Vecima Networks Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
February 12, 2026

Key Takeaways

  • Positive Sentiment: Vecima now expects 20%–30% revenue growth over the next 12 months and forecasts 12‑month Adjusted EBITDA margin to break through 20%, implying a 70%–85% increase in next‑12‑month Adjusted EBITDA versus calendar 2025.
  • Positive Sentiment: A lead tier‑one broadband customer has signaled widescale deployment beginning in Q4, driving anticipated sharp demand for Entra products (including the EN9000 GAP platform and ERM RPDs) as part of a multiyear upgrade program.
  • Positive Sentiment: The company's Terrace IQ commercial video platform won a national wholesale upgrade with a North American Tier‑1, representing a multiyear opportunity to upgrade thousands of commercial accounts and support ongoing rollouts.
  • Positive Sentiment: Q2 results showed steady momentum with revenue up 3.5% YoY, gross margin improving to 44.9% (up 850 bps YoY), and Adjusted EBITDA of CAD 10.6M (14.4% margin), driven by a higher‑margin product mix and cost efficiencies.
  • Negative Sentiment: Management cautioned about some near‑term Q3 timing lumpiness from industry consolidation that could modestly affect quarterly timing before the expected Q4 ramp, while continuing to prioritize debt reduction (net debt ~CAD 66.9M) and returning cash via a CAD 0.055/share quarterly dividend.
AI Generated. May Contain Errors.
Earnings Conference Call
Vecima Networks Q2 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Hello, this is the Chorus Call conference operator. Welcome to Vecima Networks second quarter fiscal year 2026 results conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Analysts and institutional investors who wish to join the question queue, simply press star and one on your touchtone phone. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. Should you need assistance during the conference call, you may signal the operator by pressing star and zero. Presenting today on behalf of Vecima Networks, Sumit Kumar, President and CEO, and Judd Schmid, Chief Financial Officer. Today's call will begin with executive commentary on Vecima's financial and operational performance for the second quarter fiscal year 2026 results.

Operator

Lastly, the call will finish with a question and answer period of analysts and institutional investors. The press release announcing the company's second quarter fiscal year 2026 results, as well as the detailed supplemental investor information, are posted on Vecima's website at www.vecima.com under the Investor Relations heading. The highlights provided in this call should be understood in conjunction with the company's unaudited, interim, condensed, consolidated financial statements and accompanying notes for the three and six months ended December 31, 2025 and 2024. Certain statements in this conference call and webcast may constitute forward-looking statements within the meaning of applicable securities laws from which Vecima's actual results could differ. Consequently, attendees should not place undue reliance on such forward-looking statements. All statements other than statements of historical fact are forward-looking statements.

Operator

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 risk, involve risks and uncertainties that are difficult to predict and/or are beyond our control. Vecima 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. Please review the cautionary language in the company's second quarter earnings report and press release of fiscal year 2026, as well as its annual information form dated September 25, 2025, regarding the various factors, assumptions and risks that could cause actual results to differ.

Operator

These documents are available on Vecima's website at www.vecima.com under the Investor Relations heading and on SEDAR+ at www.sedarplus.ca. At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks. Please go ahead.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Good morning and welcome, everyone. Thank you for joining us. In our earnings release today, we announced that Vecima is nearing the cusp of major growth inflection. I'm going to start today's call with some comments on this outlook and our expectations for the next twelve months before moving on to an overview of our second quarter highlights. Judd will provide our financial review, and then I'll return to wrap up before we open the call for questions. As you know, the global cable and broadband industries have been preparing for a full-scale transition to next-generation DAA technology for several years now. It's something we've described as a once-in-a-generation technology transition, fundamental to how networks will be built and operated, and requiring major multiyear capital investment by operators.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

