Vecima Networks Q2 Earnings Call Highlights
by Mitch Edgeman · The Markets DailyVecima Networks (TSE:VCM) executives told investors the company believes it is “nearing the cusp of major growth inflection,” citing expected wider-scale deployments of next-generation distributed access architecture (DAA) technology at key customers and new program wins in commercial video.
On the company’s fiscal second-quarter 2026 earnings call, President and CEO Sumit Kumar said Vecima expects demand for its Entra DAA products to rise sharply beginning in the fourth quarter, as its lead Tier 1 broadband customer prepares to expand deployment and has shared anticipated product needs and timing. Kumar also said Vecima’s lead North American Tier 1 customer selected its next-generation Terrace IQ platform to support a national wholesale upgrade of the customer’s commercial video network.
Outlook: management targets 20% to 30% revenue growth over next 12 months
Based on customer indications over the next 12 months, Kumar said Vecima is estimating revenue growth of between 20% and 30% compared to the last 12 months. He added the company expects its adjusted EBITDA margin to break through 20% as product mix shifts toward higher-margin offerings and operating efficiency improves.
Management said those assumptions translate to an anticipated 70% to 85% increase in adjusted EBITDA over the next twelve months compared with calendar 2025.
Kumar noted the company continues to see some third-quarter timing “lumpiness” related to recent industry consolidation, but said it expects the impact to be modest and mitigated by a favorable Q3 product mix. “By the fourth quarter, we expect to see demand ramping up sharply,” he said.
Q2 results: revenue rose 3.5% as gross margin rebounded
For the fiscal second quarter, Vecima reported revenue of CAD 73.7 million, up 3.5% year-over-year and 3.7% sequentially. Kumar said the company delivered “solid” revenue growth paired with a “significantly stronger” gross margin percentage of 44.9%, an 850 basis point improvement from the prior-year period.
Adjusted EBITDA was CAD 10.6 million, representing an adjusted EBITDA margin of 14.4%, management said.
Chief Financial Officer Judd Schmid said gross margin improved versus both the prior year and the first quarter, reflecting a return to a higher-margin product mix in the Video and Broadband Solutions business and accretive contributions from the Content Delivery and Storage segment. He added that adjusted gross margin, normalized for inventory reserves and warrant expense, rose to 46.4% from 35.6% a year earlier.
Segment performance: VBS steady, CDS strength, Telematics profitability
Video and Broadband Solutions (VBS) revenue was CAD 59.6 million, increasing slightly year-over-year and up 2.8% sequentially. Schmid said next-generation Entra DAA products were a key driver. Entra sales totaled CAD 56.3 million, steady year-over-year and up 2.3% from Q1. Commercial video sales were CAD 3.2 million, up 8.7% year-over-year and 12% sequentially.
Kumar highlighted continued market seeding of the company’s EN9000 “GAP node” platform and said Vecima commenced deliveries of the new EN3400 GAP node aimed at multi-dwelling unit and enterprise applications. He also said new “Power Holdover” modules gained traction and made a meaningful contribution to results and VBS product mix.
In Entra Cloud, Kumar said Vecima expanded vCMTS trials with its lead customer and increased engagement with additional customers. He described vCMTS as a long-term growth driver and cited an addressable market estimate of $350 million by 2029, while emphasizing that vCMTS is not yet a significant revenue contributor and was not included in the company’s next-12-month growth outlook.
On fiber access, Kumar said Entra Optical sales remained strong. He also said Vecima secured its first U.S. customer for XGS-PON and closed an order for its Entra EXS1610 All-PON platform with a European customer. Vecima’s number of customer engagements for Entra increased to 147 from 123 a year ago; 70 of those customers have purchased Entra products, management said.
Content Delivery and Storage (CDS) revenue was CAD 12.3 million, rising 20.7% year-over-year and 9.7% sequentially. Schmid attributed the growth to IPTV installation and expansion activity, including a 39% year-over-year increase in product sales and slightly higher services revenue. Kumar said demand was supported by customers migrating from QAM to IPTV and expanding IPTV subscriber bases, and he pointed to additional contribution from dynamic ad insertion products, which he said can help operators increase video ARPU without raising rates.
