Release Date: May 15, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vecima Networks Inc (VNWTF, Financial) achieved a solid 47.7% gross margin in Q3, along with adjusted EBITDA of $9.4 million.
- The content delivery and storage segment reported a 38% year-over-year revenue increase and an impressive 70% gross margin.
- Significant progress was made on the new intra vCMTS solution, culminating in a multi-year agreement with Costcom Communications.
- The Telematics segment achieved a strong gross margin of 65.4% in Q3, with a notable contract win involving over 1,200 vehicle subscriptions and 20,000 asset tags.
- Vecima Networks Inc (VNWTF) is well-positioned in terms of US tariffs, with most manufacturing occurring in Canada, providing a potential competitive advantage.
Negative Points
- Consolidated sales were moderately lower at $64 million, with a 20% year-over-year decrease in revenue.
- The video and broadband solutions segment experienced a 30% year-over-year revenue decline due to customer timing related to network upgrades.
- There was a temporary slowdown in Entra orders, impacting sales in the video and broadband solutions segment.
- Operating income decreased to $3.3 million compared to $10.1 million last year.
- Cash flow used in operations was $4 million in Q3, although this was an improvement from the previous year.
Q & A Highlights
Q: Has customer visibility improved for Vecima Networks, particularly regarding the Entra product line, since the last update in mid-February?
A: Sumit Kumar, President and CEO, responded that visibility and forecasting accuracy have improved for the rest of the calendar year 2025. The company now has a better indication of what to expect for the Entra product line, as tier one operators have finalized their planning cycles.
Q: Was the shortfall primarily related to residential upgrades or rural fiber upgrades?
A: Sumit Kumar confirmed that the shortfall was mainly due to residential cable access upgrades. The company is waiting for the deployment of large-scale projects by major customers. Meanwhile, rural broadband subsidies have continued robustly, with some uptick in optical products, which is reflected in the mix and margins.
Q: What are the expectations for the EN9000 nodes and cable access upgrades?
A: Sumit Kumar stated that Vecima is fulfilling EN9000 nodes strongly in preparation for the anticipated cable access upgrades. The company expects the headwinds related to these upgrades to abate over time as deployments ramp up.
Q: How is Vecima positioned regarding US tariffs, and what is the potential impact?
A: Sumit Kumar mentioned that Vecima is currently exempt from US tariffs under the USMCA agreement, which provides an advantage over competitors with offshore manufacturing exposure. The company is monitoring the situation closely and is prepared to adjust its manufacturing strategy if necessary.
Q: What is the outlook for Vecima's content delivery and storage segment?
A: Sumit Kumar highlighted that the segment had an excellent performance in Q3, with a 38% year-over-year revenue increase and a 70% gross margin. The company anticipates another strong revenue quarter, driven by IPTV upgrades, expansions, and dynamic ad insertion products. Longer-term growth potential is expected as IPTV and OTT streaming services expand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
