Rapid growth in revenue, adjusted EBITDA and
adjusted EPS achieved in FY23 as market adoption of DAA and IPTV
grows
- Annual revenue up 62.4% YoY to $303.4M; Q4 revenue up 26.0% YoY
to $75.5M
- Entra DAA sales increase 107% to $222.1M in FY23, and climb 27%
YoY to $50.7M in Q4
- Content Delivery and Storage sales grow 20% to $52.3M with Q4
sales of $17.1M, an all-time quarterly record
- FY23 gross margin of 46.8%; Q4 gross margin of 50.5%
- Adjusted EBITDA up 92.8% to $59.8M in FY23; Q4 Adjusted EBITDA
up 35.7% YoY to $15.1M
- Adjusted EPS climbs to a record $1.19 in FY23 and $0.25 in
Q4
Vecima Networks Inc. (TSX: VCM) today reported financial results
for the three months and year ended June 30, 2023.
FINANCIAL HIGHLIGHTS
(Canadian dollars in millions except
percentages, employees, and per share data)
Q4FY23
Q4FY22
FY2023
FY2022
Revenue
$75.5
$60.0
$303.4
$186.8
Gross Margin
50.5%
47.5%
46.8%
48.2%
Net Income
$5.1
$3.5
$27.2
$8.7
Earnings per Share1
$0.21
$0.16
$1.15
$0.38
Adjusted Earnings per Share1,2,3,4,5
$0.25
$0.19
$1.19
$0.41
Adjusted EBITDA2
$15.1
$11.1
$59.8
$31.0
Cash and Short-term Investments
$2.3
$12.9
$2.3
$12.9
Employees6
602
592
602
592
1 Based on weighted average number of
shares outstanding.
2 Adjusted 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.
3 Starting 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 2023.
4 Adjusted earnings per share includes
non-cash share-based compensation of $1.3 million or $0.05 per
share for the three months ended June 30, 2023, and $2.5 million or
$0.11 per share for the year ended June 30, 2023. The non-cash
share-based compensation primarily reflects certain
performance-based vesting thresholds achieved under the Company’s
Performance Share Unit Plan.
5 Adjusted earnings per share includes
foreign exchange gain of $1.3 million or $0.06 per share for the
three months ended June 30, 2023, and $2.7 million or $0.11 per
share for the year ended June 30, 2023.
6The number of employees reflect the
impact of restructuring activities initiated prior to June 30,
2023. The number of employees at March 31, 2023, was 642.
“Fiscal 2023 was an outstanding year for Vecima as we furthered
our position as a leading innovator and essential partner
supporting the global service provider industry’s wide-scale
migration to distributed access architecture and IPTV,” said Sumit
Kumar, Vecima’s President and Chief Executive Officer.
“We decisively bested fiscal 2022’s already stellar performance,
turning in the strongest results in Vecima’s history across both
the top and bottom lines. Full-year revenue climbed 62.4% to $303.4
million, gross profit was up 57.8% to $142.0 million, adjusted
EBITDA grew 92.8% to an all-time high of $59.8 million and adjusted
earnings per share increased 190.2% to $1.19 per share, breaking
records across the board.”
“Our results included a more than doubling of Entra DAA sales to
$222.1 million, underscoring the success of our investment in the
industry’s most complete and comprehensive portfolio of
interoperable DAA fiber and cable access solutions. We continued to
expand that portfolio with major product advances on both the fiber
and cable access fronts during the year, while also broadening our
customer base and geographies with new wins in North America,
Europe, and Asia. Our Entra DAA solutions are now in use by 51
customers worldwide, including eight of North America’s top twelve
largest cable operators, and the scope of DAA technologies we have
shipped represents capacity for reliable, high-speed service to
over 25 million homes.”
“Our fiscal 2023 DAA achievements included a significant
expansion of key customer relationships, including Charter
Communications’ selection of our new Entra ERM3 Remote PHY solution
to support its fixed broadband network evolution to 10G. We expect
our solution will be used for a substantial portion of Charter’s
planned footprint-wide cable access network upgrade commencing in
2024. We also partnered with Charter to successfully demonstrate
10G-capable, multi-gigabit DOCSIS 4.0, and subsequent to the
year-end, we announced a warrant agreement which gives Charter the
opportunity to purchase up to 361,050 of our common shares at a
pre-determined price, based on the achievement of significant
multi-year spending targets. Collectively, these developments
underscore the growth of our partnership with one of the world’s
largest cable operators as we together execute a broad network
evolution strategy.”
“On the IPTV front, our Content Delivery and Storage business
turned in impressive performance with 20% year-over-year revenue
growth supported by all-time record fourth quarter results.
