- Operating income increased 71% over fiscal 2007 -
VICTORIA, Sept. 25 /CNW/ - Vecima Networks Inc. ("Vecima" or "the
Company") (TSX:VCM), today reported its fourth quarter and annual financial
results for the twelve months ended June 30, 2008. (All dollar amounts are in
Canadian funds unless otherwise stated.)
Highlights for the fourth quarter included:
- 38% increase in total revenue to $36.4 million in 2008 compared to
$26.3 million in 2007;
- Increased gross margin to 45% in 2008 compared with gross margin
of 39% last year;
- A 368% increase in operating income to $8.2 million for 2008
compared to $1.8 million for 2007
- 40% increase in net income before extraordinary gains to
$4.4 million in 2008 compared with $3.2 million in 2007;
- EPS before extraordinary gains for the quarter increased to $0.18
in 2008 compared with $0.14 last year; and
- 68% year-over-year growth in converged wired products reflects
rising worldwide demand for broadband access.
- Products shipped increased by 32% to 52,000 units from
39,500 units shipped in the third quarter.
- 46 new staff joined the Company, up 6% from the third quarter
"Strong demand from bandwidth infrastructure partners like Cisco and
Motorola and the need for major cable companies to provide customers
additional bandwidth led to significant growth," said Dr. Surinder Kumar,
Chairman and CEO. "We generated improved financial performance in both the
quarter and year periods across virtually every meaningful metric. These
results highlight our ability to meet the expanding needs of our customers and
execute on our growth strategy for our core businesses."
Fourth Quarter Financial Review
Total revenue for the fourth quarter was $36.4 million, an increase of
38% over sales in the fourth quarter of the previous fiscal year. The
sequential revenue growth from the third to the fourth quarter was 20%.
Sales in the Converged Wired Solutions market increased 68%, to
$28.8 million for the three months ended June 30, 2008, compared with
$17.2 million in the fourth quarter of fiscal 2007. Converged Wired Solutions
sales for the fourth quarter last year is the sum of sales in the former core
market categories of Data over Cable and Digital Video. The Company
experienced very strong demand for high-speed internet-over-cable data
transmitter modules from its original equipment manufacturers (OEMs). Vecima
also enjoyed strong sales of edge devices to multiple-system operators (MSOs)
and its new return path demodulator to OEMs.
To support increased demand for upconverter modules and other products
for major OEM customers, Vecima reduced production of wireless products.
Broadband Wireless sales decreased $2.0 million to $5.0 million for the fourth
quarter this fiscal year, compared to $7.0 million for the three months ended
June 30, 2007.
YourLink revenue increased 20% to $2.5 million for the three months ended
June 30, 2008, compared with $2.1 million in the fourth quarter of fiscal
2007. Much of the YourLink revenue increase resulted from significant
increases in enterprise installations.
Gross margin increased to 45% in the fourth quarter, providing a gross
profit of $16.3 million, compared with a gross margin of 39% for the fourth
quarter fiscal 2007 that provided a gross profit of $10.1 million. An increase
in manufacturing efficiencies helped offset the effects of the strong Canadian
Research and development expenses for the fourth quarter this year
decreased to $1.0 million, or 3% of revenue, compared to $2.9 million, or 11%
of revenue, for the same period in the prior year. The decrease included
$1.7 million in Technology Partners Canada (TPC) funding that directly reduces
GAAP R&D expense. Total research and development costs, net of deferrals,
amortization of deferred development costs, income tax credits and TPC funding
for the fourth quarter of fiscal 2008 were $5.3 million, or 10% of sales, up
from $3.9 million, or 15% of sales, for the fourth quarter last year. This
increase was primarily due to the inclusion of expenses from Spectrum Signal
Sales and marketing expenses were $2.0 million for the three months ended
June 30, 2008, compared with $1.5 million for the fourth quarter of fiscal
2007. The increase is mainly due to additional sales and marketing staff along
with increased tradeshow activity.
General and administrative expenses for the fourth quarter this fiscal
year were $4.9 million compared with $3.7 million for the same period last
fiscal year. Acquiring Spectrum Signal Processing, rapid growth in the
Saskatchewan wireless operations of YourLink and increases in amortization
account for a majority of the increased general and administrative expenses.
Vecima previously disclosed that strategic increases in research and
development staff and sales and marketing expenses were expected to raise the
operating expense rate above its traditional model. As expected, these
strategic decisions increased the operating expense margin, which peaked at
32% of sales in the fourth quarter last fiscal year. The Company expected
operating expenses to trend downward as the strategic plans delivered
increased sales. This has happened. The operating expense margin for the
fourth quarter of fiscal 2008 was 22% of revenue, compared to 32% of sales in
the fourth quarter last year. Operating expenses for the three months ended
June 30, 2008 decreased to $8.1 million, compared with $8.4 million for the
fourth quarter of fiscal 2007.
Since gross margin is up, and operating expenses are down, over last
year, operating income for the fourth quarter of fiscal 2008 increased 368% to
$8.2 million, or $0.35 per share, compared to $1.8 million, or $0.08 per share
for the three months ended June 30th, 2007.
Net income before extraordinary gains for the fourth fiscal quarter
increased 40% to $4.4 million compared with $3.2 million in the three months
ended June 30, 2007. The increase in net income is a result of the Company's
strong growth in sales and productivity.
