© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello. This is the Chorus Call conference operator. Welcome to Vecima Networks Third Quarter Fiscal Year 2020 Results Conference Call and Webcast. [Operator Instructions] Presenting today on behalf of Vecima Networks are Sumit Kumar, President and CEO; and Dale Booth, Chief Financial Officer. Today's call will begin with executive commentary on Vecima's financial and operational performance for the third quarter fiscal year 2020 results. Lastly, the call will finish with a question-and-answer period for analysts and institutional investors. A press release announcing the company's third quarter fiscal year 2020 results as well as detailed supplemental investor information are posted on Vecima's website at www.vecima.com under the Investors 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 3 and 9 months ended March 31, 2020. Certain statements in this conference call and webcast 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 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 are -- and/or are beyond our control. A number of important factors could the 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 in credit and financial market volatility, including the impact of COVID-19 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, 2019, a copy of which is available at www.sedar.com. In addition, although the forward-looking statements in these earnings calls are based on what management believes are reasonable assumptions, such assumptions may prove to be incorrect. Consequently, attendees 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. At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks. Please go ahead.
Good morning, and welcome, everyone. Thank you for joining us. These are extraordinary times. And on behalf of all of us at Vecima, I want to start by thanking the many workers in our communities who are dealing with COVID-19 on the front lines. I also want to thank our own employees who are helping to fulfill Vecima's essential role in the telecommunications supply chain through this challenging environment. I'll start today with a look at how our business is responding to the COVID-19 situation and provide an overview of our third quarter results and achievements. Dale will provide a more detailed review of our financial results for the quarter and then I'll return to talk about what we see going forward. Vecima operates in an industry that is essential, relevant and needed today, perhaps more than ever. Our customers, which include cable MSOs, telcos and broadcasters, who provide critical communication services. As a key supplier to these service providers, Vecima is positioned and well equipped to support these vital businesses with reliable and sophisticated products, they require both in normal course and in this period of heightened need for networks that provide information and connectivity. On top of the already increasing demands for broadband Internet and IPTV, the recent shelter-at-home and work-from-home rules have been driving record levels of utilization across our customers' networks. This, in turn, is driving increased engagement and demand for our solutions because they help expand the capacity of those networks. Like other businesses, we've adapted the ways in which we operate to ensure we keep employees safe as we meet our customers' needs. Our business has been able to readily accommodate these changes thus far.Most of our product development and support can be executed remotely. So more than 80% of our workforce was working from home at any given time. And for the small number of employees who need to come into -- come on to our premises, we've implemented comprehensive safety practices and protocols to protect them. In terms of our supply chain, our suppliers are also deemed essential. And thus far, we've been able to continue sourcing the inventories we need. Lead times have stretched out in some cases, but we haven't faced any major hurdles to this point. So while the uncertainty of the situation is expected to remain the case, we've been largely successful with managing our inputs. The end result is that to date, we've experienced little disruption in our ability to meet customers' needs. We achieved a very strong third quarter, even as the realities of the COVID-19 pandemic were starting to unfold. On the top line, our sales were up 23.5% year-over-year to $25.1 million. We also grew adjusted EBITDA to $5.6 million, a significant gain from $0.4 million in the same period last year. And I'm pleased to report earnings per share increased to $0.03 from a loss of $0.07 per share a year ago. Our strong performance was led by our Content Delivery and Storage segment. Sales from that part of our business more than doubled year-over-year as we responded to strong demand for our MediaScaleX solutions from existing customers while winning new customers for IP video networks. I'm pleased to report that we added 3 new customers in the third quarter, and