Q3 2026 Vecima Networks Inc Earnings Call

May 14, 2026

Speaker #2: Hello, this is the chorus call conference operator. Welcome to Vecima Networks Q4, Q4, 2026 results conference call and webcast. As a reminder, all participants are in listen-only mode at the conference is being recorded.

Operator: Hello, this is the Chorus Call conference operator. Welcome to Vecima Networks Third Quarter Fiscal 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 1 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 reach an operator by pressing star and 0. Presenting today on behalf of Vecima Networks are 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 Q3 fiscal 2026 results.

Operator: Hello, this is the Chorus Call conference operator. Welcome to Vecima Networks Q3 Fiscal 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 the handset before pressing any keys. Should you need assistance during the conference call, you may reach an operator by pressing star and zero. Presenting today on behalf of Vecima Networks are 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 Q3 fiscal 2026 results.

Speaker #2: 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 touchstone phone.

Speaker #2: 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 reach an operator by pressing star and zero.

Speaker #2: Presenting today on behalf of Vecima Networks are Sumit Kumar, President and CEO, and Judge Smith, Chief Financial Officer. Today's call will begin with executive commentary on Vecima's financial and operational performance for the third quarter fiscal 2026 results.

Speaker #2: Lastly, the call will finish with a question-and-answer period for analysts and institutional investors. The press release announcing the company's third quarter fiscal 2026 results, as well as detailed supplemental investor information, are posted on Vecima's website at www.vecima.com under the Investor Relations heading.

Operator: Lastly, the call will finish with a question and answer period for analysts and institutional investors. The press release announcing the company's Q3 fiscal 2026 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 and nine months ended 31 March 2026 and 2025. Certain statements in this conference call and webcast may constitute forward-looking statements within the meaning of applicable securities law, 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.

Speaker #2: 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 nine-month periods ended March 31, 2026, and 2025.

Speaker #2: Certain statements in this conference call and webcast may constitute forward-looking statements within the meaning of applicable securities law. From which Vecima's actual results could differ.

Speaker #2: 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.

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 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 Q3 earnings report and press release of fiscal 2026, as well as its annual information form dated 25 September 2025, 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 SEDAR at www.sedarplus.ca.

Speaker #2: 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.

Speaker #2: Please review the cautionary language in the company's third quarter earnings report and press release of fiscal 2026, as well as its annual information form dated September 25th, 2025, regarding the various factors assumptions and risks that could cause actual results to differ.

Speaker #2: These documents are available on Vecima's website at www.vecima.com under the Investor Relations heading and on Cedar at www.cedarplus.ca. At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks.

Operator: At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks. Please go ahead.

Speaker #2: Please go ahead.

Speaker #3: Good morning and welcome, everyone. Thank you for joining us. In our third quarter earnings release this morning, we not only reiterated our expectation of a near-term resurgence of growth, but we also increased our outlook.

Sumit Kumar: Good morning and welcome, everyone. Thank you for joining us. In our Q3 earnings release this morning, we not only reiterated our expectation of a near-term resurgence of growth, but we also increased our outlook. I'm going to start today's call with some comments on our updated outlook before moving on to an overview of our Q3 highlights. Judd will provide our financial review, and then I'll return to wrap up before we take questions. You'll recall that in our last outlook, we were anticipating major growth momentum for calendar 2026, with revenue increases of between 20% to 30% compared to calendar 2025. I'm pleased to report that expectations for near-term customer demand have not only been confirmed, but they've also expanded, leading to today's upward revision.

Speaker #3: I'm going to start today's call with some comments on our updated outlook, before moving on to an overview of our third quarter highlights. Judd will provide our financial review, and then I'll return to wrap up before we take questions.

Speaker #3: You'll recall that in our last outlook, we were anticipating major growth momentum for calendar 2026 with revenue increases of between 20 and 30 percent compared to calendar 2025.

Speaker #3: I'm pleased to report that expectations for near-term customer demand have not only been confirmed, but they've also expanded, leading to today's upward revision. We're now anticipating year-over-year revenue growth for calendar '26 in the range of 22.5 to 30 percent.

