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Vecima Networks Inc
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This is the Chorus Call conference operator. Welcome to Vecima Networks First Quarter Fiscal 2021 Earnings Conference Call and Webcast. [Operator Instructions] Presenting today on behalf of Vecima Networks are Sumit Kumar, President and Chief Executive Officer; and Dale Booth, Chief Financial Officer. Today's call will begin with the executive commentary on Vecima's financial and operational performance for the first quarter fiscal 2021 results lastly, the call will finish with a question-and-answer period for analysts and institutional investors. The press release announcing the company's first quarter fiscal 2021 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 interim condensed consolidated financial statements and accompanying notes for the 3 months ended September 30, 2020 and 2019. 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, 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. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include, but are not limited to, the current significant general economic uncertainty and credit 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 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 24, 2020, a copy of which is available at www.sedar.com. In addition, although the forward-looking statements in this earnings call 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.
Thank you. Good morning, and welcome, everyone. Thank you for joining us. Fiscal 2021 got off to an excellent start, both operationally and financially. We achieved significant momentum with our next-generation Entra DAA products. We completed a strategically game-changing transaction with our acquisition of Nokia Corporation's Cable Access business, and we turned in very strong financial results, including our best quarterly revenue in over 4 years. We'll talk about all of this on today's call, but I'd like to start with a look at our first quarter sales growth. On the top line, we generated revenue of $27.8 million, anchored by deployments of next-generation products to our growing base of customers. On a consolidated basis, sales were up 38% year-over-year. Our strong performance was led by the Video and Broadband Solutions segment, where we increased first quarter revenues by 81% year-over-year. Interest sales was a key to this growth and climbed more than 16x year-over-year to $5.2 million. To put this in perspective, our first quarter Entra sales were almost on par with what we generated in all of fiscal 2020 with our Entra products. How do we achieve this? First, production deployments of our Vecima Remote PHY node to our lead Tier 1 customer began to build during the period. We also initiated Remote PHY node deployments to multiple other operators. By quarter's end, we had hundreds of venture Remote PHY nodes live in the field, servicing many thousands of subscribers. Our Q1 interest sales were further supported by growing demand for our interactive video controller from operators leveraging it to support mission-critical video services as they move to DAA. Again, the Entra IBC is the only platform available in the market that provides essential 2-way connectivity to digital set-top boxes deployed in millions of homes when an MSO adopts DAA. In addition, we quickly hit a fast stride with the new portfolio of technologies acquired from Nokia during the quarter. We talked about this transaction in some detail on our last call, but just to recap, on August 7, we acquired Nokia's portfolio of industry-leading cable access solutions. The portfolio includes market-ready DAA products, including 10-gig Epon fiber to the home capabilities and DOCSIS Remote MAC-PHY solutions. Along with Remote PHY, these are all critical pieces of the cable DAA ecosystem to flow into any and all pathways that the industry will follow as the access network evolves from Tata to 10G. The combined Entra family of solutions, Vecima positioned with the world's most advanced range of DAA technology, just as the market is kicking off. This new portfolio added about 1 communication [indiscernible] to our Q1 entry results in the first quarter. Keep in mind that given the timing of the acquisition, this represents only about a half quarter of 2 contribution from the new portfolio, and our plan anticipates that contribution from the acquired products will accelerate over the course of the fiscal year. Overall, it was a rapid start in this pivotal and exciting year for Entra. We are now actively