Vecima Networks Inc

TSX:VCM

Earnings Call Transcript 2023-Q4

[Operator]

Hello. This is the Chorus Call conference operator. Welcome to the Vecima Networks Fourth Quarter Fiscal 2023 Earnings Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [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 fourth quarter and year-end fiscal 2023 results. Lastly, the call will finish with a question-and-answer period for analysts and institutional investors. The press release announcing the company's fourth quarter and year-end fiscal 2023 results as well as a detailed supplemental investor information are posted on Vecima's website at www.vecima.com under the Investor Relations heading.

The highlights provided on this call should be understood in conjunction with the company's audited condensed annual consolidated financial statements and accompanying notes for the year ended June 30, 2023 and 2022. Certain statements in this conference call and webcast may constitute forward-looking statements with the meaning of applicable securities law. 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/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 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 21, 2023, 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.

[Sumit Kumar, executive]

Thank you. Good morning, and welcome, everyone. Thank you for joining us. Fiscal 2023 was another record-breaking year for Vecima as we furthered our position as a leading innovator and essential partner supporting the global wide-scale migration to distributed access architecture and IPTV. I'll start today with a review of some of the financial and operational highlights of the year. Dale will provide more detail on our financial results, and then I'll return to talk about what lies ahead for Vecima.

To begin, I want to impress upon the fact that by every measure, fiscal 2023 was a remarkable year teaming with growth, innovation and performance. All 3 of our business segments rose sharply over our already exceptional fiscal 2022 results and together, turned in the best top and bottom line results in Vecima's history.

On a full year basis, sales increased 62.4% to $303.4 million. That was after achieving 50.5% year-over-year growth in fiscal 2022, leading to Vecima's sales now being almost 2.5x what they were just 2 years ago. And we continue to leverage this growth through to the bottom line. Gross profit climbed by nearly 58% to $142 million. Adjusted EBITDA was up 93% to $59.8 million and adjusted net earnings per share nearly tripled to $1.19 per share from $0.41 last year. Of course, these are all record results for Vecima.

Our performance was once again led by our Video and Broadband Solutions segment, and more specifically, by further dramatic growth for our Entra family of products. As we continue to drive the first wave of the global cable industry's wide-scale migration to distributed access architecture, interest sales more than doubled from $107.3 million in fiscal 2022 to $222.1 million in fiscal 2023.

Entra continues to be our fastest-growing product family and represented 73% of fiscal 2023 total sales. To put this into perspective, consider that just 3 years ago, Entra accounted for just over $5 million or about 5% of Vecima's consolidated sales. In total, our customer engagements for Entra climbed to 107 during fiscal '23, up from 91 at the start of the year. And 51 of those customers are now using our Entra cable and fiber access products in their networks. This includes deployments with 8 of the top 12 largest cable operators in North America, which provides a strong indicator of Vecima's leadership in the DAA landscape. And our relationships with these customers continue to expand in fiscal 2023.

As an example, Charter Communications, one of the world's largest cable operators, chose our new Entra ERM3 solution as one of the backbones of the major DAA rollout that plans to implement in fiscal 2024. We also work closely with Charter to demonstrate multi-gigabit speed symmetrical DOCSIS 4.0 at various industry events during the year. And subsequent to year-end, we recently announced that Vecima and Charter have entered into a warrant agreement that has the potential to further expand the strong strategic partnership that our 2 organizations have already built, subject to achieving significant multiyear purchase targets of products and services. The successful realization of that agreement is expected to align with the accompanying growth of strong shareholder value.

Another highlight for Entra in fiscal 2023 was strong growth on the fiber access side of our portfolio as we supported the supply of substantial rural broadband connectivity capacity last year. As you're probably aware, governments are investing heavily to close the rural urban divide for high-speed Internet access and Entra products are an integral part of that solution. Now I want to note that while full year Entra growth was exceptionally strong, we are anticipating a momentary deferment in Entra's momentum at the start of fiscal 2024. This reflects a short-term transition currently underway in the DAA macro environment.