Sumit Kumar: We're now anticipating year-over-year revenue growth for calendar 2026 in the range of 22.5% to 30%. Together with an expected Adjusted EBITDA margin of 20%, we're anticipating year-over-year Adjusted EBITDA growth of between 74% and 85% for the same period. With increased demand coalescing, our raised outlook is underpinned by customer purchase orders and forecasts with clear visibility into increased volumes in the near term. We're already seeing this start to materialize. As we move into Q4, we continue to see strong revenue momentum that positions us to reach a new quarterly high in the near term with sustained growth expected thereafter, and that's Q4 fiscal 2026. On the broadband side, there are multiple growth drivers supporting this outlook.

Speaker #3: And together, we're in an expected adjusted EBITDA margin of 20 percent. We're anticipating year-over-year adjusted EBITDA growth of between 74 and 85 percent for the same period.

Speaker #3: With increased demand coalescing, a raised outlook is underpinned by customer purchase orders and forecasts with clear visibility into increased volumes in the near term.

Speaker #3: We're already seeing this start to materialize. As we move into Q4, we continue to see strong revenue momentum that positions us to reach a new quarterly high in the near term with a sustained growth expected thereafter.

Speaker #3: And that's Q4 fiscal '26. On the broadband side, there are multiple growth drivers supporting this outlook. First, we're broadly supplying one of our largest customers, Charter Communications, as they expand their wide-scale DAA network deployment using our next-gen cable and fiber access technologies.

Sumit Kumar: First, we're broadly supplying one of our largest customers, Charter Communications, as they expand their wide-scale DAA network deployment using our next-gen cable and fiber access technologies. These are major multi-year upgrade programs encompassing our Entra Remote PHY products, including our EN9000 GAP node and ERM RPD platforms, and our Entra optical fiber access portfolio centered around Fiber to the Home remote OLT nodes. As of Q3, this rollout is fully underway, and it's driving significant long-term waves of demand. At the same time, we're building on our revenue base with the launch of several new Entra products across multiple customers. Those include the EN3400, a new smaller version of the EN9000 GAP node, the EEM210 standalone 2-port 10G EPON module, and our Power Holdover Modules.

Speaker #3: These are major multi-year upgrade programs encompassing our intra remote five products, including our EN 9000 gap known and RPD platforms. And our intra optical fiber access portfolio centered around fiber to the home remote OLT nodes.

Speaker #3: As of Q3, this rollout is fully underway, and it's driving significant long-term waves of demand. At the same time, we're building on our revenue base with the launch of several new intra products across multiple customers.

Speaker #3: Those include the EN 3400, a new smaller version of the EN 9000 gap node, the EEM 210 standalone two-port 10 gig EPON module, and our power holdover modules.

Speaker #3: On the commercial video side of the portfolio, we're also preparing to roll out our next-generation Terrace IQ platform as our lead tier one customer undertakes the wholesale upgrade of its national commercial video network.

Sumit Kumar: On the commercial video side of the portfolio, we're also preparing to roll out our next generation Terrace IQ platform as our lead tier 1 customer undertakes the wholesale upgrade of its national commercial video network. This multi-year program includes upgrades to thousands of existing commercial property accounts and supports new commercial video properties and accounts added by the operator on an ongoing basis. I want to emphasize that while our outlook currently focuses on calendar 2026, the growth trajectory we see for Vecima extends well beyond that. During Q3, we signed a major multi-year DOCSIS 4.0 agreement with Charter for its spectrum operations. That's in addition to the major network upgrade program we're already working on.

Speaker #3: This multi-year program includes upgrades to thousands of existing commercial property accounts, and supports new commercial video properties and accounts added by the operator on an ongoing basis.

Speaker #3: I want to emphasize that, while our outlook currently focuses on calendar 2026, the growth trajectory we see for Vecima extends well beyond that. During the third quarter, we signed a major multi-year DOCSIS 4.0 agreement with Charter for its Spectrum operations.

Speaker #3: That's in addition to the major network upgrade program we're already working on. The new agreement again expands our collaborative partnership with Charter and covers deployment of our high-value, next-gen Entra 422, which is the world's first DOCSIS 4.0 dual downstream service group RPD.

Sumit Kumar: The new agreement again expands our collaborative partnership with Charter and covers deployment of our high-value next-gen ENTRA ERM422, which is the world's first DOCSIS 4.0 dual downstream service group RPD. The announcement also included continued nationwide Fiber to the Home deployment for our global market leading ENTRA SF-4X remote OLT. As our relationship with Charter grows and deepens, we're also continuing to work with a wide array of other operators globally for preparing for their own DAA rollouts using Vecima solutions. At the end of Q3, we were engaged with 147 MSOs worldwide. Keep in mind that our outlook only includes a minimal contribution from our new VCMTS cloud solutions, which are advancing steadily. We view VCMTS as a major incremental growth opportunity, supporting an addressable market that's estimated to be worth $350 million US by 2029.

