Vecima Networks Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
September 21, 2023

There are 7 speakers on the call.

Operator

Hello. This is the Chorus Call conference operator. Welcome to the Vessima Networks 4th Quarter Fiscal 2023 Earnings Conference Call and Webcast. As a reminder, all participants are in listen only mode. The conference is being recorded.

Operator

After the presentation, there will be an opportunity to ask questions. Analysts and institutional investors who wish to join the question Presenting today on behalf of SEMA Networks are Sumit Kumar, President and CEO and Dale Booth, Chief Financial Officer. Today's call will begin with executives' commentary on Wessima's financial and operational performance for the Q4 year end fiscal 2023 results. Lastly, the call will finish with a question and answer period for analysts and institutional investors. The press release announcing the company's Q4 year end fiscal 2023 results as well as a detailed supplemental investor information are posted on Vesema's website at www.vesema.com under the Investor Relations heading.

Operator

The highlights provided on this call should be understood in conjunction with the company's audited condensed annual consolidated financial statements and accompanying notes for the year ended June 30, 2023 2022. Certain statements in this conference call and webcast may constitute forward looking statements with the meaning of applicable securities law. All statements other than statements of historical fact are forward looking statements. These statements include, but are not limited to, statements regarding management's intentions, beliefs or current expectations with respect to market and general economic conditions, future sales and revenue expectations, future costs and operating performance. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and or are beyond our control.

Operator

A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward looking statements. These factors include, but are not limited to, the current significant general economic uncertainty and credit and financial market volatility, including the impact of COVID-nineteen and the distinctive characteristics of Bessemer's operations and industry and customer demand that may have material impact on or constitute risk factors in respect of Wessemus' future financial performance as set forth under the heading Risk Factors in the company's annual information form dated September 21, 2023, a copy of which is available at www.sedar.com. In addition, although the forward looking statements And this earnings call are based on what management believes are reasonable assumptions, such assumptions may provide to be proved to be incorrect. Consequently, attendees should not place undue reliance on such forward looking statements. In addition, these forward looking statements relate to the date on which they are made.

Operator

Vesemma disclaims any intention or obligation to update or revise Any forward looking statements as a result of new information, future events or otherwise, except as required by law. At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks. Please go ahead.

Speaker 1

Thank you. Good morning and welcome everyone. Thank you for joining us. Fiscal 2023 was another record breaking year for VESMA As we furthered our position as a leading innovator and essential partner supporting the global wide scale migration to distributed access architecture and IPTV. I'll start today with a review of some of the financial and operational highlights of the year.

Speaker 1

Dale will provide more detail on our financial results, Then I'll return to talk about what lies ahead for Bessemer. To begin, I want to impress upon the fact that By every measure, fiscal 2023 was a remarkable year, teeming with growth, innovation and performance. All three of our business segments rose sharply over our already exceptional fiscal 2022 results and together turned in the best top and bottom line results in Bessema's history. On a full year basis, sales increased 62.4% to $303,400,000 That was after achieving 50.5 percent year over year growth in fiscal 2022, leading to VESMA's sales now being almost And we continue to leverage this growth through the bottom line. Gross profit climbed by nearly 58 percent to $142,000,000 Adjusted EBITDA was up 93% to 59,800,000 And adjusted net earnings per share nearly tripled to $1.19 per share from $0.41 last year.

Speaker 1

Of course, these are all record results for Bessemer. Our performance was once again led by our Video and Broadband Solutions segment And more specifically, a further dramatic growth for our Entro family of products. As we continue to ride the 1st wave Of the global cable industry's wide scale migration to distributed access architecture, Entra sales more than doubled from 107,300,000 in fiscal 2022 to $222,100,000 in fiscal 2023. Entra continues to be our fastest growing product family and represented 73% of fiscal 2023 total sales. To put this into perspective, consider that just 3 years ago, Entera accounted for just over $5,000,000 or about 5% of Bessemer's consolidated sales.

Speaker 1

In total, Our customer engagements for Entra climbed to 107 during fiscal 2023, up from 91 at the start of the year. And 51 of those customers are now using our Enter Cable and Fiber Access products in their networks. This includes deployments with 8 of the top 12 largest And our relationships with these customers continue to expand in fiscal 2023. As an example, Charter Communications, One of the world's largest cable operators chose our new Entra ERM3 solution as one of the backbones of the major DAA rollout and plans to implement in fiscal 2024. We also work closely with Charter to demonstrate multi gigabit speed entered into a warrant agreement that has the potential to further expand the strong strategic partnership that our 2 organizations have already built.

