News Press Releases

Vecima Reports Q4 and Fiscal 2019 Results

T.VCM | September 26, 2019

Canada NewsWire

VICTORIA, Sept. 26, 2019

FY2019 Revenue - $85.0M, Gross Margin - 53%, Cash Balance - $44.4M
Secured first master purchase agreement covering Entra DAA products with a Tier 1 MSO
Broadened Entra engagements, lab trials and field trials with widening set of cable operators globally
Accelerated lead in emerging global IPTV market with technology differentiation and capturing customers on the forefront of modern IPTV rollouts

VICTORIA, Sept. 26, 2019 /CNW/ - Vecima Networks Inc. (TSX:VCM) today reported financial results for the three and twelve month periods ended June 30, 2019.

Vecima Networks Inc. (CNW Group/Vecima Networks Inc.)

FINANCIAL HIGHLIGHTS

(Canadian dollars in millions except percentages, employees, and per share data)	Q4FY19	Q4FY18	FY2019	FY2018
Revenue	$20.7	$24.4	$85.0	$78.1
Gross Margin	49%	55%	53%	54%
Net (Loss) / Income	$(3.0)	$0.7	$(3.5)	$10.8
(Loss) / Earnings per share¹	$(0.13)	$0.03	$(0.15)	$0.48
Adjusted (Loss) / Earnings per share^{1, 2, 3}	$(0.08)	$0.04	$(0.09)	$0.17
Adjusted EBITDA²	$0.3	$4.4	$8.2	$14.5
Cash and Short-term Investments	$44.4	$57.7	$44.4	$57.7
Employees	364	419	364	419
¹Based on weighted average number shares outstanding
²Adjusted 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 / (Loss) Per Share" below.
³Starting in Q4 fiscal 2019, we have changed our definition and calculation of Adjusted Earnings Per Share. For a reconciliation of Adjusted Earnings / (Loss) Per Share, investors should refer to Vecima's Management's Discussion and Analysis for the fourth quarter of fiscal 2019.

"Fiscal 2019 was a year of concerted moves and important achievements as we broadly solidified our market position in preparation for the most profound transitions unfolding in the industry: DOCSIS Distributed Access Architecture (DAA) and IPTV," said Sumit Kumar, Vecima Networks' President and CEO.

"On the DAA front, we have now secured our first master purchase agreement covering our Entra Remote PHY Nodes and Monitor products with a Tier 1 operator entering field trials. Our DAA products are also progressing successfully through lab trials with a diverse mix of other Tier 1, Tier 2 and Tier 3 MSOs. These are important milestones on the path to commercialization of our new Entra technologies, and we anticipate deployments will initiate in fiscal 2020."

"In our Content Delivery and Storage segment, we continue to make strides in the emerging global IPTV market. During fiscal 2019, we significantly advanced our industry-leading MediaScaleX™ platform and built and expanded customer relationships with some of the world's largest MSOs. We believe our Content Delivery and Storage segment has the potential for over 20% sales growth in fiscal 2020 stemming from the pipeline of opportunities for migration to IP video networks, including linear broadcast, cloud DVR and time-shift TV."

"Vecima achieved revenues of $85.0 million in fiscal 2019, a 9% increase over last year as a result of our acquisition of the Content Delivery and Storage business. While financially, fiscal 2019 reflected the overall transition of the business translating into a net loss of $3.5 million, the results are representative of a point in time for Vecima with DAA revenue yet to come. Thanks to the strategic steps taken in fiscal 2019 to tighten our R&D priorities, streamline our administrative processes and manage our business and finances prudently, we are moving into fiscal 2020 in a very strong financial position and ready to embark on growth."

BUSINESS HIGHLIGHTS

Video and Broadband Solutions

Neared commercial roll-out of Entra family of Distributed Access Architecture products

In various phases of lab and field trials with a total of 16 Tier 1, 2 & 3 operators in North America, Central and Latin America, Europe and Asia
Significantly broadened Entra products portfolio to include Entra Remote PHY Monitor, which provides industry-leading service assurance for DAA, and Entra video QAM manager, a solution that allows service providers to maintain today's primary video services within DAA architecture at the lowest cost in the industry
Signed master purchase agreement covering Entra Remote PHY nodes and Remote PHY Monitor with a Tier 1 MSO

Market-leading Terrace family of commercial video platforms enjoyed continued wide adoption among some of the world's largest cable operators

Supported a Tier 1 customer's MPEG-4 network expansion with the TC600E
Secured initial revenue with a leading European MSO for next-generation Terrace DVB

Content Delivery and Storage

Continued expansion into IPTV market with 17 operators now using Vecima platforms to deliver IP video

Expanded relationship with NOS, one of the largest communications and entertainment groups in Europe, to deploy the MediaScaleX™ platform
Secured agreements with two global resellers for transcoding and storage solutions
Partnered with one of the world's top five MSOs to use the MediaScaleX™ platform to expand services to over 75% of its footprint and more efficiently serve on-demand video across its network of cable providers

Total of six customers have deployed, or are in the process of deploying, our cloud DVR solution
On May 31, 2019, expanded Vecima's end-to-end solutions capability by acquiring the assets of Root6, a UK-based software and solutions company specializing in the video ingest and delivery automation solutions used by some of the world's leading content creators

Telematics

Continued incremental growth in fleet management market
Entered the movable assets market, securing initial customers in the restoration segment of the construction industry

Mr. Kumar concluded, "Fiscal 2020 promises to be a significant year for Vecima. We firmly believe we are one of the vendors best able to take advantage of near-term opportunities in the DAA and IPTV markets and we are sharply focused on supporting our customers' deployment plans with highly differentiated, world-class technologies."