selling to over a dozen operators across 5 continents, and our global engagements have widened to 46 MSOs across all tiers. We also continue to believe this is just the start of the momentum we'll see for our industry-leading Entra products going forward. Looking at other contributors to the Q1 BBS segment growth, I'm pleased to report, we more than doubled TerraceQAM sales to $4.2 million year-over-year as our lead customer continued to expand its hospitality footprint. This helped to offset the expected tail off in demand for some of our other legacy products, most notably the TC600 and TC600E where certain customers have neared full deployment off of those platforms. Our next-generation IP-oriented platform, the TerraceIQ, is also well underwany in development, and we continue to see the industry consolidating around migration to that forward-looking platform as their networks evolve to IP video delivery. That's expected to drive a whole new market cycle in commercial video for Vecima. Turning to our content delivery and storage segment. First quarter sales were up 15% year-over-year to $13 million. It's a very solid result for a seasonally slower Q1 period. We brought in another 2 MSO customers for IPTV during the quarter, building still more on top of the record 13 customer wins from fiscal 2020. Once again, these IPTV customer conversions are highly coveted for vendors like Vecima, with capacity expansion embedded in every account as more and more subscribers take up the new services. We've now grown the customer base for our IPTV solutions to over 100 cable companies, Telcos and broadcasters worldwide. This sets us up for the future with a large bases of customers that are just starting their migration to IPTV. Scale subscriber uptake remains ahead. I'm proud to report that our CDS team also achieved another industry first during the quarter as we provided an IP streaming solution for 8-K Ultra HD Resolution delivery for a North American customer, and we rolled out a number of important new product feature enhancements, including advances in digital rights management, dynamic ad insertion and virtualization. In our Telematics segment, the first quarter brought continued solid performance as we increased our engagement with municipal government customers. We also continue to build out the new market for our nero GPS asset tracking products. We added 4 new restoration industry customers and approximately 100 new subscribers during the quarter. We're excited about the path we see ahead of us for telematics growth as our unique asset solutions are adopted. So what an exciting start to an exciting year for Vecima. With our multiyear strategy bearing fruit as a once in a lifetime market cycle kicks off. And at this point, I'll turn the call over to Dale to provide more detail on our financial results. Dale?
Thank you, Sumit. For the purposes of this call, we assume that everyone has seen our first quarter fiscal 2021 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 first quarter of fiscal 2021 include the operating results from our acquisition of the Nokia Cable Access portfolio we acquired on August 7, 2020. Starting with consolidated sales. For the 3 months ended September 30, 2020, we generated sales of $27.8 million. This was an increase of 38% over the $20.1 million in Q1 last year, an increase of 7% from $26.1 million in Q4 fiscal 2020. The year-over-year increase reflects the growth of both the Video and Broadband Solutions segment, driven by our new Entra family of products and the Content Delivery and Storage segment with their MediaScaleX and content agent products. Within the Video and Broadband Solutions segment, we generated sales of $13.5 million. This was up 81% from Q1 last year and 29% higher than last quarter. Further deployments of our next-generation DAA products contributed first quarter Entra revenue of $5.2 million, significantly up from the $0.3 million in Q1 fiscal 2020 and the $2.1 million in Q4 fiscal 2020. The dramatic growth in Entra sales was led by production deployments of Vecima's industry-leading Entra Remote PHY node to our lead Tier 1 customer as well as initial R-PHY node production deployment to an additional 3 operators in Europe and Canada. Sales of Entra Interactive Video Controller, IVC products also grew significantly year-over-year. Entra sales further benefited from approximately $1 million of sales related to the DOCSIS DAA and Epon DPOE Cable access technology portfolio Vecima acquired from Nokia Corporation. TerraceQAM sales of $4.2 million were up 120% from $1.9 million in