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Press release from Marketwire

Vecima Reports Q3 Fiscal 2013 Results

Improved Gross Margin Drives Adjusted EBITDA 15% Higher

Tuesday, May 14, 2013

Vecima Reports Q3 Fiscal 2013 Results

08:00 EDT Tuesday, May 14, 2013

VICTORIA, BRITISH COLUMBIA--(Marketwired - May 14, 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 March 31, 2013. 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) Q3FY2013 Q2FY2013 Q3FY2012
Revenue $ 21.6 $ 23.6 $ 25.8
Gross Margin 44 % 41 % 35 %
EBITDA1 $ 4.6 $ 12.9 $ 9.6
Adjusted EBITDA1 (removes gains on sale of assets and stock-based compensation) $ 4.5 $ 3.9 $ 2.7
Net Income $ 2.0 $ 9.1 $ 6.2
Earnings per share (based on weighted average number shares outstanding $ 0.09 $ 0.41 $ 0.28
Cash and marketable securities $ 25.0 2 $ 41.4 $ 14.1
Headcount 596 617 612
1 EBITDA 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.
2 Cash and marketable securities totaled $25.0 million at March 31, 2013. The Company completed a special cash distribution on March 27, 2013 of approximately $22.3 million.

"Gross margin improved to 44% and this is the third consecutive quarter with margins exceeding 40%," said Dr. Surinder Kumar, CEO of Vecima.

Adjusted EBITDA increased to $4.5 million in Q3 up from $3.9 million in Q2 despite revenue dropping by approximately $2 million as lower margin product transitioned to end of life. The improvement was primarily driven by an increase in the volume of newer, higher margin products sold. Vecima recorded earnings per share of $0.09 for the quarter.

"Our MSO Business Services products continue to be major contributors to our overall revenue. Vecima experienced an almost 50% increase in Terrace QAM sales in Q3 compared to the prior quarter," stated Kumar. At quarter end, cash and marketable securities totaled $25.0 million even after the Company completed a special cash distribution earlier in the quarter of approximately $22.3 million.

MSO BUSINESS SERVICES

Terrace Family

  • Sales decreased to $5.0 million compared to $6.8 million in Q2 FY13.

  • As expected, Terrace Family revenue has leveled off from its peak in FY12 which was attributed to pent up demand for a new version from our MSO customers.

Terrace QAM

  • Sales increased 48% from $5.0 million in Q2 FY13 to $7.3 million this quarter. The increase is attributed to greater uptake by MSO customers who are rapidly deploying high definition video services within the hospitality market space.

CABLE HEADEND

OEM QAM Modules

  • As the product continues to move towards end of life, we saw sales drop to $0.4 million in Q3.

OEM Return Path Demodulator and CableVista

  • Sales for our OEM return path demodulator increased from $1.2 million to $1.5 million; while CableVista sales decreased from $1.5 million to $1.1 million from Q2 to Q3 FY13.

Digital Broadband Access Platform

  • Our new digital broadband access platform progressed through multiple MSO end customer trials which were led by our OEM customer during Q3. Feedback has been very positive and we expect to start shipping in commercial volume during Q4 FY13.

FLEET MANAGEMENT - FLEETLYNX

  • Subsequent to Q3, the Company hired a General Manager for its FleetLynx product line to intensify focus on the commercial rollout and to capitalize on customer opportunities.

BROADBAND WIRELESS

  • Sales increased from $2.1 million in Q2 FY13 to $2.4 million this period. The increase is attributed to an improvement in software defined radio sales.

YOURLINK

  • Revenue remained relatively flat at $3.2 million for Q3 FY13.

OUTLOOK

We expect our FY13 gross margins will be above our historical range of 35 to 40%. As a result of improving margins and controlling costs, we expect our FY13 adjusted EBITDA will improve by over 40% versus FY12. We are lowering our estimate for capital expenditures for FY13 to be in the range of $2.8 million to $3.5 million.

We expect our cash position to further strengthen in future quarters.

CONFERENCE CALL

A conference call and live audio webcast will be held on May 14, 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 March 31, 2013 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/vecima140513.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)


