Purchases of distributed access architecture (DAA) gear focused on new fiber buildouts and upgrades of hybrid fiber/coax (HFC) networks powered record revenues for Vecima Networks in its fiscal Q3 2023. The supplier of video tech and broadband access gear also warned of some market softness in coming quarters, but retained its growth projections for the longer-term.

Sales of Vecima's "Entra" DAA products notched record revenues of $62.7 million Canadian dollars (US$46.22 million) in the quarter, up 104% year-over-year and up 13% over the prior period. Vecima also pulled down record consolidated quarterly revenues of C$78.3 million ($57.72), up 54% year-over-year.

Figure 1: Vecima said a surge in DAA sales are being fueled by a blend of HFC network upgrades paired with a rise in rural-focused fiber network builds.
(Source: Piotr Malczyk/Alamy Stock Photo)

The surge in the DAA segment was driven by Vecima's best quarter ever for distributed optical products supporting scaled rollouts of operator network expansions in rural areas, including government-funded projects, company President and CEO Sumit Kumar said Thursday on Vecima's earnings call.

DAA sales were also spurred by cable operator deployments of DAA remote PHY nodes, products that will enable more capacity on existing DOCSIS 3.1 networks and plant the seeds for future DOCSIS 4.0 deployments.

Vecima said it ended the quarter with 106 "customer engagements" for DAA (60 for cable access and 46 for cable and fiber access), up from 83 in the year-ago period. To date, 50 of them have ordered Entra products, the company added.

Among Vecima's big, recent wins is Charter Communications, which is using the vendor's DAA platform, including its ERM3 remote PHY devices, for the operator's ambitious HFC evolution plan.

Vecima hasn't shed much light on the value of the Charter deal or when it will start to drive dollars through the door, but Kumar reiterated that Vecima gear is expected to be used for a "substantial portion" of Charter's network. Charter's three-year plan calls for about 85% of its HFC network to be upgraded to DAA alongside the use of a virtual cable modem termination system (vCMTS), enabling multi-gigabit downstream speeds and initial support for 1-Gig in the upstream.

"We expect our solution will be used for a substantial portion of Charter's footprint-wide cable access network upgrade to DAA," Kumar said.

Lumpy road ahead

Kumar warned that Vecima expects to see some "demand variability" in its fiscal Q4 2023 and into early fiscal 2024 as some customers refine how they are managing their DAA rollouts. Some operators have tended to get ahead of the curve on working capital in response to supply chain constraints seen in prior periods, he said.

"These influences are likely to lead to a soft-term softening in Entra deliveries even as customers increase their planned pace of field deployments," Kumar said. "But overall we expect this to be a relatively short-term transition."

Vecima, he added, expects to see deliveries and customer inventory levels come into better balance in the early part of calendar 2024. He also stressed that there's no change in Vecima's long-term outlook, believing that it's positioned to win more projects and boost the company's market share.

Vecima has seen its share in the cable access market rise in recent quarters. Dell'Oro Group found that Vecima's share of sector revenues rose to 10% in 2022, jumping ahead of Casa Systems' 8%. CommScope retained the top spot, with 37%, followed by Harmonic's 33%.

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— Jeff Baumgartner, Senior Editor, Light Reading