Vecima Reports Q4 and Full-Year Fiscal 2022 Results

Rapid growth continues as Distributed Access Architecture penetration accelerates

• Record Q4 revenue climbs 70% YoY and 18% QoQ to $60.0M; annual revenue grows 50.4% to new high of $186.8M
• Entra DAA sales increase significantly by 141% YoY to $40.0M in Q4 and 152% to $107.3M in fiscal 2022
• Q4 adjusted EBITDA of $11.1M and full-year adjusted EBITDA of $31.0M up 96% and 152% YoY, respectively
• Q4 and full-year gross margin increases to 48%
• Adjusted EPS grows to $0.19 in Q4 and $0.41 in fiscal 2022, a $0.51 increase from fiscal 2021
• Employee count increases 23% YoY

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

FINANCIAL HIGHLIGHTS

“The outstanding financial momentum we achieved through the first nine months of fiscal 2022 reached yet another higher octave in the fourth quarter as Vecima’s deep engagement in the global industry migration to distributed access architecture, or DAA, drove the best quarterly and full-year sales results and growth rate in our 34-year history,” said Sumit Kumar, Vecima’s President and Chief Executive Officer.

“Fourth quarter sales climbed 70% year-over-year to $60.0 million and full-year sales rose more than 50% to $186.8 million, representing a substantial growth rate particularly in light of ongoing global supply chain constraints. Importantly, our momentum levered through to the bottom line as we established even bigger percentage gains in gross profit, adjusted EBITDA and net earnings. Our fourth quarter adjusted EBITDA of $11.1 million was up 96% from what we achieved in the same period last year. On a full-year basis, adjusted EBITDA of $31.0 million grew a remarkable 152% or more than two and a half times year-over-year and adjusted earnings per share of $0.41 climbed 51 cents from a year ago."

“These are particularly satisfying results as they directly reflect the success of our multi-year investment in the industry’s most complete offering of fully interoperable and technically differentiated DAA fiber access and cable access solutions for broadband. In a year when operators worldwide significantly increased their capital investment into DAA broadband access networks, Vecima was the technology partner of choice for a growing number of them, including several of the world’s largest Tier 1 operators. Sales of our Entra DAA cable and fiber access products soared to $107.3 million, an increase of 152% year-over-year. This is a powerful growth trajectory for a product family that two years ago accounted for just $5.3 million or about 6% of our annual sales. Entra is precisely the growth engine we envisioned, leading Vecima’s sales and strongly supporting our bottom line."

“Our record results were further supported by continued solid performance from our Content Delivery and Storage segment, which contributed $43.5 million in sales to our full-year results."

“We are very proud of Vecima’s striking performance in fiscal 2022 and the steps taken during the year to further our industry leadership across both DAA and IPTV. Major technical milestones included successfully demonstrating 10G-capable multi-gig symmetrical speed DOCSIS 4.0 in partnership with Tier 1 operators, launching our new XGS-PON FTTH products, and, in our CDS segment, making significant progress with standards-compliant Open Caching, including a deepening engagement with a leading global streaming company. While just starting to realize the rewards of the first wave of industry migration to DAA and IPTV, Vecima is already on the pathway to capturing the next,” said Mr. Kumar.

BUSINESS HIGHLIGHTS

Corporate

• Achieved the best quarterly and annual revenue results in Vecima’s history with fourth quarter consolidated sales increasing 70% to $60.0 million year-over-year and fiscal 2022 consolidated sales climbing over 50% year-over-year to $186.8 million
• Generated Q4 gross profit of $28.5 million and full-year gross profit of $90.0 million, up 90% and 59%, respectively, from the same periods in fiscal 2021
• Increased Q4 and full-year gross profit margin to 48%, from 42% and 46%, respectively, in the same periods last year
• Lifted fourth quarter adjusted EBITDA by 96% to $11.1 million, from $5.7 million last year; full-year adjusted EBITDA climbed 152% to $31.0 million, from $12.3 million in fiscal 2021
• Fourth quarter adjusted EBITDA margin increased to 18.5%, from 16.1% in the same period of 2021
• Grew fourth quarter adjusted EPS to $0.19, from $0.06 last year; full-year adjusted EPS surged to $0.41, up from a loss of $(0.10) per share in fiscal 2021
• Ended the year in a strong financial position with $12.9 million in cash and working capital of $58.6 million, as compared to $10.6 million and $54.9 million, respectively, as at March 31, 2022

Video and Broadband Solutions (VBS)

• Achieved exceptional segment sales growth with Q4 VBS sales climbing 111% to $49.4 million and annual sales growing 83% year-over-year to $137.9 million.