Milestones for the CDS segment included multiple IPTV expansions
with existing customers, new customer wins, and the launch of new
next-generation MediaScale solutions.”
“We are deeply proud of our fiscal 2023 achievements, even more
given the fast-changing supply chain dynamics we faced during the
year. For over two years, our response to global component
shortages has been highly effective to the extent that Vecima’s
solutions were never the critical path preventing customer network
upgrades. And now, customers are working to catch up on and ramp
projects using the inventories we had unlocked for them through our
strong supply chain strategies and disciplined operating management
that enabled us to respond effectively to a challenging
macroenvironment and achieve exceptional results,” said Mr.
Kumar.
BUSINESS HIGHLIGHTS
Financial and Corporate
- Full-year consolidated sales climbed 62.4% year-over-year,
setting a new Company record at $303.4 million. Fourth quarter
sales grew 26.0% year-over-year to $75.5 million.
- Full-year gross profit of $142.0 million and fourth quarter
gross profit of $38.1 million were up 57.8% and 33.8%,
respectively, from the same periods in fiscal 2022.
- Achieved full-year gross profit margin of 46.8% and Q4 gross
profit margin of 50.5%, as compared to 48.2% and 47.5% in the same
periods of fiscal 2022.
- Full-year adjusted EBITDA climbed 92.8% to $59.8 million; Q4
adjusted EBITDA increased 35.7% year-over-year to $15.1 million. As
a percentage of revenue, Q4 adjusted EBITDA increased to 20.0% from
18.5% in Q4 fiscal 2022.
- Full-year adjusted EPS grew to a record $1.19 per share, from
$0.41 in fiscal 2022; Q4 adjusted EPS grew to $0.25 per share, from
$0.19 in Q4 fiscal 2022.
- Ended the fiscal year in strong financial position with $2.3
million in cash and working capital of $83.7 million at June 30,
2023, compared to $12.9 million and $58.6 million, respectively, at
June 30, 2022.
- Declared annual dividends of $0.22 per share, including a
fourth quarter dividend of $0.055 per share payable on November 6,
2023 to shareholders of record on October 13, 2023. This represents
a cumulative $45 million returned to shareholders through regular
dividends since Vecima initiated dividends in October 2014.
Video and Broadband Solutions (VBS)
- Achieved strong segment sales growth with annual VBS revenue
increasing 77.7% year-over-year to a record $245.1 million and Q4
VBS sales climbing 15.4% year-over-year to $57.0 million. VBS
services revenues increased 44.9% to $15.1 million for the full
year and 25.5% to $3.6 million in Q4.
DAA (Entra family)
- Deployments of next-generation Entra DAA products increased
107% year-over-year to $222.1 million in FY23; Q4 Entra sales
increased 26.8% year-over-year to $50.7 million.
- Milestone DAA achievements in fiscal 2023 included:
- An increase in total customer engagements to 107 MSOs
worldwide, from 91 a year earlier. Fifty-one of these customers
have now ordered Entra products, with order sizes increasing as
operators continue to transition to broader deployment.
- Customers engaged for cable access now number 61.
- Customers engaged for fiber (or both cable and fiber) access
technologies now number 46.
- Achieved significant market adoption of next-generation fiber
and cable access solutions, including deployments with eight of the
twelve largest cable operators in North America.
- Selected by Charter Communications to provide Entra ERM3
next-generation Remote PHY devices for this customer’s planned
enterprise-wide hybrid fiber coax (HFC) network evolution. The
Entra ERM3 RPD is expected to be used for a substantial portion of
Charter’s network upgrade.
- Reached a major fiber milestone with a Tier 1 operator in the
US, deploying more than 20,000 10G PON (Passive Optical Network)
ports of Vecima’s Entra Fiber Access portfolio.
- Grew Vecima’s footprint in Europe with Entra R-PHY deployments
at Telenet Belgium and Telenet Systems in Austria.
- In Asia, Kbro, Taiwan’s largest cable operator, selected Entra
Remote PHY to enable high-speed DOCSIS 3.1 services to
subscribers.
- California’s Orion Cable chose Vecima for an R-PHY solution
tailored to smaller cable operators requiring a turnkey,
cost-effective and future-proof path to DOCSIS 4.0.
- Demonstrated 10G-capable multi-gigabit symmetrical speed DOCSIS
4.0 in partnership with Charter Communications.
- Expanded PON portfolio with the launch of the Entra EXS1610
All-PON 10G shelf solution, which broadly supports widely deployed
PON standards.