Over the past few years, Vecima has been effectively responding to extremely challenging supply chain conditions. These challenges continue through much of fiscal '23, and we were distinctly successful in helping our customers secure the inventory they needed to support their planned rollout programs.

While Vecima's exceptionally strong supply chain management, led to fulfillment of customer orders on schedule, in some cases, customer projects, on the other hand, got delayed due to lagging construction, labor, permitting, utility make-ready and other requirements for these very large-scale network build-outs. As we enter Q1, we're now seeing a measure of timing realignment and project cadence tying to a brief transition where customers are working to catch up on and ramp project rollouts using the inventories we've unlocked for them. That's led to some short-term pushouts and order delivery dates starting in Q1 even as backlog for the outquarters continues to build. I want to emphasize that we expect this to be a relatively transient intermission in what is a much broader wave of DAA adoption and growth.

DAA is becoming a multibillion-dollar market as operators worldwide undertake this transformational evolution of broadband access networks. And the industry is heading into this journey with Vecima widely recognized as the leading DAA technology partner. We're on the cusp of another major wave of growth and extremely well positioned to benefit.

Looking now the highlights from our other business segments. Our Content Delivery and Storage segment turned in impressive performance with annual sales growing 20.3% to $52.3 million in fiscal 2023. We finished the year on a high note with record Q4 sales performance of $17.1 million, an 85% increase over last year, which drove the strong full year results. The year's highlights included multiple IPTV expansions with existing customers, along with new customer wins. As we've highlighted before, with respect to the many new IPTV program wins we've achieved over the past few years in CDS, when customers initiate managed IPTV platforms, they typically start by rolling out to just a starting subset of their overall video subscribers. They then have the expectation to gradually migrate the remaining bulk of legacy video subscribers to the next-generation video fabric represented by MediaScale.

In fiscal 2023, we saw a significant increase in this type of activity. After attaining the expected success and benefits associated with IPTV, customers drove step-ups in migration, expansion and corresponding capacity purchase increases for MediaScale IPTV.

On the innovation front, we continue to advance our MediaScale portfolio with multiple product enhancements, including major new releases in our origin and cash product families as well as a new MediaScale video platform, enabling operators to refresh old video-on-demand infrastructure and expand their content libraries while leveraging existing back office investments and deploying IPTV-ready origins and storage.

We also continue to develop our standards compliant open caching solution. As we've mentioned, open caching is a significant new development for our service provider and streaming customers because it delivers video that looks and performs better on consumer viewing screens while offering compelling business advantages. We believe open caching is the future of video streaming, and we're continuing to lay the groundwork for it in partnership with leading global content and service providers.

Finally, in Telematics, we continue to build on the segment's profitable recurring revenue contribution as we advanced uptake for NERO global tracking, our growing movable asset tracking platform. In fiscal 2023, we added 58 new asset tracking customers and more than doubled the total number of movable assets we monitor in the year to over 48,000 tags. In every aspect, fiscal 2023 was a powerful year for Vecima, and we ended in a very strong financial position with $83.7 million in working capital and modest long-term debt of $14 million. That was just after investing heavily in working capital, R&D and organic growth and returning cash to our investors in the form of our regular dividend of $0.22 per share. I also want to note that we undertook the realignment of our workforce of the close of fiscal 2023. That changes, which involve about 10% of our workforce, are expected to provide a corresponding reduction in our run rate operating expense compared to Q4, excluding restructuring costs, stock-based compensation and other expense in the fourth quarter.

For the full year, net of any planned staff additions and other incremental OpEx increases through the year, we expect an 8.5% decrease compared to the fourth quarter OpEx. I want to point out that the staffing reduction was proactively associated with adjustments we've anticipated in the market needs and therefore, predominantly program alignment related. While the downsizing was driven primarily by our go-forward program needs, it also speaks to our continued commitment to efficiency, contributive management as we enter the first half of fiscal 2024.