Fiscal Year 2008 Financial Review
Total sales for the 2008 fiscal year increased by $26.8 million, or 29%,
to $120.6 million, up from $93.7 million for the year ended June 30, 2007.
Sales in the Converged Wired Solutions increased 26% to $89.1 million for
the 2008 fiscal year, compared with $70.8 million last fiscal year.
Broadband Wireless sales increased 47% to $22.5 million for the year
ended June 30, 2008 compared with $15.4 million for fiscal 2007. Broadband
Wireless represented 19% of revenue in fiscal 2008, compared to 16% of sales
YourLink revenue increased 17% to $8.9 million for the year ended
June 30, 2008, compared with $7.6 million last fiscal year.
Gross margin increased to 42%, providing a gross profit of $50.8 million
for the 2008 fiscal year, compared with a gross margin of 38% that provided a
gross profit of $36.0 million for the year ended June 30, 2007.
Research and development expenses for fiscal 2008 increased 4% to
$8.9 million, or 7% of sales, compared to $8.5 million, or 9% of sales, for
the prior fiscal year. The increase includes the research and development
costs from the acquisition of Spectrum Signal Processing. Total research and
development costs net of deferrals, amortization of deferred development
costs, income tax credits and TPC funding for the 2008 fiscal year were
$16.1 million, or 12% of sales, up from $12.5 million, or 13% of sales, for
last fiscal year. This increase was primarily due to increased staff levels
and the inclusion of expenses from Spectrum Signal Processing.
Sales and marketing expense was $6.9 million, or 6% of sales, for the
year ended June 30, 2008, compared to $4.6 million, or 5% of sales, for the
prior fiscal year.
General and administrative expenses for the 2008 fiscal year increased to
$16.2 million, or 13% of sales, compared to $11.2 million, or 12% of sales,
for the prior fiscal year. About one third of the increase was contributed
each by administrative costs from the acquired Spectrum Signal Processing,
rapid growth in the SaskWireless operation and by increased amortization.
Operating expenses for the 2008 fiscal year increased to $33.0 million,
or 27% of sales, compared with $25.4 million, or 27% of sales, for last fiscal
year. Almost half of this increase resulted from inclusion of expenditures in
Spectrum Signal Processing, which was acquired in May 2007. The Company
increased operating expenditures in prior periods to fund strategic plans to
increase Vecima's products, markets and managerial capacity. As expected,
these strategic decisions increased the operating expense margin, which peaked
at 32% of sales in the fourth quarter last fiscal year and fell to 22% of
sales for the fourth quarter of fiscal 2008. The decrease in operating expense
margin is evidence of the successful implementation of management's strategic
Since gross margin is up and operating expenses are down, over last year,
operating income for the 2008 fiscal year increased 67% to $17.7 million, or
$0.76 per share, compared to $10.6 million, or $0.46 per share, for fiscal
Vecima's net income before extraordinary items increased 24% to
$11.9 million, or $0.51 per share, for the 2008 fiscal year compared to
$9.5 million or $0.42 per share last fiscal year. Last year, extraordinary
gains on acquisitions added $11.1 million, or $0.49 per share, to net income.
During the current year, the Company identified an error in its prior year
future tax asset. The investment tax credits (ITC's) acquired in the purchase
of Spectrum Signal Processing Inc. (SSP) were not recorded net of the future
tax liability associated with the ITC and therefore the future tax asset was
overstated by $4.4 million. The result has no impact on operating income, but
reduces the prior year extraordinary gain and the prior year tax asset by
Working capital represents the Company's current assets less current
liabilities. Vecima's working capital remained strong at $51.7 million on
June 30, 2008, up from $43.6 million as at June 30, 2007.
As at June 30, 2008, the Company had outstanding a total of 22,972,173
Vecima enjoyed an outstanding fourth quarter and record sales for the
2008 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. During the fourth quarter of fiscal 2008, Vecima
increased products shipped by 32% to 52,000 units from 39,500 units shipped in
the third fiscal 2008 quarter. This follows sequentially on a 28% increase in
units shipped between the second and third quarters of fiscal 2008. Products
shipped increased 62%, to more than 200,000 units in the year ended June 30,
2008, compared to 125,000 units last fiscal year. 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 results in the fourth quarter while laying a solid foundation for
continued growth in the future periods.
New product introductions, 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
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 2008 fiscal year, the Company improved its cash position by
$2.0 million, while investing $12.8 million in capital assets and repurchasing
$1.9 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
The Company's full annual consolidated financial statements and
management's discussion and analysis for the three months and year ended
June 30, 2008 is posted on www.SEDAR.com.
Vecima's annual consolidated financial statements and accompanying notes
for the three months and year ended June 30, 2008 are available at
http://www.vecima.com/financials_ir.php. A conference call and live audio
webcast will be held on September 25, 2008 at 11 a.m. ET to discuss the
results. To participate in the teleconference, dial 617-597-5378 or
1-866-510-0710 and enter the code 68281238 followed by the number sign. The
fiscal 2008 earnings call webcast is available at:
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 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.
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 Information Form dated
September 25, 2007 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
For further information:
For further information: Vecima Networks, Alan Brick, Investor Relations
Officer, (250) 881-1982, firstname.lastname@example.org