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Press release from Marketwire

Vecima Reports Q2 Fiscal 2013 Results

Cash Position Improves From $25.7 Million to $41.4 Million

Tuesday, February 12, 2013

Vecima Reports Q2 Fiscal 2013 Results08:00 EST Tuesday, February 12, 2013VICTORIA, BRITISH COLUMBIA--(Marketwire - Feb. 12, 2013) - Vecima Networks Inc. (TSX:VCM), an experienced designer and manufacturer of innovative technology in the broadband equipment market, today reported financial results for the three months ended December 31, 2012. All figures are in Canadian dollars and in accordance with International Financial Reporting Standards ("IFRS") unless otherwise stated.FINANCIAL HIGHLIGHTS(CAD dollars in millions except percentages, headcount, and per share data)Q2FY2013Q1FY2013Q2FY2012Revenue$23.6$24.9$21.2Gross Margin41%40%37%EBITDA1$12.9$8.4$10.0Adjusted EBITDA1(removes gains on sale of assets and stock-based compensation)$3.9$4.5$2.1Net Income or (Loss)$9.1$5.3$6.2Earnings or (Loss) per share (based on weighted average number shares outstanding)$0.41$0.24$0.28Cash and marketable securities$41.4$25.7$12.6Headcount6176196041EBITDA and adjusted EBITDA 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 EBITDA and adjusted EBITDA should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of our financial performance or as a measure of our liquidity and cash flows. For a reconciliation of EBITDA and adjusted EBITDA, investors should refer to Management's Discussion and Analysis for the current quarter. EBITDA and adjusted EBITDA are provided because they provide investors with an alternative measure of Vecima's financial performance."Vecima sees strong deployment of our Terrace and Terrace QAM families of products by North America's largest cable MSOs," said Dr. Surinder Kumar, CEO of Vecima. "I am pleased to report that gross margin remained 40% or higher over the last two quarters. This continued strength in gross margin is attributable to a transition to higher margin products." Dr. Surinder Kumar stated that, "Vecima is in a position where its cash at the end of Q2 plus its realizable value of non-core assets is approaching its current market capitalization. We are working hard to unlock hidden value." In comparing the first half of fiscal 2013 to the last six months of fiscal 2012, adjusted EBITDA increased to $8.4 million from $7.3 million despite revenue decreasing from $54.5 million to $48.5 million. Vecima's cash position improved from $25.7 million at the end of Q1 fiscal 2013 to $41.4 million at the end of Q2 fiscal 2013. The increase in cash and marketable securities is attributable to cash flow from operations and the further sale of radio spectrum for proceeds of $9.4 million. MSO BUSINESS SERVICES Terrace FamilySales decreased 22% to $6.8 million compared to $8.7 million in Q1 of FY13. Our leading MSO customer had pent up demand for our TC1200 in prior quarters that is starting to level off.While revenue from the Terrace Family from our lead customer continues to be strong, other MSO customers have taken longer than expected to initiate analog reclamation.Terrace QAMSales decreased 6% from $5.3 million in Q1 of FY13 to $5.0 million this quarter. The number of units deployed varies from quarter to quarter but we expect a sales increase in the coming quarters. CABLE HEADEND OEM QAM ModulesSales increased from $1.1 million to $3.0 million. The uptick was a one-time increase in demand from our customer and is not indicative of sales in future quarters. As indicated previously, sales are expected to decline over fiscal 2013 as the product moves towards end of life.OEM Return Path Demodulator and CableVistaCombined sales of these legacy products were relatively flat from Q1 fiscal 2013 to Q2 fiscal 2013. Sales for our OEM return path demodulator dropped from $1.6 million to $1.2 million; while CableVista sales improved from $1.1 million to $1.5 million. Our new OEM digital broadband access platform is expected to start volume shipping in Q4 fiscal 2013. FLEET MANAGEMENT - FLEETLYNX Feedback from our customers confirms that our FleetLynx system solution provides superior benefits as compared to competitive offerings. Our focus is on accelerating sales to address this large and fragmented market. BROADBAND WIRELESS Sales decreased from $2.3 million in Q1 of fiscal 2013 to $2.1 million this period. Weakness in sales of both BWIN and WiMAX products were responsible for the revenue drop. Software defined radio sales remained relatively flat quarter over quarter. We have introduced new products in our software defined radio division. YOURLINK Revenue increased slightly to $3.1 million from Q1 fiscal 2013 to Q2 fiscal 2013. YourLink had net additions to its subscriber base during the period.OUTLOOK Vecima remains profitable