The combination of programmatic OpEx adjustments, robust working capital and product readiness for new large-scale programs means we're balanced and very well positioned to support the significant ongoing growth we see ahead. I'll tell you more about that in just a few minutes.

First, though, I'll turn the call over to Dale to provide our financial review. Dale?

[Dale Booth, executive]

Thank you, Sumit. For the purposes of this call, we assume that everyone has seen the fourth quarter and fiscal year 2023 results, news release and MD&A and our fiscal year 2023 financial statements posted on Vecima's website. I will present the relevant numbers and discussions around overall results, market segments, operational expenses and the balance sheet.

Starting with consolidated sales. For the 3 months ended June 30, 2023, we generated sales of $75.5 million. This was an increase of 26% over the $60 million in Q4 last year and a 3% decrease from the $78.3 million in Q3 fiscal 2023. The year-over-year increase reflects higher sales from the Video and Broadband Solutions segment, combined with record fourth quarter sales in our Content Delivery and Storage segment. Within the Video and Broadband Solutions segment, for the fourth quarter of fiscal 2023, we generated sales of $57 million. This was up 15% from the $49.4 million in Q4 last year, and 12% lower than the $64.8 million in sales last quarter. Next-generation DAA products contributed fourth quarter Entra revenue of $50.7 million, up 27% from the $40 million in Q4 fiscal 2022, but down 19% from the $62.7 million in Q3 fiscal 2023.

We anticipate a resurgence of demand momentum in the second half of fiscal 2024 as we begin to launch major DAA rollouts with key customers. In all, Entra DAA platforms are now being sold to 51 operators across 6 continents.

Commercial video product sales were $6.3 million for the quarter, a decrease of 29% from the $8.8 million in Q4 fiscal 2022, but almost 3x higher than the $2.1 million generated in Q3 fiscal 2023. The year-over-year change reflects the transition to next-generation platforms and the impact of some of our newer DAA-driven commercial video solutions being accounted for as part of the Entra family sales. The quarter-over-quarter improvement reflects stronger-than-expected TC600E sales in Q4.

Content Delivery and Storage segment sales delivered a record quarter with $17.1 million in Q4 fiscal 2023, an 85% increase from the $9.2 million in the fourth quarter of fiscal 2022 and up 45% compared to $11.8 million in Q3 of this year. Our record Q4 performance reflects significant IPTV expansion activity with customers together with strong services revenue.

CDS segment sales for Q4 fiscal 2023 included $10.3 million of product sales and $6.8 million in services revenue. As always, we note that quarterly sales variances are typical for the CDS segment.

Turning to the Telematics segment. Sales in the fourth quarter were $1.4 million, consistent with expectations. This was slightly higher than the $1.3 million generated in the same period last year, but lower than the $1.7 million in Q3 of this year. Consolidated gross margin for the fourth quarter was at 50.5%, with a gross profit of $38.1 million, an increase of 34% from the $28.5 million in Q4 of fiscal 2022 and up 12% from last quarter's $34.1 million, above our targeted range of 45% to 49%. Gross margin was also up from the 48% achieved in Q4 of fiscal 2022 and the 44% last quarter. The improvement in gross margin reflects higher sales and margins in the CDS segment, combined with improved gross margin offset by lower sales in the Video and Broadband Solutions segment.

Video and Broadband Solutions segment gross profit grew 21% to $27.9 million in the fourth quarter of fiscal 2023 from the $23 million in the same period last year, and up 4% from the $26.7 million in gross profit last quarter. Gross profit margin of 49% was slightly higher as compared to 47% in Q4 fiscal 2022 and significantly higher than the Q3 fiscal 2023 gross profit margin of 41%. The year-over-year increase in gross profit reflects higher sales compared with reduced expedite costs in our commercial video products, a large software feature sale for commercial video and a favorable deferred revenue adjustment resulting from a change in contract terms.