March 31,
2013

June 30,
2012
Assets
Current assets
Cash and cash equivalents $ 14,471 $ 19,549
Marketable securities 10,577 -
Accounts receivable 14,588 23,818
Income tax receivable 4,459 13,600
Inventories 29,922 29,663
Prepaid expenses 1,127 1,076
75,144 87,706
Non-current assets
Property, plant and equipment 26,160 28,158
Assets held for resale - 385
Intangible assets 12,287 10,819
Investment tax credit asset 36,416 30,384
Deferred tax asset 2,313 5,129
$ 152,320 $ 162,581
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 9,721 $ 13,653
Provisions 761 974
Income tax payable 568 806
Deferred revenue 1,477 1,311
Current portion of long-term debt 250 250
12,777 16,994
Non-current liabilities
Other long-term liabilities 355 342
Provisions 1,478 1,522
Long-term debt 3,292 3,479
17,902 22,337
Shareholders' equity
Share capital 12,183 34,482
Reserves 2,800 2,761
Retained earnings 119,435 103,001
134,418 140,244
$ 152,320 $ 162,581
The accompanying notes are an integral part of these condensed interim consolidated financial statements
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited - in thousands of Canadian dollars except net income per share data)
Three months ended
March 31,
Nine months ended
March 31,
2013 2012 2013 2012
Sales $ 21,630 $ 25,838 $ 70,133 $ 67,055
Cost of sales 12,010 16,709 40,746 42,775
Gross margin 9,620 9,129 29,387 24,280
Operating expenses
Research and development 1,823 2,893 5,976 8,741
Sales and marketing 1,369 1,567 3,748 3,814
General and administrative 4,462 4,585 13,442 14,130
Stock-based compensation 9 16 39 66
Other (income) (266 ) (7,118 ) (13,635 ) (15,543 )
7,397 1,943 9,570 11,208
Operating income 2,223 7,186 19,817 13,072
Finance costs 52 58 333 272
Finance income 556 220 894 835
Income before income taxes 2,727 7,348 20,378 13,635
Income tax expense 711 1,192 3,944 2,023
Net income and
total comprehensive income $ 2,016 $ 6,156 $ 16,434 $ 11,612
Net income per share
Basic $ 0.09 $ 0.28 $ 0.74 $ 0.52
Diluted $ 0.09 0.28 $ 0.73 $ 0.52
Weighted average number of Common
Shares outstanding - basic 22,322,328 22,316,767 22,322,328 22,316,767
Shares outstanding - diluted 22,455,545 22,316,767 22,455,545 22,316,767
The accompanying notes are an integral part of these condensed interim consolidated financial statements
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited - in thousands of Canadian dollars)
Share
Capital

Reserves
Retained
Earnings

Total
Balance as at June 30, 2011 $ 34,482 $ 2,678 $ 89,735 $ 126,895
Net income and total comprehensive income - - 11,612 11,612
Share-based payment expense - 66 - 66
Balance as at March 31, 2012 $ 34,482 $ 2,744 $ 101,347 $ 138,573
Balance as at June 30, 2012 $ 34,482 $ 2,761 $ 103,001 $ 140,244
Net income and total comprehensive income - - 16,434 16,434
Shares issued by exercising options 23 - - 23
Return of capital to shareholders (22,322 ) - - (22,322 )
Share-based payment expense - 39 - 39
Balance as at March 31, 2013 $ 12,183 $ 2,800 $ 119,435 $ 134,418
VECIMA NETWORKS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited - in thousands of Canadian dollars)
Three months ended
March 31,
Nine months ended
March 31,
2013 2012 2013 2012
Cash flows from operating activities
Net income $ 2,016 $ 6,156 $ 16,434 $ 11,612
Add (deduct) items not requiring cash
Gain on the sale of property, plant and equipment (44 ) (5 ) (30 ) (275 )
Gain on the sale of assets held for resale - - (3,604 ) -
Gain on sale of intangible assets - (6,896 ) (9,358 ) (14,619 )
Depreciation of property, plant and equipment 1,201 1,401 3,621 4,009
Amortization of deferred development costs 559 779 1,676 3,299
Amortization of finite-life intangible assets 37 23 110 106
Stock-based compensation 9 16 39 66
Deferred income tax expense 820 310 2,816 483
Income tax (recovery) expense (109 ) 882 1,128 1,540
Interest expense 52 58 156 272
Interest income (220 ) (25 ) (325 ) (70 )
(Decrease) increase in other long-term liabilities (53 ) 149 13 306
(Decrease) increase in provisions (64 ) (44 ) (257 ) 272
Increase in investment tax credit asset (125 ) (335 ) (3,401 ) (968 )
Net change in non-cash working capital relating to operations (1,520 ) (5,997 ) 8,116 (6,621 )
Interest paid (25 ) (67 ) (120 ) (261 )
Income tax paid (237 ) - (1,366 ) -
Interest received 219 25 320 67
Income tax received 6,148 - 6,148 -
8,664 (3,570 ) 22,116 (782 )
Cash flows provided by investing activities
Purchase of property, plant and equipment (469 ) (772 ) (1,725 ) (2,483 )
Proceeds from the sale of property, plant and equipment 71 12 132 1,572
Proceeds from the sale of assets held for resale - - 3,989 -
Proceeds from the sale of intangible assets - 7,262 9,738 15,509
Purchase of marketable securities (26,276 ) - (42,250 ) -
Proceeds from the sale of marketable securities 31,673 - 31,673 4
Deferred development costs (2,255 ) (1,168 ) (6,245 ) (4,403 )
Purchase of indefinite and finite-life intangible assets (12 ) (191 ) (20 ) (205 )
2,732 5,143 (4,708 ) 9,994
Cash flows used in financing activities
Proceeds from shares issued through exercised options 18 - 23 -
Return of capital to shareholders (22,322 ) - (22,322 ) -
Repayment of long-term debt (41 ) (62 ) (187 ) (187 )
(22,345 ) (62 ) (22,486 ) (187 )
(Decrease) increase in cash during the year (10,949 ) 1,511 (5,078 ) 9,025
Cash and cash equivalents, beginning of year 25,420 12,609 19,549 5,095
Cash and cash equivalents, end of year $ 14,471 $ 14,120 $ 14,471 $ 14,120

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Vecima Networks Inc.
Investor Relations
250-881-1982
invest@vecima.com
www.vecima.com

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