From the start, Vecima made a deliberate decision to lead this transition through sustained investment in a comprehensive portfolio of next-generation solutions. It's a strategy that's positioned Vecima as a global leader in DAA technologies, and it's already been and it's already driven meaningful growth. But we've always recognized that the true scale of the opportunity would depend on customers moving to full scale adoption and deployment. While it's taken time to reach this point, that critical new phase of adoption is approaching. On the broadband side, our lead Tier 1 customer is now preparing to expand widescale deployment and have shared their anticipated product needs and expected timing with us. Based on that outlook, we anticipate a sharp rise in demand for our Entra products, including the EN9000 GAP platform and ERM 3 and 4 RPDs beginning in the fourth quarter. This is a major multiyear upgrade program.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Now, with it underway and expanding, we expect it will provide sustained benefits to Vecima over an extended period. On the commercial video side of our portfolio, we also announced today that our lead North American Tier 1 customer has selected our next-generation Terrace IQ platform to underpin the wholesale upgrade of its commercial video network nationally. This includes upgrades to thousands of our customers' existing commercial account properties, as well as ongoing rollouts to service new commercial video contracts, and it represents another multiyear opportunity for Vecima. These two developments, combined with continued strong demand for our high-margin fiber access products and the traction building for new products like our EN3400, are providing excellent forward visibility. Based on customer indications on a next 12 months basis, we're now estimating revenue growth of between 20%-30% as compared to the last 12 months.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

The anticipated demand profile also positions Adjusted EBITDA margin for the same period to break through 20% as our product mix expands with higher margin offerings and as we make gains in operating efficiency, paired with the top line growth expectation, this translates to an anticipated 70%-85% increase in next twelve-month Adjusted EBITDA compared to calendar 2025. I want to note that we continue to see some third quarter timing lumpiness related to recent industry consolidation activity. We discussed this on our last call, but we now expect the impact to be modest and further mitigated by a favorable Q3 product mix. By the fourth quarter, we expect to see demand ramping up sharply. The developments announced today pave the way for renewed and sustained growth, and they follow on another rewarding quarter for Vecima in Q2.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

So turning to our second quarter results, I'm pleased to report that we achieved solid year-over-year revenue growth of 3.5%, paired with a significantly stronger gross margin percentage of 44.9%. The 850 basis point, the 850 basis point year-over-year improvement in our gross margin reflects an expected return to a more typical and higher margin product mix, as well as continued improvement in our operating efficiencies. We also generated Adjusted EBITDA of CAD 10.6 million in Q2, with an Adjusted EBITDA margin of 14.4%. In our Video and Broadband Solutions segment, we turned in a productive quarter, marked by steady sales performance, improved profitability, and important product and customer advances. We continue to seed the market with our EN9000 platform, the industry's only GAP node, which is gaining deep adoption with customers.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

We expect the EN9000 platform will continue to pay many short and long-term dividends as it widely seeds broadband networks with a modular, standardized, and future-proof platform that's capable of being upgraded with multiple successive generations of DOCSIS or Fiber to the Home technology for years to come. We also commenced deliveries of our new EN3400 GAP node, which is a more compact and condensed version of the EN9000, specifically targeted to multi-dwelling unit and enterprise applications. Our innovative new Power Holdover modules, which provide Entra platforms with protection from power fluctuations in the field, also gained traction in Q2. Both the EN3400 and Power Holdover modules provided meaningful contributions to our Q2 results and VBS product mix. In our Entra Cloud portfolio, we continued to expand vCMTS trials with our lead customer, while also expanding our engagement with additional customers.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

We view vCMTS as a major long-term growth driver for Vecima, supporting an addressable market estimated to be worth $350 million by 2029. I also want to highlight that contribution from vCMTS sales is not yet a significant factor in current revenues or within the strong projected growth for the next 12 months, meaning that vCMTS remains a major incremental growth opportunity for the business. On the fiber access side of the portfolio, Q2 was another successful quarter with ongoing strength in Entra Optical sales. We also secured our first customer for XGS-PON in the U.S. and closed an order for our new Entra EXS1610 All-PON platform with a European customer. All in all, an excellent quarter for VBS and our customer engagements for Entra increased to 147 from 123 a year ago.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

