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Vecima Reports Q3 Fiscal 2014 Results

Highest Gross Margin and Cash Balance in the Company's History

VICTORIA, BRITISH COLUMBIA -- (Marketwired) -- 05/15/14 -- Vecima Networks Inc. (TSX: VCM), an experienced designer and manufacturer of innovative technology in the broadband equipment market, today reported financial results for the three months ended March 31, 2014.

"We have delivered exceptional financial performance in Q3 and are extremely pleased that our investments in the best products to meet our customer's needs are paying dividends," stated Sumit Kumar, President and CEO. "With our business services and other solutions continuing to lead important market segments, we've driven our margins and cash balance to new highs as we capitalize on the market strength of these solutions."

FINANCIAL HIGHLIGHTS


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(CAD dollars in millions except percentages,         Q3        Q2        Q3
 headcount, and per share data)                  FY2014    FY2014    FY2013
----------------------------------------------------------------------------
Revenue                                            22.6      21.6      21.5
----------------------------------------------------------------------------
Gross margin                                         52%       46%       44%
----------------------------------------------------------------------------
Adjusted EBITDA(1)                                  6.2       4.9       4.5
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Net income                                          3.4      11.4       2.0
----------------------------------------------------------------------------
Earnings per share (based on weighted average
 number shares outstanding)                    $   0.15  $   0.51  $   0.09
----------------------------------------------------------------------------
Cash and short-term investments                    42.1      36.5      25.0
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Headcount                                           520       538       596
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(1) Adjusted EBITDA does not have a standardized meaning under IFRS and
therefore may not be comparable to similar measures provided by other
issuers. Accordingly, investors are cautioned that Adjusted EBITDA should
not be construed as an alternative to net income, determined in accordance
with IFRS, as an indicator of our financial performance or as a measure of
our liquidity and cash flows. For a reconciliation of Adjusted EBITDA,
investors should refer to Management's Discussion and Analysis for the
current quarter.
----------------------------------------------------------------------------

MSO BUSINESS SERVICES

Terrace Family


--  Sales in the third quarter were $8.1 million compared to $6.6 million in
    the previous quarter. Results continue to demonstrate the intimate
    connection the Terrace product line has to the ongoing digitization of
    the world's cable networks. The new MSO win, announced in Q1, further
    ramped its uptake in the quarter. Further, in Q3, Vecima captured a new
    national deployment win at another prominent US cable MSO that is now
    launching its nationwide all-digital upgrade.

Terrace QAM


--  Sales in Q3 were $4.1 million. The reduction in sales was largely
    attributed to the need to prioritize other products that were time
    sensitive to ship in Q3. Bookings for Terrace QAM were strong leading
    into Q4. Hospitality remains an exciting new market segment for the
    cable MSOs. Though an initial deployment ramp in earlier quarters is
    behind us, we expect customer demand to remain robust as cable operators
    work to provide upgrades to HD service across the major hotel brands.

CABLE HEADEND

Digital Video Access Platform


--  During the third quarter, further feedback received from our OEM partner
    for the solution again reinforced the pressing market need for the
    product. As a reminder, the platform is required to provide two-way
    communications to a very widely deployed base of video equipment in
    residential customer premises. Field trials at most of the top MSOs in
    North America approached their final stages during our fiscal third
    quarter. Vecima believes that all final software refinements are
    complete.

"Because of the ongoing strength of our current product portfolio that squarely solves the needs of cable operators as they upgrade networks today, we are investing in the development of a new suite of platform products. Those new platforms are finely tuned to address the market dynamics that will lead cable MSOs to invest in long term network evolution that maintains their leadership in the digital world," said Sumit Kumar.

CONFERENCE CALL

A conference call and live audio webcast will be held on May 15, 2014 at 1 p.m. ET to discuss the Company's third quarter results. Vecima's unaudited condensed interim consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2014 are available under the Company's profile at www.SEDAR.com, and at www.vecima.com/financials/.

To participate in the teleconference, dial 1-800-319-4610 or 1-604-638-5340. The webcast will be available in real time at http://services.choruscall.ca/links/vecima140515.html and will be archived on the Vecima website at www.vecima.com/shareholder-events/.

About Vecima Networks

Vecima Networks Inc. (TSX: VCM) designs, manufactures and sells products that enable broadband access to cable, wireless and telephony networks. Vecima's hardware products incorporate original embedded software to meet the complex requirements of next-generation, high-speed digital networks. Service providers use Vecima's solutions to deliver services to a converging worldwide broadband market, including what are commonly known as "triple play" (voice, video and data) and "quadruple play" (voice, video, data and wireless) services. Vecima's solutions allow service providers to rapidly and cost-effectively bridge the final network segment that connects the system directly to end users, commonly referred to as "the last mile", by overcoming the bottleneck resulting from insufficient carrying capacity in legacy, last mile infrastructures. Vecima's products are directed at two principal markets: Converged Wired Solutions and Broadband Wireless. The Company has also developed and continues to focus on developing products to address emerging markets such as Voice over Internet Protocol, fibre to the home and IP video. More information is available at our website at www.vecima.com.