Speaker #3: The announcement also included continued nationwide fiber to the home deployment for our global market-leading Entra SF4X remote OLT. As our we're also continuing to work with a wide array of other operators globally for preparing for their own DAA rollouts using Vecima solutions.

Speaker #3: At the end of Q3, we were engaged with 147 MSOs worldwide. And keep in mind that our outlook only includes a minimal contribution from our new VCMTS cloud solutions, which are advancing steadily.

Speaker #3: We view VCMTS as a major incremental growth opportunity, supporting an adjustable market that's estimated to be worth $350 million US by 2029. After achieving our highest quarterly revenue for Entra optical products in over three years, we see rapidly growing demand for Vecima's fiber to the home access solutions.

Sumit Kumar: After achieving our highest quarterly revenue for Entra optical products in over 3 years, we see rapidly growing demand for Vecima's Fiber to the Home access solutions, including 10G EPON and XGS-PON. Keep in mind that Vecima has been the market share leader in Fiber to the Home remote OLT nodes for 5 years running now. With our Entra optical portfolio now addressing the much larger ITU standards driven PON market, our Fiber to the Home access business is positioned to expand significantly in the long term. We see this enriching our comprehensive scope in global broadband networks and providing major new growth pathways for the company. We see additional opportunities with IPTV and Dynamic Ad Insertion in our Content Delivery and Storage segment. Taken together, this adds up to a clear long-term growth trajectory for Vecima.

Speaker #3: Including 10 Gig EPON and XGS-PON, and keep in mind that Vecima has been the market share leader in fiber-to-the-home remote OLT nodes for five years running now.

Speaker #3: With our Entra optical portfolio now addressing the much larger ITU standards driven PON market, our fiber to the home access business is positioned to expand significantly in the long term.

Speaker #3: We see this enriching our comprehensive scope and global broadband networks and providing major new growth pathways for the company. As well, we see additional opportunities with IPTV and dynamic ad insertion in our content delivery and storage segment.

Speaker #3: Taken together, this adds up to a clear long-term growth trajectory for Vecima. Our outlook for calendar 2026 is just the start of what we see ahead.

Sumit Kumar: Our outlook for calendar 2026 is just the start of what we see ahead. Turning now to our Q3 financial performance, our results were fully in line with our expectations. We anticipated a temporary modest pullback in sequential revenue related to industry consolidation activity and the normal initiation phase that happens just prior to major customer program acceleration. Our consolidated revenue of CAD 64.8 million was below what we achieved in Q2 of this year, but slightly higher than Q3 last year. Still, we achieved an impressive gross margin of 47.3%, representing the third consecutive quarter gross margin improvement. That reflects a favorable product mix in the quarter with a strong contribution from our high-value fiber access solutions. Together, we continued operating improvements.

Speaker #3: Turning now to our third quarter financial performance, our results were fully in line with our expectations. We anticipated a temporary, modest pullback in sequential revenue related to industry consolidation activity and the normal initiation phase that happens just prior to major customer program acceleration.

Speaker #3: Our consolidated revenue of $64.8 million was below what we achieved in Q2 of this year, but slightly higher than Q3 last year. Still, we achieved an impressive gross margin of 47.3%, representing the third consecutive quarter gross margin improvement.

Speaker #3: That reflects a favorable product mix in the quarter, with a strong contribution from our high-value fiber access solutions, together with continued operating improvements. Notably, adjusted EBITDA climbed to $11.3 million, up both year-over-year and quarter-over-quarter, and represented a strong adjusted EBITDA margin of 17.4%.

Sumit Kumar: Notably, Adjusted EBITDA climbed to CAD 11.3 million, up both year over year and quarter over quarter, and represented a strong Adjusted EBITDA margin of 17.4%. In our Video and Broadband Solutions segment, the Q3 included a 9.6% year-over-year revenue increase, a strong gross margin, and continued major product and customer advances. The key highlight of the quarter was a multiyear DOCSIS 4.0 agreement signed with Charter that I referenced earlier. That was a big win for both our cable and fiber access broadband portfolios and represented just one of several highlights in the quarter. We also achieved our highest Entra optical sales in over three years, led by our industry-leading SF4X optical line terminals for Fiber to the Home.