we've added 1 more since quarter end. Our MediaScaleX products are now in use by an impressive list of cable companies, telcos and broadcasters worldwide, serving over 130 million subscribers and managing a remarkable 30 petabytes of content. This represents an excellent base for the future as many of these customers are just starting their migration to IPTV, and we expect that their needs will grow over time. In the nearer term, we're well on track to deliver 20% or better revenue growth from the Content Delivery and Storage segment in fiscal 2020 as expected. In our Video and Broadband Solutions segment, sales of our next-generation Entra family of Distributed Access Architecture, or DAA products, also continued to ramp-up in the third quarter. You recall, we achieved our first meaningful Entra revenues in the second quarter with sales of $1.1 million. We grew that to $1.8 million in the third quarter, led by an uptake of our Entra Interactive Video Controller by a Tier 1 and a Tier 2 MSO. We also achieved sales across the broader Entra portfolio to a diverse group of MSOs that are moving closer to the DAA transition. So some very good progress in Q3. And I want to add a bit of color on how our new Entra products are performing in the field. During the second quarter, you may recall we sold volume licenses of the Entra Remote PHY Monitor to a Tier 1 MSO. This customer is using our solution as a critical management platform for their DAA network rollout and ongoing operations. Normally, with the first deployment of a new technology, particularly one as sophisticated as an Entra Remote PHY node, we will be working right alongside our customer to provide assistance during bring up. But in this case, the customer's desire to independently stage the self-sufficient launch in view of the anticipated scale and volume of a wide DAA rollout led them to put the Entra Monitor to work and see how seamlessly the node came online. What happened was that our Entra Monitor and work -- and node worked flawlessly in tandem from day 1, and they continue to. That's a remarkable achievement, not only speaking to the robustness of the node, but also for first-of-its-kind management and monitoring tool and how they together enable DAA deployment at scale. Now looking at other contributors to our Q3 performance, we saw significant uptake of Terrace QAM again this quarter as our lead Tier 1 customer continued to expand its hospitality footprint, while preparing for migration to the next-generation Terrace IQ platform. This helped to offset the expected tail-off in demand for some of our other legacy products, most notably the TC600 and somewhat TC600E. In our Telematics segment, we continue the fleet-wide rollout with the city of Saskatoon, which includes monitoring about 1,000 municipal vehicles and movable assets. We've now completed about half of that rollout. We also continue to build up a new market for our Nero GPS Asset Tracking products. I'm pleased to report that we added 6 new customers during the period, including assets and fleet. Overall, it was an excellent quarter for Vecima under any circumstances. And at this point, I'll ask Dale to provide more detail on our results. Dale?
Thank you, Sumit. For the purposes of this call, we assume that everyone has seen our third quarter fiscal 2020 news release and financial statements that are posted on Vecima's website. I will present the relevant numbers and discussions around overall results, market segments, operational expenses and the balance sheet. Please note that the results for the third quarter of fiscal 2020 includes 9 full months of operating results from our acquisition of ContentAgent. That business is now part of the Content Delivery and Storage segment. We also adopted IFRS 16 leases on July 1, 2019. The net impact to the income statement as a result of the adoption of IFRS 16 was insignificant and does not have an impact on cash flows. Starting with consolidated sales for the 3 months ended March 31, 2020, sales increased 23.5% to $25.1 million from $20.3 million during the same period last year, and on par with the $25.1 million last quarter. The increase in sales year-over-year was due to increased sales from our Content Delivery and Storage segment partially offset by lower sales in our Video and Broadband Solutions segment. Within the Video and Broadband Solutions segment, we generated sales of $9.6 million. This was up 14% from $8.4 million in Q2 of this year, but down 23% from the $12.4 million a year ago. Our new Entra DAA products contributed sales of $1.8 million compared to just $0.3 million in sales a year ago and $1.1 million in the second quarter of this year, led by a Tier 1 and a Tier 2 MSO uptake of our Entra IVC product. Sales came from a broad range of products across the Entra family portfolio as customers continued moving closer to DAA. Our Terrace QAM products had a small increase this quarter with $3.3 million in sales. That was up 5% quarter-over-quarter, but 