To date, 70 of those customers have purchased Entra products from Vecima. Looking at our other business segments, our Content Delivery and Storage segment achieved another strong quarter, with revenues of CAD 12.3 million, growing sharply both year-over-year and quarter-over-quarter, and gross margin climbing to a very robust 65.1%. These results were supported by increased demand for immediate scale managed IPTV solutions as customers continued to migrate their networks from QAM to IPTV, while also expanding their subscriber bases on IPTV. The second quarter also brought further contribution from our newer dynamic ad insertion products. DAI is providing a compelling use case for operators that are seeking to increase their video ARPUs without having to increase their rates to customers.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

So as such, it's a highly effective way for our customers to increase their monetization of video while retaining and building their subscriber base, and we view it as an important growth driver for CDS. Turning to Telematics, we achieved another highly profitable quarter with year-over-year revenue growth and an exceptionally strong gross margin of 71.4%. During the quarter, Telematics added 11 new customers and booked 345 new subscriptions for our narrow asset tracking platform. This brought the number of asset tags under management to over 106,000. So a very successful second quarter for Vecima across all three of our business segments, and we're moving forward with a very exciting outlook as some of our largest customers advance to wider scale on adoption.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

I'll return to talk more about what we see ahead in just a few moments, but first, I'll pass the call to Judd to provide our Q2 financial review. Judd?

Judd Schmid
Judd Schmid
CFO at Vecima Networks

Thanks, Sumit. Good morning to everyone with us on the call today. I'll be reviewing our second quarter financial performance in more detail, and for the purposes of this call, I'll assume that everyone has seen our Q2 fiscal year 2026 news release, MD&A, and financial statements posted on Vecima's website. We had another solid quarter of financial results. Starting with consolidated sales, revenue grew to CAD 73.7 million in the second quarter, increasing 3.5% year-over-year and 3.7% quarter-over-quarter. Our Video and Broadband Solutions segment accounted for CAD 59.6 million of our revenues, with VBS sales increasing slightly year-over-year and up 2.8% sequentially compared to Q1.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

Next-generation Entra DAA products were a key driver of our VBS segment results. At CAD 56.3 million, Entra sales were steady year-over-year and up 2.3% on a sequential quarterly basis. Commercial video sales added CAD 3.2 million to the VBS results and were up 8.7% from Q2 fiscal year 2025 and 12% from Q1 fiscal year 2026. In our Content Delivery and Storage segment, second quarter revenues of CAD 12.3 million climbed a sharp 20.7% year-over-year, and were up 9.7% from the first quarter of fiscal year 2026. This growth reflects significant IPTV installation and expansion activity, including a 39% increase in product sales and slightly higher services revenue year-over-year. We continue to note that quarterly sales variations are typical for the CDS segment.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

In our Telematics segment, second quarter sales of CAD 1.8 million grew 5% year-over-year, but were 3% lower than last quarter. The year-over-year gains reflect the increase in the number of tags and assets now being monitored. As we expected, gross margin rebounded in Q2, with gross margins climbing to 44.9%. That compares very favorably to 36.4% in the same period last year, and 42.1% in Q1 of 2026. After normalizing for inventory reserves and warrant expense, our adjusted gross margin also increased sharply to 46.4% from 35.6% last year and 43.9% in Q1 of fiscal year 2026.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

The improvements in gross margin and adjusted gross margin primarily reflect the return to a higher margin product mix in our VBS segment and accretive contributions from our CDS segment as well. Turning now to our second quarter operating expenses. These increased slightly to CAD 29.8 million from CAD 29.3 million in Q2 last year. On a quarter-over-quarter basis, operating expenses were CAD 1.8 million higher. Notable year-over-year changes are as follows: G&A expenses were lower at CAD 6.7 million, or 9% of sales, as compared to CAD 7.3 million, or 10% of sales, in the same period last year. This CAD 600,000-dollar improvement reflects decreased expenses for legal fees, other professional services, training and development costs, offset by higher expense for salary, wages, and benefits.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