Q1 fiscal 2020 and up 25% from $3.3 million in Q4 last quarter. While we believe demand for TerraceQAM is nearing saturation, we're currently seeing an uptick in ordering activity prior to our lead customer moving to the next-generation platform. This could continue into the second quarter. First quarter Terrace family sales of $3.5 million were down 33% from last year and down 19% as compared to Q4 fiscal 2020, primarily due to lower sales of our TC600 and TC600E products. In the Content Delivery and Storage segment, first quarter revenues were $13 million, an increase of 15% from $11.3 million in the same period last year. The year-over-year increase reflects the expansion of our customer base and a strong demand for our IPTV solutions. While content delivery and storage solutions sales were 9% lower than the $14.3 million generated in Q4, this was still a very strong result for the seasonally slower Q1 period. Turning to the Telematics segment. Sales in the first quarter were a solid $1.3 million. This was slightly lower than the $1.4 million we achieved a year ago and on par with the $1.3 million generated in Q4 fiscal 2020, all in line with our expectations. Gross margin for the quarter was 47%, down from 49% in Q4 2020 and 52% in Q1 of fiscal 2020. Video and Broadband Solutions gross margin was 44% in the current quarter. This was lower than 47% a year ago, but higher than the 39% in Q4 of fiscal '20. The year-over-year decrease in gross margin reflects different product mixes in each period, while the increase in Q1 fiscal '21 gross profit dollars reflects higher sales. Gross margin in the Content Delivery and Storage segment decreased to 48% from 53% in Q1 last year and 54% in Q4 last quarter due to a different product and customer mix as well as the impact of obsolete inventory allowances recorded in the quarter and a onetime concentration of service costs as the segment absorbed new business. In the Telematics segment, gross margin in the quarter decreased to 65% from 72% during Q1 fiscal '20 and 70% in Q4 fiscal '20, reflecting higher product costs. Turning to first quarter operating expenses. The notable changes year-over-year were as follows: R&D expenses increased to $6.3 million from $5.1 million in Q1 fiscal '20 as we continue to invest in research and development to support the launch of new products. Until these new products are commercialized, development costs are deferred to future periods. Sales and marketing expenses decreased to $3.2 million from $3.7 million in the same period last year due to lower travel, entertainment and trade show expenses year-over-year partially offset by higher staffing costs from the Nokia Portfolio acquisition. G&A expenses increased to $4.8 million in the quarter from $4 million in Q1 fiscal '20 and primarily reflecting the onetime acquisition costs from the Nokia portfolio acquisition and additional costs associated with the new operations. Total OpEx in Q1 increased to $14.6 million from $12.8 million during the same period last year. This reflects higher operating expenses in the video and broadband Solutions segment, reflecting the addition of operating expenses related to the newly acquired Nokia Cable Access technology portfolio. I note that reported R&D expense in a 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 increased to $8.2 million or 29% of sales from $6.1 million or 30% of sales in the same period last year. The increase reflects higher costs from the Nokia portfolio, higher staffing costs, subcontracting and prototyping costs as our next-generation product families move closer to deployment. We reported an operating loss of $1.6 million in Q1 fiscal '21 as compared to an operating loss of $2.3 million in Q1 fiscal '20. This was due to a decrease in losses in both the Video and Broadband Solutions and the Content Delivery and Storage segments. Net loss for the quarter was $0.8 million or $0.04 per share. This compares to a net loss of $1.4 million or $0.06 per share in Q1 fiscal '20. Turning to the balance sheet. We ended the first quarter with $27.3 million in cash and short-term investments. Working capital decreased to $48.1 million from $55.3 million in Q4 fiscal '20 reflecting the $6.4 million Nokia Cable Access technology portfolio acquisition. Finally, cash flow from operations for the first quarter increased to $3.4 million from $0.5 million during the same period last year. The $2.9 million increase reflects a $2.5 million increase in cash flow from noncash working capital and $0.4 million increase in operating cash flow. Now back to Sumit.