Speaker #3: In our Video and Broadband Solutions segment, the third quarter included a 9.6% year-over-year revenue increase, a strong gross margin, and continued major product and customer advances.

Speaker #3: The key highlight of the quarter was the multi-year DOCSIS 4.0 agreement signed with Charter that I referenced earlier. That was a big win for both our cable and fiber access broadband portfolios, and represented just one of several highlights in the quarter.

Speaker #3: We also achieved our highest Entra optical sales in over three years, led by our industry-leading SF-4X optical line terminals for fiber to the home.

Speaker #3: And further underscoring our leadership in fiber, we were once again named the global market share leader for PON remote optical line terminals in Doloro Group's 2025 market share report.

Sumit Kumar: Further underscoring our leadership in fiber, we were once again named the global market share leader for PON remote optical line terminals in Dell'Oro Group's 2025 market share report. Again, that was the 5th consecutive year we've earned that honor. Fiber to the Home solutions have grown to become a material and high-value part of Vecima's broadband product sales, and I want to emphasize that this growth is driven by more than just subsidized rural programs. With a global value exceeding CAD 6 billion, the Fiber to the Home market is growing rapidly. Vecima is a critical supplier in this space, supported by strong 10 gig plus NDAA capabilities. Looking at some other highlights in our VBS segment, we made significant advances with our vCMTS cloud solution during the quarter.

Speaker #3: And again, that was the fifth consecutive year we've earned that honor. Fiber-to-the-home solutions have grown to become a material and high-value part of Vecima's broadband product sales, and I want to emphasize that this growth is driven by more than just subsidized rural programs.

Speaker #3: With a global value exceeding $6 billion, the fiber to the home market is growing rapidly, Vecima is a critical supplier in this space, supported by strong 10 gig plus and DAA capabilities.

Speaker #3: Looking at some other highlights in our VBS segment, we made significant advances with our VCMTS cloud solution during the quarter. In addition to further progressing trials with our lead Tier One customer, we secured a paid proof-of-concept agreement with an additional international Tier One customer.

Sumit Kumar: In addition to further progressing trials with our lead tier 1 customer, we secured a paid proof of concept agreement with an additional international tier 1 customer. We continued to deepen lab trials and secure initial orders, adding 3 new operators in Europe. We also introduced another new cable access solution in Q3 with our launch of the ERM312, a new compact RPD module for our EN9000 and EN3400 platforms. Taken together, these achievements lay the groundwork for continued profitable growth in the VBS Segment, both in the near and the long term. Looking at our other business segments, in our Content Delivery and Storage Segment, we generated revenue of CAD 10.7 million, which was lower year over year and quarter over quarter, but paired that with a very strong 68% gross margin.

Speaker #3: And we continue to deepen lab trials and secure initial orders adding three new operators in Europe. We also introduced another new cable access solution in Q3 with our launch of the 312, a new contact RPD model for our EN9000 and EN3400 platforms.

Speaker #3: Taken together, these achievements lay the groundwork for continued profitable growth in the VBS segment, both in the near and the long term. Looking at our other business segments, in our content delivery and storage segment, we generated revenue of $10.7 million, which was lower year-over-year and quarter-over-quarter, but paired that with a very strong 68% gross margin.

Speaker #3: As we've always reminded investors, quarterly revenue fluctuations are typical in that segment and relate to project and order timing. That was the case in Q3, and we expect to return to higher revenues in Q4.

Sumit Kumar: As we've always reminded investors, quarterly revenue fluctuations are typical in that segment and relate to project and order timing. That was the case in Q3, and we expect to return to higher revenues in Q4. During the quarter, we made excellent progress with our targeted dynamic ad insertion solution as we deployed phase 2 with our lead customer, Hotwire Communications. Dynamic advertising, or DAI, is providing a compelling use case for operators seeking to increase video ARPU without having to increase their rates to customers. As such, it's a highly effective way for customers to increase their monetization of video while retaining and building their subscriber bases, and we view it as an important growth driver for CDS. Turning to Telematics, we've given another profitable quarter with an exceptionally strong gross margin of nearly 73% on sales of CAD 1.9 million.