and we expect both operations and asset monetization to continue to contribute to our cash position. We continue to execute on our strategy of monetizing non-core assets and will pursue opportunities to sell non-core assets over the next 18 months. On January 21, 2013, Vecima proposed a special cash distribution in the form of a return of capital. Following the proposed distribution, we will have a strong balance sheet and will continue to explore opportunities to maximize shareholder value, including the possibility of future cash dividends or distributions. In light of adjustments to our customers' sales forecasts, we are revising our fiscal 2013 revenue forecast to be in the range of $91 to $98 million. We are managing our costs carefully. With these measures in place, we expect our fiscal year adjusted EBITDA to improve by 20-40% over fiscal 2012.CONFERENCE CALLA conference call and live audio webcast will be held on February 12, 2013 at 1 p.m. ET to discuss the Company's second quarter results. Vecima's unaudited condensed interim consolidated financial statements and management's discussion and analysis for the three months ended December 31, 2012 are available under the Company's profile at www.SEDAR.com, and at http://www.vecima.com/financials_ir.php.To participate in the teleconference, dial 1-800-319-4610 or 1-604-638-5340. The webcast will be available in real time at http://services.choruscall.ca/links/vecima120213.html and will be archived on the Vecima website at http://www.vecima.com/events_ir.php. About Vecima Networks Vecima Networks Inc. (TSX:VCM) designs, manufactures and sells products that enable broadband access to cable, wireless and telephony networks. Vecima's hardware products incorporate original embedded software to meet the complex requirements of next-generation, high-speed digital networks. Service providers use Vecima's solutions to deliver services to a converging worldwide broadband market, including what are commonly known as "triple play" (voice, video and data) and "quadruple play" (voice, video, data and wireless) services. Vecima's solutions allow service providers to rapidly and cost-effectively bridge the final network segment that connects the system directly to end users, commonly referred to as "the last mile", by overcoming the bottleneck resulting from insufficient carrying capacity in legacy, last mile infrastructures. Vecima's products are directed at two principal markets: Converged Wired Solutions and Broadband Wireless. The Company has also developed and continues to focus on developing products to address emerging markets such as Voice over Internet Protocol, fibre to the home and IP video. More information is available at our website at www.vecima.com.Forward-Looking Statements Certain statements in this press release may constitute forward-looking statements within the meaning of applicable securities laws. All statements other than statements of historical fact are forward-looking statements. These statements include but are not limited to statements regarding management's intentions, belief or current expectations with respect to market and general economic conditions, future sales, future shipping volumes, future cash position, revenue expectations, future costs, future operating performance, plans to sell non-core assets, and plans to continue to explore opportunities to maximize shareholder value, including the possibility of future cash dividends and distributions. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or are beyond our control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include, but are not limited to, the current significant general economic uncertainty and credit and financial market volatility and the distinctive characteristics of Vecima's operations and industry and customer demand that may have a material impact on, or constitute risk factors in respect of Vecima's future financial performance, as set forth under the heading "Risk Factors" in the Company's Annual Information Form dated September 28, 2012, a copy of which is available at www.sedar.com. In addition, although the forward-looking statements in this press release are based on what management believes are reasonable assumptions, such assumptions may prove to be incorrect. Consequently, readers should not place undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Vecima disclaims any intention or obligation to update or revise any forward-looking statements, as a result of new information, future events or otherwise, except as required by law.VECIMA NETWORKS INC.