Forward-Looking Statements

Certain statements in this press release may constitute forward-looking statements within the meaning of applicable securities laws. 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, belief or current expectations with respect to market and general economic conditions, future sales, future shipping volumes, future cash position, revenue expectations, future costs, future operating performance, plans to sell non-core assets, and plans to continue to explore opportunities to maximize shareholder value, including the possibility of future cash dividends and distributions. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or are beyond our control. 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 and the distinctive characteristics of Vecima's operations and industry and customer demand that may have a material impact on, or constitute risk factors in respect of Vecima's future financial performance, as set forth under the heading "Risk Factors" in the Company's Annual Information Form dated September 26, 2013, a copy of which is available at www.sedar.com. In addition, although the forward-looking statements in this press release are based on what management believes are reasonable assumptions, such assumptions may prove to be incorrect. Consequently, readers 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. 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.


                            VECIMA NETWORKS INC.
       CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
               (unaudited - in thousands of Canadian Dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                        March 31,   June 30,
                                                             2014       2013
----------------------------------------------------------------------------
Assets
Current assets
  Cash and cash equivalents                             $   7,942  $   7,148
  Short-term investments                                   34,141     24,699
  Accounts receivable                                      15,580     13,442
  Income tax receivable                                         -      4,762
  Inventories                                              24,622     28,264
  Prepaid expenses                                          1,105        936
----------------------------------------------------------------------------
                                                           83,390     79,251
Non-current assets
  Property, plant and equipment                            21,477     25,006
  Assets held for resale                                        -        342
  Intangible assets                                        12,463     12,176
  Investment tax credit                                    32,902     30,286
  Deferred tax asset                                        3,839      7,729
----------------------------------------------------------------------------
                                                        $ 154,071  $ 154,790
----------------------------------------------------------------------------
Liabilities
Current liabilities
  Accounts payable and accrued liabilities              $  11,063  $   9,973
  Provisions                                                  956        957
  Income tax payable                                          292        281
  Deferred revenue                                          1,881      1,331
  Current portion of long-term debt                           250        250
----------------------------------------------------------------------------
                                                           14,442     12,792
Non-current liabilities
  Other long-term liabilities                                 179        306
  Provisions                                                1,315      1,314
  Long-term debt                                            3,021      3,229
----------------------------------------------------------------------------
                                                           18,957     17,641
----------------------------------------------------------------------------
Shareholders' equity
  Share capital                                               153     12,183
  Reserves                                                  2,821      2,803
  Retained earnings                                       132,140    122,163
----------------------------------------------------------------------------
                                                          135,114    137,149
----------------------------------------------------------------------------
                                                        $ 154,071  $ 154,790
----------------------------------------------------------------------------

                            VECIMA NETWORKS INC.
      CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  (unaudited - in thousands of Canadian dollars except net income per share
                                    data)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 Three months ended       Nine months ended
                                          March 31,               March 31,
                                   2014        2013        2014        2013
----------------------------------------------------------------------------

Sales                       $    22,592  $   21,509  $   65,835  $   69,630
Cost of sales                    10,782      11,956      33,877      40,449
----------------------------------------------------------------------------
Gross margin                     11,810       9,553      31,958      29,181
----------------------------------------------------------------------------
Operating expenses
Research and development          2,135       1,823       6,183       5,976
Sales and marketing               1,402       1,487       4,014       4,118
General and administrative        3,983       4,269      12,159      12,826
Stock-based compensation              5           9          18          39
Other (income)                      (50)       (258)    (14,433)    (13,595)
----------------------------------------------------------------------------
                                  7,475       7,330       7,941       9,364
----------------------------------------------------------------------------
Operating income                  4,335       2,223      24,017      19,817
Finance costs                        48          52         134         333
Finance income                      383         556       1,203         894
----------------------------------------------------------------------------
Income before income taxes        4,670       2,727      25,086      20,378
Income tax expense                1,272         711       4,838       3,944
----------------------------------------------------------------------------
Net income and total
 comprehensive income       $     3,398  $    2,016  $   20,248  $   16,434
----------------------------------------------------------------------------

Net income per share
Basic                       $      0.15  $     0.09  $     0.91  $     0.74
Diluted                     $      0.15  $     0.09  $     0.91  $     0.74