Thank you, Dale. Before I move to our outlook, I want to mention some industry recognition Vecima has received in recent weeks. First, we are deeply honored to be awarded the Chairman's Advanced Technology award in the network hardware category at the Cable TECH Expo in October. This is a prestigious award that recognizes Vecima among an elite group of technology companies that are helping the cable industry bring the 10G platform to life. We've also been recognized with 2 new BTR diamond technology review awards, one for our Entra EN2112 compact access node and the other for our new TerraceIQ platform. The Diamond technology awards recognize unique technological innovation, ease of use, reliability and efficiency, among other criteria. We're very proud to have our product and technology strengths acknowledged in this way and recognize and the recognition that we received as a testament to the talent of our employees. As we move forward, we continue to see a very positive year ahead for Vecima. In our Video and Broadband Solutions segment, we anticipate accelerating momentum for our Entra products in fiscal 2021, particularly in the second half. Our large lead Tier 1 customer remains on track in transitioning to scale deployment. We have multiple customers purchasing and deploying across the enter portfolio. We're also working with a broader and very vast set of MSOs who are moving through trials and expected to start shifting to field deployments, a number of them in fiscal 2021. Our newly acquired portfolio of MAC-PHY and 10-gig EPON products has added and will further add to the momentum. As we indicated last quarter, we expect this new portfolio will produce an incremental 10% to 15% in sales relative to fiscal 2020. Combined with organic sales growth, we see a significant ramp-up in-store for Vecima and Entra sales in fiscal 2021. In our tariffs family of products, we anticipate continued demand for the current generation TerraceQAM, making way for the long-term migration to the next-generation TerraceIQ in lockstep with the overall network transition that will ultimately happen towards IPTV. Looking at the Content Delivery and Storage segment, we're anticipating continued measured growth in fiscal 2021. We're consolidating the significant new business we secured in fiscal 2020, and we expect to continue our successful trend of converting new customers as they transition to IP video. We're an industry leader in this space, and we intend to remain so. In our telematics business, we expect consistent growth from the fleet tracking market, together with increasing demand for our newer and market unique movable asset tracking services as customers operate in commercial fleets look to realize the ROI of tracking the high-value assets and machinery to fuel their businesses alongside of their vehicles. Overall, we're planning for a strong fiscal 2021 and as we start to reap the rewards of our multiyear investments in strategic technology and strategic acquisitions. One caveat continues to be that the COVID-19 pandemic continues to present unknowns in terms of investment time frames, supply chains and the pace of customer network evolution. To date, we've managed very well, and we have the benefit of operating in an industry where our products and services and the industry's outputs are deemed essential and where demand is growing swiftly. We're proud to be part of the industries that are helping people navigate the current climate. Going forward, I believe Vecima is extremely well-positioned for the future, and we look forward to telling you more about our achievements as the year progresses. As I said, when I accepted the Chairman's award that I mentioned earlier, the future is now. That concludes our formal comments for today. We'd now be happy to take questions. Operator?
[Operator Instructions] The first question comes from Nihal Upadia with PI Financial.
Congrats on the strong quarter here. Just had a couple of questions here. Given the strong Q1 performance for Entra with over $5 million in revenue and the commentary on the revenue ramping throughout the year, particularly in the second half. It would seem to suggest that Entra revenue this year could be in the $35 million range, if not higher. Would this be a reasonable assumption in your view?
Yes. So we're not pinpointing not totally, Nihal, at this point, I would say that you're correct in the interpretation of our comments that we have the Q1, $5.2 million and a ramping trend when we think about the consolidated portfolio, which we've said is very leading and with respect to our vendor profile in the industry as it goes these are major infrastructure projects. So again, that's always a factor, and we want to see that continued momentum happen as we carry on for the year. But most definitely, we're seeing this this trend of the organic and inorganic acquisition combination driving us up in revenues, and you can interpret that growth from the 5.2% we had in Q1.
Understood. So in terms of -- if you were, for example, to achieve that kind of revenue for entra or thereabout roughly and based on the assumption that the majority of that revenue is for your nodes, what do you see as the impact on your gross margins? Would you expect gross margins to be at the lower end of your target range of 49% to 52%?
As we've said before, the mix that we see across the entire consolidated portfolio, including the CDS segment and the entirety of the Entra portfolio is consistent with our typical range of 49% to 53%. We expect that to be maintained. Depending on the products and the Entra portfolio, there's definitely variations in mix and margin profile because certain products like the MAC-PHY and the 10-gig EPON platforms, of course, have of more the access network content encompassed within them versus something like a Remote PHY, which was of course, Vecima's organic development. And in a certain sense Remote PHY is a smaller uptick in the access network as an evolutionary step as well. So that might flow into our mix for this fiscal year and proportionately speaking, because it's a an early moving type of product, but we've said that we're impressed with the margin, the fiber to the home products. And of course, the increased content in the MAC-PHY solution means that creates another tailwind. So overall, it balances quite nicely when we think about our typical range of 49% to 53%.
