $22,222
 Short-term investments   85,675   51,872
 Accounts receivable   12,972   4,674
 Income tax receivable   2,011   3,009
 Inventories   13,928   22,172
 Assets held for sale   641   1,486
 Prepaid expenses   1,258   1,359
       
    120,002   106,794
Non-current assets        
 Property, plant and equipment   11,109   20,214
 Goodwill   6,111   6,210
 Intangible assets   32,566   26,724
 Investment tax credit   20,141   20,031
 Deferred tax asset   4,066   6,272
       
   $193,995  $186,245
       
Liabilities        
Current liabilities        
 Accounts payable and accrued liabilities  $6,377  $8,746
 Provisions   692   927
 Deferred revenue   2,226   2,942
 Liabilities associated with assets held for sale   -   707
 Current portion of long-term debt   250   250
       
    9,545   13,572
Non-current liabilities        
 Other long-term liabilities   -   5
 Provisions   -   1,167
 Long-term debt   2,208   2,458
       
    11,753   17,202
Shareholders' equity        
 Share capital   803   739
 Reserves   3,965   3,662
 Retained earnings   177,474   164,642
       
    182,242   169,043
   $193,995  $186,245
       

 
VECIMA NETWORKS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars except net income and per share data)
 
   Years ended
   June 30,
   
    2017    2016
      
      
Sales  $71,460   $98,347
Cost of sales   34,439    44,125
        
Gross profit   37,021    54,222
Operating expenses         
Research and development   11,749    10,856
Sales and marketing   5,285    5,622
General and administrative   9,875    8,743
Impairment of intangible assets   174    -
Impairment of property, plant and equipment   -    337
Restructuring costs   986    -
Stock-based compensation   321    502
Other (income) expense   (276 )  6
        
    28,114    26,066
Operating income   8,907    28,156
Finance income   1,134    894
Foreign exchange gain   795    46
        
Income before income taxes   10,836    29,096
Income tax expense   3,045    7,862
Net income and comprehensive income from         
continuing operations   7,791    21,234
Net income and comprehensive income from         
discontinued operations   10,257    735
Net income and comprehensive income  $18,048   $21,969
        
        
Net income per share         
Continuing operations   0.35    0.95
Discontinued operations   0.46    0.03
Total basic net income per share  $0.81   $0.98
Continuing operations   0.35    0.95
Discontinued operations   0.46    0.03
Total diluted net income per share  $0.80   $0.98
        
Weighted average number of common shares         
 Shares outstanding - basic   22,385,574    22,384,877
 Shares outstanding - diluted   22,434,282    22,448,127
        
  
VECIMA NETWORKS INC. 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 
(in thousands of Canadian dollars) 
  
  Share     Retained     
  Capital  Reserves  Earnings  Total  
Balance as at June 30, 2015 $488  $3,228  $147,608  $151,324  
Net income and total comprehensive income  -   -   21,969   21,969  
Dividends  -   -   (4,935 ) (4,935 )
Shares issued by exercising options  251   (68 ) -   183  
Share-based payment expense  -   502   -   502  
              
Balance as at June 30, 2016  739   3,662   164,642   169,043  
              
              
Net income and total comprehensive income  -   -   18,048   18,048  
Dividends  -   -   (4,924 ) (4,924 )
Shares repurchased and cancelled  (1 ) -   (292 ) (293 )
Shares issued by exercising options  65   (18 ) -   47  
Share-based payment expense  -   321   -   321  
              
Balance as at June 30, 2017 $803  $3,965  $177,474  $182,242  
             
  
VECIMA NETWORKS INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands of Canadian dollars) 
  
   Years ended  
   June 30,  
    
    2017    2016  
        
Cash flows from operating activities         
Net income and comprehensive income from continuing         
operations  $7,791   $21,234  
Adjustments to reconcile net income to cash from operating           
activities   8,966    13,159  
Decrease in provisions   (235 )  (491 )
Decrease in investment tax credit   57    2,891  
Net change in non-cash working capital relating to operations   (2,888 )  7,756  
Interest paid   (85 )  (95 )
Interest received   1,109    815  
Income tax received   11    11  
Income tax paid   (26 )  (13 )
Net cash provided by continuing operations   14,700    45,267  
Net cash (used) provided by discontinued operations   (714 )  2,968  
          
Net cash provided by operations   13,986    48,235  
Cash flows used in investing activities           
Purchase of property, plant and equipment   (1,607 )  (2,894 )
Proceeds from the sale of property, plant and equipment   71    5  
Purchase of short-term investments   (39,115 )  (31,778 )
Proceeds on sale of short-term investments   5,312    26,800  
Deferred development costs   (12,950 )  (11,163 )
Purchase of indefinite and finite-life intangible assets   (232 )  (33 )
Business acquisition   -    (13,479 )
Net cash used by continuing operations   (48,521 )  (32,542 )
Net cash provided (used) by discontinued operations   19,586    (2,391 )
          
Net cash used in investing   (28,935 )  (34,933 )
Cash flows used in financing activities           
Proceeds from shares issued through exercised options   47    183  
Proceeds from government grants   367    353  
Repurchase and cancellation of shares   (293 )  -  
Dividends paid   (4,924 )  (4,935 )
Repayment of long-term debt   (250 )  (250 )
Net cash used by continuing operations   (5,053 )  (4,649 )
Net cash provided by discontinued operations   1,297    792  
          
Net cash used in financing   (3,756 )  (3,857 )
          
(Decrease) increase in cash and cash equivalents during the           
year   (18,705 )  9,445  
Cash and cash equivalents, beginning of year   22,222    12,777  
Cash and cash equivalents, end of year  $3,517   $22,222  

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