Weighted average number of
 common shares
  Shares outstanding -
   basic                     22,328,159  22,322,328  22,328,159  22,322,328
  Shares outstanding -
   diluted                   22,349,701  22,333,304  22,349,701  22,333,304

                            VECIMA NETWORKS INC.
       CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
               (unaudited - in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Share                Retained
                                Capital    Reserves    Earnings       Total
----------------------------------------------------------------------------
Balance as at June 30, 2012  $   34,482  $    2,761  $  103,001  $  140,244
Net income and total
 comprehensive income                 -           -      19,162      19,162
Shares issued by exercising
 options                             23           -           -          23
Return of capital               (22,322)          -           -     (22,322)
Share-based payment expense           -          42           -          42
----------------------------------------------------------------------------
Balance as at June 30, 2013      12,183       2,803     122,163     137,149
----------------------------------------------------------------------------

Net income and total
 comprehensive income                 -           -      20,248      20,248
Dividends                             -           -     (10,271)    (10,271)
Shares issued by exercising
 options                             27           -           -          27
Return of capital to
 shareholders                   (12,057)          -           -     (12,057)
Share-based payment expense           -          18           -          18
----------------------------------------------------------------------------
Balance as at March 31,
 2014                        $      153  $    2,821  $  132,140  $  135,114
----------------------------------------------------------------------------

                            VECIMA NETWORKS INC.
           CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
               (unaudited - in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Three months ended   Nine months ended
                                              March 31,           March 31,
                                         2014      2013      2014      2013
----------------------------------------------------------------------------
Cash flows from operating activities
Net income and total comprehensive
 income                              $  3,398  $  2,016  $ 20,248  $ 16,434
Add (deduct) items not requiring
 cash
  Loss (gain) on sale of property,
   plant and equipment                     20       (44)        7       (30)
  Gain on sale of assets held for
   resale                                   -         -   (14,027)   (3,604)
  Gain on sale of intangible assets         -         -         -    (9,358)
  Depreciation of property, plant
   and equipment                          816     1,201     2,433     3,621
  Amortization of deferred
   development costs                      617       559     1,819     1,676
  Amortization of finite-life
   intangible assets                       20        37        96       110
  Stock-based compensation                  5         9        18        39
  Income tax expense                      174      (109)      948     1,128
  Deferred income tax expense           1,098       820     3,890     2,816
  Interest expense                         48        52       134       156
  Interest income                        (133)     (220)     (522)     (325)
(Decrease) increase in other long-
 term liabilities                         (39)      (53)     (127)       13
(Decrease) increase in provisions          (6)      (64)      175      (257)
Increase in investment tax credit        (207)     (125)     (762)   (3,401)
Net change in non-cash working
 capital relating to operations         2,477    (1,505)    2,888     8,114
Interest paid                             (43)      (40)     (113)     (129)
Interest received                         134       224       508       336
Income tax received                        16     6,148     4,695     6,148
Income tax paid                          (238)     (242)     (955)   (1,371)
----------------------------------------------------------------------------
                                        8,157     8,664    21,353    22,116
----------------------------------------------------------------------------
Cash flows (used in) provided by
 investing activities
Purchase of property, plant and
 equipment                               (796)     (469)   (2,097)   (1,725)
Proceeds from the sale of property,
 plant and equipment                       26        71        79       132
Proceeds from the sale of assets
 held for resale                            -         -    17,465     3,989
Proceeds from the sale of intangible
 assets                                     -         -         -     9,738
Purchase of short-term investments     (3,630)  (26,276)  (33,627)  (42,250)
Proceeds on sale of short-term
 investments                                -    31,673    24,185    31,673
Deferred development costs             (1,682)   (2,255)   (4,015)   (6,245)
Purchase of indefinite and finite-
 life intangible assets                   (19)      (12)      (40)      (20)
----------------------------------------------------------------------------
                                       (6,101)    2,732     1,950    (4,708)
----------------------------------------------------------------------------
Cash flows (used in) provided by
 financing activities
Proceeds from shares issued through
 exercised options                          -        18        27        23
Return of capital to shareholders           -   (22,322)  (12,057)  (22,322)
Dividends paid                              -         -   (10,271)        -
Repayment of long-term debt               (62)      (41)     (208)     (187)
----------------------------------------------------------------------------
                                          (62)  (22,345)  (22,509)  (22,486)
----------------------------------------------------------------------------

Increase (decrease) in cash during
 the year                               1,994   (10,949)      794    (5,078)
Cash and cash equivalents, beginning
 of period                              5,948    25,420     7,148    19,549
----------------------------------------------------------------------------
Cash and cash equivalents, end of
 period                              $  7,942  $ 14,471  $  7,942  $ 14,471
----------------------------------------------------------------------------

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