Sales and marketing expenses increased to CAD 9.4 million or 13.13% of sales from CAD 7.3 million or 10% of sales last year, reflecting lower finished goods inventory allowance recoveries of CAD 100,000 in the current period, compared to CAD 1.7 million in Q2 of fiscal year 2025. R&D expenses for the second quarter increased to CAD 13.2 million, or 18% of sales, from CAD 11.3 million, or 16% of sales last year. This is primarily a result of higher amortization of our deferred development costs, along with lower capitalized labor development costs. As we note each quarter, we defer some of our R&D expenditures to future periods until our products begin commercialization, and so reported R&D expense in a period is typically different than the actual cash expenditure.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

Adjusting for this, our actual cash R&D investment was CAD 16.8 million, or 23% of revenues in the second quarter, up from CAD 15.9 million or 22% of revenues in Q2 of last year. As we continue to emphasize our investment in future product developments and building our innovation pipeline. Also included in OpEx for Q2 of last year were CAD 2.8 million in restructuring charges related to our workforce reduction at that time. We continue to monitor and control our operating expenses, contributing to our bottom-line results, and do not foresee any significant OpEx increases in the near term. Now, looking at bottom-line results, second quarter operating income increased significantly to CAD 3.3 million from an operating loss of CAD 3.4 million in the same period last year.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

The CAD 6.7 million improvement primarily reflects VBS's higher margin product mix, as well as the increase in CDS sales, which typically carry accretive gross margins, and the CAD 2.8 million restructuring charge taken in last year's Q2. Lastly, net income for the second quarter increased to CAD 100,000 or CAD 0.00 per share from a net loss of CAD 7.9 million or a CAD 0.32 loss per share in the same period of fiscal year 2025. Additionally, adjusted earnings per share for the second quarter grew to CAD 0.04 from an adjusted loss per share of CAD 0.30 in the same period last year. Turning to the balance sheet, working capital of CAD 49.3 million decreased from CAD 51.2 million at the end of June 2025.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

As we discussed, as we discussed in our MD&A, the components of working capital can be subject to swings from quarter to quarter. Product shipments can be lumpy as they reflect the fluctuating requirements of our customers. Contract timing issues, like those with greater than 30-day payment terms, also affect working capital, particularly if shipments are back-end loaded for the quarter. Lastly, cash flow provided from operations for the second quarter decreased to CAD 6.8 million from CAD 15.2 million during the same period last year, primarily related to the changes in working capital. Our net debt position as a whole remains conservative, however, and stood at CAD 66.9 million at the end of the second quarter, down from a peak of CAD 92 million in Q3 of fiscal year 2024.

Judd Schmid
Judd Schmid
CFO at Vecima Networks

We had forecasted a slight increase in our net debt position for Q2, and continue to focus our efforts on paying down our debt. On a final note, the Board of Directors approved a quarterly dividend of CAD 0.055 per common share, payable on March 23rd, 2026, to shareholders of record as of February 27th, 2026. It's important to note that this dividend will be designated as an eligible dividend for Canadian income tax purposes. Now back to Sumit.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Thank you, Judd. To recap our expectations for the next 12 months, we are anticipating a year-over-year revenue gain of 20%-30%, with 12-month Adjusted EBITDA margin breaking through 20% based on customer indications. We expect to see this momentum growing beginning in Q4, driven by Vecima's portfolio strength, our design wins with major customers, and the many other DAA-based gigabit network upgrades that are occurring globally. We anticipate our VBS segment will lead the growth, with strong demand for a wide range of next-generation Entra DAA solutions. Our remote PHY device solutions, our EN9000 and EN8400 platforms, and our highly successful Entra Optical fiber-to-the-home portfolio, are all expected to be strong contributors. Additionally, our newer EN3400 platforms and Power Holdover modules are expected to gain momentum over the next 12 months.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Our VBS results are also expected to be strongly supported by the program win with our lead Tier 1 customer and related uptake of our Terrace IQ commercial video platform. Well, while we haven't yet factored vCMTS contribution into our outlook, this too, could have a positive impact on our next twelve months results and will be incremental to the demand profile nonetheless. In our Content Delivery and Storage segment, we continue to focus on driving revenue growth through managed IPTV expansions with new and existing customers and the rollout of DAI. As always, we note, however, that quarter-to-quarter performance in the CDS segment can be lumpy. In our Telematics segment, we're anticipating steady and highly profitable performance from our high margin, recurring software and subscriptions-based monitoring business for vehicles and assets.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Across Vecima's operations, we're moving forward with a sharp focus on capturing the significant opportunities ahead, both over the next 12 months for high growth and in the long term. Our strategy of building the industry's broadest and most innovative portfolio of interoperable cable and fiber access products and IPTV solutions has created multiple engines for growth. Combined with a wide customer base and deep relationships with some of the world's largest operators and BSPs, we've invested in and built a broad, uniquely innovative and world-leading platform that we enjoy today, and that sets us up for sustained expansion. As wide-scale deployment of DAA now gets underway and IPTV, IPTV adoption continues to grow, Vecima is uniquely positioned for success, not just in the next 12 months, but for years to come. That concludes our formal comments for today, and we'd now be happy to take questions. Operator?

