Vecima Achieves All-Time High Q2 Fiscal 2022 Results

• Record Revenue: $43.6M (up 47% YoY and 35% QoQ)
• Record Gross Profit: $21.8M (up 48% YoY and 39% QoQ)
• Gross Margin: 50.1%, Cash Balance: $10.3M
• Adjusted EBITDA of $7.4M (up 201% YoY and 72% QoQ)
• Video and Broadband Solutions sales climb 65% YoY to $27.2M
• Record Content Delivery and Storage sales of $15.0M (up 27% YoY and 121% QoQ)

Vecima Networks Inc. (TSX: VCM) today reported financial results for the three and six months ended December 31, 2021.

FINANCIAL HIGHLIGHTS

“Vecima’s momentum accelerated to the next level in the second quarter as surging demand for our industry-leading Entra Distributed Access Architecture (DAA) and MediaScaleX IPTV solutions drove year-over-year organic sales growth of 47% and resulted in consolidated revenue of $43.6 million, the best quarterly sales result in Vecima’s 33-year history,” said Sumit Kumar, Vecima’s President and Chief Executive Officer.

“Our phenomenal top-line performance carried through with leverage to our bottom line, with second quarter adjusted EBITDA nearly tripling year-over-year to $7.4 million or 17.1% of sales, gross profit climbing 48% to $21.8 million, and adjusted earnings per share growing to $0.06. These are significant achievements that reflect not only the rapidly growing demand for our next-generation products, but also our disciplined approach to OpEx, inventory and supply chain management in a period of supply challenges never-before-seen across the tech sector.”

“As anticipated, second quarter results were led by our Video and Broadband Solutions segment and a record quarter for our Entra DAA portfolio,” added Mr. Kumar. “Despite ongoing supply chain hurdles, Entra revenue grew 130% year-over-year to $18.5 million as we continued to deploy with a growing roster of Tier 1, 2, and 3 customers. A wide array of broadband service providers have begun their transition to Distributed Access Architecture, with Vecima’s pioneering and market-leading DAA technology underpinning the evolution to the multi-gigabit broadband internet era. Our Content Delivery and Storage segment added to the momentum, setting a new quarterly segment record of $15.0 million on robust demand across the full MediaScaleX IPTV product family.”

“While it was already a ground-breaking quarter for Vecima, I want to emphasize that the cable and broadcast industries are still in the early stages of the transformative shift to Distributed Access Architecture and IPTV. We see significantly greater growth potential ahead, including multiple investment cycles for our industry-leading platforms. Accordingly, as we begin to capture the rewards of the first wave of network transformations, we are already investing in the next. This includes not only the numerous new products and feature enhancements we introduced in the second quarter, but also importantly, future-defining advancements we are making, such as our recent DOCSIS 4.0 milestone with Charter Communications. We demonstrated industry-first and leading multi-gigabit symmetrical broadband speeds over widely-deployed and highly-leverageable coaxial cable infrastructure, making 10G a reality.”

“I am pleased to report that we ended the second half in very strong financial shape, with $10.3 million of cash, working capital of $42.5 million, and virtually no debt. Our strong balance sheet, strategic investment in growth inventory, and available liquidity positions us to continue supporting our rapid growth and next-generation technology development as we pursue the truly outstanding opportunities in the worldwide DAA and IPTV markets,” said Mr. Kumar.

BUSINESS HIGHLIGHTS

Video and Broadband Solutions (VBS)

The VBS segment delivered exceptional revenue performance of $27.2 million, up 65% year-over-year and 12% quarter-over-quarter as customers continued to transition to next-generation networks using Vecima’s platforms.