Telematics revenue was CAD 1.8 million, up 5% year-over-year but down 3% from Q1. Kumar said Telematics delivered an “exceptionally strong” gross margin of 71.4%, added 11 new customers, and booked 345 new subscriptions, bringing asset tags under management to over 106,000.
Expenses, profitability, balance sheet, and dividend
Operating expenses were CAD 29.8 million, up slightly from CAD 29.3 million a year ago and CAD 1.8 million higher sequentially. Schmid said G&A declined to CAD 6.7 million from CAD 7.3 million due to lower legal, professional services, and training costs, partially offset by higher compensation. Sales and marketing expense rose to CAD 9.4 million from CAD 7.3 million, which Schmid said was influenced by smaller finished goods inventory allowance recoveries versus the prior-year quarter. R&D expense increased to CAD 13.2 million from CAD 11.3 million, primarily due to higher amortization of deferred development costs and lower capitalized labor development costs; he said cash R&D investment totaled CAD 16.8 million, up from CAD 15.9 million.
Operating income improved to CAD 3.3 million, compared with an operating loss of CAD 3.4 million a year earlier. Net income was CAD 100,000, compared with a net loss of CAD 7.9 million in the prior-year quarter; adjusted EPS was CAD 0.04 versus an adjusted loss per share of CAD 0.30.
Working capital was CAD 49.3 million at quarter-end, down from CAD 51.2 million at the end of June 2025. Cash flow from operations was CAD 6.8 million, down from CAD 15.2 million, which Schmid said primarily reflected changes in working capital. Net debt stood at CAD 66.9 million, down from a peak of CAD 92 million in fiscal Q3 2024, and management reiterated a focus on paying down debt.
The board approved a quarterly dividend of CAD 0.055 per common share, payable March 23, 2026, to shareholders of record as of Feb. 27, 2026, and designated as an eligible dividend for Canadian tax purposes.
Analyst Q&A: GAP node criteria, fiber deployment, Terrace IQ, vCMTS, capital allocation
During Q&A, Needham’s Ryan Koontz asked about customer criteria for choosing a traditional node design versus a GAP node. Kumar emphasized the GAP platform’s modularity and ability to evolve across DOCSIS generations and potentially fiber-to-the-home modules, adding that thermal management and standardization were key elements. Kumar also said Vecima is currently the only manufacturer of the GAP platform and believes it has a time-to-market advantage.
Koontz also asked about fiber deployment plans. Kumar said the focus has been on network edge and greenfield expansion, with rural subsidy activity adding to customer footprints. He said overbuild is not a primary focus, noting cable networks’ capacity and cost advantages with DOCSIS 3.1 and 4.0.
On commercial video, Kumar said the market is shifting from linear QAM feeds to IPTV-based delivery for commercial properties, and he described the Terrace IQ win as meaningful over the next 12 months and over the next several years as the customer upgrades its installed base.
LionGuard’s Alexandre Ryzhikov asked about confidence in growth beyond the major customer upgrade cycle. Kumar said segmentation and expansion are continuous and not strictly “start-stop,” and he noted that about 50% of Vecima’s business is not cable access, pointing to broader customer upgrades, fiber expansion with XGS-PON, and vCMTS as additional drivers.
Ryzhikov also asked about market share expectations in vCMTS by 2029. Kumar reiterated the $350 million market estimate and said there are effectively three viable vendors, adding that Vecima’s lead win with Cox and broader engagements support an expectation of “respectable” market share. On capital allocation, Kumar said management remains focused on cash generation and reducing leverage, but said improved performance could open the door to exploring other uses of capital, including potential share purchases or M&A.
About Vecima Networks (TSE:VCM)
Vecima Networks Inc delivers scalable software, services, and integrated technologies for broadband access, content delivery, and telematics. The company operates in three segments: Video & Broadband Solutions, Content Delivery & Storage, and Telematics. The Video & Broadband Solutions segment delivers scalable, flexible broadband and video networks for cable and telecommunications operators to meet tomorrow’s bandwidth demands. The Content Delivery & Storage segment develops advanced applications that protect, transform, and deliver visual media.