Mr. Sumit Kumar reports

VECIMA REPORTS Q1 FISCAL 2024 RESULTS

Vecima Networks Inc. has released financial results for the three months ended Sept. 30, 2023.

"Vecima performed well in the first quarter as we achieved positive operating results and generated year-over-year revenue growth in our content delivery and storage and telematics segments, while weathering the anticipated temporary slowdown in Entra distributed access architecture (DAA) product deliveries," said Sumit Kumar, Vecima's president and chief executive officer.

"As we noted in our fourth quarter report, we successfully managed major constraints in the supply chain during fiscal 2023 to fulfill strong DAA deliveries in support of our customers' ongoing major network upgrade projects. Correspondingly, customers have now temporarily shifted from building up their product pipelines to managing their DAA rollout logistics, expanding field deployment activity and working through existing inventories. We anticipate renewed Entra sales growth in the second half of fiscal 2024 as customers bring inventories into balance while initiating new programs and deployments alike. These encompass additional DAA launches and project ramp-ups with key customers, including a major ERM3 rollout to support a Tier 1 customer's network evolution to 10G.

"In our content delivery and storage segment, first quarter sales grew 43 per cent to $15.7-million, reflecting both the growing base of customers for our IPTV solutions and expansions with a number of these customers during the period. Paired with strong gross margin performance of 58.5 per cent, our CDS segment enjoyed an excellent start to fiscal 2024," added Mr. Kumar.

"Operationally, we continued to focus on tightly managing the business to achieve efficiently lower operating expenses while continuing to advance our technologies and industry leadership with robust R&D investment. We ended the first quarter in a strong financial position, with an unparalleled portfolio of next-generation solutions, a veritable war chest of customer program-aligned DAA product inventory and a growing base of customers that are effecting a wide-scale migration to next-generation networks globally using our products. While the timing of our customers' rollouts may naturally vary, we see multiple pathways for growth coalescing as the year progresses and translating into the next wave of revenue momentum in the latter half of fiscal 2024," said Mr. Kumar.

Business highlights

Financial and corporate:

• First quarter revenue of $61.5-million, as compared with $73.4-million in Q1 fiscal 2023;
• Achieved gross profit of $28.8-million, as compared with $33.7-million in Q1 fiscal 2023;
• Gross margin and adjusted gross margin increased to 46.9 per cent and 47.9 per cent, respectively, from 45.9 per cent in the prior-year period;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $8.1-million, as compared with $17.2-million in Q1 fiscal 2023;
• Earnings per share (EPS) and adjusted EPS were seven cents and nine cents per share, respectively, as compared with EPS and adjusted EPS of 41 cents per share in Q1 fiscal 2023;
• Ended the first quarter in strong financial position with working capital of $79-million at Sept. 30, 2023, compared with $83.7-million at June 30, 2023.

Video and broadband solutions (VBS)

The video and broadband solutions segment contributed first quarter sales of $44.1-million, as compared with $61-million in Q1 fiscal 2023 and $57-million in Q4 fiscal 2023.

DAA (Entra family):

• Next-generation Entra product sales of $38.8-million were in line with expectations and compared with $53-million in Q1 fiscal 2023 and $50.7-million in Q4 fiscal 2023.

Notable first quarter DAA achievements:

• An increase in total customer engagements to 108 MSOs (multiple system operators) worldwide, from 95 a year earlier. Fifty-one of these customers are ordering Entra products, with order sizes increasing as broader DAA deployment continues.
  • Customers engaged for cable access now number 62;
  • Customers engaged for fibre access or both access technologies now number 46.
• Vecima supported Orion Cable's broadband expansion with a scalable, quick-to-deploy and turnkey remote Macphy solution that drives value through partnership with the customer and supports unique needs for flexible, open and interoperable broadband access networks.
• Executed warrant agreement with Charter Communications Holding Company LLC as disclosed and further discussed in Vecima's press release dated Sept. 11, 2023.