Speaker 1

Subject to achieving significant multiyear purchase targets of products and services, the successful realization of that agreement is expected to align with the accompanying growth of strong shareholder value. Another highlight for Entra in fiscal 2023 was Strong growth on the fiber access side of our portfolio as we supported the supply of substantial rural broadband connectivity capacity last year. As you're probably aware, governments are investing heavily to close the rural urban divide for high speed Internet access and Entra products are an integral part of that solution. Now I want to note that while full year Entra growth was exceptionally strong, we are anticipating a momentary deferment in Entra's momentum at the start of fiscal 2024. This reflects a short term transition currently underway in the DAA macro environment.

Speaker 1

Over the past few years, Bessemer has been effectively responding to extremely challenging supply chain conditions. These challenges continue through much of fiscal 2023 and we were distinctly successful in helping our customers secure the inventory they needed to support their planned rollout programs. While Bessemer's exceptionally strong supply chain management led to fulfillment of customer orders on schedule, In some cases, customer projects on the other hand got delayed due to lagging construction, labor, permitting, utility make ready and other requirements for these very large scale network build outs. As we enter Q1, we're now seeing a measured timing realignment and project cadence Tying to the brief transition where customers are working to catch up on and ramp project rollouts using the inventories we've unlocked for them. That's led to some short term push outs in order delivery dates starting in Q1, even as backlog for the L quarters continues to build.

Speaker 1

I want to emphasize that we expect this to be a relatively transient intermission in what is a much broader wave of DAA adoption and growth. DAA is becoming a multibillion dollar market as operators worldwide undertake this transformational evolution of broadband access networks. And the industry is heading into this journey with Bessemer widely recognized as a leading DAA technology partner. We're on the cusp of another major wave of growth and extremely well positioned to benefit. Looking now at the highlights from our other business segments.

Speaker 1

Our Content Delivery and Storage segment turned impressive performance with annual sales growing 20.3 percent to $52,300,000 in fiscal 2023. We finished the year on a high note with record Q4 sales performance of $17,100,000 an 85% increase over last year. This drove the strong full year results. The year's highlights included multiple IPTV expansions with existing customers along with new customer wins. As we've highlighted before, with respect to the many new IPTV program wins we've achieved over the past few years in CDS, When customers initiate managed IPTV platforms, they typically start by rolling out to just a starting subset of their overall video subscribers.

Speaker 1

They then have the expectation to gradually migrate the remaining bulk of legacy video subscribers to the next generation video fabric represented by MediaScale. In fiscal 2023, we saw a significant increase in this type of activity. After attaining the expected success and benefits associated with IPTV, customers drove step ups in migration, expansion and corresponding capacity purchase increases for Media Scale IPTV. On the innovation front, we continue to advance our Media Scale portfolio with multiple product enhancements, including major new releases in our Origin and Cash product families as well as the new media scale video Enabling operators to refresh old video on demand infrastructure and expand their content libraries while leveraging existing back office investments And deploying IPTV ready origins and storage. We also continue to develop our standards compliant OpenCaching solution.

Speaker 1

As we've mentioned, OpenCaching is a significant new development for our service provider and streaming customers because it delivers video that looks and performs better on We believe Open Caching is the future of video streaming And we're continuing to lay the groundwork for it in partnership with leading global content and service providers. Finally, in telematics, We continue to build on the segment's profitable recurring revenue contribution as we advanced uptake for NEARO Global Tracking, Our growing movable asset tracking platform. In fiscal 2023, we added 58 new asset tracking customers and more than doubled the total number of movable assets we monitor in the year to over 48,000 tags. In every aspect, Fiscal 2023 was a powerful year for Bessemo, and we ended in a very strong financial position with $83,700,000 in working capital and modest long term debt of $14,000,000 That was after investing heavily in working capital, R and D and organic growth and returning cash to our investors in the form of our regular dividends of $0.22 per share. I also want to note We undertook a realignment of our workforce at the close of fiscal 2023.

