Vecima Networks Q1 2027 Earnings Call Transcript

Vecima Networks (TSX:VCM) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.

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Summary

Vecima Networks reported record quarterly revenue of $95.1 million for Q1 fiscal 2027, a 37.5% year-over-year increase driven by strong performance in the Broadband Access Solutions segment.

Adjusted EBITDA grew 72% year-over-year to $18.7 million, with a margin of 19.7%. Earnings per share increased to $0.24, surpassing last year’s total earnings in one quarter.

The company highlighted successful expansion in its Broadband Access Solutions with the Entra product family and significant progress in Content Delivery Solutions, particularly with the Terrace IQ platform.

Vecima anticipates 30% to 35% revenue growth for fiscal 2027, with an EBITDA margin around 20%, despite some timing shifts in customer deliveries affecting Q2 expectations.

Management emphasized ongoing investments in R&D, expecting to spend 18% of sales on innovation, focusing on future product developments like vCMTS and XGS-PON.

Full Transcript

OPERATOR

Hello, this is the Chorus Call conference operator. Welcome to Vecima Networks’ first quarter fiscal 2027 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 then one on your touchtone phone. You will hear a tone acknowledging your request.

If you’re using a speakerphone, please pick up the handset before pressing any keys. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. Presenting today on behalf of Vecima Networks are Sumit Kumar, President and CEO, and Judd Smith, Chief Financial Officer. Today’s call will begin with executive commentary on Vecima’s financial and operational performance for the first quarter fiscal 2027. Lastly, the call will finish with a question-and-answer period for analysts and institutional investors. The press release announcing the company’s first quarter fiscal 2027 results, as well as 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 months ended September 30, 2026 and 2025. 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. 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. 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 first quarter fiscal 2027 earnings report and press release, as well as its Annual Information Form dated September 24, 2026 regarding the various factors, assumptions, and risks that could cause actual results to differ. These documents are available on Vecima’s website at www.vecima.com under the Investor Relations heading and on 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 (President and Chief Executive Officer)

Good morning and welcome everyone. Thank you for joining us. Our fiscal 2027 year got off to an exceptional start as we set yet another record for quarterly revenue performance and achieved powerful year-over-year growth in adjusted EBITDA and earnings per share. I’ll start today with an overview of our first quarter highlights. Judd will provide our financial review and then I’ll return to discuss our outlook before opening the call to your questions.

To begin, as wide-scale broadband rollouts continue to gain momentum, our first quarter revenues climbed to 95.1 million, a new all-time quarterly revenue record for Vecima. That was up 37.5% year over year and 5% quarter over quarter. Our adjusted EBITDA performance grew 72% year over year to 18.7 million, representing an adjusted EBITDA margin of 19.7%. And we grew Q1 earnings to $0.24 per share, which in just one quarter exceeded what we achieved in all of last year.

These very strong results were led by our Broadband Access Solutions segment which, as of Q1, has been realigned to focus fully on the Entra family products. Revenue in the segment climbed 39% year over year and came very close to matching the all-time record revenue we achieved in Q4. This was driven in part by continued uptake from our lead customer Charter as we support their extensive network-wide DAA rollout under our multi-year agreement. It also reflects our growing relationships with a large and expanding base of operators worldwide.

By quarter end we have broadband engagements across both cable broadband and fiber-to-the-home with 162 customers, an increase of 22 customers year over year. These span over 300 individual broadband product engagements, meaning that many customers work with Vecima with pull-through across multiple product categories. In many cases this includes both cable and fiber broadband at a single customer and spans across the wider Entra platform we have built including nodes, RPDs, vCMTS, intelligence, and of course PON.

In terms of specific product highlights, our EN9000 node platform enjoyed a particularly strong quarter. We also ramped up deliveries of our EN3400 node, which is a compact version of the EN9000. I want to remind you again of these platforms’ strategic importance. Both are modular and flexible foundations that are designed to support evolving DOCSIS and fiber-to-the-home technologies and, as such, they’re pivotal technologies that give us a significant network incumbency advantage.

We’ve discussed previously that the EN9000 is a lower-margin product on a standalone basis, but one that pays long-term dividends by housing successive generations of higher-margin access modules in later periods. We started to see this dynamic in action in Q1 as we achieved a significant increase in sales of next-gen ERM3 Remote PHY nodes which are used in conjunction with the EN9000 and EN3400. And our broad footprint of EN9000s and EN3400 are expected to go on supporting future generations of Entra cable and fiber access products for many years to come.