- Recognized by Dell’Oro Group as the 2022 market share leader in
two key DAA categories: Remote Optical Line Terminals and Remote
MACPHY.
Commercial Video (Terrace family)
- Generated full-year commercial video sales of $22.2 million, as
compared to $29.8 million in fiscal 2022, and Q4 sales of $6.3
million, as compared to $8.8 million a year earlier, reflecting the
transition to next-generation platforms and the impact of certain
newer DAA-driven Commercial Video solutions being accounted for as
part of Entra family sales.
- Achieved a new milestone with Terrace and TerraceQAM bulk video
delivery reaching an estimated 25,000 hotels, enterprises and
commercial sites.
- Completed lab qualification and first large operator deployment
of TerraceIQ in an IPTV environment.
Content Delivery and Storage (CDS)
- Full-year CDS sales grew 20.3% to $52.3 million, from $43.5
million in fiscal 2022; achieved record fourth quarter CDS sales of
$17.1 million, up 85.4% from $9.2 million in Q4 FY22.
- CDS services revenues increased 28.9% to $22.2 million in FY23
and grew 44.3% to $6.8 million in Q4.
- Undertook multiple IPTV expansions with existing customers in
fiscal 2023, broadening network footprints to give larger
subscriber bases access to state-of-the-art live, on-demand, and
cloud DVR streaming services on the IPTV fabric, while further
migrating from legacy QAM-based video services. These significant
customer expansions of MediaScale IPTV subscriber coverage
included:
- major footprint growth at a top 10 U.S. cable operator;
- a phase 2 buildout with a Tier 2 telecom provider in the
U.S.;
- broadened IPTV deployment at a Tier 2 cable operator in the
Midwestern U.S.;
- increased IPTV services capacity with a fiber service provider
in the Southeastern U.S. where Vecima’s full MediaScale portfolio
is used as the operator’s flagship video offering to households and
multiple dwelling units;
- a major IPTV expansion with another top 10 U.S. cable operator;
and
- network capacity growth for a leading fiber service provider
covering several U.S. markets with a full suite of IPTV services in
multi-tenant and multi-dwelling communities.
- Achieved an additional telco win for IPTV linear streaming,
cloud DVR and Video on Demand (VOD) in fiscal 2023.
- Supported the record traffic experienced by operators during
the FIFA World Cup Qatar 2022™ and again during Super Bowl LVII,
while delivering 100% uptime performance.
- Established a partnership with Cadent, the largest independent
platform for advanced TV advertising, to integrate Vecima’s
MediaScale streaming solution with the Cadent Aperture platform.
This integrated solution will enable service providers to protect
existing linear ad revenue as they migrate to new IPTV platforms,
while creating opportunities for incremental revenue.
Telematics
- Achieved best fiscal year to date for additions of new moveable
asset customers, including 58 new customers for the NERO asset
tracking platform and the addition of over 1,250 net new
subscriptions. Asset tracking-related telematics subscriptions now
represent approximately 17% of total subscriptions.
- Significantly increased the number of moveable assets being
monitored to over 48,000 units, an over 280% increase in the last
eight quarters.
- In the municipal government market for vehicle monitoring
systems, continued roll-out with a Canadian municipality for
approximately 100 vehicle subscriptions, including winter
operations vehicles.
- Achieved record full-year and Q4 margins of 67.7% and 72.4%,
respectively.
- Achieved record full-year sales of $6.1 million.
“As we move forward, Vecima’s outlook remains highly positive
with cable service providers ramping up investment in
next-generation DAA to protect and enhance their broadband
competitiveness, while expanding their footprints,” added Mr.
Kumar.
“Although we anticipate a slower-than-normal start to the year
as operators complete current projects and fine tune rollout
logistics, we are preparing to launch major DAA deployments with
multiple customers in fiscal 2024. We anticipate a resurgence of
Entra sales momentum in the second half and expect our quarterly
run rate will reach a new high watermark by year-end, with more
momentum to follow in fiscal 2025 and beyond.”
“In our Content, Delivery and Storage segment, demand for our
IPTV and open caching solutions continues to build as existing IPTV
customers undertake network expansions and new customers come on
board. We anticipate low double-digit sales growth for the CDS
segment in fiscal 2024 and continue to see robust future growth
potential as IPTV gains momentum and our newer open caching
solutions become an important driver of CDS performance.”
“Overall, we expect fiscal 2024 will bring a shift to much wider
industry adoption of DAA and continued evolution to IPTV. Our years
of investment and innovation have positioned us at the forefront of
both markets and we are poised to reap the rewards,” concluded 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 6, 2023 to shareholders of record as at
October 13, 2023.
