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"Vecima
ended the third quarter with a very healthy sequential revenue growth of
7% over Q2," said Dr. Surinder Kumar, Chairman and CEO. "The Canadian
dollar strengthened by 2% relative to the US dollar from Q2 to Q3 and
without this effect, revenue would have grown 9% sequentially. Vecima
grew revenue by 49% to $30 million in the third quarter compared to the
same period last year, despite the dramatic strengthening of the
Canadian dollar by 11% between these periods. This is an indication of
continued recovery and is in line with a general strengthening of
forecasts."
Fiscal 2010 Q3 financial highlights:
- revenue increased by 49% to $30.0 million in Q3 compared to $20.1
million in the same quarter last year;
- gross margin in the third quarter decreased to 35%, providing a gross
profit of $10.5 million, compared with a gross margin of 48% for the
three months ending March 31, 2009 that provided a gross profit of $9.6
million. This decline was driven by the mix of products manufactured and
by the strengthening of the Canadian dollar since last year;
- operating expenses for the three months ended March 31, 2010 was $10.7
million, or 36% of sales, compared to $8.3 million, or 41% of sales, for
the three months ended March 31, 2009;
- net income for the third fiscal quarter decreased 30% to $0.9 million,
compared with $1.2 million in the three months ended March 31, 2009.
In the 2010 fiscal year we have made progress on a number of fronts
including:
- signing a multi-year worldwide supply agreement with a major
networking company to private label and exclusively sell a platform
providing encrypted High Definition (HD) video to newer flat panel
HDTVs. The contract calls for a minimum of $10 to $15 million annual
revenue and allows Vecima the rights to sell the platform directly to a
single leading US-based multiple system operator (MSO). Driven by the
upcoming large scale transition to HD in hotels, the market is expected
to grow to a cumulative $600 million worldwide over the next ten years
and creates opportunities for operators to deploy all-digital services
to new market segments. Vecima is carrying on an extensive field trial
for the platform in parallel with certification testing at both the MSO
and the large original equipment manufacturer (OEM) customer for
worldwide sales;
- shipping healthy volumes of our world leading TerraceA solution
throughout the first nine months of fiscal 2010. Our TerraceA multiunit
digital transport adaptor (M-DTA) is in rapid deployment in multiple
North American cable systems. The TerraceA delivers breakthrough
technology to provide a headend quality line-up of services at the entry
to multiple dwelling units and allows the MSO to create the capacity for
hundreds of HD channels or gigabits per second of high speed data as
part of the all-digital transition. All major MSOs are deploying
TerraceA or are certifying the product and expect to deploy in the near
term. Currently, 17 North American MSOs have deployed the TerraceA, 19
additional North American MSOs are evaluating the product, and we expect
to launch additional evaluation trials in the next few months;
- expanding the deployment of our custom-designed 700 MHz solution to
Telebec, a member of Bell Aliant, for wide-spread wireless broadband
service in rural Quebec;
- we previously announced that Vecima had sold a portion of its wireless
spectrum asset to a Canadian wireless internet service provision
company. An additional 3% of Vecima's total spectrum holding was sold in
the third quarter for approximately $1.2 million. Vecima has now sold
about 9% of the Company's total wireless spectrum holdings for
approximately $3.5 million. Vecima's wireless spectrum is a very
valuable asset which the company believes will appreciate. As previously
announced, part of Vecima's growth strategy involves maximizing and
monetizing the value of our non-core assets, such as some real estate
and wireless spectrum holdings. We now have an agreement to sell one of
the two buildings we own in Victoria for a capital gain of about $1.5
million. We have initiated design of our new headquarters building in
Colwood as previously announced and will continue to pursue
opportunities to sell our commercial spectrum and real estate assets and
derive value for shareholders from these assets as economic conditions
improve;
- in November we announced the beginning of a full-scale deployment of
our 3.5 GHz WiMAX equipment by one of Canada's largest oil production
and distribution companies in a multi- million dollar, 3-year program to
bring most of its system onto this modern 4G data network. In the third
quarter, the Company received additional commitment from our customer
more than doubling the size of the current deployment as forecasted in
our November announcement. Vecima's solution delivers a sophisticated
network while producing significant operations cost savings for the
company by adding advanced applications including SCADA, remote office
data management, well site security, real time video surveillance and IP
based communication. This is strong evidence of the effectiveness of our
solution for this growing market segment;
- in November Vecima announced an agreement with SaskTel to install and
operate a new network providing residential broadband internet service
to 12 underserved remote communities. The deployment was initiated in
the third quarter utilizing Vecima's tower construction services and
wireless products. Vecima remains committed to expanding wireless
broadband access in Canadian rural communities and is pleased that this
deployment will help fulfill that objective;
- in addition to the deployments already mentioned, we have made
significant progress towards further deployments of our broadband
wireless WiMAX family of products in the utility and resource markets.
In addition to the utility and resource sectors, Vecima's WiMAX products
are currently deployed by 44 Internet Service Providers; and
- Vecima has staged 1.8 GHz WiMAX compliant live trials for Canadian
electric utilities that have special rights to license this frequency.
Vecima has also set up a demonstration of smart metering and smartgrid
applications utilizing Vecima's WiMAX technology at our Saskatoon RND
facility. The demonstration includes applications such as meter reading
and data collection, IP video surveillance, Voice over IP, and WiMAX
backhaul.
Outlook:
Vecima's business fundamentals remain strong and the Company is well
positioned to capitalize on opportunities as macroeconomic conditions
continue to improve. We remain committed to executing our growth
strategy and generating continued improvements in financial performance
as the economy recovers in 2010.
The Company's full consolidated financial statements and management's
discussion and analysis for the three months and nine months ended March
31, 2010 are posted on www.SEDAR.com.
Vecima's consolidated financial statements and accompanying notes for
the three months and nine months ended March 31, 2010 are available at
http://www.vecima.com/financials_ir.php.
A conference call and live audio webcast will be held on May 13, 2010 at
1 p.m. ET to discuss the results. To participate in the teleconference,
dial 800-291-5365 or 617-614-3922 and enter the code 89327959. The third
quarter fiscal 2010 earnings call webcast is available 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. www.vecima.com
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