125% year-over-year, as our lead customer advances its extensive hospitality services footprint as they prepare to migrate to the next-generation Terrace IQ platform. These gains fully offset the slowdown in demand for our other legacy TC600 and TC600E year-over-year. TC600E did increase 35% quarter-over-quarter with 2 top Tier 1 and 2 customer contributions of the MPEG4 upgraded related purchases. In the Content Delivery and Storage segment, third quarter revenues were a solid $14.2 million, up 119% from the weaker-than-normal sales of Q3 last year, but 8% lower than the Q2's exceptional sales number, which was our best-ever quarter for CDS revenue. The revenue growth was driven by the factors Sumit discussed, including the growing demand for our IPTV solutions from new and existing customers and use of our MediaScaleX products by broadcast, cable and telecommunications companies worldwide. In our Telematics segment, sales in the third quarter were down slightly to $1.3 million from $1.4 million we achieved, both in Q3 a year ago and Q2 of this year. Gross margin for the third quarter was a strong 52%, down from our extraordinary 64% high in Q2 2020, but only down slightly from the 53% in Q3 2019. In the Video and Broadband Solutions segment, gross margin decreased to 47% from 50% a year ago and 58% last quarter. The changes reflected the different product mixes in each period with Q2 fiscal '20 benefiting from a larger proportion of higher-margin software sales. Gross margin in the Content Delivery and Storage segment remained at 54% as compared to the same period last year, but down significantly from the exceptional 67% reported in Q2 fiscal '20 due to the increased percentage of higher-margin software sales last quarter. In the Telematics segment, gross margin for the quarter was slightly higher at 70% as compared to 69% in Q3 2019 and 63% in Q2 2020, mostly due to lower product costs in the current period. Turning to the third quarter operating expenses. The notable changes year-over-year were as follows: R&D expenses increased to $5.7 million from $4.8 million in Q3 fiscal 2019. This increase is mainly a result of higher amortization of our deferred development costs as our new products become commercially available; sales and marketing expenses decreased to $3.7 million from $4 million last year primarily due to lower finished goods inventory allowances, partially offset by higher staffing costs in the current period; and G&A expenses slightly decreased to $4.1 million from $4.2 million in Q3 of last year. The year-over-year decrease reflects reduced staffing costs partially offset by the addition of ContentAgent expenses. In total, operating expenses increased to $13.5 million from $13 million in the same period last year, primarily reflecting higher operating expenses in the Content Delivery and Storage segment, partially offset by a reduction in costs in the Video and Broadband Solutions segment. R&D expense in the period is typically different than the actual expenditure. That's because certain R&D expenditures are deferred until product commercialization. Adjusting for deferrals, amortization of deferred development costs and income tax credits, actual R&D investment for the quarter decreased to $6.8 million or 27% of sales. That was down from $7.5 million or 37% of sales in the same period last year. The year-over-year change primarily reflects that we're getting closer to commercial deployment with a number of our next-generation products. Turning to our bottom line results. Operating loss decreased to $0.5 million in Q3 fiscal '20 from $2.3 million in Q3 fiscal 2019 driven by an increase in contribution from the Content Delivery and Storage segment partially offset by the decrease in contribution from the Video and Broadband Solutions segment and the year-over-year decrease in contribution from the Telematics segment. Adjusted EBITDA increased to $5.6 million from $0.4 million in the prior year quarter, but down from last quarter's strong $7 million. And net income for the quarter increased to $0.7 million or $0.03 per share from a loss of $1.5 million or $0.07 per share last year. Overall, it was a very strong quarter, both on the top and bottom lines. Turning to our balance sheet. We ended the third quarter with $36.2 million in cash and short-term investments. Working capital was slightly lower at $56.3 million as compared to $58.3 million at the end of fiscal 2019. Finally, cash flow from operations for the third quarter decreased to $2.6 million from $8.6 million in the same period last year. This $6 million decrease reflects a $10 million reduction in cash flow from noncash working capital, partially offset by a $4 million improvement in operating cash flow. So just to summarize, a solid quarter, even with the uncertainty and challenges due to COVID-19. With a strong balance sheet, including cash of $36.2 million and working capital of $56.3 million, Vecima is well positioned for continued growth over the long term. Now back to Sumit.