Gross profit in the Content Delivery and Storage segment for Q4 fiscal 2023 increased significantly by 99% to $9.2 million from the $4.6 million in Q4 of fiscal 2022. CDS gross margin of 54% for the quarter was also higher than the 50% gross margin for the same period last year. On a sequential quarterly basis, CDS gross profit was 47% higher than the $6.3 million generated last quarter and CDS gross margin was slightly higher than the 53% achieved in Q3 fiscal 2023. Year-over-year changes in gross profit and gross margin reflect a higher percentage of high-margin software sales in the product mix and an increase in sales in the current quarter as compared in the same period last year.

In the Telematics segment, gross profit in the fourth quarter increased to $1 million with a gross margin of 72% from the $0.9 million in gross profit and 66% gross margin in Q4 of fiscal 2022 and gross profit of $1.1 million and 65% gross margin last quarter. The year-over-year improvement in gross margin was mainly the result of lower product costs in the current quarter.

Turning to fourth quarter operating expenses. The notable changes year-over-year were as follows: R&D expenses increased to $12.9 million in the current quarter from $11.4 million in Q4 fiscal 2022, primarily reflecting the hiring of additional R&D employees, the amortization of deferred development costs, higher licensing costs, partially offset by increased capitalized development costs.

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 for the fourth quarter increased to $7.8 million from $6 million in the same period last year. This increase was due to higher staffing costs as well as increased travel, entertainment and trade show expenses. G&A expenses increased to $8.0 million in Q4 fiscal 2023 from $6.5 million in Q4 fiscal 2022, primarily reflecting the additional staffing, travel and entertainment, training and development and contracting costs.

Restructuring costs were $1.2 million in Q4 fiscal 2023 compared to 0 in Q4 of fiscal 2022. The increase is a result of restructuring activities undertaken in Q4 fiscal 2023 to better align the company's resources with their strategy and outlook. Operating cost savings will occur in fiscal 2024 as a result of this restructuring. Other expenses were $1.6 million in Q4 fiscal 2023, an increase from other income of $0.8 million in Q4 fiscal 2022. This primarily relates to cancellation penalties incurred on supplier contracts that were incurred in fiscal 2023.

Total OpEx in Q4 increased to $32.7 million from $24.7 million during the same period last year. This increase primarily reflects higher operating expenses in the Video and Broadband Solutions segment. Video and Broadband Solutions operating expenses for the quarter increased to $23.8 million from $15.8 million in Q4 fiscal 2022. The $8 million year-over-year increase primarily reflects additional expenses for research and development, sales and marketing, general and administrative activities and staffing, all related to sales growth.

Content Delivery and Storage operating expenses were $8 million in both Q4 fiscal 2023 and Q4 fiscal 2022. Higher expenditures on research and development and general and administrative activities were offset by a onetime impairment charge in the fourth quarter of fiscal 2022.

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 current quarter increased to $15.3 million or 20% of sales from $12.7 million or 21% of sales in the same period last year.

The year-over-year increase reflects higher staffing costs, higher costs for software licensing as our next-generation product families move closer to full scale commercial deployment. In our operating results, we reported an operating income of $5.4 million in Q4 fiscal '23 as compared to $3.8 million in Q4 fiscal '22. The $1.6 million increase was primarily due to higher sales in the content delivery and storage segments, partially offset by increased operating expenses in the VBS segment with higher R&D and staffing aimed at supporting future growth. Adjusted EBITDA grew to $15.1 million this quarter from $11.1 million in the prior year quarter, and up from $11.7 million sequentially. Foreign exchange gain was $1.3 million in Q4 fiscal 2023 as compared to $1.4 million in the prior year period.

Net income for the quarter increased to $5.1 million or $0.21 per share from a net income of $3.5 million or $0.16 per share in Q4 fiscal 2022. Overall, a very solid quarter.

Turning to the balance sheet. We ended the fourth quarter of fiscal 2023 with $2.3 million in cash as compared to $12.9 million in the same period last year. Working capital increased to $83.7 million in the current quarter from $58.6 million in Q4 last year, but decreased from the $91.1 million in Q3 fiscal 2023. We note that working capital balances can also be subject to significant swings from quarter-to-quarter.