And on the topic of next-gen products, Q1 brought important achievements as we advanced on our new solutions. On the vCMTS front, we significantly increased the number of committed purchasing and deploying customers for the software platform over the last few quarters, with a marked acceleration in our engagements and wins. We now count multiple wins including two North American Tier 1s, and we have many additional customers engaged including several more Tier 1s, 2s, and 3s.

During the quarter we made meaningful progress towards field trials with our lead Tier 1 customer. We also expanded trials with Videotron, our Canadian Tier 1 customer win. Under our agreement with Videotron, we’ll be supplying a combination of Entra vCMTS, EN9000 nodes, and ERM3 RPDs to upgrade and modernize their next-gen DOCSIS network. This is an exciting broadband buildout that partners a leading Canadian operator with a globally leading vendor also based in Canada.

We’ve also made important progress with our next-gen fiber access solutions. During the quarter that included the start of commercial lab testing of Entra XGS-PON with a North American Tier 1 customer. Similar to 10Gig EPON, where Vecima is a global market share leader, XGS-PON is a foundational layer that’s going to enable operators to deliver symmetrical multi-gig fiber broadband to homes and businesses while preparing for future upgrades to even faster 50Gig PON.

Together, XGS-PON and 50Gig PON open up a huge US $3.2 billion addressable market for Vecima. And given that we’re already a dominant market leader in PON remote optical line terminals, or remote OLTs, globally, and we have been for the past five years, we’re approaching that market with a significant competitive advantage that’s already established. That reflects our track record of building material market share in every segment we address, especially during generational transformations in technology.

We expect that winning strategy will translate to meaningful market share. I’m pleased to add that Entra XGS-PON with vPON Manager, Entra vCMTS, and Entra Access Simulators were all named winners in this year’s prestigious Diamond Technology Reviews, further building on our global reputation. One other fiber achievement I’d like to mention is our continued progress on our EXS1610 all-PON solution, which is designed to help operators flexibly deploy high-speed fiber broadband while protecting their existing technology investments. By enabling all of 10Gig EPON, XGS-PON, and Combo PON all in one platform, we broadened customer engagements and expanded feature sets for this product during the period. In a market that’s increasingly deploying both cable and fiber access solutions, our ability to provide exceptional, interoperable, and future-proof cable and fiber solutions is creating significant new growth pathways for Vecima.

Turning to our Content Delivery Solutions segment, which now encompasses the Terrace family commercial video products with our MediaScale portfolio, revenue climbed an impressive 32% year over year and 36% quarter over quarter. Those gains include continued uptake of managed IPTV installations and further deployment of our targeted dynamic ad insertion solution. But the significant growth driver for this CDS segment in Q1 was the ramp-up of our next-gen Terrace IQ commercial video solution.

As we previously announced, during the first quarter a major North American Tier 1 operator selected Terrace IQ for a broad commercial video network modernization, and that’s expected to span thousands of locations. Vecima’s legacy commercial video platforms have underpinned that operator’s video offering in the commercial vertical for several years already. We delivered the first tranche of next-gen platforms during the quarter, driving the surge in Terrace IQ sales and nearly tripling what we achieved with this product in all of fiscal 26.

And this is just the start of what we expect from Terrace IQ as we build our longtime leadership in the commercial video market. We currently have design wins with five Tier 1s and numerous Tier 2s, with more expected. As those rollouts get underway and expand, we expect Terrace IQ will position us to drive high growth rates in CDS similar to what we’re achieving in the Broadband Access segment. So an exciting time for both of our segments and overall a very strong start to the year for Vecima. Now I’ll turn the call over to Judd to discuss our first quarter results in more detail. Judd.

Thank you, Jud. Turning now to our outlook, we continue to anticipate year-over-year revenue growth of 30% to 35% in fiscal 2027, along with an EBITDA margin of approximately 20%. I want to note, however, that based on a slight change in customer timing, some Entra deliveries originally intended for late Q2 are now expected to shift to early Q3. So, as a result of that shift in delivery timing, we revised our calendar year outlook for 2026 to approximately 20% revenue growth as compared to calendar 2025, with an adjusted EBITDA margin of about 18%.