Got you. And then could you provide any color on the number of Tier 1 MSOs you're working with? As part of the 46 operators you've engaged for Entra beyond your lead Tier 1 customer, where are the other Tier 1 operators in the pipeline?
Sure. So and like last quarter, I'm not ready to kind of update the number just yet. I'm not going to break it out further at this point. But what I've offered before is that we're north of the 6 Tier 1 engagements that we've talked about before. I'll go so far to say we're significantly higher than the 6 in terms of the number of Tier 1s and our 46 engagement. And those -- and the reason, of course, is things are competitive. And I'll color it more as we progress in those engagements with the Tier they are, of course, highly coveted prizes in the industry for the DAA stuff, and we do really like the number of Tier 1s we have in our engagement matrix, considering the scope for the particular Tier 1. So we have the lead Tier 1 moving along scaling deployment as we speak, a very important part of our revenue profile in Q1 and throughout fiscal '21. I've talked about a second Tier 1 that is making their way towards forward progress, lab trial, field trial and then potentially into starting their deployment this fiscal year. And then there are a series of others when we look at the overall portfolio, some of whom will definitely be contributing revenue in fiscal '21, that are part of the increased number of Tier 1s we have an engagement matrix.
Right. Okay. Perfect. So switching to tariffs, what is the timeline on TerraceIQ as it relates to lab and field trials and a potential commercial launch? Is it just the one lead MSO customer that is really pushing ahead right now?
Yes. So in fact, lead customers consolidate a lot of their focus today on TerraceQAM, and we've seen that with the uptick in Q1 and on strength in TerraceQAM, that is the primary commercial video platform in their blueprint today. TerraceIQ for them, they are certainly the lead customer in that respect to having to find that evolutionary platform with us, but we do think that their movement to the IQ platform is potentially out of this fiscal year where we're doing really well with TerraceQAM. So we're happy about that, but they are not the only TerraceIQ moving customer. Again, this is the next-generation commercial video platform. I think there's an entirely new market cycle across all of the customers that we have penetrated with Terrace and TerraceQAM in the last decade are addressable with this. And certainly, we are making progress in development and are nearing the first phase of availability, and there are customers outside of the lead that we anticipate could move towards that, and the lead is going to continue flowing on TerraceQAM and then long-term move to the IQ.
Got you. Understood. And then revenue in Europe was down significantly this quarter. Anything particular going on there as Q2 has typically been the weakest quarter in recent years. Was this weakness covid related?
Sorry, that was Europe or just Q2? I missed that.
So the revenue in Europe, it was down significantly this quarter. Is there anything in particular going on in there? And was the weakness covid related?
Yes. And I have to go back to so to look at what led to that change in the region quarter-over-quarter from Q4. I do -- I would say that certainly, with respect to Europe, there's a bit more of pause in some respects related to COVID across our CDS segment. Things are generally moving forward well, and we're quite comfortable with the puts and takes on timing of regions and our plan for the fiscal year to have that continued growth, more measured growth in fiscal '20. We continue to grow all things considered and the covid aspect is there, but we believe that it's not going to be a factor for us overall, hitting our growth profile this year in CDS.
Perfect. And then the gross margins were down this quarter due in part to revenue and product mix. And there was also a mention of obsolete inventory allowances and a onetime concentration on service costs as the CDS segment absorb significant new business. Can you provide some more color on this and including the magnitude of the inventory allowances on the concentration of service costs?
Yes. Dale, why don't you take the magnitude, and maybe I can come back to color?
Sure. So for the obsolete inventory, this related to pre-acquisition of concurrent which is our CDS segment inventory that we were unable to deploy and it's all generation inventory. So we've taken an allowance on that. For concentration of service costs are large APAC contract that we had previously press released had some upfront service costs that related to this very large project, and the revenues on that are expected to begin in Q2 of fiscal 2020. So I'll pass it to you, Sumit, for some color, other color maybe?