CONFERENCE CALL
A conference call and live audio webcast will be held today,
September 21, 2023 at 1 p.m. ET to discuss the Company’s fourth
quarter and full-year end results. Vecima’s audited condensed
annual consolidated financial statements and management’s
discussion and analysis for the three months and year-ended June
30, 2023 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/vecima2023q4.html and will be
archived on the Vecima website at
https://vecima.com/investor-relations/earnings-call-archive/.
About Vecima Networks
Vecima Networks Inc. (TSX: VCM) is leading the global evolution
to the multi-gigabit, content-rich networks of the future. Our
talented people deliver future-ready software, services, and
integrated platforms that power broadband and video streaming
networks, monitor and manage transportation, and transform
experiences in homes, businesses, and everywhere people connect. We
help our customers evolve their networks with cloud-based solutions
that deliver ground-breaking speed, superior video quality, and
exciting new services to their subscribers. There is power in
connectivity – it enables people, businesses, and communities to
grow and thrive. Learn more at 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 fourth quarter of fiscal 2023.
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 2023 was an outstanding year for
Vecima as we furthered our position as a leading innovator and
essential partner supporting the global service provider industry’s
wide-scale migration to distributed access architecture and IPTV;
these developments underscore the growth of our partnership with
one of the world’s largest cable operators as we together execute a
broad network evolution strategy; our Entra ERM3 RPD is expected to
be used for a substantial portion of Charter’s network upgrade; we
established a partnership with the largest independent platform for
advanced TV advertising that will enable service providers to
protect existing linear ad revenue as they migrate to new IPTV
platforms while creating opportunities for incremental revenue; as
we move forward, Vecima’s outlook remains highly positive with
cable service providers ramping up investment in next-generation
DAA to protect and enhance their broadband competitiveness, while
expanding their footprints; although we anticipate a
slower-than-normal start to the year as operators complete current
projects and fine tune rollout logistics, we are preparing to
launch major DAA deployments with multiple customers in fiscal
2024; we anticipate a resurgence of Entra sales momentum in the
second half and expect our quarterly run rate will reach a new high
watermark by year-end, with more momentum to follow in fiscal 2025
and beyond; demand for our IPTV and open caching solutions
continues to build as existing IPTV customers undertake network
expansions and new customers come on board; we anticipate low
double-digit sales growth for the CDS segment in fiscal 2024 and
continue to see robust future growth potential as IPTV gains
momentum and our newer open caching solutions become an important
driver of CDS performance; overall, we expect fiscal 2024 will
bring a shift to much wider industry adoption of DAA and continued
evolution to IPTV; our years of investment and innovation have
positioned us at the forefront of both markets and we are poised to
reap the rewards.
A more complete discussion of the risks and uncertainties facing
Vecima is disclosed under the heading “Risk Factors” in the
Company’s most recently filed Annual Information Form, 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,
except per share amounts)
As at
June 30, 2023
June 30, 2022
Assets
Current assets
Cash and cash equivalents
$
2,278
$
12,902
Accounts receivable
57,662
49,655
Income tax receivable
530
693
Inventories
101,601
49,608
Prepaid expenses and other current
assets
13,695
7,302
Contract assets
2,707
1,335
Total current assets
178,473
121,495
Non-current assets
Property, plant and equipment
15,683
16,483
Right-of-use assets
2,364
2,626
Goodwill
15,049
14,813
Intangible assets
82,991
75,917
Other long-term assets
1,298
1,440
Investment tax credits
24,252
23,041
Deferred tax assets
11,576
6,793
Total assets
$
331,686
$
262,608
Liabilities and shareholders’
equity
Current liabilities
Revolving line of credit
$
20,513
$
-
Accounts payable and accrued
liabilities
47,162
48,172
Provisions
1,978
659
Income tax payable
7,808
182
Deferred revenue
15,086
12,129
Current portion of long-term debt
2,260
1,782
Total current liabilities
94,807
62,924
Non-current liabilities
Provisions
387
366
Deferred revenue
4,716
4,465
Deferred tax liability
-
6
Long-term debt
14,123
15,115
Total liabilities
114,033
82,876
Shareholders’ equity
Share capital
23,997
7,935
Reserves
3,111
3,141
Retained earnings
190,926
168,923
Accumulated other comprehensive loss
(381)
(267)
Total shareholders’ equity
217,653
179,732
Total liabilities and shareholders’
equity
$
331,686
$
262,608
VECIMA NETWORKS INC.