Irrespective, as I just mentioned, we continue to anticipate fiscal 2027 consolidated revenue growth of 30% to 35%. We expect our Broadband Access Solutions segment will continue to lead our growth as we support both our lead tier-one and 80 other customers in their wide-scale DAA network deployments. We’re expecting strong demand for a wide range of Entra DAA solutions in fiscal 2027, including our ERM3 and ERM4 remote fiber devices, EN9000 and EN8800 cable broadband platforms, as well as our highly successful Entra Optical Fiber to the Home portfolio centered around our remote OLT nodes, and adding to this, we anticipate increased deployment of the EM3400, the EM210 standalone 10-gig EPON module, and our power holdover modules in our Content Delivery Solutions segment.

Terrace Family sales are poised to continue expanding in the quarters ahead as our lead tier-one customer continues its major multi-year network upgrade using Terrace IQ. Additional operators are also beginning their own rollouts with that platform. We also anticipate continued steady performance with our MediaScale portfolio as we focus on driving revenue growth through managed IPTV expansions and our rollout of DAI. Combined, we’re on track for a sustained and expanding period of growth.

Remember that our 30% to 35% revenue growth outlook for fiscal year 2027 contemplates only the early stages of contribution from Entra VCMTS and DOCSIS 4.0 RPDs, XGS-PON, and several other platforms now entering the market. We expect these newer products will become meaningful and compounding drivers of performance in fiscal 2028 and beyond. And I want to emphasize again the increasingly important role we see for our fiber access products. Leveraging our existing global market share leadership in remote OLT tech, we expect to participate fully in the global expansion of Fiber to the Home networks through XGS-PON, extending our reach beyond just cable across the entire broadband space, which includes traditional telco operators. Vecima Networks expects to capitalize on the emerging 50G-PON and all-PON evolution projected to become pervasive globally over time.

As in cable access, where we’ve achieved significant market share in every category we’ve focused on, this major evolution in technology is expected to cause every operator worldwide to reevaluate their vendor and purchasing decisions and open the door for major expansion of Vecima Networks’ fiber access products. Overall, we have multiple engines for growth at Vecima Networks, at the forefront of the technology shaping future network architectures. As I said earlier, this is a very exciting time for Vecima Networks, and we look forward to reporting to you on our progress going forward. That concludes our formal comments for today. We’d now be happy to take questions. Operator.

OPERATOR

We will now begin the question-and-answer session for analysts and investors. To join the question queue, you may press star then 1 on your telephone keypad. You will 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 2. The first question comes from Ryan Koontz with Needham & Company. Please go ahead.

Ryan Koontz (Analyst at Needham & Company)

Great. Thanks for the question. Really nice quarter, guys. In the quarter just passed, did you talk about customer concentration at all? Was it pretty similar to what we’ve seen historically, or any discussion about customer mix there?

Sumit Kumar (President and Chief Executive Officer)

Yeah, we’ve reported on that, Ryan. Thanks for the question. I think quarter after quarter, as everyone knows, we have a very significant tier-one customer, a major and now the largest broadband operator in North America. And that’s been an important part of Vecima Networks’ growth over the last several years. It continues to be, but at the same time, with the 162 engagements we have and a broader set of 80-plus customers also starting their rollouts, we expect that to change over time and lessen the kind of concentration in that one customer.

Ryan Koontz (Analyst at Needham & Company)

Got it. And maybe in terms of supply, can you comment on the supply environment these days? Obviously memory has been an issue. I hear other things like PCBs and other parts are difficult to come by. How are you combating that, and is that affecting your ability to ship product at all?

Sumit Kumar (President and Chief Executive Officer)

Yeah, I think we’re doing pretty well with that as we go. Obviously, on a macro supply chain side of the equation, every vendor is facing these challenges. We feel good about our order coverage spanning well into calendar 2027, and we have infrastructure allocations. Our volumes on the network side rather than the customer premise side are a different order of magnitude, so that also helps. And our customers are being great partners, managing through this with us in strong partnerships.

So, we’ve been very successful. We’ve got good coverage, and we’ve got to continue to manage that effectively. We think that we have been. It has been a little bit of a headwind in margins, as it is for many people, but that leaves upside in the future going forward, and I think that’s accounted for in some of what you’re seeing on the margin trends between the fourth and first quarter. In addition to the mix, we are seeing that evolving scope on supply chain start to have a little bit of influence on where we’re sitting, and our longer-term target of pushing towards the upper 40s is still in play as more software comes into the mix.