Thank you, Dale. We're very pleased with what we achieved through the first 9 months of the fiscal 2020, and demand so far in the fourth quarter has remained strong. The industry's overall plan to move to DAA and IPTV, together with the current climate of unprecedented consumer demands on networks is translating into opportunities for our strategic product offerings. In our Video and Broadband Solutions segment, we're continuing to advance field and lab trials for a portfolio of Entra DAA products with a diverse mix of MSOs. Once again, our list of engagements is broad, spanning multiple tiers, multiple geographies and multiple of our Entra products that has been designed to make DAA a reality. We're now seeing conversion amongst these engagements and expect momentum and activity to grow. Given the compelling need of MSOs to expand their network capacity, we've not been surprised to see a number of operators stepping up their investment in CCAP cores in recent months. This is a preliminary step that, in our view, precedes moves to DAA. So we view this as consistent with beginning network evolution to DAA. It's a good thing to see the CCAP core spend materializing today, leaving the door open for Distributed Access. In our Terrace family of products, we've experienced continued demand for the current generation Terrace QAM and TC600E. We're also continuing to make good progress on Terrace IQ development with our lead customer, with our sights remaining set on long-term migration to the IQ, in lockstep with the overall network transition, which will ultimately happen to IPTV. Looking at our Content Delivery and Storage segment, we continue to see a lot of opportunity ahead in the IPTV market with the industry early in this evolution. As I noted earlier, we've already added 1 new customer in Q4 after the 3 we added in Q3, and we're on track to achieve our target of 20% plus revenue growth for this segment in fiscal 2020. As we move forward, we'll continue to focus on converting new customers as they transition to IP video. We are an industry leader in this space, and we intend to remain so. In our Telematics business, we expect consistent incremental growth from the fleet tracking market, and we anticipate increasing demand for our Nero moveable asset tracking services. Overall, we remain very positive about our prospects going forward. But there's no question we're in uncharted territory as far as the broader economy goes. It's not yet clear what the ultimate impacts on demand, supply chains and our customers' networks will be, so I want to be cautious. We'll continue to monitor the economic and supply situation closely, and we will make adjustments to our business as necessary. I want to point out that we are very solidly positioned to manage through these uncertain times. As Dale noted, we're in a very strong financial position with over $36 million in cash and working capital of over $56 million. We have the benefit of operating in an industry that provides essential services and with customers whose need for our products is growing. And we have a long track record of being both agile and very practical in how we deal with external economic challenges. I believe we're well equipped to manage the challenges of the COVID-19 business environment in the near term, and I remain confident that Vecima has positioned itself for continued growth over the long term. We have powerful products and a skilled team that are contributing to a more connected world than ever. That concludes our formal comments for today. We'd now be happy to take questions. Operator?
[Operator Instructions] Our first question comes from David Kwan with PI Financial.
Good quarter from you guys, and happy to hear that -- it seems like the business is holding in quite well, I guess, post-Q3, so keep up the good work. Jumping, I guess, into some of the product lines here Entra, obviously, a main focus. Is the lead customer that you guys have referenced expanding their field trial? Is that the same one that you talked about nearing commercial deployment?
Yes. They're one and the same, David. We're calling them our lead Tier 1 DAA customer at this point. So lots of ongoing activity, expanding field trial activity, et cetera.
Okay. And when do you -- do you -- have they given you any kind of timeline as to when they expect to kind of hit more commercial-type volumes?
Yes. So they're certainly investing in a great deal of activity preparing for that phase. And we, of course, know that they have a very fulsome complete long-term migration plan for DAA has been in the midst of talking about pinning down a quarter per se or anything like that. But we're seeing all the signals and meaningful efforts being put in, broadening field activity. I mentioned that they took some nodes in a very important region and launched them flawlessly. That's broadening to other very important regions. All of those things tell us that this calendar '20 is a period where they're preparing themselves to move.
Sorry. Sumit, you said potentially expect that could happen later this year, calendar '20?
I think that's -- yes, that's the potential we're seeing now.
Okay. No. That's good color. And can you comment, I guess, on the Entra revenue you've generated to date, what the mix has been between hardware versus software? And how we can try to take a look at it for any kind of given customer looking to deploy Entra. Is it more software licenses that you're selling upfront with the monitor? Or is it kind of a mix?
Yes. So for -- definitely for the monitor in Q2, that was a very heavy software proportion of that sale. We do have some appliance servers that are a small percentage of what -- of the bill of materials, very small, in fact. So the monitor, of course, pure software solution, service assurance and DAA tuned and whatnot. That's a software product and we'll be corresponding. Third quarter, we said that the Interactive Video Controller, the IVC, was a -- big part of that was a Tier 1 and Tier 2 moving on that. That is custom hardware, but it does command some software like margin profiles to it, and we're pleased with that. So far, we've been in that higher software proportion segment with the family.
And would the -- would software be kind of north of 50% of the revenue that's been generated so far, say, over the last year?
I think if we take any of your margins over the last several quarters, yes, you're going to see a softer mix that's driving that. So...
Sorry. Should we expect the software to be higher in the coming quarters as guys move closer, or move out of lab trials into field trials and then field trials into commercial deployment?
