Vecima Reports Q1 Fiscal 2023 Results

• Revenue continues to climb to a record $73.4M, up 127% YoY and 22% QoQ
• Record Adjusted EBITDA of $17.2M, up 296% YoY and 55% QoQ
• EPS of $0.41 up 14 times YoY and 156% QoQ
• Entra Family DAA sales further rise to $53.0M, up 192% YoY and 32% QoQ
• CDS segment sales up 63% YoY and 19% QoQ

Vecima Networks Inc. (TSX: VCM) today reported financial results for the three months ended September 30, 2022.

FINANCIAL HIGHLIGHTS

“Fiscal 2023 got off to an exceptional start as record high demand for our next-generation Entra DAA products, together with strong performance across all of our product families, drove the best quarterly top-line and Adjusted EBITDA results in Vecima’s history,” said Sumit Kumar, Vecima’s President and Chief Executive Officer. “Consolidated sales heightened again, to $73.4 million, a year-over-year gain of 127%, and we paired this with all-time best Adjusted EBITDA of $17.2 million and strong earnings per share of $0.41.”

“In our Video and Broadband Solutions (VBS) segment, we comprehensively met the needs of Tier 1 customers undertaking larger-scale DAA deployments to achieve a near tripling of Entra sales year-over-year. This growth was even higher than expected and reflects not only the timing of our customers’ DAA rollouts, but our own success in leveraging our inventory investments and supply chain strengths to address our customers’ pressing needs for fiber and cable access rollouts. Adding to our success was year-over-year growth in Commercial Video sales, which together with our record Entra performance, contributed to VBS segment sales climbing 151% to a remarkable $61.0 million year-over-year.”

“Our Content Delivery and Storage segment also turned in strong performance with first quarter sales growing 63% year-over-year as we added a new customer for our IPTV and Video on Demand products, carried out expansions with existing customers, and benefited from favorable order timing as compared to last year.”

“We are proud of our first quarter results and the tremendous effort put in by Vecima’s teams to respond to our customers’ rollout plans. While we anticipate a balancing of Entra shipping growth across the first two quarters following the record deliveries we achieved in Q1, including some pull-ins to support customers, we are on track to meet or exceed our expectations for significant Entra revenue growth in fiscal 2023 as DAA deployments continue to gain momentum,” said Mr. Kumar.

BUSINESS HIGHLIGHTS

Financial and Corporate Highlights

• Achieved a new quarterly sales record with first quarter sales climbing 127% to $73.4 million, from $32.4 million in Q1 fiscal 2022
• Gross profit increased 115% to $33.7 million, up from $15.7 million last year
• Adjusted EBITDA grew 296% to a record $17.2 million, from $4.3 million in the prior-year period
• EPS and Adjusted EPS increased 14 times to $0.41 per share, from $0.03 per share in Q1 fiscal 2022
• Ended the first quarter in strong financial position with working capital of $66.8 million at September 30, 2022, compared to $58.6 million at June 30, 2022

Video and Broadband Solutions (VBS)

• Generated exceptional segment sales growth with Q1 VBS sales climbing 151% to $61.0 million year-over-year and 23% quarter-over-quarter from the $49.4 million in Q4 fiscal 2022

DAA (Entra Family)

• Deployments of next-generation Entra DAA products rose 192% year-over-year to $53.0 million and 32% to $40.0 million quarter-over-quarter
• Notable DAA achievements in Q1 fiscal 2023 included:
  • An increase in total customer engagements to 95 MSOs worldwide, from 77 a year earlier. Forty-nine of these customers are ordering Entra products, with order sizes increasing as broader DAA deployment is continuing
    • Customers engaged for cable access now number 57
    • Customers engaged for fiber access or both access technologies now number 38
  • Significant market adoption of Vecima’s next-generation fiber and cable access solutions with deployments at eight of the twelve largest cable operators in North America. The Vecima DAA solutions being deployed by these top operators include Remote PHY and Remote MACPHY cable access nodes and 10G-EPON shelf and Remote OLT (Optical Line Terminal) fiber access
  • Continued to hold the majority market share, globally, for fiber-to-the-home (FTTH) 10G-EPON Remote OLT and DAA Remote MACPHY nodes
  • Expanded Vecima’s PON portfolio with the launch of the Entra EXS1610 All-PON 10G shelf solution, which broadly supports widely deployed PON standards including both XGS-PON and 10G-EPON. This new platform enables service providers to shorten the time to market for fiber- to-the-home solutions and provides Vecima with access to a vast new addressable market valued at close to $2 billion globally
  • Demonstrated 10G-capable multi-gigabit symmetrical speed DOCSIS 4.0 in partnership with a leading global Tier 1 operator. This multi-vendor demonstration, which showcased an extension to 1.8 GHz cable frequencies, highlighted the massive capacity available through incremental upgrades to the cable access network with DAA nodes
  • Announced next-generation Remote PHY Device (RPD), the ERM322 module, a fully interoperable Remote PHY solution available for both Vecima’s leading cable access platforms and to extend the life of widely deployed, third-party cable access nodes

Commercial Video (Terrace Family)