Ryan Koontz (Analyst at Needham & Company)

Got it. That’s helpful. On the push-out into the March quarter, is there any kind of general rationale there? It’s obviously customer decisions based on their kind of inventory and pace and these sorts of things. Anything stand out there as far as rationale?

Sumit Kumar (President and Chief Executive Officer)

Yeah, I think, as many of you know, our largest customer has been executing on some really big plans: a major merger, an integration after that merger, and a network transformation all at once. And all that’s been pretty well publicized. They have this renewed focus on subscriber growth and churn reduction, customer loyalty, and all of that really plays out really well for Vecima Networks both in the short and long term. But network quality and capacity and resiliency are really at the heart of everything we bring to the table for that customer.

So, it is normal to see some seasonality show up at the end of calendar years as operators work to either pull in or push out based on financial objectives. Sometimes that involves pull-ins; sometimes it involves spend moving out past the boundary. We’re trying to be cautious about the near-term statements, but everything that we’re seeing that’s moved really from December is going to early Q3. So that’s why it supports reiterating this 30% to 35% outlook we have for the fiscal year, irrespective of seeing a little bit of that movement in Q2.

Ryan Koontz (Analyst at Needham & Company)

Yeah, definitely. And maybe a question on product: I don’t think we’ve talked about it before, but just this power holdover capability — is this relatively new, customer-driven? I know there’s been a lot of iterations around battery-type approaches in the node. It’s a pretty noisy environment on power. Any kind of commentary there you have around what this brings for your customers and opportunity for share gains?

Sumit Kumar (President and Chief Executive Officer)

Yeah, thanks for that. It’s a good point. And, as I just spoke to, network quality, reliability, resiliency is a big part of their market share in terms of broadband subscribers, and that’s an important part of it. As we move the cable network to DAA, to 3.1, 4.0, VCMTS, we also want to continue to drive the increases in the quality of the network. Power holdover modules are important for lots of operators in terms of managing through. We’re putting software deep in the network for the first time, so we don’t want to go through reboots when we hiccup in the power supplies or the grid.

The holdover modules very effectively allow you to do that and to prevent software reboot timings and whatnot. So that’s become more and more important at our lead customer and propagating out through other customers along with the expansion they’re doing with their acquisitions. So, the technology-wise between supercapacitors and lithium and all that, that’s all in play, but what we’re looking at is how many of those milliseconds we can hold past when you see a hiccup in the grid, and that’s getting to a really strong spot.

Ryan Koontz (Analyst at Needham & Company)

Very cool. And is that product for your DAA node specifically, or which products will have the capability?

Sumit Kumar (President and Chief Executive Officer)

Yeah, so all of the DAA nodes — the EN9000 — it will move also to the 8800 platform, which has been the lead at another customer, as you know, and that’s a 4x. And the remote OLT on the 10-gig EPON as well has carried that. So, basically all the DAA platforms are building into getting power holdover capability within them.

Ryan Koontz (Analyst at Needham & Company)

Great. Super. That’s all I’ve got. Thanks for the questions.

Sumit Kumar (President and Chief Executive Officer)

All right, thanks, Ryan.

OPERATOR

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

Jim Byrne (Analyst at Acumen Capital)

Yeah, thanks, guys. Maybe just touching on some of the expense items, I just wanted to get an idea of your total cash R&D spend for fiscal 2027. Kind of anticipated that 65 to 70 million range for the year. Is that fair?

Sumit Kumar (President and Chief Executive Officer)

Pitta, do you want to jump in on that one?

Pitta

Yeah, I think we certainly look at some increases over what we were spending last year. You probably got the top end of the range pretty close there, but definitely the more money we make, we’ve always prided ourselves in reinvesting in the company. So, obviously R&D is the area that’s going to get most of that extra money that we have.

Sumit Kumar (President and Chief Executive Officer)

Yeah, I think I’d just add if I could, Jim. You know, it’s about 18% of sales is kind of the envelope there on cash R&D. And as Judd just said, it’s a very important part of how we drive the future, and it’s been very effective for us. With the kind of growth we’re seeing on the top line and the gross profit, obviously we are gaining leverage on that R&D spending, and our ability now to pivot the bulk of that expenditure on future products that are not even in the fiscal 2027 revenue profile has increased significantly.