Our product shipments are lumpy, reflecting the requirements of our major customers. Other issues like contracts with greater than 30-day payment terms also affect working capital, particularly if shipments are back-end weighted for a quarter. Lastly, cash flow provided by operations for the fourth quarter was $4.6 million as compared to cash flow provided by operations of $10.4 million during the same period last year. The $5.8 million change reflects a $7.3 million decrease in cash flow related to noncash working capital, partially offset by a $1.5 million increase in operating cash flow.

On a final note, in terms of the quarterly dividend, the Board of Directors approved a quarterly dividend of $0.055 per common share payable on November 6, 2023 to shareholders of record as at October 13, 2023. I would like to point out that this dividend will be designated as an eligible dividend for Canadian income tax purposes.

So just to summarize, another strong quarter with continued sales growth and a solid gross margin and adjusted EBITDA. Now back to Sumit.

[Sumit Kumar, executive]

Thank you, Dale. Now looking at what lies ahead for Vecima. We see ourselves nearing a major new phase of growth and development, further scaling the business beyond the tripling of sales that we've achieved over the last 3 years. I want to repeat that. In fiscal 2023, Vecima's sales were more than 3x what they were in fiscal 2020. Our adjusted EBITDA this year is 3.25x what it was in fiscal 2020, and our adjusted earnings per share have grown by nearly 20x since fiscal 2020.

Around the globe, MSOs are planning significant capital investment to upgrade their broadband and IPTV networks. These are essential investments that address operators' urgent need to expand capacity, respond to increasing competition and meet customers' expectations for ever faster Internet speeds and enhanced services. As a core broadband supplier to the global industry with unrivaled DAA and IPTV product portfolios and a very strong market position, we're exceptionally well positioned to harvest our share of the far-reaching opportunity ahead.

In our Video and Broadband Solutions segment, we anticipate the market making its way towards even wider DAA deployment in calendar 2024 as operators roll out their planned network upgrades. We expect this to have significant positive impact on our results in the second half of our fiscal 2024, but I want to again emphasize that in the first half and particularly in Q1, will still be in transition as customers deepen rollout of existing projects using the inventory we helped unlock for them this past year.

As I said earlier, we expect this transition to be short-lived. By the second half, we anticipate a resurgence of Entra sales growth momentum as we carry on rolling out major DAA deployments with multiple customers. This should lead to respectable full year consolidated sales growth in fiscal 2024. More importantly, though, we expect our quarterly run rate to reach new and compelling highs by year-end, with that momentum expected to build into fiscal 2025 and beyond.

Turning to our Content Delivery and Storage segment. We anticipate continued expansion in demand for our IPTV solutions contributing to year-over-year sales gains in the low double digits. And over the longer term, we continue to see higher growth potential. The IPTV and OTT streaming services markets are on pace to significantly expand in the next several years, and they'll depend on reliable and scalable solutions like those provided by our MediaScale portfolio. We're also anticipating continued incremental growth in our Telematics segment.

In summary, we're tremendously excited about Vecima's prospects. At a time when the industry is moving decisively to DAA and IPTV, Vecima boasts one of the world's most comprehensive DAA portfolios, covering both fiber and cable access, and we've built some of the industry's best technology that's being adopted by several of the world's largest broadband service providers.

So we remain deeply confident in our market position and in Vecima's ability to capture the major opportunities that lie ahead as we continue to realize the true deployment potential for our leading technologies and break new ground in ultra-high-speed connectivity, time and again. That concludes our formal comments for today. We'd now be happy to take questions. Operator?

[Operator]

[Operator Instructions] The first question comes from Steven Li with Raymond James.

[Steven Li, analyst]

I wanted to ask you about your fiber rollouts, like the pace of these rural rollouts. Can you share what you're seeing on the installation front in terms of velocity, even as your customers work down their inventory and slow down their peers?

[Dale Booth, executive]

Yes. Unlike we said, it's kind of this remaining component of calendar '23 that we see this continuing digestion phase. As I've been saying, this is the year where those projects are ramping up in the field. You may see even some commentary from operators indicating that they're accelerating their pace of field deployment and the fiber access, given that it's funding subsidized, very, very strong ROI metrics.

