ViXS Reports First Quarter Fiscal 2015 Results

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TORONTO, ONTARIO--(Marketwired - June 5, 2014) - ViXS Systems Inc. (TSX:VXS) a pioneer and leader in media processing solutions, reported its first quarter fiscal 2015 results for the period ended April 30, 2014. All results are reported under International Financial Reporting Standards ("IFRS") and in U.S. dollars, unless otherwise specified. ViXS reported Q1FY15 revenue of $7.4 million, total comprehensive loss of $5.1 million and non-IFRS net loss of $4.5 million.

Q1FY15 Financial Summary

--Revenue of $7.4 million, a sequential increase over the previous
quarter's revenue of $7.0 million. Revenue from new products accounted
for 61% of sales in F1Q15 versus 54% in the previous quarter, and 37% in
the same quarter last year.
--Gross margin of 42.1%
--Product margin of 47.4% which excludes the effects of amortization of IP
and mask-sets, support contracts, and design kits.
--IFRS Comprehensive loss of $5.1 million, or a loss of $(0.10) per share
basic and diluted, a 34% improvement over the previous quarter.
--Non-IFRS net loss totalled $4.4 million, as compared to a $6.9 million
loss in the previous quarter, and a $6.1 million loss in the same
quarter last year.
--$19.7 million of cash and equivalents, with no bank debt outstanding at
end of quarter.

Customer and Product Announcements

--Sharp selected ViXS to power its Ultra High Definition (UHD) 4K Recorder
and Television products that are expected to begin shipment during June
in Japan.
--ViXS launches UHD HEVC 4K Golden Reference Decoder providing the
broadcast industry with a standardized tool to test, validate, and
enable UHD 4K/HEVC content.
--ViXS demonstrated industry-first RDK client on UHD 4K Platform at The
Cable Show.
--Astra and NTT-Plala commence trails of UHD 4K HEVC 60p using ViXS XCode
--ViXS received the top award for Outstanding Business Innovation from the
Hong Kong-Canada Business Achievement Awards.

Q1FY2015 Results:

Revenue for the first quarter of fiscal 2015 was $7.4 million, up 6% sequentially from the $7.0 million in the previous quarter.

Revenue from new products (XCode6, XConnex) accounted for 61% of sales in F1Q15 versus 54% in the previous quarter, and 37% in the same quarter last year.

Revenue was down 7% from the $8.0 million in the same quarter of last year primarily due to the timing of product transitions as customers migrate from the Company's older generation products (such as the XCode5000 and older products) to more integrated next-generation SoC products for the MoCA (XConnex) and cloud video infrastructure (XCodePro) markets. As evidence of this transition, ViXS' new XCode6 product completed its first full quarter of sales, exceeding 20% of revenue, and remains the only commercial shipping product to support UHD4K-60 and HEVC 10-bit.

Gross margin was 42.1% in Q1FY15, an increase from the 40.1% level in Q4FY14 due to the higher mix of XCode6 and other integrated SoC products. Product gross margin was 47.4% in the quarter. Unlike most semiconductor companies, ViXS amortizes its IP and mask-sets, and certain other design costs, at the COGS level but we believe our product margin is a useful metric for assessing and comparing ViXS margins within our industry. ViXS has included the product margin for each of the last eight quarters in the "Selected Consolidated Quarterly Financial Information" section in Company's filed MD&A.

Comprehensive loss for the first fiscal quarter was $5.1 million, or a loss of $(0.10) per share basic and diluted, a 34% improvement compared with the comprehensive income loss in the fourth quarter of FY2014 of $7.6 million, or $(0.15) per share basic and diluted. The sequential improvement in IFRS loss was primarily due to higher revenue from XCode6 and MoCA products, plus ongoing cost controls. The Company also had a $0.3 million gain from currency gains which is now reported below the operating expense line for this and previous quarters. A detailed explanation of these and other changes in operating expenses is also described in the Company's filed MD&A.