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(unaudited - in thousands of Canadian dollars)December 31,June 30,20122012AssetsCurrent assetsCash and cash equivalents$25,420$19,549Marketable securities15,974-Accounts receivable14,61423,818Income tax receivable10,60713,600Inventories30,26629,663Prepaid expenses1,2311,07698,11287,706Non-current assetsProperty, plant and equipment26,91928,158Assets held for resale-385Intangible assets11,55810,819Investment tax credit asset35,34930,384Deferred tax asset3,1335,129$175,071$162,581LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities$11,967$13,653Provisions792974Income tax payable914806Deferred revenue1,1991,311Current portion of long-term debt25025015,12216,994Non-current liabilitiesOther long-term liabilities408342Provisions1,5111,522Long-term debt3,3333,47920,37422,337Shareholders' equityShare capital34,48734,482Reserves2,7912,761Retained earnings117,419103,001154,697140,244$175,071$162,581The accompanying notes are an integral part of these condensed interim consolidated financial statements.The financial statements were approved by the Board of Directors and authorized for issue on February 7, 2013 and were signed on its behalf by:Barry A. Baptie, DirectorSurinder Kumar, DirectorVECIMA NETWORKS INC.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(unaudited - in thousands of Canadian dollars except net income per share data)Three months endedDecember 31,Six months endedDecember 31,2012201120122011Sales$23,631$21,236$48,503$41,217Cost of sales13,90713,38928,73626,066Gross margin9,7247,84719,76715,151Operating expensesResearch and development2,2553,0844,1535,848Sales and marketing1,3531,0652,3792,247General and administrative4,5194,5058,9809,545Stock-based compensation13283050Other (income)(9,214)(8,115)(13,369)(8,425)(1,074)5672,1739,265Operating income10,7987,28017,5945,886Finance costs4678281214Finance income29981338615Income before income taxes11,0517,28317,6516,287Income tax expense1,9431,1063,233831Net income and total comprehensive income$9,108$6,177$14,418$5,456Net income per shareBasic$0.41$0.28$0.65$0.24Diluted$0.41$0.28$0.64$0.24Weighted average number of CommonShares outstanding - basic22,318,13122,316,76722,318,13122,316,767Shares outstanding - diluted22,416,73222,316,76722,416,73222,316,767VECIMA NETWORKS INC.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(unaudited - in thousands of Canadian dollars)Share CapitalReservesRetainedEarningsTotalBalance as at June 30, 2011$34,482$2,678$89,735$126,895Net income and total comprehensive income--5,4565,456Share-based payment expense-50-50Balance as at December 31, 2011$34,482$2,728$95,191$132,401Balance as at June 30, 2012$34,482$2,761$103,001140,244Net income and total comprehensive income--14,41814,418Shares issued by exercising options5--5Share-based payment expense-30-30Balance as at December 31, 2012$34,487$2,791$117,419$154,697VECIMA NETWORKS INC.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited - in thousands of Canadian dollars)Three months endedSix months endedDecember 31,December 31,2012201120122011Cash flows from operating activitiesNet income$9,108$6,177$14,418$5,456Add (deduct) items not requiring cashGain on the sale of property, plant and equipment-(257)14(270)Gain on the sale of assets held for resale--(3,604)-Gain on sale of intangible assets(9,005)(7,644)(9,358)(7,723)Depreciation of property, plant and equipment1,2451,3252,4202,608Amortization of deferred development costs5621,2801,1172,520Amortization of finite-life intangible assets36427383Stock-based compensation13283050Deferred income tax expense7664481,996173Income tax expense1,1776581,237658Interest expense4678104214Interest income(65)(20)(105)(45)(Decrease) increase in other long-term liabilities(80)18766157(Decrease) increase in provisions(92)(331)(193)316Increase in investment tax credit asset(3,094)(499)(3,276)(633)Net change in non-cash working capital relating to operations8,416(4,228)9,636(627)Interest paid(49)(65)(95)(194)Income tax paid(242)-(1,129)-Interest received6420101458,806(2,801)13,4522,788Cash flows provided by investing activitiesPurchase of property, plant and equipment(617)(790)(1,256)(1,711)Proceeds from the sale of property, plant and equipment611,421611,560Proceeds from the sale of assets held for resale--3,989-Proceeds from the sale of intangible assets9,3758,0979,7388,247Purchase of marketable securities(1,966)4(15,974)4Deferred development costs(1,876)(1,030)(3,990)(3,235)Purchase of indefinite and finite-life intangible assets(5)-(8)(14)4,9727,702(7,440)4,851Cash flows used in financing activitiesProceeds from shares issued through exercised options3-5-Repayment of long-term debt(84)(63)(146)(125)(81)(63)(141)(125)Increase in cash during the year13,6974,8385,8717,514Cash and cash equivalents, beginning of year11,7237,77119,5495,095Cash and cash equivalents, end of year$25,420$12,609$25,420$12,609FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Vecima Networks Inc.Investor Relations250-881-1982invest@vecima.comwww.vecima.com