Speaker 1

The changes, which involved about 10% of our workforce, are expected to provide a corresponding reduction in our run rate operating expenses compared to Q4, excluding restructuring costs, stock based compensation and other expense in the Q4. For the full year, net of any planned staff additions and other incremental OpEx increases through the year, We expect an 8.5% decrease compared to the 4th quarter OpEx. I want to point out that the staffing reduction was proactively associated With adjustments we've anticipated in the market needs and therefore predominantly program alignment related. While the downsizing was driven primarily by our go forward program needs, it also speaks to our continued commitment Efficiency and prudent management as we enter the first half of fiscal twenty twenty four. The combination of programmatic OpEx adjustments, Robust working capital and product readiness for new large scale programs means we're balanced and very well positioned to support the I'll tell you more about that in just a few minutes.

Speaker 1

First though, I'll turn the call over to Dale to provide our financial review.

Speaker 2

Thank you, Sumit. For the purposes of this call, we assume that everyone has seen the 4th quarter and fiscal year 2023 results, news release and MD and A and our fiscal year 2020 3 financial statements posted on Bessemer's website. I will present the relevant numbers in discussions around overall results, market segments, operational expenses and the balance sheet. Starting with consolidated sales. For the 3 months ended June 30, 2023, we generated sales of 75,500,000 This was an increase of 26% over the $60,000,000 in Q4 last year and a 3 decreased from the $78,300,000 in Q3 fiscal 2023.

Speaker 2

The year over year increase reflects Higher sales from the Video and Broadband Solutions segment combined with record 4th quarter sales in our Content Delivery and Storage segment. Within the Video and Broadband Solutions segment, for the Q4 of fiscal 2023, we generated sales of $57,000,000 This was up 15% from the $49,400,000 in Q4 last year and 12% lower than the $64,800,000 in sales last quarter. Next generation DAA products contributed 4th quarter enter revenue of $50,700,000 up 27% from the $40,000,000 in Q4 fiscal 2022, but down 19% from the $62,700,000 in Q3 fiscal 2023. We anticipate a resurgent of demand momentum in the second half of fiscal twenty twenty four as we begin to launch major DAA rollouts with key customers. In all, Enter DAA platforms are now being sold to 51 operators across 6 continents.

Speaker 2

Commercial video product sales were $6,300,000 for the quarter, a decrease of 29 The year over year change reflects the transition to next generation platforms and the impact of some of our newer DAA driven commercial video TC 600e sales in Q4. Content Delivery and Storage segment sales delivered a record quarter with $17,100,000 In Q4 fiscal 2023, an 85% increase from the $9,200,000 in the Q4 of fiscal 2022 and up 45% compared to the $11,800,000 in Q3 of this year. Q4 performance reflects significant IPTV expansion activity with customers together with strong services revenue. CDS segment sales for Q4 fiscal 2023 included $10,300,000 of product sales and $6,800,000 in services revenue. As always, we note that quarterly sales variances are typical for the CDS segment.

Speaker 2

Turning to the Telematics segment, Sales in the Q4 were $1,400,000 consistent with expectations. This was slightly higher than the 1 point Consolidated gross margin for the 4th quarter was at 50.5 percent with a gross profit of 38,100,000 An increase of 34% from the $28,500,000 in Q4 fiscal 2022 and up 12% from last quarter's $34,100,000 above our targeted range of 45% to 49%. Gross margin was also up from the 48% achieved in Q4 fiscal 2022 and the 44% last quarter. In the Video and Broadband Solutions segment. Video and Broadband Solutions segment gross profit grew 21% $27,900,000 in the Q4 of fiscal 2023 from the $23,000,000 in the same period last year and up 4% from the $26,700,000 in gross profit last quarter.

Speaker 2

Gross profit margin of 49% Slightly higher as compared to 47% in Q4 fiscal 2022 and significantly higher than the Q3 3 fiscal 2023 gross profit margin of 41%. The year over year increase in gross profit reflects higher sales Compared with reduced expedite costs in our commercial video products, a large software feature sale for commercial video and a favorable deferred revenue adjustment resulting from a change in contract terms. Gross profit in the Content Delivery and Storage segment for Q4 fiscal 2023 increased significantly by 99% to $9,200,000 from the $4,600,000 in Q4 of fiscal 2022. CDS Gross margin of 54% for the quarter was also higher than the 50% gross margin for the same period last year. On a sequential quarterly basis, CDS gross profit was 47% higher than the $6,300,000 generated last quarter And CDS gross margin was slightly higher than the 53% achieved in Q3 fiscal 2023.