Operator

Thank you. We'll now begin the question session for analysts and institutional investors. To join the question queue, you may press star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. First question comes from Ryan Koontz with Needham & Co. Please go ahead.

Ryan Koontz
Ryan Koontz
Managing Director and Research Analyst at Needham & Company

Great, thanks for the question. Nice to hear about the improved outlook this year and gaining momentum there. I wanted to ask about the GAP node and, you know, what you hear are the criteria for customers to decide to go with a traditional node design versus a GAP node. I kind of understand... I do understand the future-proof investment thesis, but how do you think customers are deciding to go with one versus the other? What do you think the criteria is?

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Yeah. Okay, good morning, Ryan, and thanks for the question. Yeah, with the GAP platform, you know, as we've talked about, you know, we've developed in conjunction with our lead Tier 1 operator customer, you know, this future-proof platform that's modular and scalable and can evolve, you know, both over multiple generations of cable access, the DOCSIS 3.1, DOCSIS 4.0, and evolve to, you know, fiber to the home modules inserted within that same platform, and longevity in terms of any other use cases that emerge, once those nodes are widely deployed. So, you know, operators are typically seeing that platform allows them, you know, a long runway of capability within the network, you know, from successive generations of access technology.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

You know, you could even so go so far as thinking about edge compute and some of the, you know, opportunities that arise therefrom. So we can also mix services within the same platform, you know, cable, DOCSIS, fiber to the home, PON OLTs within the GAP platform. The thermal management is excellent. You know, it gives them a lot of, you know, capacity there, in terms of, you know, the cooling, the passive cooling that it offers. And in the past, you know, there's been a lot of fragmentation and unique nodes. So, you know, we contributed the standard in conjunction with our operator partner. We are the only manufacturer in the world of this platform today, so we have a significant time to market advantage.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

As we said, it's, it's being broadly adopted, you know, giving us a great amount of network incumbency at operators like our lead Tier 1.

Ryan Koontz
Ryan Koontz
Managing Director and Research Analyst at Needham & Company

... It's helpful. And you mentioned the thermal management. Is it better than a node, or what differentiates it from a traditional node in terms of the thermals?

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

It's just, you know, how we design the heat dissipation within the platform, how the modules slot into the available slots in the lid, and, you know, all the metalwork and then the way the heat is passing through to the fins on this type of platform. You know, it's taken 30 or 40 years of experience from vendors like us, from our operator partner, to know that we, you know, that the peak of engineering for thermal capacity is there in this platform. So, you know, we've been forward-looking with what we can do with the platform, again, with our operator partners as helping us to define that standard. Yeah.

Ryan Koontz
Ryan Koontz
Managing Director and Research Analyst at Needham & Company

Uh-huh.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Thanks, Ryan.

Ryan Koontz
Ryan Koontz
Managing Director and Research Analyst at Needham & Company

Sure. It sounds like the OLT business is picking up. Are you hearing, you know, any changes in terms of fiber deployment plans from customers? Is it still primarily, you know, greenfield deployments, or are you picking up much about, rehabbing coax with fiber in the cable industry?