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 1, 2019 to shareholders of record as at October 11, 2019.

CONFERENCE CALL

A conference call and live audio webcast will be held today, September 26, 2019 at 1 p.m. ET to discuss the Company's fourth quarter and full year results. Vecima's audited annual consolidated financial statements and management's discussion and analysis for the three months and year ended June 30, 2019 are available under the Company's profile at www.SEDAR.com, and at https://vecima.com/investor-relations/financial-reports/

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/vecima20190926.html and will be archived on the Vecima website at https://vecima.com/investor-relations/earnings-call-archive/

About Vecima Networks
Vecima Networks Inc. is a global leader focused on developing integrated hardware and scalable software solutions for broadband access, content delivery, and telematics. We enable the world's leading innovators to advance, connect, entertain, and analyze. We build technologies that transform content delivery and storage, enable high‑capacity broadband network access, and streamline data analytics. For more information, please visit our website at www.vecima.com.

Adjusted EBITDA and Adjusted Earnings / (Loss) Per Share
Adjusted EBITDA and Adjusted Earnings / (Loss) 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 / (Loss) 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 / (Loss) Per Share, investors should refer to Vecima's Management's Discussion and Analysis for the fourth quarter of fiscal 2019.

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 includes the following statements: Fiscal 2019 was a year of concerted moves and important achievements as we broadly solidified our market position in preparation for the most profound transitions unfolding in the industry: DOCSIS Distributed Access Architecture (DAA) and IPTV; Our DAA products are also progressing successfully through lab trials with a diverse mix of other Tier 1, Tier 2 and Tier 3 MSOs. These are important milestones on the path to commercialization of our new Entra technologies, and we anticipate deployments will initiate in fiscal 2020; In our Content Delivery and Storage segment, we continue to make strides in the emerging global IPTV market; During fiscal 2019, we significantly advanced our industry-leading MediaScaleX™ platform and built and expanded customer relationships with some of the world's largest MSOs; We believe our Content Delivery and Storage segment has the potential for over 20% sales growth in fiscal 2020 stemming from the pipeline of opportunities for migration to IP video networks, including linear broadcast, cloud DVR and time-shift TV; While financially, fiscal 2019 reflected the overall transition of the business translating into a net loss, the results are representative of a point in time for Vecima with DAA revenue yet to come; Thanks to the strategic steps taken in fiscal 2019 to tighten our R&D priorities, streamline our administrative processes and manage our business and finances prudently, we are moving into fiscal 2020 in a very strong financial position and ready to embark on growth; Fiscal 2020 promises to be a significant year for Vecima; We firmly believe we are one of the vendors best able to take advantage of near-term opportunities in the DAA and IPTV markets and we are sharply focused on supporting our customers' deployment plans with highly differentiated, world-class technologies.

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, 2019, 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)

As at June 30,	2019		2018
Assets
Current assets
Cash and cash equivalents	$	19,834	$	11,034
Short‑term investments	24,569		46,660
Accounts receivable	15,154		18,047
Income tax receivable	437		2,519
Inventories	12,724		15,020
Prepaid expenses	2,235		1,608
Contract assets	187		-
	75,140		94,888
Non‑current assets
Property, plant and equipment	12,526		12,105
Goodwill	15,131		14,903
Intangible assets	67,887		62,324
Other long‑term assets	1,017		788
Investment tax credits	24,355		22,692
Deferred tax asset	4,714		2,339
	$	200,770	$	210,039
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	11,699	$	12,151
Provisions	804		520
Income tax payable	55		358
Deferred revenue	4,046		4,206
Current portion of long‑term debt	250		250
	16,854		17,485
Non‑current liabilities
Deferred revenue	763		524
Provisions	332		352
Deferred tax liability	324		414
Long‑term debt	1,729		1,979
	20,002		20,754
Shareholders' equity
Share capital	1,916		1,756
Reserves	4,104		4,041
Retained earnings	173,738		182,411
Accumulated other comprehensive income	1,010		1,077
	180,768		189,285
	$	200,770	$	210,039