DAA (Entra family)

• Deployments of next-generation Entra DAA products soared 141% year-over-year to $40.0 million in Q4 fiscal 2022; Entra sales for the full year climbed 152% to $107.3 million
• Milestone DAA achievements in fiscal 2022 included:
  • An increase in total customer engagements to 91 MSOs worldwide, from 71 a year earlier. Forty-five of these customers have now ordered Entra products, with order sizes increasing as operators begin to transition to broader deployment
    • Cable access engagements increased by 27% year-over-year
    • Fiber access engagements increased by 31% year-over-year
• Multiple customer wins, including Liberty Latin America and Bluepeak
• Industry-leading demonstration of symmetrical multi-gig DOCSIS 4.0 standard; selected by two of the world’s largest cable operators as a joint development partner for this next-generation DAA technology
• Launched XGS-PON, an additional standard for FTTH PON (passive optical networks), which like 10G-EPON can support 10 Gbps symmetrical data transfer
• Announced industry’s first cloud-based DAA controller, another step in Vecima’s journey to a cloud-driven intelligent and cost-effective set of virtualized services for access networks

Commercial Video (Terrace family)

• Grew Q4 Commercial Video sales to $8.8 million, from $6.7 million in the same period last year; generated full-year sales of $29.8 million as compared to $31.4 million in fiscal 2021
  • Increased TerraceQAM sales to $5.9 million in Q4 and $20.6 million in fiscal 2022, up from $4.4 million and $17.1 million, respectively, last year
  • Grew Terrace family sales to $2.9 million in the fourth quarter, from $2.4 million in the same period last year. For the full year, Terrace family sales decreased to $9.2 million from $14.3 million in fiscal 2021, with customers increasingly transitioning to next-generation solutions
  • Deployed 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

Content Delivery and Storage (CDS)

• Generated sales of $9.2 million in Q4 fiscal 2022 and $43.5 million in fiscal 2022, as compared to $10.4 million and $43.4 million in the same periods of 2021, respectively
• Milestone CDS developments in fiscal 2022 included:
  • Won and executed the largest IPTV deal in Vecima’s history with a Top 10 U.S. cable operator
  • Breezeline (formerly Atlantic Broadband) chose MediaScale to power its IPTV video delivery solution and accelerate its next-generation TV experience to its broad subscriber base
  • Won two new IPTV customers and secured multiple expansions
  • Demonstrated Vecima’s Streaming Video Technology Alliance standards-compliant Open Caching solution and progressed an engagement with a globally-leading Tier 1 streaming customer
  • Achieved significant enhancements in MediaScale feature sets and scalability, including server efficiency, egress and throughput, Ultra-HD support, DRM, and the latest state-of-the-art flash storage
  • Developed and launched Digital Ad Insertion technology in the MediaScale portfolio allowing for enhanced ad monetization of broadcast managed-IPTV streams

Telematics

• Generated additional deployments in high-value verticals, including municipal government and moveable asset customers
• Added 39 new customers for the NERO asset tracking platform in fiscal 2022, with the number of movable assets being monitored rising to over 23,000 tags
• Transitioned to newer generation cellular standards in step with the migration from legacy networks by wireless providers

“Looking ahead to fiscal 2023, we expect demand for our Entra DAA products will continue to rapidly escalate, with existing customers ramping scale deployment and newer customers transitioning to field deployments. Our outlook is further supported by a very broad order book that gives us excellent visibility into customer expectations and growth for the year ahead,” added Mr. Kumar. “While momentum is already building at a brisk pace, we emphasize that we are still in the early stages of broad industry DAA adoption, and we see an extraordinary and lengthy growth runway for Entra."

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

“We reiterate our caution that continuing global supply chain challenges have the potential to constrain or impact our revenue growth and put pressure on gross margins in the near term. We have increased our working capital to maintain higher-than-normal inventories of finished goods and raw material, and we will continue to carefully manage all aspects of our supply chain as we work to realize the significant opportunities created by the large and rapidly growing distributed access and IPTV markets,” 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 7, 2022 to shareholders of record as at October 7, 2022.

CONFERENCE CALL

A conference call and live audio webcast will be held today, September 22, 2022 at 1 p.m. ET to discuss the Company’s fourth quarter and 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, 2022 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/vecima2022q4.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/(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 2022.

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: the outstanding financial momentum we achieved through the first nine months of fiscal 2022 reached yet another higher octave in the fourth quarter; fourth quarter sales climbed, representing a substantial growth rate particularly in light of ongoing global supply chain constraints; our momentum levered through to the bottom line; results as directly reflect the success of our multi-year investment in the industry’s most complete offering of fully interoperable and technically differentiated DAA fiber access and cable access solutions for broadband; in a year when operators worldwide significantly increased their capital investment into DAA broadband access networks, Vecima was the technology partner of choice for a growing number of them, including several of the world’s largest Tier 1 operators; Entra is precisely the growth engine we envisioned, leading Vecima’s sales and strongly supporting our bottom line; while just starting to realize the rewards of the first wave of industry migration to DAA and IPTV, Vecima is already on the pathway to capturing the next; looking ahead to fiscal 2023, we expect demand for our Entra DAA products will continue to rapidly escalate, with existing customers ramping scale deployment and newer customers transitioning to field deployments; our outlook is further supported by a very broad order book that gives us excellent visibility into customer expectations and growth for the year ahead; while momentum is already building at a brisk pace, we emphasize that we are still in the early stages of broad industry DAA adoption and we see an extraordinary and lengthy growth runway for Entra; in our Content Delivery and Storage segment, we anticipate moderate growth in fiscal 2023 as demand for our IPTV and open caching solutions continues to grow; over the medium-to-longer term, we see higher growth potential as IPTV gains momentum and as our newer open caching solutions become an important new driver of CDS performance; we reiterate our caution that continuing global supply chain challenges have the potential to constrain or impact our revenue growth and put pressure on gross margins in the near term; we have increased our working capital to maintain higher-than-normal inventories of finished goods and raw material, and we will continue to carefully manage all aspects of our supply chain as we work to realize the significant opportunities created by the large and rapidly growing distributed access and IPTV markets.

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.

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