• Grew Q1 Commercial Video sales by 19% to $7.3 million, from $6.1 million in Q1 fiscal 2022
  • Grew Terrace family sales to $3.0 million in Q1, from $1.4 million in Q1 fiscal 2022
  • Generated Terrace QAM sales of $4.3 million in Q1 fiscal 2023, as compared to $4.8 million in Q1 fiscal 2022
  • Launched new Community Cache solution combining MediaScale and Terrace products to empower operators to efficiently increase bandwidth for data services, utilize the latest IPTV user interfaces, and support legacy video delivery, particularly suited to use cases such as multi-dwelling units. Using the Community Cache solution, a live linear broadcast IPTV channel only has to be delivered from the network once rather than for each individual viewer, saving considerable network bandwidth

Content Delivery and Storage (CDS)

• Grew CDS sales to $11.0 million in Q1 fiscal 2023, from $6.8 million in Q1 fiscal 2022 and $9.2 million in Q4 fiscal 2022
  • Achieved an additional telco win for IPTV linear and Video on Demand (VOD)
  • Began Phase 2 expansion of IPTV deployment with a Tier 2 telco provider in the U.S., broadening the network’s footprint to give a larger subscriber base access to state-of-the-art, live, on-demand, and cloud DVR streaming services
  • Continued coverage expansion with a large Tier 1 customer in CALA, with MediaScale solutions now deployed across nine countries in the customer’s network
  • Announced Blue Stream Fiber will deploy Vecima community cache solution with MediaScale MicroCache to help reclaim video bandwidth to fuel broadband speeds
  • Released Origin 5.1, increasing redundancy and resiliency options for deploying linear services, broadening support for Multi-DRM scenarios, and expanding support for service providers looking to increase audio profiles available with their payTV content
  • Released Cache 6.0 providing support for linear dynamic ad insertion, increasing cache efficiency for Common Encryption (CENC) use cases, and expanding deployment options for public and private cloud scenarios

Telematics

• Generated additional deployments in high-value verticals, including municipal government and moveable asset customers
• Achieved our best quarter to date for additions of new moveable asset customers, adding 12 new subscribers to the NERO asset tracking platform, and significantly increasing the number of moveable assets being monitored to over 28,000 units
• Achieved strong gross margin percentage of 66.1%

“Vecima’s outlook remains extremely compelling,” added Mr. Kumar. “In the DAA market, we are already global leaders in the 10G-EPON Remote OLT and DAA Remote MACPHY node categories. We expect demand for our products, as well as our broader portfolio of Entra DAA cable and fiber access solutions, will continue to escalate as our customers ramp scale deployment and newer customers transition to field deployment. Simultaneously, we are positioning to lead the next phase of DAA expansion with our significant advances in 10G-capable DOCSIS 4.0.”

“In our Content Delivery and Storage segment, demand for our IPTV and open caching solutions continues to build. We anticipate moderate growth for the CDS segment in fiscal 2023, with higher growth potential over the medium-to-longer term as IPTV gains momentum and as our newer open caching solutions become an important new driver of CDS performance.”

“We reiterate our caution that global supply chain challenges could continue to constrain or impact our revenue growth. Higher expediting costs related to the supply chain challenges could also impact gross margin performance as we experienced in the first quarter. We are maintaining higher-than-normal inventories of finished goods and raw material to address these challenges and have increased our investment in working capital in support of this strategy,” 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 December 19, 2022 to shareholders of record as at November 25, 2022.

CONFERENCE CALL

A conference call and live audio webcast will be held today, November 10, 2022 at 2 p.m. ET to discuss the Company’s first quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three months ended September 30, 2022 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/vecima2023q1.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 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 first 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: we comprehensively met the needs of Tier 1 customers undertaking larger-scale DAA deployments; this growth was even higher than expected and reflects not only the timing of our customers’ DAA rollouts, but our own success in leveraging our inventory investments and supply chain strengths to address our customers’ pressing needs for fiber and cable access rollouts; while we anticipate a balancing of Entra shipping growth across the first two quarters, following the record deliveries we achieved in Q1, including some pull-ins to support customers, we are on track to meet or exceed our expectations for significant Entra revenue growth in fiscal 2023 as DAA deployments continue to gain momentum; Vecima’s outlook remains extremely compelling; we expect demand for our products, as well as our broader portfolio of Entra DAA cable and fiber access solutions, will continue to escalate as our customers ramp scale deployment and newer customers transition to field deployment; we are positioning to lead the next phase of DAA expansion with our significant advances in 10G-capable DOCSIS 4.0; demand for our IPTV and open caching solutions continues to build; we anticipate moderate growth for the CDS segment in fiscal 2023, with higher growth potential over the medium-to-longer term as IPTV gains momentum and as our newer open caching solutions become an important new driver of CDS performance; we reiterate our caution that global supply chain challenges could continue to constrain or impact our revenue growth; higher expediting costs related to the supply chain challenges could also impact gross margin performance as we experienced in the first quarter; we are maintaining higher-than-normal inventories of finished goods and raw material to address these challenges and have increased our investment in working capital in support of this strategy.

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 22, 2022, 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.

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