Speaker 2

The year over year changes in gross profit and gross margin reflect a higher percentage of high margin software sales in the product mix and an increase in sales in the current quarter as compared to in the same period last year. The Telematics segment gross profit in the 4th quarter increased to $1,000,000 with a gross margin of 72% From the $900,000 in gross profit and 66% gross margin in Q4 fiscal 2022 and gross profit of $1,100,000 65 percent gross margin last quarter. The year over year improvement in Gross margin was mainly the result of lower product costs in the current quarter. Turning to 4th quarter operating The notable changes year over year were as follows. R and D expenses increased to $12,900,000 in the current quarter from $11,400,000 in Q4 fiscal 2022, primarily reflecting the hiring of additional R and D employees, The amortization of deferred development costs, higher licensing costs, partially offset by increased capitalized development costs.

Speaker 2

We continue to invest in research and development to support the launch of new products. Until these new products are commercialized, Development costs are deferred to future periods. Sales and marketing expenses for the Q4 increased to $7,800,000 from $6,000,000 in the same period last year. This increase was due to higher staffing costs as well as increased travel, entertainment and trade show G and A expenses increased to $8,000,000 in Q4 fiscal 2023 from $6,500,000 in Q4 fiscal 2022, primarily reflecting the additional staffing, travel and entertainment, training and development and contracting costs. Restructuring costs were $1,200,000 in Q4 of fiscal 2023 compared to nil in Q4 of fiscal 2022.

Speaker 2

The increase is a result of restructuring activities undertaken in Q4 fiscal 2023 to better align the company's resources with our strategy and outlook. Operating cost savings will occur in fiscal 2024 as a result of this restructuring. Other expenses were $1,600,000 in Q4 fiscal 2023, an increase from other income of $800,000 in Q4 fiscal 2022. This primarily relates to Total OpEx in Q4 increased to $32,700,000 from $24,700,000 during the same period last year. This increase primarily reflects higher operating expenses in the Video and Broadband Solutions segment.

Speaker 2

Video and broadband solution operating expenses for the quarter increased to $23,800,000 from $15,800,000 in Q4 fiscal 2022. The $8,000,000 year over year increase primarily reflects additional expenses for research and development, sales and marketing, general and administrative activities and staffing, all related to sales growth. Content delivery and storage operating expenses were $8,000,000 in both Q4 fiscal 2023 and Q4 fiscal 2022. Higher expenditures on research and development and general administrative activities were offset by a one time impairment charge in the Q4 of fiscal 2022. I note that reported R and D expense in a period is typically different than the actual expenditure.

Speaker 2

That's because certain R and D expenditures are deferred until product commercialization. Adjusting for deferrals, amortization of deferred development costs And income tax credits, actual R and D investment for the current quarter increased to $15,300,000 or 20 percent of sales from $12,700,000 or 21 percent of sales in the same period last year. The year over year increase reflects higher staffing costs, Higher costs for software licensing as our next generation product families move closer to full scale commercial deployment. In our operating results, we reported an operating income of $5,400,000 in Q4 fiscal 'twenty three as compared to $3,800,000 in Q4 fiscal 2022. The $1,600,000 increase was primarily due to higher sales in Content Delivery and Storage segments, partially offset by increased operating expenses in the VBS segment, with higher R and D and staffing aimed at supporting future growth.

Speaker 2

Adjusted EBITDA grew to $15,100,000 this quarter Foreign exchange gain was $1,300,000 in Q4 fiscal 2023 as compared to $1,400,000 in the prior year period. Net income for the quarter increased to $5,100,000 or $0.21 per share from a net income of $3,500,000 or 0.1 dollars per share in Q4 fiscal 2022. Overall, a very solid quarter. Turning to the balance sheet. We ended the Q4 of fiscal 2023 with $2,300,000 in cash as compared to $12,900,000 in the same period last year.

Speaker 2

Working capital increased to $83,700,000 in the current quarter from $58,600,000 in Q4 last year, but decreased from the $91,100,000 in Q3 fiscal 2023. We note that working capital balances Our product shipments are lumpy, reflecting the requirements of our major customers. Other issues like contracts with greater than 30 day payment terms also affect working capital, particularly if Shipments are back end weighted for a quarter. Lastly, cash flow provided by operations for the Q4 was $4,600,000 as compared to cash flow provided by operations of $10,400,000 during the same period last year. The $5,800,000 change reflects a $7,300,000 decrease in cash flow related to non cash working capital, partially offset by a $1,500,000 increase in operating cash flow.

