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Vecima reports Q2 fiscal 2009
results
Other Topics: WiMAX
France Growth, Wireless IP
Backhaul Solutions
Vecima Networks Inc.
Feburary 12, 2009
Revenue up 33%, operating income more than triples from the first
half of last fiscal year
Victoria -- Vecima Networks Inc. ("Vecima" or "the Company") (TSX:VCM),
today reported its second quarter and six-month financial results for
the period ended December 31, 2008. (All dollar amounts are in Canadian
funds unless otherwise stated.) |
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Highlights:
-
34% increase in second quarter
revenue to $36.9 million compared with $27.4 million in fiscal 2008;
six month sales up 37% over the same period last fiscal year;
-
second quarter gross margin 47%
compared to 40% last year; first half gross margin of 49% in fiscal
2009 compared with gross margin of 40% in prior year period;
-
172% increase in operating income
in second quarter to $7.1 million from $2.6 million last year; 226%
increase in operating income to $17.8 million in the six month
period ended December 31, 2008 compared with $5.4 million in the
same period last fiscal year;
-
33% year-over-year growth in
converged wired products for the second quarter reflecting rising
worldwide demand for broadband access; 47% increase year-to-date
compared to the first six months of last fiscal year;
-
46% year-over-year increase in
broadband wireless sales from the second quarter last year;
-
YourLink sales increased 26% to
$2.8 million in the second quarter compared to $2.2 million in the
three months ended December 31, 2007; year-to-date YourLink revenue
is up 25% to $5.2 million compared to $4.1 million for the first
half of last fiscal year;
-
announced a multi-year
engineering, supply and maintenance contract with a leading,
US-based Cable multiple system operator (MSO) for a new product for
all-digital cable networks;
-
launched VistaMAX, an
FCC-certified, 3.65 GHz, WiMAX-compliant base and subscriber
stations;
-
signed supply agreement with
Cisco for next generation upconverter module for use in the CMTS
products; and
-
subsequent to quarter end,
announced partnership between Spectrum Signal Processing and LiveTV
LLC to supply next generation radios for LiveTV's connectivity
system permitting sending and receiving of email from aircraft while
in-flight.
"Strong continued demand from bandwidth infrastructure partners like
Cisco and Motorola combined with the ongoing need for major cable
companies to provide customers with additional bandwidth led to
significant growth in the second quarter," said Dr. Surinder Kumar,
Chairman and CEO. "While not immune to worsening macroeconomic
conditions, we have been able to effectively manage our operations and
generate solid improvements in revenue and gross margin, in excess of
historical levels, as we focused on some key opportunities in our
converged wired business. Looking ahead, we will focus on executing our
multi-prong growth strategy and working closely with key customers in an
effort to mitigate volatility in the near-term and generate continued
meaningful improvements in our financial performance over the
longer-term."
Financial Review
Total revenue for the second quarter was $36.9 million, an increase of
34% over sales in the second quarter of the previous fiscal year. Total
sales for the first half of fiscal 2009 increased by 37%, to $73.6
million, up from $53.8 million for the six months ended December 31,
2007.
Sales in the Converged Wired Solutions market increased 33%, to $26.9
million for the three months ended December 31, 2008, compared with
$20.3 million in the second quarter of fiscal 2008. Sales in this market
increased 47% to $56.2 million for the six months ended December 31,
2008, compared with $38.2 million last fiscal year. The increases came
from strong demand for edge decoders from Cable MSOs and solid sales of
data-over-cable internet transmitters to original equipment
manufacturers (OEMs).
Broadband Wireless sales increased 26% to $2.8 million for the second
quarter of this fiscal year, compared with $2.2 million for the three
months ended December 31, 2007. Wireless sales increased 7% to $12.3
million for the six months ended December 31, 2008 compared with $11.5
million for the first half of fiscal 2008. The increase in the second
quarter was driven by an increase in WiMAX sales and growth in shipment
of Broadband Wireless Internet Network (BWIN) equipment.
YourLink revenue increased 26% to $2.8 million for the three months
ended December 31, 2008, compared with $2.2 million in the second
quarter of fiscal 2008; and increased 25%, to $5.2 million, for the
six-month period, compared with $4.1 million in the same period last
fiscal year. Much of the YourLink revenue increase resulted from new
enterprise installations.
Gross margin was 47% in the second quarter, providing a gross profit of
$17.3 million, compared with a gross margin of 40% for the second
quarter of fiscal 2008 that provided a gross profit of $11.0 million.
Gross margin was 49%, providing a gross profit of $36.0 million for the
first six months of the 2009 fiscal year, compared with a gross margin
of 40% that provided a gross profit of $21.6 million for the six months
ended December 31, 2007. Product mix and manufacturing efficiencies
contributed to the increased gross margin.
Operating expenses for the second quarter this year increased 22% to
$10.2 million, compared with $8.3 million, for the same period in the
prior year. The increase included a 3% increase in research and
development and a 15% increase in sales and marketing expenses.
Operating expenses increased 13% to $18.2 million for the six months
ended December 31, 2008, compared with $16.1 million for the first six
months of the prior fiscal year. The change in operating expenses
included a 5% decrease in research and development reported on a GAAP
basis, from the significant increase in M-DTA development cost deferred
until commercial production commences, and an 8% increase in sales and
marketing expenses.
The operating expense margin for the second quarter of fiscal 2009 was
28% of revenue, compared with 30% of sales in the second quarter last
year. Strategic plans implemented in prior periods were successful in
delivering increased sales and reduced the operating expense margin.
Operating expenses for the first half of the 2009 fiscal year increased
to $18.2 million, or 25% of sales, compared with $16.1 million, or 30%
of sales, for the six months ended December 31, 2007.