It has a lot of priority. And like I said, we've unlocked inventory to allow for that whereas the labor, the permitting and the pole access and construction is now catching up. So we expect a lot of heavy activity on the part of operators this calendar year, and that will make way for ongoing deliveries from us.

[Steven Li, analyst]

Okay. And Sumit, can you also comment on RDOF in terms of funding? Like is it still early innings? Or are we past the halfway point for RDOF?

[Sumit Kumar, executive]

In terms of deployment activity, it is still relatively early innings. Some of the operators talk about their overall funding awards and where they see themselves getting to by the end of calendar '23, and you can interpret from that, how far along they are. I think in the best cases, we think some operators are 20% to 30% deployed. Some of the largest [ of these ] of the funding. So there's a lot of activity yet to come. Of course, particularly our 10 gig EPON on remote OLT is aligned for those implementations. So as inventory gets consumed and they continue to ramp those projects to leverage that funding, we're excited about what's in store.

And then meanwhile, the longer-term larger U.S. Go funding program that is [ beat ], is underway with distribution to the state administration happening, and that creates another 2x factor on subsidies for rural broadband. Once again, with the aim to at last finally serve underserved regions of the United States, and we're happy about what that suggests for long-term continuation prospects for funding-driven fiber-to-the-home deployment with Vecima's technology.

[Steven Li, analyst]

Right. So Sumit, on [ beats ], so you expect those state funds to become available in 2024. Is that what your customers are telling you?

[Sumit Kumar, executive]

I think they're still working through the regulatory environment there. We know that the NTIA has kind of created their notice of funding opportunity. Some states have responded. There's been some allocations. And now the states have to go through their process of submitting their deployment plans to capture in the funding and those all tie to subgrantees with the operators and other carriers. So it's going to take a continued amount of time for that to work through the system. But it's a major program over multiple years. So we do think that 2024 calendar year will be an exciting year for developments in [ beat ].

[Operator]

The next question comes from Jim Byrne with Acumen Capital.

[Jim Byrne, analyst]

With the kind of slowdown here that we've got or you're anticipating, maybe just give us an update on supply chain constraints on your systems and your productive capacity. I know you've even talked about maybe even onshoring more of your manufacturing. Maybe just give us an update on your production.

[Sumit Kumar, executive]

Yes. So I think reflecting again on what's happened in the supply chain environment over the last 3 years, starting with the pandemic, things got extremely constrained, probably peaking in calendar '22 and starting the process of incremental capacity and relief in calendar '23. So with respect to investments, we've made the growth. We've had, the strong working capital investment, we've made to support our growth and to manage the supply chain. We're positioned quite strongly today in terms of go forward. And the fact that we're seeing correction in the supplier marketplace, generally speaking, is very helpful as we look at our long-term plans.

So well positioned, well situated working capital war chest. I think there are some remaining isolated and still relatively key cases of long lead times that we need to continue to manage effectively working in partnership with our customers as we have for some of our newer programs and some of our core silicon that's upcoming from the supply chain. But that is all well practiced in terms of estimates capability together with our customers to manage those things. So by and large, we have a strong work war chest to work with in our working capital. We've seen a lot of improvement from the supply chain, and we have to continue to work and manage those isolated cases where there's a lagging condition of elevated lead times.

[Jim Byrne, analyst]

Okay. And then maybe just looking at the warrant agreement, maybe just give us a little color on how that came about. I know something that charged in the past, but maybe just give us an update from what you see as the advantages of the agreement.

[Sumit Kumar, executive]

Okay, Jim. I'm not able to offer too much more than I've already provided in the press releases. We've said the warrants give Charter Communications opportunity to buy up to about 360,000 shares exercise price of $17.09 per. And they are subject to vesting conditions that are based on the achievement of significant multiyear spending targets. We have seen our partnership expand over the last several years. And we're continuing together build the 10G cable and fiber access networks that they plan for the future. So again, we believe that, that agreement really underscores the growth of the relationship, and we're working on this network evolution strategy together.