Consolidated Statements of
Comprehensive Income
(in thousands of Canadian dollars,
except per share amounts)
Years ended June 30,
2023
2022
Sales
$
303,437
$
186,814
Cost of sales
161,466
96,852
Gross profit
141,971
89,962
Operating expenses
Research and development
45,950
36,552
Sales and marketing
27,694
19,330
General and administrative
29,428
22,761
Restructuring costs
1,236
-
Share-based compensation
2,502
881
Other expense
1,871
1,001
Total operating expenses
108,681
80,525
Operating income
33,290
9,437
Finance expense
(2,370)
(272)
Foreign exchange gain
2,681
1,882
Income before income taxes
33,601
11,047
Income tax expense
6,389
2,358
Net income
$
27,212
$
8,689
Other comprehensive income
(loss)
Item that may be subsequently reclassed
to net income
Exchange differences on translating
foreign operations
$
(114)
$
831
Comprehensive income
$
27,098
$
9,520
Net income per share
Basic
$
1.15
$
0.38
Diluted
$
1.15
$
0.38
Weighted average number of common
shares
Shares outstanding – basic
23,712,384
23,079,181
Shares outstanding – diluted
23,736,484
23,114,389
VECIMA NETWORKS INC.
Consolidated Statements of Changes in
Equity
(in thousands of Canadian
dollars)
Share capital
Reserves
Retained earnings
Accumulated other
comprehensive (loss) income
Total
Balance as at June 30, 2021
$
7,299
$
3,407
$
165,312
$
(1,098)
$
174,920
Net income
-
-
8,689
-
8,689
Other comprehensive income
-
-
-
831
831
Dividends
-
-
(5,078)
-
(5,078)
Shares issued by exercising options
733
(171)
-
-
562
PSUs settled in common shares
976
(976)
-
-
-
Withholding taxes on PSUs
(1,073)
-
-
-
(1,073)
Share-based payment expense
-
881
-
-
881
Balance as at June 30, 2022
$
7,935
$
3,141
$
168,923
$
(267)
$
179,732
Net income
-
-
27,212
-
27,212
Other comprehensive loss
-
-
-
(114)
(114)
Dividends
-
-
(5,209)
-
(5,209)
Common share issuance
15,926
-
-
-
15,926
Shares issued by exercising options
502
(106)
-
-
396
PSUs settled in common shares
2,426
(2,426)
-
-
-
Withholding taxes on PSUs
(2,792)
-
-
-
(2,792)
Share-based payment expense
-
2,502
-
-
2,502
Balance as at June 30, 2023
$
23,997
$
3,111
$
190,926
$
(381)
$
217,653
VECIMA NETWORKS INC.
Consolidated Statements of Cash
Flows
(in thousands of Canadian
dollars)
Years ended June 30,
2023
2022
OPERATING ACTIVITIES
Net income
$
27,212
$
8,689
Adjustments for non-cash items:
Loss on disposal of property, plant and
equipment
71
208
Depreciation and amortization
20,017
17,849
Impairment on deferred development
costs
-
712
Share-based compensation
2,502
881
Income tax expense
11,178
1,883
Deferred income tax expense (recovery)
(4,789)
475
Interest expense
2,390
299
Interest income
(20)
(27)
Net change in working capital
(66,064)
(25,748)
Decrease (increase) in other long-term
assets
152
(110)
Increase (decrease) in provisions
1,290
(787)
Increase in investment tax credits
(117)
(147)
Income tax received
-
164
Income tax paid
(2,614)
(883)
Interest received
20
29
Interest paid
(2,233)
(154)
Cash (used in) provided by operating
activities
(11,005)
3,333
INVESTING ACTIVITIES
Capital expenditures, net
(3,012)
(5,868)
Deferred development costs
(23,342)
(17,405)
Cash used in investing
activities
(26,354)
(23,273)
FINANCING ACTIVITIES
Proceeds from the revolving line of
credit
20,513
-
Principal repayments of lease
liabilities
(1,805)
(1,584)
Repayment of long-term debt
(772)
(250)
Proceeds from long-term debt
585
12,410
Dividends paid
(5,209)
(5,078)
Gross proceeds from issuing shares
17,002
-
Share issuance costs
(1,076)
-
Issuance of shares through exercised
options
396
562
Withholding taxes on PSUs
(2,792)
(1,073)
Cash provided by financing
activities
26,842
4,987
Net decrease in cash and cash
equivalents
(10,517)
(14,953)
Effect of change in exchange rates on
cash
(107)
(1,054)
Cash and cash equivalents, beginning of
year
12,902
28,909
Cash and cash equivalents, end of
year
$
2,278
$
12,902
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230921927832/en/
Vecima Networks Investor Relations - 250-881-1982
invest@vecima.com
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