With gross margin up, and operating expense margin down, operating
income for the second quarter of fiscal 2009 increased 172% to $7.1
million, or $0.31 per share, compared with $2.6 million, or $0.11 per
share for the three months ended December 31, 2007. Operating income for
the six months ended December 31, 2008 increased 226% to $17.8 million,
or $0.77 per share, compared with $5.4 million, or $0.23 per share, for
the first six months of fiscal 2008.
Deteriorating global economic conditions in recent months have brought
high levels of volatility to the currency market, which has made
managing foreign exchange very challenging. Vecima previously entered
into forward foreign exchange transactions to lock-in the value of
United States dollars it would be receiving on expected US dollar
receipts at rates available in its first fiscal quarter. Those rates
were much lower than at exercise and foreign exchange losses resulted in
a significant decrease in net income before taxes.
The foreign exchange loss for the six months ended December 31, 2008 was
$5.3 million compared to a gain of $0.3 million in the same period last
fiscal year. Of the total loss, $3.7 million resulted from the
mark-to-market of forward hedges falling due in the third and fourth
quarters of fiscal 2009.
Since we have marked-to-market our foreign exchange contracts maturing
from January to June, 2009, bottom-line impacts of foreign exchange
movements should be substantially reduced in upcoming quarters.
For the three months ended December 31, 2008, management's disciplined
focus on expense containment translated into net income of $1.0 million,
or $0.04 per share, down from $2.0 million, or $0.09 per share, in the
second quarter last year. Vecima's net income increased 106% to $8.8
million, or $0.38 per share, for the six months ended December 31, 2008
compared with $4.3 million, or $0.18 per share, for the same period last
fiscal year.
Working capital remained strong at $59.8 million at December 31, 2008,
up from $51.7 million as at June 30, 2008. Total assets increased 6% to
$153.7 million at December 31, 2008 compared to $144.4 million at June
30, 2008.
As at December 31, 2008, the Company had outstanding a total of
22,964,000 common shares.
Outlook
Vecima generated outstanding results for the first half of the 2009
fiscal year. Consumer appetite for bandwidth and digital video streaming
has caused increased demand for infrastructure products for digital
television and data-over-cable services. The Company has implemented
process improvements and increased production staff levels in Saskatoon
and Victoria. Dedicated efforts by employees allowed Vecima to deliver
record production in the first half of fiscal 2009 while laying a solid
foundation for continued growth in the future periods.
New product introductions, greater success within its acquired business
units and growing demand for existing products have allowed Vecima to
generate 30% growth in revenue compounded annually over the past five
fiscal years. The compound annual growth rate of ordinary profit over
the same time period has been 33%.
Vecima is not immune to current macroeconomic conditions and is seeing
signs of softening demand as end customers conserve cash by reducing
capital purchases. Market conditions have affected visibility and
shipment requirements forecasting by our major customers, which will add
even more 'lumpiness' to quarterly results than the Company has
experienced in the past. However, based on contracted and expected sales
to major customers and the introduction of the new M-DTA product, the
Company expects it will continue to grow revenue in fiscal 2009 at
historical levels of 20% to 30% on an annual basis.
Vecima continues to strengthen its balance sheet by increasing capital
assets, growing retained earnings and reducing the draw on its bank line
of credit. In the first half of the 2008 fiscal year, the Company
generated $13.9 million in cash from operations that improved its cash
position by $5.2 million, in addition to investing $5.4 million in
capital assets, paying $4.6 million in deferred development costs and
repurchasing $0.1 million in shares through a Normal Course Issuer Bid.
These investments will allow Vecima to continue to improve manufacturing
capacity, fuel the research and development and sales pipelines and
provide increased benefit to shareholders.
The Company's full consolidated financial statements and management's
discussion and analysis for the three months and six months ended
December 31, 2008 is posted on www.SEDAR.com.
Vecima's consolidated financial statements and accompanying notes for
the three months and six months ended December 31, 2008 are available at
http://www.vecima.com/financials_ir.php. A conference call and live
audio webcast will be held on February 12, 2009 at 11 a.m. EST to
discuss the results. To participate in the teleconference, dial
617-213-8892 or 866-271-0675 and enter the code 69685997. The second
quarter fiscal 2009 earnings call webcast is available at
http://www.vecima.com/events_ir.php.
All dollar amounts are in Canadian dollars.
About Vecima Networks
Vecima Networks Inc. (TSX:VCM) designs, manufactures and sells products
that enable broadband access to cable, wireless, fibre 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 worldwidebroadband 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. www.vecima.com
Forward-Looking Statements
Certain statements in this news release may constitute forward-looking
statements which involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially
different from any future results, performance or achievements expressed
or implied by such forward-looking statements. When used in this news
release, such statements are generally identified by the use of such
words as "may", "will", "expect", "believe", "plan", "intend" and other
similar terminology. These statements reflect Vecima's current
expectations regarding future events and operating performance and speak
only as of the date of this news release.
Forward-looking statements involve significant risks and uncertainties,
should not be read as guarantees of future performance or results, and
will not necessarily be accurate indications of whether or not such
results will be achieved. A number of factors including, but not limited
to, the factors discussed under "Risk Factors" in the Company's Annual
Report dated September 25, 2008 available on SEDAR (www.sedar.com),
could cause actual results to differ materially from the results
discussed in the forward-looking statements. Although the
forward-looking statements contained in this news release are based upon
what management of the Company believes are reasonable assumptions, the
Company cannot assure investors that actual results will be consistent
with these forward-looking statements. These forward-looking statements
are made as of the date of this news release, and the Company assumes no
obligation to update or revise them to reflect new events or
circumstances. |
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