Non-IFRS net loss for the third fiscal quarter was $4.2 million, or $(0.09) per share (basic and diluted), compared with a non-IFRS net loss of $6.9 million, or $(0.14) per share (basic and diluted), in the prior quarter and non-IFRS net loss of $6.1 million, or $(1.23) per share (basic and diluted), in the same quarter last year. The impact on non-IFRS loss from continuing operations and non-IFRS loss per share (basic and diluted) from continuing operations are summarized in the table below.

Total of cash and cash equivalents was $19.7 million as of April 30, 2014, compared to $25.6 million at the end of the previous quarter. The decrease was due to $5.1 million in operating loss and the timing of certain working capital needs (including IP licenses) needed for growth this year.

"ViXS made a strategic decision to invest early in technologies that we saw disrupting the global video industry, and as a result we are the first and only commercially shipping solution to support both UHD 4K 60p and 10-bit HEVC," said Sally Daub, President and CEO of ViXS Systems Inc. "Our customer wins, Intel partnership, and incremental revenue from new products in Q1FY15 clearly demonstrate that our investment is starting to pay off, and we expect that UHD and HEVC will drive continued revenue and earnings growth for years to come."

Based on the strength of our new products, ViXS expects sequential revenue growth for the second quarter of fiscal 2015, and continued growth is expected through the rest of the year.

For More Information

In conjunction with this announcement, ViXS management will be holding a conference call on Thursday, June 5, 2014, at 5:00 P.M. Eastern time to discuss the Company's results for the first quarter fiscal 2015.


DATE:Thursday June 5, 2014
TIME:5:00 P.M. EST
DIAL IN NUMBER:Local / International: 647-426-1845
 North American Toll: Free: 1-866-782-8903
REPLAY NUMBER: Local / International: 416-915-1035
 North American Toll: Free: 1-866-245-6755
 Passcode: 271960
 The webcast will be archived for 90 days
WEBSITE: To view the press release or any additional
 financial information, please visit the Investor
 Relations section of the ViXS website at:


Three Month Period Ended
April 30,January 31,April 30,
Dollar amounts in U.S. dollars201420142013
 Amounts in thousands

 Cost of sales 4,305 4,173 4,178
Gross margin 3,136 2,866 3,846
Operating expenses
 Research and development4,255 4,548 6,041
 Selling, general and administrative 4,246 4,230 2,577
Total operating expenses (1) 8,501 8,778 8,618
Loss before finance costs and income,
 currency gain, convertible preferred
 share revaluation adjustment and
 income taxes(5,365) (5,912) (4,772)
Other income (expense):
 Finance costs(20) (152)(18,835)
 Finance income 2433 -
 Currency gain 291 (1,578)10
Convertible preferred share
 revaluation adjustment- - (1,185)
Total other income (expense) 295 (1,697)(20,010)
Loss before taxes ($5,070)($7,609) ($24,782)
 Income tax expense (13)(10)(56)
Net loss for the period(5,083) (7,619)(24,838)
Items subject to reclassification
 Exchange difference on translating
 foreign operations (30) -(40)
Comprehensive loss for the period ($5,113)($7,619) ($24,878)
Loss per share attributed to common
 equity holders
 Basic and Diluted ($0.10) ($0.15) ($5.01)
Weighted average number of common
 shares outstanding
 Basic and Diluted50,35250,225 4,960

(1) Includes share-based transaction
 expense of:
Research and development 345 25060
Selling, general and administrative199 25175

Consolidated Balance Sheet
 DataAs at April 30, As at January 31, As at April 30,
 2014 2014 2013
---------------- ----------------- ---------------
Cash and cash equivalents$19,667 $25,588$2,069
Trade accounts receivable7,045 6,959 6,544
Inventory3,321 5,293 2,175
Total assets40,70647,35922,304

Bank Debt- -10,772
Total liabilities 12,78215,048 132,006
Shareholders' equity
 (deficiency) 27,92432,311 (109,702)


Non-IFRS net income (loss) is defined as total comprehensive income (loss) before share-based transaction expense, exchange difference related to translating foreign operations and non-recurring or one-time items such as: share offering costs, listing fees, convertible preferred share revaluation adjustment, fair value adjustment on warrant liability, provision for repayable government assistance. Non-IFRS net income (loss) does not have any standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by other companies. Non-IFRS net income (loss) from operations should not be considered in isolation or as a substitute for comprehensive income (loss) prepared in accordance with IFRS.