Achievements subsequent to the quarter-end:

• Participated in the SCTE Cable-Tec Expo 2023, a major industry show, demonstrating recent innovations in Vecima's remote PHY, access nodes, PON, Open CDN, Dynamic Content and TruLive product lines. Vecima's technology was a key focus for industry decision-makers where interest in the company's expansive portfolio was prominent and unparalleled.
• Entra ERM3 remote PHY device was honoured with five diamonds in the 2023 BTR Diamond Technology Reviews Awards. The ERM3 RPD helps operators upgrade legacy HFC nodes to DAA quickly and cost-effectively, while dramatically increasing broadband capacity.
• Announced availability of Vecima's DOCSIS 4.0-ready and 1.8-gigahertz forever nodes which provide a clear and cost-effective path to 10G by supporting DAA today while also supporting future technologies, including DOCSIS 4.0 and remote optical line terminal (OLT) applications.

Commercial video (Terrace family):

• Commercial video products contributed $5.3-million to first quarter VBS sales, as compared with $7.3-million in Q1 fiscal 2023 and $6.3-million in Q4 fiscal 2023. The year-over-year change reflects the transition to next-generation platforms and the impact of some of Vecima's newer DAA-driven commercial video solutions being accounted for as part of Entra family sales.

Content delivery and storage (CDS):

• First quarter CDS segment sales grew 43 per cent to $15.7-million, from $11-million in Q1 fiscal 2023. This included a 56-per-cent increase in product sales and a 24-per-cent increase in services revenue. On a sequential quarterly basis, CDS sales were 8 per cent lower than the record $17.1-million performance achieved in Q4 fiscal 2023.
• CDS gross margin increased to 58.5 per cent, from 54.5 per cent in Q1 fiscal 2023 and 53.8 per cent in Q4 fiscal 2023.
• Subsequent to the quarter-end, announced an engagement with Blue Ridge Communications to support this customer's video expansion. Blue Ridge has engaged Vecima's professional services team to provide assisted operations support utilizing proprietary tools to remotely monitor Blue Ridge's Internet protocol video network for issues, while maximizing system uptime and operating efficiency.

Telematics:

• First quarter Telematics sales grew approximately 14 per cent to $1.6-million, from $1.4-million in both Q1 fiscal 2023 and Q4 fiscal 2023.
• Generated additional deployments in high-value verticals, including municipal government and moveable asset customers.
• Achieved the company's best quarter to date for additions of new moveable asset subscriptions, adding 14 new customers to the Nero asset tracking platform, and significantly increasing the number of moveable assets being monitored to over 57,000 units.
• Achieved strong gross margin percentage of 64.9 per cent.

"Moving forward, Vecima's long-term outlook remains exceptionally compelling," added Mr. Kumar. "We are continuing to demonstrate the full deployment potential of our technologies as we support our customers' wide-scale network transformations and repeatedly break new ground in ultrahigh-speed connectivity. We are advancing further from a global leadership position and remain highly confident in our ability to capture the major and multiyear opportunities in the large DAA and IPTV markets."

As previously reported, Vecima's board of directors declared a quarterly dividend of 5.5 cents per share for the period. The dividend will be payable on Dec. 18, 2023, to shareholders of record as at Nov. 24, 2023.

Conference call

A conference call and live audio webcast will be held today, Nov. 9, 2023, at 1 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 Sept. 30, 2023, are available under the company's profile on SEDAR+, and on Vecima's website.

To participate in the teleconference, dial 1-800-319-4610 or 1-604-638-9020. The webcast will be available in real time on the Chorus Call website and will be archived on the Vecima website.

About Vecima Networks Inc.

Vecima Networks is leading the global evolution to the multigigabit, content-rich networks of the future. Its 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. Vecima helps its customers evolve their networks with cloud-based solutions that deliver groundbreaking 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.

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