Yes. So once we -- the volume driver, of course, is the Remote PHY node and I've tried to highlight that, that is a high-volume piece of gear that's going to be rolled out in the infrastructure network, access network at scale. So when we look at commercial deployment, yes, there's coverage with the software components, the Interactive Video Controller being largely software, the Remote PHY Monitor being entirely software, those will cover given operator's network, and they may do that leading up to the node scale ramp up. And then we're back to the node environment, where I've articulated that margin profile is more oriented towards Vecima's historical type of businesses.
So it sounds like, I guess, until we see at least that lead customers start to ramp up with the node purchases, it's likely to be more software-driven type sales?
I would say so. And there's hardware, its lower volume, but carries software-type margins because it's leveraging some hardware, but it's largely a software product. All of the, I would say, the LQA, the VQM, Remote PHY Monitor and the IVC are -- fall into that camp of software-type business.
No. That's helpful. Okay. And just curious to get your thoughts, at least one of your competitors -- just kind of talking about customers pushing out DAA and virtualization projects in favor of adding new capacity at the head, which obviously makes sense in this environment and in terms of -- at least in terms of adding capacity to kind of a bandwidth solution to address the bandwidth constraints that they're seeing in their networks. Obviously, I think, a bit self serving, given at least one of those vendors also sell CCAP cores. But curious to get your thoughts on that.
Yes. I mean I can see that point. And I think in conversations since COVID emerged, I've articulated that as well. And even in today's prepared remarks that I've said that we're not at all surprised about core activity happening now using the band data in your words. And that is some activity that's needed to precede DAA to get those cores licensed up. So I think that's a positive movement for the vendor you're talking about. And certainly, they're in a good spot to take advantage of that movement. That's driven by this kind of pop in demand we've seen for broadband networks. And for us, that translates into, in some sense, preparing the network and moving to the long game of DAA.
Have you seen any of your customers, those say, we're pushing out our DAA plans because we think, at least for now, we should be okay, just adding more capacity at the head end.
Across the wider industry of overall customers, many of them are at different stages of their network capacity requirements, whether they have 1.2 gigahertz type plant, how much video they're carrying, legacy video, all of these factors. But for our part in the DAA engagements that we're first-in, first-out, that we're working on our engagement list. We haven't seen a lot of suggestions that there's a deferral situation that's being caused by this.
That's helpful. Just a few more questions. On the Content Delivery and Storage side, I guess, based on what you've talked about kind of post-Q3 here, about demand being quite strong. I guess it'd be fair to assume that you aren't really seeing any material weakness in that business? We've seen some lumpy quarters in the past. But it sounds like that's not necessarily the case at least today.
Yes. I think -- and I've talked about the different nature of that business with the project-oriented purchases -- type of sales cycles that can happen and that being kind of more naturally lumpy, volatile, if you will. But we've been adding customers regularly and the situation we find ourselves in any given quarter is that our pipeline encompasses many opportunities for projects to ebb and flow in and out, so that still lends yourself to some more incremental risk on lumpiness, but we are able to take the overall pipeline, which has been growing with new customer IPTV wins, and manage that on a quarterly basis. So ongoing strength driven by new wins of IPTV deployments in new and existing customers, that gives us a lot of flexibility.
No. That's helpful. I know like -- I think some of the cable MSOs, really, some of the vendors that sell into them, and they are kind of talking about things slowing down, I guess, towards the end of your Q3 and into early Q4, albeit when things did resume, there was -- guys had to maintain physical distancing and whatnot. So somewhat impacting it. But it seemed like activity kind of picked up as normal. So I was just curious to see if that was consistent with what you guys were seeing. Okay. I guess in that context then, kind of talking about 20% at least growth for this year, given where we are 3 quarters in, which is almost at where you were for all of last year. I guess is it fair to assume that we should probably see reasonably stronger growth in that 20% that you guys are talking about?
Yes. And I've tried to highlight that we talked just now about some of the lumpiness, where we've got the opportunity to be very good at managing that. Supply risk has been minimal at this point. Lead times have moved a little bit, but well in line with what we want to see out of the cost servers and whatnot that we need. We're keeping some of that stuff in mind for the fourth quarter, that clearly with the 9 months, you can see that we're feeling very bullish about beating the 20% growth and are setup to exceed that.
Perfect. And then just quickly on the Terrace IQ line. Can you comment on how, I guess, things have progressed with that lead MSO customer? More specifically, I guess, how you -- when you could start to see material orders coming in?