Speaker 2

On a final note, in terms of the quarterly dividend, The Board of Directors approved a quarterly dividend of $0.055 per common share payable on November 6, 2023, To shareholders of record as at October 13, 2023, I would like to point out So just to summarize, another strong quarter with continued sales growth and a solid gross margin and adjusted EBITDA. Now back to Sumit.

Speaker 1

Thank you, Dale. Now looking at what lies ahead for VESSMOM. We see ourselves nearing a major new phase of growth and development further scaling the business beyond the tripling of sales that we've achieved over the last 3 years. I want to repeat that. In fiscal 2023, Bessemer sales were more than 3 times what they were in fiscal 2020.

Speaker 1

Our adjusted EBITDA this year is 3.25 times what it was in fiscal 2020 and our adjusted earnings per share have grown by nearly 20 times since fiscal 2020. Around the globe, MSOs are planning significant capital investment to upgrade their broadband and IPTV networks. These are essential investments that address operators' urgent need to expand capacity, respond to increasing competition and meet customers' expectations for ever faster Internet speeds and enhanced services. As a core broadband supplier to the global industry We are well positioned to harvest our share of the far reaching opportunity ahead. In our Video and Broadband Solutions segment, we Anticipate the market making its way towards even wider DAA deployment in calendar 2024 as operators roll out their planned network upgrades.

Speaker 1

We expect this to have significant positive impact on our results in the second half of our fiscal twenty twenty four. I want to again emphasize that in the first half and particularly in Q1, we'll still be in transition as customers deepen rollout of existing projects Using the inventory, we helped unlock for them this past year. As I said earlier, we expect this transition to be short lived. By the second half, we anticipate a resurgence of Entra sales growth momentum as we carry on rolling out major DAA deployments with multiple customers. This should lead to respectable full year consolidated sales growth in fiscal 2024.

Speaker 1

More importantly We expect our quarterly run rate to reach new and compelling highs by year end, with that momentum expected to build into fiscal 2025 and beyond. Turning to our Content Delivery and Storage segment, we anticipate continued expansion and demand for our IPTV solutions contributing to year over year sales gains in the low double digits. And over the longer term, we continue to see higher growth potential. The IPTV and OTT streaming services markets are on pace to significantly expand in the next several years, And they'll depend on reliable and scalable solutions like those provided by our media scale portfolio. We're also Continued incremental growth in our telematics segment.

Speaker 1

In summary, we're tremendously excited about Bessemer's prospects. At a time when the industry is moving decisively to DAA and IPTV, Bessemer boasts one of the world's most comprehensive DAA portfolios covering both Fiber and cable access and we've built some of the industry's best technology that's being adopted by several of the world's largest broadband service providers. So we remain deeply confident in our market position and Envestmab's ability to capture the major opportunities that lie ahead As we continue to realize the true deployment potential for our leading technologies and break new ground in ultra high speed connectivity time and again. That concludes our formal comments for today. We'd now be happy to take questions.

Speaker 1

Operator?

Operator

The first question comes from Steven Li with Raymond James. Please go ahead.

Speaker 3

Hey guys. I want to ask you about your fiber rollouts like the pace of these Google rollouts. Can you share what you're Seeing on the installation front in terms of velocity, even as your customers work down their inventory and slow down their POs?

Speaker 1

Yes. And like we said, it's kind of this remaining component of calendar 2023 that we see this continuing digestion phase. As I've been saying, this is the year where those projects are ramping up in the field. You may see Even some commentary from operators indicating that they're accelerating their pace of field deployment And the fiber access, given that it's funding subsidized, very, very strong ROI metrics, it has a lot of priority. And like I said, we've unlocked inventory to allow for that, whereas the labor, the permitting and the Pull access and construction is now catching up.

Speaker 1

So we expect a lot of heavy activity on the part of operators this calendar year, That'll make way for ongoing deliveries from us.

Speaker 3

Okay. Thanks. And Sumit, can you also comment on order off in terms of funding? Like is it still early innings or we pass the halfway point for order off?

Speaker 1

In terms of deployment activity, it is still relatively early innings. Some of the operators talk about their overall funding awards and where they see I'm getting to by the end of calendar 'twenty three and you can interpret from that how far along they are. I think in the best cases, we think some operators are 20% to 30% deployed, Some of the largest OREs of the funding. So there's a lot of activity yet to come. Of course, our Particularly our 10 gig EPON remote OLTE is aligned for those implementations.