I think generally speaking now, when we think about a customer approaching a vendor for a warrant agreement, we believe that it signals strong strategic alignment, faith in the technology and partnership and an expectation of executing thorough programs together that highly benefit both organizations. That typically, we would see that in the industry when some robust market share is expected and there is an expectation that there's an opportunity to drive significant overall shareholder value. So that's all. We're very pleased to have the potential for even more alignment with such a world-leading service provider as Charter is.

[Jim Byrne, analyst]

And then maybe one for you, Dale. The working capital continues to grow. When should we anticipate some of that release coming back to you here? Is that a Q1 or kind of a back half weighted in 2024 event?

[Dale Booth, executive]

It will be more back half loaded as our sales get back into ramping up. As Sumit has said, that's war chest just sitting there. And as we increase our sales in the back half of fiscal 2024, we'll see us utilizing that inventory.

[Operator]

The next question comes from Ryan Koontz with Needham & Company.

[Ryan Koontz, analyst]

I wonder if you could kind of step back in the big picture and think a little longer term and maybe well into '25 and kind of the migration from DAA and DOCSIS 3.1 toward DOCSIS 4 and the bifurcation of standards there versus fiber-to-the-home spending. And how do you expect kind of the broader cable market to evolve there in terms of spending on the various options they have to move beyond this first step in DAA?

[Sumit Kumar, executive]

Thanks, Ryan. I think like you said, our leading first wave of DAA. DAA is Vecima and Gainspeed both. Now Vecima are pioneers and inventors in DAA, and this has been a decade in the making for the industry and the movement is upon us where DOCSIS 3.1 is being rolled out with DAA at scale today. As you've seen, several operators are leveraging it to allow them to leverage the HFC on the cable access plant to offer leading -- nation-leading broadband services gigabit and beyond. There's going to be a movement towards more symmetrical networks with high split is the consensus. And then we have a lot of runway as DOCSIS 4.0 continues to mature. You've seen that there is even some opportunity to mix DOCSIS 4.0 modems with 3.1 infrastructure and get some benefits and speed on the buys even further runway as the industry makes preparation for the long-term migration to DOCSIS 4.0, whether that is FDX or 1.8 gigahertz extended spectrum, we see that we can continue to drive leverage of that HFC cable plant to move to symmetrical 10G over time.

Meanwhile, of course, the fiber is powerful. I talked earlier about how the funding is a very strong motivator for fiber expansion. And we do believe that operators in greenfield environments continue to emphasize fiber rollout where they can. And I think the marriage of these 2 things that we've done with the capability to continue to expand on a supremely competitive service with the cable plant as well as pour on the new greenfield new build with fiber, that positions operators with everything they need to do to maintain this major market share they enjoy broadband service provision.

[Operator]

[Operator Instructions] The next question comes from Jesse Pytlak with Cormark Securities.

[Jesse Pytlak, analyst]

Just one quick question for me. Customer engagement, kind of flat quarter-over-quarter and just the growth there has been slowing down. Are you kind of reaching a saturation point here? Or is there still a pretty large cohort of cable operators out there that you engage with? And is this just kind of a temporary slowdown as well?

[Sumit Kumar, executive]

Yes. I think the engagement count has been ticking up. I think over the full year, I don't have the entry point on my table here, but we've ramped that up across the year. Q3 to Q4, just point in time stuff, I think, in terms of that and not really a signal saturation. One of the other factors has been, I mean, while we were in the supply chain constraints, and we have these 8 North American leading operators deploying our products. There is perhaps less opportunity to service incremental customers because we had to put all of our delivery attention to our current customers and our Tier 1s. So insofar as those Tier 1 customers are digesting for the time being, that does create opportunity for us to broaden our exposure to other customers. So we expect that there is a significant amount of global growth ahead in the engagement and overall customer accounts still ahead of us.

[Operator]

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.