Yes. Yes. I think that was pretty good summary there, Dale. I'd say on the APAC deal, as we said, the highest deal we secured in the history of the CDS segment, even before we acquired concurrence. So that, of course, is a major project of a major Tier 1 customer. And in the timing in Q1, we had some costs kind of leading the revenue full in, which will be more focused on Q2 and Q4 we think, for the fiscal year. So that's just the natural cadence of that type of a contract that we're investing in some of the acquired activity and service cost before the revenue really kicks in.
Perfect. And last one from me. How much was the onetime acquisition costs related to the Nokia acquisition? How much of that was included in G&A?
So you want to, yes.
Yes, I can take that one. So the onetime acquisition costs are in between CAD 300,000 and CAD 400,000 on that that hit our G&A in the quarter.
Sure. Perfect, guys. It's all for me. Again, congrats on the strong quarter.
Next question comes from Todd Coupland with CIBC.
I'll start with the OpEx there. So $14.5 million in the quarter, 300 to 400 onetime. So is x that, is that about the right run rate with Nokia fully loaded?
Dale, why don't you go ahead and we may break that down by the category.
Yes, we can definitely break down by category, if you'd like. And just on that, Todd, you have to remember that the Nokia acquisition was August 7. So we don't have a full quarter of operating expenses for that acquisition in those numbers. Yes. Sure. So I'll start with R&D in the quarter. And for answer that in our Q4 call, we provided OpEx expectations for the premerger business and gave some percentage by category breakdowns for the acquisition expenses. And as we indicated at that point, we planned that as of Q1 go forward that we would begin to provide expectations for the fully consolidated business. So that's how you should understand our numbers to date. Again, for the consolidated business, we're planning for R&D expense to be on the average pace of $6.9 to $7 million per quarter for the full year, driven again by ongoing commercialization activity increases in the now combined Entra family and CDS. This is going to be a little bit skewed to the second half of the year. We expect the full year cash R&D to be in the range of $9 million to $9.1 million quarterly. The increase from Q4 moving from that 8.2% in Q1 was driven by a little over half a quarter of acquisition, R&D coming in, or again, 70% of the expenses coming in largely headcount were R&D. As we realize a full quarter of expenses from the acquisition starting in Q2 and continue again on the accelerated commercialization activity for the combined Entra family and CDS, that will drive up the cash R&D and take us to that full year average of $9 million to $9.1 million. So if we could move over to sales and marketing next and talk about that. So our guidance on our consolidated business, we plan to be on average of about 3.7 to 3.8 per quarter for the remainder of fiscal 2021 or for fiscal '21, probably back-end loaded on hitting that average across the full year, which will account for the current macro environment continuing to travel and trade showdown tools, but assumes just a touch of things starting up again in the second half. We're optimistically, we could see some resumption of trade shows and travel. So plan to continue to mobilize on DAA and IPTV on the opportunities between salaries and marketing spend where we are directing our investments to more non-travel related marketing, such as webinars, et cetera. Additionally, we saw a slow-moving finished goods inventory allowances lower than typical in Q1 for the BBS segment and expect that to turn to more typical levels in the second half of the year. Turning to our G&A. In the first quarter, we noted we had about $300,000 to $400,000 initial onetime setup in legal costs related to the acquisition. And we only had roughly 7 weeks of operating expenses with the closing occurring on August 7. And for the remainder of fiscal '21, we plan to be on pace for G&A of about 4.4 to 4.5 per quarter. And then the only other item that we traditionally don't talk to, but I wanted to highlight this quarter was that we have issued performance share-based units. You saw that in our financial statements this quarter. And that's going to -- although it's a noncash item and doesn't impact EBITDA. We are looking at about $240,000 on average for the year quarterly and probably a majority of that is front-end loaded. So those are my comments related to OpEx. Okay.
That's helpful. I was a little bit late on the call. So I imagine you maybe said that earlier. It sounds like it.
No, you were a first one on.
So that's good. All perfect. Okay, good. So then could you just bridge me -- I don't know if I read this right, but I thought you capitalized $3.5 million in the quarter. So you're basically saying for the rest of the year, it will just be a couple of million a quarter of capitalized R&D with 7 to 9 being the spread rate?