Speaker 1

So as inventory gets consumed and they continue to ramp those projects to leverage up funding, we're excited about what's in store. And then meanwhile, the longer term larger U. S. Gov funding program in that SBED is underway With the distribution to the state administration happening, and that creates another 2x factor on subsidies for rural broadband. Once again, with the aim to at last Finally serve underserved regions of the United States and we're happy about what that suggests for long term continuation Thanks for funding driven fiber to the home deployment with customized technology.

Speaker 3

Right. So, Sumeet, on BEAT, so you expect those state funds To become available in 2024. Is that what your customers are telling you?

Speaker 1

I think they're still working through the regulatory environment there. We know that the NTIA has kind of created their notice of funding opportunity Some states have responded. There's been some allocations. And now the states have to go through their process of submitting Their deployment plans to capture in the funding and those will tie to sub grantees with the operators and other carriers. So it's going to take a continued amount of time for that to work through the system, but it's a major program over multiple years.

Speaker 1

So we do think that 2024 calendar year will be an exciting year for developments in Bede.

Speaker 3

Got it. Thanks.

Speaker 2

Thanks, Stephen. Thanks, Stephen.

Operator

The next question comes from Jim Byrne with Acumen Capital. Please go ahead.

Speaker 4

Good morning, guys. Good morning, Jim.

Speaker 3

A

Speaker 4

couple for me. With the kind of slowdown here that we've had or you're anticipating, maybe just give us an on supply chain constraints on your systems and your productive capacity. I know you've even talked about Maybe even on shoring more of your manufacturing. Maybe just give us an update on your production?

Speaker 1

Yes. So I think reflecting again on what's happened in the supply chain environment over the last 3 years starting with the pandemic, things got I'm extremely constrained, probably peaking in calendar 2022 and starting the process of incremental capacity So with respect to the investments we've made, the growth we've had, the Strong working capital investment we've made to support our growth and to manage the supply chain. We're positioned quite strongly today in terms of Go forward. And the fact that we're seeing correction in the supplier marketplace, generally speaking, is Very helpful as we look at our long term plans. So well positioned, well situated, working capital war chest.

Speaker 1

I think there are some remaining isolated and still relatively key cases of long lead times that we need to continue to manage effectively working with our customers as we have, for some of our newer programs and some of our core silicon that's upcoming from the supply chain. But that is all well practiced in terms of SMA's capability together with our customers to manage those things. So by and large, we have a strong war chest to work within our working capital. We've seen a lot of improvement from the supply chain, And we have to continue to work and manage those isolated cases where there's a lagging condition of Elevated lead times.

Speaker 4

Okay. Thanks for that, Sumit. And then maybe just looking at the warrant agreement. Maybe just give us a little color on how that came about. I know it's something that Charter has done in the past, but maybe just give us an update from What will you see as the advantages of the agreement?

Speaker 1

Okay, Jim. I'm not I'm able to offer too much more than I've already provided in the press release. As you know, we've said the warrants give Charter Communications opportunity to buy up to About 360,000 shares exercise price of $17.09 per and they are subject to vesting conditions That are based on the achievement of significant multiyear spending targets. We have seen our partnership expand over the last several years. And we're continuing together build the 10 gs Cable and fiber access networks that they plan for the future.

Speaker 1

So again, we believe that that agreement really underscores the growth Of the relationship, and we're working on this network evolution strategy together. I think generally speaking now when we think about a customer Approaching a vendor for a warrant agreement, we believe that it signals strong strategic alignment, faith in the technology and partnership and expectation of executing thorough programs together that highly benefit both organizations. That typically we would see that In the industry, when some robust market share is expected and there is an expectation that there's opportunity to drive significant overall shareholder value. So that's all we're very pleased to have the potential for even more alignment with

Speaker 4

Thanks, Sumit. And then maybe one for you, Dale. The Working capital continues to grow. When should we anticipate some of that release coming back to you here? Is that a Q1 or kind of a back half Weighted 2024 event.

Speaker 2

It will be more back half loaded as our sales Get back into ramping up, as Sumit has said, that's Workjust is sitting there. And as we increase our sales In the back half of fiscal twenty twenty four, we'll see us utilizing that inventory.

Speaker 4

All right. That's it for me. Thanks, guys.

Speaker 2

Thanks, Jim. Thanks, Jim.