DAA (Entra family)

• Deployments of next-generation Entra DAA products grew to a record $18.5 million, up 130% year-over-year and 2% quarter-over-quarter

• Total customer engagements for Entra increased to 80 MSOs worldwide, from 77 at the end of Q1 fiscal 2022. Forty-three of these customers have now ordered Entra products, up from 39 last quarter
  • Selected by GCI, Alaska’s largest telecommunications company, to deliver multi-gigabit speed to its customers via the Entra 10G EPON DAA solution
  • Chosen by Wyandotte Municipal Services to provide an Entra 10G EPON network as the cornerstone to this customer’s new Fiber-to-the-Home (FTTH) offering
  • Subsequent to the quarter-end, announced that Liberty Latin America has selected the Entra Remote MACPHY DAA solution across its properties to support its expansion to next-generation ultra-broadband services
• Continued to expand Entra’s leading capabilities for the future:
  • In October, Vecima, in partnership with Charter Communications, demonstrated the long-term hybrid fiber-coaxial (HFC) network future with multi-gigabit DOCSIS 4.0. The demonstration achieved industry-leading >8.5 Gbps downstream and >6 Gbps upstream with 1.8 GHz DOCSIS 4.0 Frequency Division Duplexing (FDD)
  • Launched the industry’s highest capacity Remote MACPHY module, the Entra EMM324, at SCTE Cable-Tec Expo
  • Announced the world’s first commercially available Generic Access Platform (GAP) node, the EN9000, supporting Remote MACPHY and 1.8 GHz DOCSIS 4.0 with up to four service groups
  • Leveraged input from Vecima’s fast-growing roster of DAA-deploying customers and engagements to add a broad set of enhancements and features that further differentiate the Entra DAA portfolio as customers ramp scale deployments and look to magnify the many benefits of DAA
• Received high-profile industry recognition underscoring Vecima’s market-leading position
  • Highlighted by world-leading Tier 1 operators in the SCTE Cable-Tec Expo keynote session as a leading next-generation vendor and strategic partner, helping to enable the industry’s next leap in broadband
  • Subsequent to the quarter-end, Vecima was recognized by the Dell’Oro Group as the industry’s market share leader in Remote MACPHY and Remote Optical Line Terminal FTTH product groups

Commercial Video (Terrace family)

• Commercial Video sales increased to $8.7M in the second quarter, up 4% year-over-year and 42% quarter-over-quarter
  • Terrace QAM sales grew to $4.9 million, an increase of 61% year-over-year and 3% quarter-over-quarter, with the lead customer continuing its scale hospitality program with the platform while preparing for migration to TerraceIQ
  • Terrace family sales contributed solid Q2 revenue of $3.8 million, a quarter-over-quarter increase of 178%
  • Introduced additional IP streaming formats and DRM functionality to our innovative next-generation TerraceIQ platform, which further broadens support for unique customer-by-customer needs for IPTV adaptation and distribution in commercial premises

Content Delivery and Storage (CDS)

• Achieved record CDS sales of $15.0 million, up 27% from $11.8 million in the prior-year period and an increase of 121% sequentially from $6.8 million in Q1 fiscal 2022
• Significantly expanded systems sales with multiple customers as operators forge ahead and reap the benefits of IP video deployments while rolling out to more subscribers:
  • Secured largest IPTV network win to date for MediaScaleX
  • Won new IPTV customer serving Eastern Canada
  • Selected by Buckeye Broadband to replace a legacy Video on Demand (VOD) network with Vecima’s MediaScaleX, offering a next-generation IPTV architecture and migration path
  • Subsequent to the quarter-end, Breezeline (formerly Atlantic Broadband), announced that it has chosen MediaScaleX to power its IPTV video delivery solution and accelerate the next-generation TV experience to its subscribers
• In January 2022, successfully completed interoperability tests for MediaScaleX as part of the Streaming Video Alliance (SVA) Open Caching Initiative. This is a key step to enabling open caching solutions to distribute over-the-top content at the highest quality, working with Vecima’s customers and their over 100 million subscribers worldwide

Telematics

• Multiple additional deployments in high-value verticals, such as municipal government and moveable asset customers
• Added 12 new customers for the NERO asset tracking platform, with number of moveable assets being monitored rising significantly to over 16,000 units
• Achieved trailing 12-month adjusted EBITDA of $1.95M and adjusted EBITDA margin of 35%

“As we move into the second half, we see a continued escalation of the high demand for our products, tempered only by the constraints of ongoing worldwide supply chain issues and materials shortages,” said Mr. Kumar.

