Vecima welcomed a period of smooth-sailing in its fiscal Q3 2023 (ended March 31) after what CEO Sumit Kumar described during an earnings call as a “lumpy and volatile” period of telecom supply chain hurdles. Case in point: Vecina’s working capital by their Q3 wrap was CAD $91.1 million (roughly $67.5 million), up from CAD $58.6 million in June 2022.
“Our penetration increase in the industry is broadly scaling in the evolution to 10G, fiber access roll-out, and greenfield [and] cable access roll-outs… [We’re] seeing that across the world and across the industry,” said Kumar.
Its Entra family of products saw sales increase to CAD $62.7 million, up 104 percent year over year and 13 percent since Q2. Two partnerships for Remote PHY fueled much of that growth: One with Charter Communications, and another with Kbro, Taiwan’s largest cable operator. Krbo chose the Entra EN2112 Compart Remote PHY nodes as a portion of their DAA solution to power up their DOCSIS 3.1 upgrades.
Vecima’s video and broadband solutions segment generated CAD $64.8 million, a 75 percent increase year over year. Across all verticals, quarterly revenue shook out to CAD $78.3 million, up 54 percent from Q3 2022.
According to Kumar, some of Vecina’s payoff is coming from working off their backlog and tackling supply chain snafus head-on. Some of the hold-ups in quarter-over-quarter capital also come down to larger global supply issues that don’t intersect with Vecima’s products but impact the larger telecom industry as a whole.
Additionally, considering that some of Vecima’s customers are large-scale operators like Charter, they require more patience and planning to manage large construction projects carefully. If there are issues with not having enough fiber supply, for example, large operators are going to hold off on moving forward with builds until they have what they need. The impact of such decisions trickle down to Vecima.
“Now it’s time to let [our customers] wind up on the anticipated significant growth they have on rollouts through 2024,” Kumar says. “Operators are well-fueled to move forward. There’s some catch-up to be done on deployment, but our customers are strong in their capability and we’ve outfitted them for what they need to do.”
Vecima also acknowledged that gross margins in Q3 have shifted back and forth in the 40s depending on a rotating mix of product lines. “[Our margin] depends on a mix in a given amount of time… The mix can move around a bit. On balance, the overall view of margin on cable and fiber access continue to drive out EBITDA margins,” Kumar noted.
As for when it may start to see a windfall from the Charter deal, Kumar noted that the team was not in the position to discuss their customer’s plans, but pointed to the fact that Charter has talked about their plans to upgrade their network over the next three years. “We are working with them in that regard consistent with their targeted timeline,” he concluded.