Speaker #3: During the quarter, we made excellent progress with our targeted dynamic ad insertion solution, as we deployed phase two with our lead customer, Hotwire Communications.

Speaker #3: Dynamic advertising, or DAI, is providing a compelling use case for operators seeking to increase video RPUs without having to increase their rates to customers.

Speaker #3: And as such, it's a highly effective way for customers to increase their monetization of video while retaining and building their subscriber bases. And we view it as an important growth driver for CDS.

Speaker #3: Turning to Telematics, we delivered another profitable quarter with an exceptionally strong gross margin of nearly 73% on sales of $1.9 million. Telematics added 12 new customers during the quarter and booked 137 new subscriptions for our Nero asset tracking platform.

Sumit Kumar: Telematics had 12 new customers during the quarter and booked 137 new subscriptions for our NERO asset tracking platform. This brought the number of asset tags under management to almost 125,000. Overall, it was a strategically important and solid quarter for Vecima as we operated on the precipice of significant growth immediately ahead of us. I'll now ask Judd to discuss our Q3 results in more detail. Judd?

Speaker #3: This brought the number of asset tags under management to almost 125,000. Overall, a strategically important and solid quarter for Vecima, as we operated on the precipice of significant growth immediately ahead of us.

Speaker #3: I'll now ask Judd to discuss our Q3 results in more detail. Judd? Thanks, Tim. Good morning to everyone with us on the call today.

Judd Schmid: Thanks, Sumit. Good morning to everyone with us on the call today. I'll be reviewing our Q3 financial performance in more detail. For the purposes of this call, I'll assume that everyone has seen our Q3 fiscal 2026 news release, MD&A, and financial statements posted on our website. Please refer to today's news release and our MD&A for definitions and reconciliations of our non-IFRS financial measures. Starting with consolidated sales, Q3 revenue grew to CAD 64.8 million, an increase of 1.3% year over year and 12.1% lower quarter over quarter, as Sumit noted, in line with our expectations. Our Video and Broadband Solutions segment contributed CAD 52.2 million towards our revenues, with VBS segment sales increasing 9.6% from Q3 of last year.

Speaker #3: I'll be reviewing our third quarter financial performance in more detail. And for the purposes of this call, I'll assume that everyone has seen our Q3 fiscal 2026 news release, MD&A, and financial statements posted on our website.

Speaker #3: Please refer to today's news release and our MD&A for definitions and reconciliations of our non-IFRS financial measures. Starting with consolidated sales, third quarter revenue grew to $64.8 million, an increase of 1.3% year-over-year, and 12.1% lower quarter-over-quarter as Tim noted, in line with our expectations.

Speaker #3: Our Video and Broadband Solutions segment contributed $52.2 million towards our revenues, with VBS segment sales increasing 9.6% from Q3 of last year. As compared to Q2 of this year, they were 12.3% lower sequentially.

Judd Schmid: As compared to Q2 of this year, they were 12.3% lower sequentially. Next-generation Entra DAA products continue to be the key revenue driver in our VBS segment. Entra sales of CAD 49.3 million were up 13.3% year over year and 12.6% lower on a sequential quarterly basis. Commercial video sales contributed CAD 2.9 million to our VBS segment. This was 29.5% lower year over year and 9% lower quarter over quarter, reflecting the continued transition to next-generation platforms and some of our newer DAA-driven commercial video products that are now being included in our Entra family revenues. In our Content Delivery and Storage segment, Q3 revenues of CAD 10.7 million included CAD 4.7 million in product sales and CAD 5.9 million in services revenue.

Speaker #3: Next generation Entra DAA products continue to be the key revenue driver in our VBS segment. Entra sales of 49.3 million were up 13.3% year-over-year and 12.6% lower on a sequential quarterly basis.

Speaker #3: Commercial video sales contributed 2.9 million to our VBS segment. This was 29.5% lower year-over-year and 9% lower quarter-over-quarter, reflecting the continued transition to next-generation platforms and some of our newer DAA-driven commercial video products that are now being included in our Entra family revenues.

Speaker #3: In our content delivery and storage segment, third quarter revenues of $10.7 million included $4.7 million in product sales and $5.9 million in services revenue.

Speaker #3: This was a lumpy quarter for CDS, with sales decreasing 24.1% year-over-year and 13.2% quarter-over-quarter. As we continue to reiterate, quarterly fluctuations are typical for the CDS segment.