ViXS has provided a comparison of comprehensive income (loss) to non-IFRS net loss in the following table:

 Three Month Period Ended
(in thousands of U.S. dollars)April 30, January 31, April 30,
2014 2014 2013
Comprehensive loss for the period ($5,113) ($7,619)($24,878)
R&D adjustments
 Stock-based compensation expense345250 60
 Provision for repayment of
government assistance111-(1,121)
Selling, general and administrative
 Stock based compensation expense199251 75
Other Income/Expense adjustments
 Listing Fees- 15300
 Accreted interest on provision for
repayment of government assistance -165-
 Fair value adjustment on warranty
liability-- 18,219
Other adjustments
 Convertible preferred share
 Exchange differences on translating
foreign operations30- 40
Non-IFRS net loss ($4,429) ($6,938) ($6,120)

Non-IFRS EPS ($0.09)($0.14)($0.28)

About ViXS Systems Inc.

ViXS is the pioneer and market leader in designing revolutionary media processing semiconductor solutions for the broadcasting and consumer electronics industries, with over 461 patents issued and pending worldwide, numerous industry awards for innovation, and over 30 million media processor shipments to date. ViXS is driving the transition to Ultra HD 4K across the entire content value chain by providing professional and consumer grade chipsets that support the new High Efficiency Video Coding (HEVC) standard up to Main 10 Profile, reducing bandwidth consumption by 50% while providing the depth of color and image clarity needed to take advantage of higher-resolution content. ViXS' XCodePro 300 family is ideal for Ultra HD 4K infrastructure equipment, and the XCode 6000 family of system-on-chip (SoC) products achieve unprecedented levels of integration that enable manufacturers to create cost-effective consumer entertainment devices.

ViXS is headquartered in Toronto, Canada with offices in Europe, Asia and North America. VIXS(TM), the ViXS(R) logo, XCode(R), XCodePro(TM), XConnex(TM) and Xtensiv(TM) are trademarks and/or registered trademarks of ViXS. Other trademarks are the property of their respective owners. For more information on ViXS, visit our website:

Forward-Looking Statements

Statements in this press release that are not historical facts constitute "forward-looking statements" within the meaning of applicable securities laws. Such statements include, but are not limited to, statements regarding ViXS' projected revenues, gross margins, earnings, growth rates, the impact of new product design wins, market penetration and product plans. The use of terms such as "may", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause ViXS' actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements.

These factors include, but are not limited to, our history of losses and the risks associated with not achieving or sustaining profitability; our dependence on a limited number of customers for a substantial portion of our revenues; fluctuating revenue and expense levels arising from changes in customer demand, sales cycles, product mix, average selling prices, manufacturing costs and timing of product introductions; risks associated with competing against larger and more established companies; risks associated with changing industry standards such as MoCA 2.0; risks related to intellectual property, including third party licensing or patent infringement claims; risks associated with adverse economic conditions in Asia; our dependence on a limited number of supply chain partners for the manufacture of our products; and other factors discussed in the "Risk Factors" section of the Annual Information Form of ViXS Systems, a copy of which is available on SEDAR at All forward-looking statements are qualified in their entirety by this cautionary statement. ViXS is providing this information as of the date of this release and does not undertake any obligation to update any forward-looking statements contained in this release as a result of new information, future events or otherwise.

ViXS Systems Inc.
Charlie Glavin
+1 416 646-2000

Investor Relations
ViXS Systems Inc.
+1 416 646-2000 ext. 3