No. I think we were at 3-point -- our amortization was 1.7 in last quarter. We're looking at about 2.2 for the remaining quarters as we commercialize some of the additional products. The R&D amortization, you were asked about, Todd?
No. The capitalized development.
Deferred development.
Deferred development, sorry, deferred development was $3.5 million. So when you say 7% to 9% cash R&D, that's basically the $2 million per quarter spread, right? So I guess, I just wanted you to bridge me to what's going to be deferred development quarterly? Is it -- will that -- I guess, that's $2 million a quarter, that's the -- actually right.
So we're at 3.5%, and our -- we'll be capitalizing about -- 4.2 is probably where we're going to be averaging for the rest of the year on our deferrals. And as I stated, our cash R&D is about $9 million to $9.1 million.
And it's good to see you putting stock-based units. That means you're having to compete for some employees and are hoping for some share price before. So I'll take that as a positive sign on the spot, right? What's that, Sumit?
So World class portfolio, World Class team.
That's right. In fact, exactly, exactly.
You probably saw so in the subsequent events note where 1/3 of those PSUs did best subsequent to quarter end.
No, that's good. That's good. Yes, you can't just pay them with the nice views in Victoria. Okay. That's helpful on the cost. And then I just wanted to see if I read this right. So I think you've said a couple of times, Nokia will add 10% to 15% to sales. So let's call it, $10 million to $15 million in rough terms. And I don't know if I read this right, but I thought I saw an acquisition price of $6.5 million. So is that sort of roughly the sort of purchase price and -- in terms of what you've got here?
You caught that right. CAD 6.5 on purchase price and we're looking at that $10 million to $15 million first 12 months top line.
Okay. And are there like trailers or earn-outs if they do better?
No, they're not.
Look. So I mean, that's a pretty low price. So now you specialize in certain parts of the network. And I guess, Nokia is willing to let this go at that price because they've got to continue to focus on it internally, and they have to make development choices. And this has sort of been consistent with how Vecima has operated over the years, you're able to take a niche and operate it and make a nice business out of it, even if these larger players aren't willing to dedicate the resources to it. So in a way, this is consistent with the overall strategy of the company. I mean that's how I look at it anyway.
Yes. No, indeed, it is. And just one other highlight there is that a market like DAA and the fiber EPON you know requires. In our industry's view, especially the cable customers, that -- the focus of a vendor like of a scale and size and capability of Vecima, when we assemble our full R&D between organic Vecima and the new people coming in from the acquisition. That's the kind of profile [indiscernible] so that was certainly a factor in terms of, we believe in Nokia's thinking, and they talked about it as well that the home of the assets and the opportunity to realize the vision with assets is suitable for a company like Vecima and that was certainly sponsored, but it's some of the most important customers in the industry.
Yes. Okay. All right. That certainly makes sense. Those were all my questions. I appreciate the color.
[Operator Instructions] The next question comes from Ola Tragl, a private investor.
Yes. Very encouraging runway, I see going forward. And congratulations on that. Now, is there any speed bumps coming up? In the past, there has been instances where a supplier -- there wasn't enough supply of restriction of parts like electronic parts, et cetera. Is -- how does that look going forward? Will you say any restrictions now?
No, I think you may have been referring to either general things we've talked about before with lead times expanding on parts and some specific things. We're on TerraceQAM and we had a little bit of work to do on some on 1 supplier during -- when COVID came into the frame, but what -- generally speaking, as we look forward and our visibility is improving with forecast and whatnot from customer base, we've been able to be quite effective in managing working capital to play into what we see out ahead of us. So yes, the lead time expansion had happened over the last several years in the marketplace, but we're past the point of managing through that, and we feel pretty good about how we've organized ourselves on flow of working capital relative to the forecast we put together.
Okay. That's encouraging. Is there many parts suppliers that you need to get from China?
Not typically. I mean, certainly, China is involved in manufacturing some of the parts that typically we have Taiwan, U.S., we have a worldwide ecosystem of silicon, especially, and I haven't seen any particular concentration, I would say, in China for parts for us.
There appear to be no further questions. This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.