Judd Schmid: This was a lumpy quarter for CDS, with sales decreasing 24.1% year over year and 13.2% quarter over quarter. As we continue to reiterate, quarterly fluctuations are typical for the CDS segment. In our Telematics segment, Q2 sales of CAD 1.9 million were 15.8% lower year over year, reflecting a one-time CAD 200,000 accounting adjustment for certain mobile asset tracking products in the prior year period. Sequentially though, Telematics sales increased 2.7% quarter over quarter. As we anticipated, Q3 gross margin was much improved at 47.3%. That was similar to the 47.7% we generated in the same period last year and up sharply from the 44.9% last quarter.

Speaker #3: In our telematics segment, second quarter sales of $1.9 million were 15.8% lower year-over-year, reflecting a one-time $200,000 accounting adjustment for certain mobile asset tracking products in the prior year period.

Speaker #3: Sequentially, though, telematic sales increased 2.7% quarter-over-quarter. As we anticipated, third quarter gross margin was much improved at 47.3%. That was similar to the 47.7% we generated in the same period last year and up sharply from the 44.9% last quarter.

Speaker #3: Adjusted gross margin was an even stronger 50.7% in the third quarter, up from 47.4% in Q3 of fiscal 2025 and 46.4% in Q2 of fiscal 2026.

Judd Schmid: Adjusted gross margin was an even stronger 50.7% in Q3, up from 47.4% in Q3 of fiscal 2025 and 46.4% in Q2 of fiscal 2026. The improvements in gross margin and Adjusted gross margin primarily reflect the return to a higher margin product mix in our VBS Segment, as well as our focus throughout the year on lowering our manufacturing costs and improving efficiencies. Turning now to Q3 operating expenses. On a year-over-year basis, these were CAD 2.3 million higher, and on a sequential basis, Q3 operating expenses decreased slightly to CAD 29.5 million from CAD 29.8 million in Q2. R&D expenses for Q3 increased to CAD 13.5 million or 21% of sales from CAD 11.5 million or 18% of sales last year.

Speaker #3: The improvements in gross margin and adjusted gross margin primarily reflect the return to a higher-margin product mix in our VBS segment, as well as our focus throughout the year on lowering our manufacturing costs and improving efficiencies.

Speaker #3: Turning now to the third quarter operating expenses, on a year-over-year basis, these were $2.3 million higher, and on a sequential basis, Q3 operating expenses decreased slightly to $29.5 million from $29.8 million in Q2.

Speaker #3: R&D expenses for the third quarter increased to $13.5 million, or 21% of sales, from $11.5 million, or 18% of sales last year. This was primarily a result of higher amortization of deferred development costs and increased salary wages and benefits offset by higher capitalized labor development costs related to our future product offerings.

Judd Schmid: This was primarily a result of higher amortization of deferred development costs and increased salary, wages, and benefits, offset by higher capitalized labor development costs related to our future product offerings. As we note each quarter, we defer some of our R&D expenditures to future periods until our products begin commercialization. Reported R&D expense in a period is typically different than the actual cash expenditures. Adjusting for this, our actual cash R&D investment was CAD 16.2 million, or 25% of revenues in Q3, up from CAD 15.2 million or 24% of revenues in Q3 of last year as we continue to emphasize our investment in future product development and building our innovation pipeline.

Speaker #3: 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.

Speaker #3: Adjusting for this, our actual cash R&D investment was $16.2 million, or 25% of revenues in the third quarter, up from $15.2 million, or 24% of revenues, in Q3 of last year as we continue to emphasize our investment in future product development and building our innovation pipeline.

Speaker #3: Sales and marketing expenses increased slightly to $8.7 million, or 13% of sales, from $8.2 million, or 13% of sales, last year, reflecting a modest increase in salary wages and benefits, and travel expenses.

Judd Schmid: Sales and marketing expenses increased slightly to CAD 8.7 million or 13% of sales from CAD 8.2 million or 13% of sales last year, reflecting a modest increase in salary, wages, and benefits and travel expenses. G&A expenses of CAD 6.9 million or 11% of sales were level with the same period last year. We continue to closely monitor and control our operating expenses and do not foresee any significant operating expense increases in the near term. Looking now at the bottom line results. We generated Q3 operating income of CAD 1.1 million, which compared to CAD 3.3 million in the same period last year. The CAD 2.2 million decrease primarily reflects the increased amortization of deferred development costs and higher salary, wages, and benefits.