So the R&D is being effectuated on our growth beyond fiscal 2027.

Jim Byrne (Analyst at Acumen Capital)

Okay. And then just thinking about your debt levels obviously come down nicely here with the sale of telematics. Cash flows are going up. Any shift — you mentioned R&D — but any shift in capital allocation, maybe NCIB activity, anything like that?

Sumit Kumar (President and Chief Executive Officer)

Yeah, we’re generally conservative when it comes to those, and nothing outrageous or outlandish is planned for this year.

Jim Byrne (Analyst at Acumen Capital)

Okay. And then maybe lastly,

Sumit Kumar (President and Chief Executive Officer)

I would just add. Just—sorry. Let you go ahead, Jim. Sorry about that.

Jim Byrne (Analyst at Acumen Capital)

Yeah, yeah, no, I just—maybe just thinking about the rollout with Charter. Obviously a little bit of delay, but, you know, what would you characterize in terms of innings, where we are in that Charter rollout?

Sumit Kumar (President and Chief Executive Officer)

I think, you know, we’ve, we’ve hit some good, you know, momentum there. I think, you know, I wouldn’t necessarily characterize it as delay as much as, you know, this, this kind of movement and some, some specific timing from month to month, year, calendar year to calendar year. But the overall program is, is on the move. I think they reflected that, that, you know, the network upgrade remains one of their core, you know, four priorities they have going forward.

It’s a big part of how they’re, they’re working to improve the network at, you know, they’re at full multi-gig, you know, drive the upstream, that response to AI pressure on the upstream as well. So, you know, that’s ongoing. I think, you know, with that specific customer, we have a long runway ahead. They are, you know, early in the sequence of the industry, which is great for us, obviously, and speaks to some of the influences and, you know, the amount of our revenue that they represent today. But we see, you know, a long, long cycle ahead for both them and, you know, the remaining industry at large, you know, is really early in terms of innings. So that’s how I characterize it.

Jim Byrne (Analyst at Acumen Capital)

Okay, that’s it for me. Thanks, guys.

Sumit Kumar (President and Chief Executive Officer)

Thanks, Jim.

OPERATOR

Once again, analysts and institutional investors who would like to ask a question should press star and one on their touch-tone phone. The next question comes from Dave Kang with B. Riley. Please go ahead.

Dave Kang (Analyst at B. Riley)

Thank you. Just one quick question. How should we think about gross margin going forward with Entra ramping?

Sumit Kumar (President and Chief Executive Officer)

Yeah. So I think, you know, on the margin front, I think I want to highlight, you know, probably three things. There are some near-term factors we’re continuing to manage through. You know, memory costs, as per the earlier question, do remain elevated all across the industry. And while, you know, we feel well positioned from access to supply and coverage point of view, the costs are, you know, the headwinds there are reflected in our outlook. You know, and, you know, we’re also seeing, you know, the mix as you saw between the fourth and the first quarter start to kind of get a little less favorable than it was in the third and fourth quarters.

So, you know, the second part is really that the mix is very, very important in terms of how the margin stacks. So, you know, as these customer deployments continue to scale, I’ve always said, you know, certain cable access products, they tend to carry a bit of a lower margin profile, but they are also tied to some, some much larger deployment volumes. And, you know, we are seeing those programs ramp like we expected. So that’s an important part of the growth, you know, on the top line we’re showing for fiscal 27, but having a little bit of an ongoing kind of mix influence on the margin.

And then longer term the increases to the margins, the drivers we have there are firmly intact. More and more software content is coming into the business. The vCMTS, the evolution of our broadband portfolio — fiber, and optical fiber to the home, XGS-PON — those are all attractive in terms of what they do to the margins. So as those become more and more a part of the mix over time, they set us up for tailwinds to the margin. So putting that all together, I think fiscal 27 margins remain in a good spot. Our long-term target is the 45 to 49 range. Probably going to be a bit under that for the full year. But as the vCMTS and more of the fiber products increase in the mix in fiscal 28, we’re set up really well in terms of our target profile there at the 45 to 49.

Dave Kang (Analyst at B. Riley)

Got it. Thank you.

Sumit Kumar (President and Chief Executive Officer)

Thanks, Dave.

OPERATOR

Once again, analysts and institutional investors who would like to ask a question should press star then one on the touch-tone phone. As there appear 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.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.