Yes. So I think Terrace IQ and with the lead especially, and as you've seen, Terrace QAMs kind of come back into the fold very nicely in Q2 and Q3, $3.3 million in Q3. And the reason for that is the hospitality playbook or blueprint of that lead MSO, that Tier 1 is entirely based around the Terrace QAM portfolio or platform. And they had, some time ago, transitioned from an all up penetration point of view in the market to a network fill-in run rate, and that's been ongoing throughout this period, but that tail-off caught them with some inventory some years ago. We've also done some anti [indiscernible] related transcoding work with them on all the existing platforms. But in Q2 and Q3, we started to see that start to resolve itself on the inventory side, and we got a re-up on equipping themselves for the run rate hospitality blueprint type of deployments are getting in that work fill in. So that's been an ongoing story and continues to be. IQ is ticking along. It's plan of record, both in our case and for the lead. But they have the platform they deploy today with Terrace QAM. So we're able to attach to whatever the timing is for that kind of upstream network from us to transition to IPTV, and that's a long-term story for that operator. So we're being very agile with that, and both platforms are set up to put us in a good spot. And that's all tying to very consistent -- or deployment from the MSO.
Okay, that's perfect. And then just interest from other customers. I know you, I think, previously indicated 1 Tier 1 was doing some valuation work. And the other major 1, I think that's a customer of yours, wasn't paying too much attention, I guess. Any update out of those 2?
Nothing new there so far to talk about, David, but it remains the case that one of those other Tier 1s besides the lead is definitely in our sights for IQ when we're up and running there on the product. And the other one, over time, I think there's this consensus with our customers, of course, we're the leader for cable hospitality platforms, that as their networks themselves migrate to IP, IQ is the right answer for that solution. I would say that second Tier 1, given the timing of the transition to IPTV for a larger network, is less focused now. So that's -- or I should call them the third to be more accurate. The second one, of course, is the one that we see is adding to the lead relatively soon.
Our next question comes from [ Ole Prago ], a private investor.
Great quarter. So I'd like to know is the move to premium video-on-demand that has been in public recently an added potential benefit to Vecima? So how would that work? Also the way increasing webinar with Zoom and augmented reality gaining tracks in this new environment. Would that also benefit Vecima in a big way?
Okay, I'll start with the second part in terms of augmented reality and whatnot. I think -- I haven't tracked that directly. But what I'd say is, overall, what we're encountering now is, of course, people are leveraging networks for their day-to-day lives more than ever. And that -- all that activity will accrue to our customers needing to provide more capacity. And we talked about that some of the core vendors are filling that capacity now. And DAA will fill that capacity going forward. So we have this overriding long-term trend of movement to gigabit networks using Distributed Access. And we're hastening that and catalyzing it with what we're seeing today between telecommuting and telehealth and e-learning, augmented reality, all of the above. So that's how we view that. In terms of streaming, of course, very high increases in sustained peak load. Our customers tend to design their networks for 80% run rate capacity, meaning that they operated at an average -- to peak out at 80% of the capacity that they've got for hardware and software. When you see -- you can imagine when you see these peaks, a sustained media consumption that are greater than 50%, that would motivate them to have to increase that peak capacity. So that type of effect is a factor right now that leading to, again, an overall migration to IPTV that's happening amongst cable operators and broadcasters alike. But being hastened by what we're seeing today.
So in this -- that particular space with the need for increase in bandwidth, et cetera, et cetera, who is your biggest competitor?
So we talked about, again, some of the core vendors. So I've kind of listed off some of the vendors that are in the DOCSIS arena. That being CommScope, Cisco, Harmonic, Casa, et cetera. And then in the media streaming, there's VOS, MediaKind and CineMedia and other players like that. So there are a set of -- I would say, a handful of key competitors in both spaces.
So is there a risk here that somebody is simply going to buy out Vecima?
Well, I think we're focused on our own efforts. So that's working well for us and very excited about the story we see coming together here. And I think for any public company, there's always people taking -- paying attention.
Well, do you feel that what you have achieved in the last few years could be getting close to the gold standard in that space?
We have a lot of work ahead of us. I feel like our CDS segment is definitely market-leading, definitely winning customers, and we're firmly on the being a leader position there. DAA is still out ahead of us with Entra, and I feel very great about our setup in our product portfolio. And I think time will tell where we land in terms of market share.
[Operator Instructions] There are no more questions at this time. This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.