Speaker #3: G&A expenses of $6.9 million or 11% of sales were level with the same period last year. We continue to closely monitor and control our operating expenses and do not foresee any significant operating expense increases in the near term.

Speaker #3: Looking now at the bottom line results, we generated third quarter operating income of $1.1 million, which compares to $3.3 million in the same period last year.

Speaker #3: The $2.2 million decrease primarily reflects the increased amortization of deferred development costs and higher salary wages and benefits. We reported a net loss for the third quarter of $200,000, or 1 cent per share, as opposed to net income of $1.2 million, or 5 cents per share, in the same period of fiscal '25.

Judd Schmid: We reported a net loss for Q3 of CAD 200,000 or CAD 0.01 per share, as opposed to net income of CAD 1.2 million or CAD 0.05 per share in the same period of fiscal 2025. Additionally, our Adjusted EBITDA margin also improved to 17.4% in Q3, up from 14.4% last quarter and 16.1% in the same quarter last year. As Sumit noted, we are approaching our Adjusted EBITDA margin goal of at least 20% on a consistent basis. Adjusted earnings per share for Q3 grew slightly from CAD 0.06 from CAD 0.05 in the same period last year. Now turning to the balance sheet.

Speaker #3: Additionally, our adjusted EBITDA margin also improved to 17.4% in the third quarter, up from 14.4% last quarter and 16.1% in the same quarter last year.

Speaker #3: As Sumit noted, we are approaching our adjusted EBITDA margin goal of at least 20% on a consistent basis. Adjusted earnings per share for the third quarter grew slightly to 2.6 cents from 2.5 cents in the same period last year.

Speaker #3: Now, turning to the balance sheet, working capital of $51.8 million increased slightly from $51.2 million at June 30, 2025, and $49.3 million at December 31, 2025.

Judd Schmid: Working capital of CAD 51.8 million increased slightly from CAD 51.2 million at 30 June 2025, and CAD 49.3 million at 31 December 2025. We expect to see modest improvements in working capital going forward. Lastly, cash flow provided by operations for Q3 increased significantly to CAD 19.5 million from CAD 4.4 million used in operating activities during the same period last year. This was primarily related to the favorable changes in the components of working capital for the quarter. Our net debt position, defined as total debt less cash and less lease liabilities, stood at CAD 54.4 million at the end of Q3, down from a peak of CAD 92 million 2 years ago in Q3 of fiscal 2024.

Speaker #3: We expect to see modest improvements in working capital going forward. Lastly, cash flow provided by operations for the third quarter increased significantly to $19.5 million from $4.4 million used in operating activities during the same period last year.

Speaker #3: This was primarily related to the favorable changes in the components of working capital for the quarter. Our net debt position, defined as total debt less cash and less lease liabilities, stood at 54.4 million at the end of the third quarter, down from a peak of $92 million two years ago in Q3 of fiscal '24.

Speaker #3: We continue to focus our efforts on paying down our debt in the future and showing improvements in our net debt position. With our inflection point in our results now coming to fruition, we remain committed to providing ever-increasing value to our shareholders.

Judd Schmid: We continue to focus our efforts on paying down our debt in the future and showing improvements in our net debt position. With our inflection point in our results now coming to fruition, we remain committed to providing ever-increasing value to our shareholders. On a final note, the board of directors approved a quarterly dividend of five and a half cents per common share, payable on 22 June 2026 to shareholders of record as of 29 May 2026. It is important to note that this dividend will be designated as an eligible dividend for Canadian income tax purposes. Now back to Sumit.

Speaker #3: On a final note, the board of directors approved a quarterly dividend of 5.5 cents per common share, payable on June 22, 2026, to shareholders of record as of May 29, 2026.

Speaker #3: It's important to note that this dividend will be designated as an eligible dividend for Canadian income tax purposes. Now, back to Sumit.

Speaker #1: Thank you, Judd. To recap our expectations for calendar 2026, we're anticipating a year-over-year revenue gain in the range of $22.5 to 30% as compared to calendar 2025.