Operator

The next question comes from Ryan Koonce with Needham and Company. Please go ahead.

Speaker 5

Thanks for the question. What if you could kind of step back in the big picture and A little longer term and maybe well into 2025 and kind of the migration from DAA And DOCSIS 3.1 toward DOCSIS 4 and the bifurcation of standards there versus fiber to the home spending. And How do you expect kind of the broader cable market to evolve there in terms of spending on the various options they have to move beyond this first step in DAA. Thanks a lot.

Speaker 1

Yes. Thanks, Troy. I think, like you said, Our leading first wave of DAA, DAA is we Bessemer and Gainspeed, both now Bessemer are Pioneers and inventors in DAA and this has been a decade in the making for the industry and the movement is upon us Where DOCSIS 3.1 is being rolled out with DAA at scale today. As you've seen, several operators are leveraging it to Allow them to leverage the HFC, the cable access plant to offer leading Nation leading broadband services, gigabits and beyond, there's going to be a movement towards more symmetrical networks with high split as Networks with high split is the consensus. And then we have a lot of runway as DOCSIS 4.0 continues to mature.

Speaker 1

You've seen that there is even some opportunity to mix DOCSIS 4.0 modems with 3.1 Infrastructure and get some benefits and speed on the buys even further runway as the industry makes Preparation for the long term migration to DOCSIS 4.0, whether that is FDX or 1.8 gigahertz Extended spectrum, we see that we can continue to drive leverage of that HFC cable plant to move to symmetrical 10 gs over time. Meanwhile, of course, fiber is powerful. I talked earlier about how the funding is a very strong motivator for fiber expansion. And we do believe that operators will And greenfield environments continue to emphasize fiber rollout where they can. And I think the marriage of These two things that we've done with the capability to continue to expand on a supremely competitive Service with the cable plant, as well as, pour on the new greenfield, new build with fiber, That positions operators with everything they need to do to maintain this major market share.

Speaker 1

They enjoy broadband service provision.

Speaker 5

Makes great sense. Really appreciate the insights, Sumit. Thanks.

Speaker 1

All right. Thanks, Ryan.

Speaker 2

Thanks, Ryan.

Operator

The next question comes from Jesse Pytlak with Cormark Securities. Please go ahead.

Speaker 6

Hey, guys. Just one quick question for me. Customer engagements, kind of flat quarter over quarter and just the growth there has been slowing down. Are you kind of reaching saturation points here? Or is there still a pretty large cohort of cable operators out there that you can engage with?

Speaker 6

And is this just kind of a temporary slowdown as well?

Speaker 1

Yes, I think that engagement count has been taking up. I think over the full year, I don't have the entry point On my table here, but we've ramped that up across the year, Q3 to Q4 is just point in time stuff, I think, In terms of that and not really a signal of saturation. One of the other factors has been, I mean, while we were in the supply chain constraints and we have These 8 North American leading operators deploying our products, there is Perhaps less opportunity to service incremental customers because we had to put all of our delivery attention Our current customers and our Tier 1s, so insofar as those Tier 1 customers are digesting for the time being, That does create opportunity for us to broaden our exposure to other customers. So we expect that there is Significant amount of global growth ahead in the engagement and overall customer accounts still ahead of us.

Operator

As there appears to be no further questions, this concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Powered by Quartr

Key Takeaways

  • Fiscal 2023 delivered record results with sales up 62.4% to $303.4 M, gross profit +58% to $142 M, adjusted EBITDA +93% to $59.8 M, and adjusted EPS nearly tripling to $1.19.
  • The Video and Broadband Solutions segment, led by the Entra DAA family, more than doubled sales to $222.1 M (73% of total) and grew customer engagements to 107 operators, including a major rollout with Charter Communications.
  • A short-term Q1 FY2024 deferral in Entra order deliveries is expected as customers ramp field deployments with unlocked inventory, but strong DAA momentum should return in the second half of FY2024.
  • Content Delivery & Storage achieved a record Q4 with $17.1 M in sales (+85% YoY), driven by IPTV expansion projects, new MediaScale origin and cache releases, and progress on the OpenCaching streaming solution.
  • A recent workforce realignment (10% headcount reduction) aims to reduce run-rate operating expenses by ~8.5%, complementing a robust balance sheet with $83.7 M in working capital and modest long-term debt.
AI Generated. May Contain Errors.
Earnings Conference Call
Vecima Networks Q4 2023
00:00 / 00:00