“With the industry’s strongest and most relevant portfolio of DAA and cable access solutions, expanding relationships with 80 cable operators worldwide, and a growing volume of customer purchase orders and forecasts providing excellent and high demand visibility, we expect Entra family product orders to continue to build through the balance of the year and remain our leading sales generator in fiscal 2022.”

“In our Content Delivery and Storage segment, demand for our IPTV solutions remains robust and we anticipate another strong quarter in Q3. On a full-year basis, we continue to anticipate high single-digit to low double-digit sales growth from this segment in fiscal 2022.”

“We once again reiterate our caution that the significant current global supply chain challenges could temper our growth and margin potential in the near-term. However, the opportunities in both the DAA and IPTV markets are enormous and Vecima is exceptionally well-positioned to capitalize on them over an expected multi-year cycle of investment into the broadband access network,” 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 March 28, 2022 to shareholders of record as at February 25, 2022.

CONFERENCE CALL

A conference call and live audio webcast will be held today, February 10, 2022 at 1 p.m. ET to discuss the Company’s second quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three and six months ended December 31, 2021 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/vecima20220210.html and will be archived on the Vecima website at https://vecima.com/investor-relations/earnings-call-archive/

About Vecima Networks

Vecima Networks Inc. is a global leader focused on developing integrated hardware and scalable software solutions for broadband access, content delivery, and telematics. We enable the world's leading innovators to advance, connect, entertain, and analyze. We build technologies that transform content delivery and storage, enable high‑capacity broadband network access, and streamline data analytics. For more information, please visit our website 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 second 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: Vecima’s momentum accelerated to the next level in the second quarter as surging demand; these are significant achievements that reflect not only the rapidly growing demand for our next-generation products, but also our disciplined approach; as anticipated, second quarter results were led by our Video and Broadband Solutions segment and a record quarter for our Entra DAA portfolio; a wide array of broadband service providers have begun their transition to Distributed Access Architecture, with Vecima’s pioneering and market-leading DAA technology underpinning the evolution to the multi-gigabit broadband internet era; while it was already a ground-breaking quarter for Vecima, the cable and broadcast industries are still in the early stages of the transformative shift to Distributed Access Architecture and IPTV; we see significantly greater growth potential ahead, including multiple investment cycles for our industry-leading platforms; our strong balance sheet, strategic investment in growth inventory, and available liquidity positions us to continue supporting our rapid growth and next-generation technology development as we pursue the truly outstanding opportunities in the worldwide DAA and IPTV markets; as we move into the second half, we see a continued escalation of the high demand for our products, tempered only by the contraints of ongoing worldwide supply chain issues and materials shortages; with the industry’s strongest and most relevant portfio of DAA and cable access solutions, expanding relationships with 80 cable operators worldwide, and a growing volume of customer purchase orders and forecasts providing excellent and high demand visibility, we expect Entra family product orders to continue to build through the balance of the year and remain our leading sales generator in fiscal 2022; in our Content Delivery and Storage segment, demand for our IPTV solutions remains robust and we anticipate another strong quarter in Q3; on a full-year basis, we continue to anticipate high single-digit to low double-digit sales growth from this segment in fiscal 2022; we once again reiterate our caution that the significant current global supply chain challenges could temper our growth and margin potential in the near-term; the opportunities in both the DAA and IPTV markets are enormous and Vecima is exceptionally well-positioned to capitalize on them over an expected multi-year cycle of investment into the broadband access network.

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 23, 2021, 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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