Sumit Kumar: Thank you, Judd. To recap our expectations for calendar 2026, we're anticipating a year-over-year revenue gain in the range of 22.5% to 30% as compared to calendar 2025, with Adjusted EBITDA margin breaking through 20% and driving Adjusted EBITDA gains of 74% to 85% versus last year. We expect this near-term growth to be led by our Video and Broadband Solutions segment and supported by our contracts with major customers, our portfolio strength across both fiber and cable access products, and by the DAA-based gigabit network upgrades that are rolling out now globally. It will be hard to overemphasize the importance of network upgrades to operators who want or need to enhance their earnings and competitiveness. Higher speeds, better quality, these are today's necessities, and they're achieved by getting nodes and fiber deeper into the network.

Speaker #1: With adjusted EBITDA margin breaking through 20% and driving adjusted EBITDA gains of 74% to 85% versus last year, we expect this near-term growth to be led by our Video and Broadband Solutions segment and supported by our contracts with major customers, our portfolio strength across both fiber and cable access products, and by the DAA-based gigabit network upgrades that are rolling out now globally.

Speaker #1: It will be hard to overemphasize the importance of network upgrades to operators who want or need to enhance their earnings and competitiveness. Higher speeds, better quality, these are today's necessities.

Speaker #1: And they're achieved by getting nodes and fiber deeper into the network. Our entry solutions are essential to our customers' objectives. With our strong global market share and increasing network incumbency, we're poised to benefit not just in the near term, but over the long haul as customers continue to invest in their networks.

Sumit Kumar: Our Entra solutions are essential to our customers' objectives. With our strong global market share and increasing network incumbency, we're poised to benefit not just in the near term, but over the long haul as customers continue to invest in their networks. In our Content Delivery and Storage segment, we're anticipating a stronger Q4 as we continue to focus on driving revenue growth through managed IPTV expansions with the new and existing customers, and our rollout of DAI, dynamic advertising. As always, we know, however, that quarter-to-quarter performance in that CDS segment can and has been lumpy. In our Telematics segment, we're anticipating steady and highly profitable performance from our high margin, recurring, software as a subscription-based monitoring business for vehicles and assets.

Speaker #1: In our content delivery and storage segment, we're anticipating a stronger fourth quarter as we continue to focus on driving revenue growth through managed IPTV expansions with the new and existing customers and our rollout of DAI, Dynamic Advertising.

Speaker #1: As always, we note however that quarter-to-quarter performance in that CES segment can, and has been, lumpy. And in our Telematics segment, we're anticipating steady and highly profitable performance from our high-margin, recurring software and subscription-based monitoring business for vehicles and assets.

Speaker #1: Across our operations, we remain sharply focused on meeting our customers' fast-ramping near-term demand projections, while also positioning investment to capture this remarkable longer-term growth opportunity ahead of us.

Sumit Kumar: Across our operations, we remain sharply focused on meeting our customers' fast-ramping near-term demand projections while also positioning Vecima to capture this remarkable longer-term growth opportunity ahead of us. Our broad and innovative portfolio of interoperable cable and fiber access products and IPTV solutions give us multiple engines for growth while also creating important diversification. Our overall market share continues to expand as our customer relationships broaden and deepen. Against the backdrop of accelerating widescale DAA adoption, our successful product strategies and decisive execution have positioned Vecima for creating substantial returns and enhanced shareholder value. We look forward to reporting to you on our progress over the coming quarters. That concludes our formal comments for today, and we'd now be happy to take questions. Operator?

Speaker #1: Our broad and innovative portfolio of interoperable cable and fiber access products and IPTV solutions give us multiple engines for growth while also creating important diversification.

Speaker #1: And our overall market share continues to expand as our customer relationships broaden and deepen. Against the backdrop of accelerating wide-scale DAA adoption, our successful product strategies and decisive execution have positioned Vecima for creating substantial returns and enhanced shareholder value.

Speaker #1: We look forward to reporting to you on our progress over the coming quarters. That concludes our formal comments for today. We now be happy to take questions.

Speaker #1: Operator?

Speaker #3: Thank you. We will now begin the question and answer session for analysts and institutional investors. To join the question queue, you may press star, then one, on your telephone keypad.

Operator: Thank you. We will now begin the question and answer session for analysts and institutional investors. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. Once again, analysts and institutional investors who would like to ask a question should press star and one on their, 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 pleasant day.

Speaker #3: You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star, then two.

Speaker #3: We will pause for a moment as callers join the queue. Once again, analysts and institutional investors who would like to ask a question should press star one on their touch-tone phone.

Speaker #3: 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 pleasant day.