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

I think the focus definitely has been on you know, network edge, oh, greenfield expansion, on more and more opportunities our customers are seeing for that. Of course, the rural subsidy activity is going strong too, and adding to our customers' footprints and their passings overall. You know, I don't think that overbuild is a focus. We have a lot of capacity on the cable side with 3.1 and 4.0. And you know, the cost advantage is there. So the cable network has got a long runway to it for multi-gigabit, symmetrical 4.0. You know, there's standardization work being done on generations beyond 4.0 for DOCSIS as well.But, you know, the fiber activity, there's a lot of ground to plow on expansion of the network itself, without overbuilding.

Ryan Koontz
Ryan Koontz
Managing Director and Research Analyst at Needham & Company

Got it. Thanks. You talked about a new win for your new video platform. Do you have a rough idea of what your TAM is there, say, in North America for those sorts of products? I mean, is it still primarily a legacy model? You know, I don't think about, you know, linear being upgraded a whole lot. I assume you're going to a kind of switched IP IPTV-type model there. Can you maybe talk about where we are in adoption for those sorts of products?

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Yeah. No, you're absolutely right that we are going to IP AV input, switched IP, you can think of. So you know, the feed to the commercial video platforms is evolving from a linear, you know, QAM feed to IPTV AV. And that's the, you know, generational shift that we're seeing in this platform. We've led this market for the past 15 years, and it began with when networks were converting to all digital from analog and, you know, commercial services, and hospitality in particular, needed, you know, a bulk demarcation solution into the property. So, you know, that's been a market we've enjoyed for well over a decade, and we have good visibility.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Of course, you know, it doesn't have the growth engine capacity of something like broadband access, but, you know, it's going to be very meaningful to our results and, you know, particularly with this lead Tier 1, with the amount of units of the prior generation that they have fielded with our Terrace QAMs and our TC600Es. You know, so we see a very meaningful contribution over the next 12 months and really in the next three years or so as they upgrade that whole footprint. So, you know, I won't get too specific on the TAM side, but, you know, five years ago, the commercial video was, you know, maybe five to 10 years ago, commercial video drove the entirety of MSO business. That'll give you a sense of the magnitude.

Ryan Koontz
Ryan Koontz
Managing Director and Research Analyst at Needham & Company

Okay, great. Appreciate that. Thanks so much.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Thanks, Ryan.

Operator

Once again, analysts and institutional investors who would like to ask a question should press star and one on their touchtone phone. The next question comes from Alexandre Ryzhikov with LionGuard. Please go ahead.

Alexandre Ryzhikov
Partner and Portfolio Manager at LionGuard

Hey, thanks a lot for taking my question. I guess, Sumit, I just want to focus on your comments around renewed and sustained growth. I get that your largest customer will ramp up spending on network evolution in 2026 and 2027, and that will drive growth. But I guess, what gives you confidence in growth beyond that upgrade cycle? Maybe if you can just break down the key drivers of growth beyond 2026, calendar 2026, that would be, that would be helpful. Then I have a follow-up.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

All right. Thanks, Alex. Yeah. You know, of course, you know, that's a very meaningful program as we've talked about and with our lead customer and what will happen over the next, you know, several years there. I think that, you know, focusing there, you know, that cycle is a significant wholesale upgrade that's happening to the cable network. I think what sometimes gets lost in the picture is that there's continuous segmentation activity and expansion activity that occurs for all operators. So you know, it, it's not a start, stop type of program. It'll tail off into a more regular run rate type of scenario.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

You know, another thing that I think we, we'd like people to understand is that, you know, only about 50% of our business today is in cable access, so we're already on the path of diversifying business. So, you know, we have a whole set of customers in, you know, when I talk about the 147 engagements we have for cable and fiber access, that are also in their own cycles of moving to the upgrade.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