Vecima Networks Inc. Consolidated Statements of Comprehensive (Loss) Income (in thousands of Canadian dollars except net income per share data)
	Years ended June 30,
	2019		2018
Sales	$	85,032	$	78,104
Cost of sales	40,155		36,254
Gross profit	44,877		41,850
Operating expenses
Research and development	18,973		15,101
Sales and marketing	14,112		10,463
General and administrative	16,596		13,248
Impairment of intangible assets	-		22
Restructuring costs	2,176		-
Share‑based compensation	112		80
Other (income) expense	(418)		(317)
	51,551		38,597
Operating (loss) income	(6,674)		3,253
Finance income	879		1,132
Foreign exchange (loss) gain	(66)		930
(Loss) income before income taxes	(5,861)		5,315
Income tax (recovery) expense	(2,402)		1,532
Net (loss) income from continuing operations	(3,459)		3,783
Net income from discontinued operations	-		7,019
Net (loss) income	(3,459)		10,802
Other comprehensive (loss) income
Item that may be subsequently reclassed to net income
Exchange differences on translating foreign operations	(67)		1,077
Comprehensive (loss) income	$	(3,526)	$	11,879
Net (loss) income per share
Continuing operations	(0.15)		0.17
Discontinued operations	-		0.31
Total basic net (loss) income per share	$	(0.15)	$	0.48
Continuing operations	(0.15)		0.17
Discontinued operations	-		0.31
Total diluted net (loss) income per share	$	(0.15)	$	0.48
Weighted average number of common shares
Shares outstanding ‑ basic	22,362,031		22,414,944
Shares outstanding ‑ diluted	22,362,031		22,456,821

Vecima Networks Inc. Consolidated Statements of Changes in Equity (in thousands of Canadian dollars)
	Share Capital		Reserves		Retained Earnings		Accumulated Other Comprehensive Income		Total
Balance as at June 30, 2017	$	803	$	3,965	$	177,474	$	-	$	182,242
Net income	-		-		10,802		-		10,802
Other comprehensive income	-		-		-		1,077		1,077
Dividends	-		-		(4,932)		-		(4,932)
Share repurchased and cancelled	(8)		-		(933)		-		(941)
Shares issued by exercising options	13		(4)		-		-		9
Shares issued in exchange for	948		-		-		-		948
short‑term investments
Share‑based payment expense	-		80		-		-		80
Balance as at June 30, 2018	$	1,756	$	4,041	$	182,411	$	1,077	$	189,285


Balance as at June 30, 2018	$	1,756	$	4,041	$	182,411	$	1,077	$	189,285
IFRS 15 transition	-		-		(102)		-		(102)
Adjusted balance at June 30, 2018	1,756		4,041		182,309		1,077		189,183
Net loss	-		-		(3,459)		-		(3,459)
Other comprehensive loss	-		-		-		(67)		(67)
Dividends	-		-		(4,920)		-		(4,920)
Share repurchased and cancelled	(2)		-		(192)		-		(194)
Shares issued by exercising options	162		(49)		-		-		113
Share‑based payment expense	-		112		-		-		112
Balance as at June 30, 2019	$	1,916	$	4,104	$	173,738	$	1,010	$	180,768

Vecima Networks Inc. Consolidated Statements of Changes in Equity (in thousands of Canadian dollars)
	Years ended June 30,
	2019		2018
Operating activities
Net (loss) income from continuing operations	$	(3,459)	$	3,783
Adjustments to reconcile net (loss) income to cash	8,413		9,574
Decrease in other long‑term assets	(10)		(13)
Increase (decrease) in provisions	265		(214)
Increase in investment tax credits	(67)		(238)
Net change in non‑cash working capital relating to operations	3,672		7,506
Interest paid	(98)		(92)
Interest received	1,047		1,174
Income tax received	2,413		-
Income tax paid	(741)		(503)
Increase in long‑term contract assets	7		-
Cash provided by continuing operations	11,442		20,977
Cash provided by discontinued operations	-		63
Cash provided by operating activities	11,442		21,040
Investing activities
Purchase of property, plant and equipment	(2,868)		(1,816)
Proceeds from sale of property, plant and equipment	25		80
Purchase of short‑term investments	(2,007)		(54,434)
Proceeds on sale of short‑term investments	24,098		93,449
Deferred development costs	(16,057)		(16,407)
Purchase of indefinite and finite‑life intangible assets	(86)		(134)
Business acquisitions	(823)		(37,379)
Proceeds from the sale of intangible assets	202		-
Cash provided by (used in) continuing operations	2,484		(16,641)
Cash provided by discontinued operations	-		8,732
Cash provided by (used in) investing activities	2,484		(7,909)
Financing activities
Proceeds from government grants	221		49
Repurchase and cancellation of shares	(194)		(941)
Repayment of long‑term debt	(250)		(229)
Dividends paid	(4,920)		(4,932)
Proceeds from shares issued through exercised options	113		9
Proceeds from issuance of share capital	-		948
Cash used by financing activities	(5,030)		(5,096)
Increase in cash and cash equivalents, net	8,896		8,035
Effect of change in exchange rates on cash held	(96)		(518)
Cash and cash equivalents, beginning of year	11,034		3,517
Cash and cash equivalents, end of year	$	19,834	$	11,034