We've had these lead Tier 1s in the whole industry that have led the timing, and some very scale programs, but very typical of DOCSIS upgrades across the industry is that we will have, you know, multiple other customers come into the fold, you know, after these large Tier 1s start to ramp back down to some more of a run rate scenario. And then the fiber access and vCMTS are incremental to our portfolio. The fiber access in the sense of we've added XGS-PON, much larger TAM. You know, we've been a leader in 10G-EPON, fiber to the home, to this point. And, you know, with this much larger TAM in XGS, we announced that we had the first customer win today.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

You know, our differentiation should, you know, come into play and give us good market share in that much larger TAM. So we've thought about this, you know, and the profile still sets itself up between the new customer additions, the fiber expansion, the addition of vCMTS, to lead us to a sustained growth scenario after this next couple of years of very strong growth that are anchored by our lead customer.

Alexandre Ryzhikov
Partner and Portfolio Manager at LionGuard

That's, that's very helpful. I guess maybe specifically on vCMTS, I think you still included in your press release, you know, the TAM for that business, the estimate from Dell'Oro for $350 million. Are your expectations around market share, call it in 2029, still the same as they've been previously? Do you think you can, you know, capture a quarter of this market? I know currently, essentially, you know, it's a, a single player has all of it. Maybe just help me understand your expectations today around the opportunity there for you.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Yeah, no, great question. I think, like we said, like you reiterated, you know, the market is about $350 million it'll reach in by 2029. There are only, you know, effectively 3 viable vendors in the space, us being one of them. We have our lead win with Cox. And, you know, typically in every segment that we've participated in, you know, we have been successful, and we have the track record of building this, you know, meaningful market share. You know, the IP that we brought into bear, it originally started in our MACPHY platforms that we've put into the Entra Cloud and virtualized in vCMTS. We've been a leader in MACPHY for years now.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

You know, that translates to, you know, a, a reasonable expectation between what we're doing with Cox, between these other engagements, that we've already built a significant number of them for vCMTS, and the natural timing of the rest of the market as it grows to 350 million. I think, you know, we've seen that, it's, it's very common to expect that a player like us, when there's only three in the market, and the customer engagements we have, is going to have a respectable market share.

Alexandre Ryzhikov
Partner and Portfolio Manager at LionGuard

Great. And then my final question on capital allocation. I know you've talked about prioritizing debt repayment, but if I think about just the multiple on the numbers that you've shared today on 2026 EBITDA, you're trading at a huge discount to all of your peers. So, you know, why not be more aggressive on debt repurchases? I know the volume is very low, but why not explore an SIB or some other type of a, you know, share repurchase, given where the market is valuing you today? Thank you.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Yeah. No, well, thanks for pointing that out. And of course, you know, we agree that, you know, there's, we have opportunity to the upside in the valuation. You know, I think that, fundamentally, you know, that pathway from our growing performance is going to provide an avenue. I think, as Judd mentioned, you know, we have been focused on bringing down our leverage and our debt position, and we see that happening, you know, relatively, you know, significantly in these next 12 months of the P&L performance and the EBITDA delivery. So, you know, that should open up the opportunity to, you know, explore other uses of capital.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

And, and, you know, one of the topics that does tend to gain the thought processes is, you know, should we look at share purchases? You know, we haven't done any significant M&A in a while either, you know, that would be the other avenue to turn to. But, you know, our first focus is on the cash generation, and that, you know, that is expected to be there.

Alexandre Ryzhikov
Partner and Portfolio Manager at LionGuard

Thank you.

Sumit Kumar
Sumit Kumar
President and CEO at Vecima Networks

Thanks, Alex.

Operator

Once again, analysts and institutional investors who would like to ask their questions should press star and one on their touchtone phone. 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 blessed day.

Executives
    • Judd Schmid
      Judd Schmid
      CFO
    • Sumit Kumar
      Sumit Kumar
      President and CEO
Analysts
    • Alexandre Ryzhikov
      Partner and Portfolio Manager at LionGuard
    • Ryan Koontz
      Managing Director and Research Analyst at Needham & Company
Powered by Quartr