ViXS Reports Third Quarter Fiscal 2017 Results

TORONTO, ON --(Marketwired - December 14, 2016) - ViXS Systems Inc. (TSX: VXS) a pioneer and leader in advanced media processing solutions, reported today its third quarter fiscal 2017 results for the period ending October 31, 2016. All results are reported under International Financial Reporting Standards ("IFRS") and in U.S. dollars, unless otherwise specified.

Customer, Product and Corporate Announcements:

--Completion of upgradeable MoCA2.0 acceptance testing with one of the large broadcasting and cable television companies in the United States, resulting in larger volume shipments and performance improvements to existing and new customers;

--Growth in ViXS' Cloud & Video Delivery segment (XCodePro family of
products) with multiple design wins including WellAV, a strategic
corporate partner of Sencore, a major manufacturer of video delivery
electronics equipment;

--Design-ins with several new and follow-on customers for the XCode5
consumer transcoder products, growing the Over-the-Air (OTA) streamer
and CordCutterTV markets with WiFi capabilities;

--Nationwide broadcast trials for the Golden Reference Decoder (GRD3) box with HDR and 12-bit HEVC capabilities with partners including PBS and DTS;

--Strengthened balance sheet, general corporate and working capital needs with the completion of non-brokered private placement offerings to a group of strategic investors including Morega Systems Inc, Vecima Networks Inc. and a North American subsidiary of a major Chinese electronics conglomerate, and new and existing investors raising aggregate gross proceeds of approximately $5.8 million (CAD$6.6 million); and

--Appointed Phillip Deck to the Company Board of Directors adding significant operational expertise and technology investing experience;

"Revenue growth during the quarter was driven by multiple product lines XConnex, XCode and XCodePro. With a strong product portfolio in place, our strategy of focusing on our target market segments are yielding results. We remain confident this progress will continue into Fiscal 2018 and beyond," said Sohail Khan, President and CEO of ViXS.

Q3F17 Financial Summary:

--Revenue for Q3 Fiscal 2017 of $8.3 million grew 61% year-over-year, or $3.2 million, from the $5.1 million recognized in Q3 Fiscal 2016, and a 5% sequential increase from $7.9 million recognized in Q2 Fiscal 2017. This revenue increase was primarily driven by higher sales of XCode5 and XConnex products, plus initial shipments of XCode 6800 chips.

--Gross margin for Q3 Fiscal 2017 was 27.4%, a 3.9% sequential decrease from the previous quarter of 31.3%, primary due to the full impact from the amortization of mask/IP costs associated with the production tape-out of our XCode 6800 chip which commenced during the second quarter, which offset a modest sequential improvement in product mix. The product margin for Q3 Fiscal 2017 was 35.5%. Gross margin declined 16.5% points from Q3 Fiscal 2016 gross margin of 43.9% due to sales mix from XConnex and higher amortization costs;

--IFRS comprehensive loss for Q3 Fiscal 2017 was $(3.1) million, or a loss of $0.05 per share basic and diluted. This is compared to a loss of $(2.7) million in the previous quarter, and a $0.1 million improvement from the $(3.2) million loss in Q3 Fiscal 2016;

--Non-IFRS net loss for the current quarter (as defined in the Non-IFRS Financial Measures section) totalled $(3.0) million, a $0.2 million decrease compared to the $(2.9) million loss in the previous quarter, and a modest decrease from the $(2.8) million loss in Q3 Fiscal 2016. $(2.8) million loss in the third quarter of fiscal 2016. This continued fluctuation in non-IFRS net loss from operations reflects a combination of higher revenue, cost controls, and efficiencies we have been implementing in our operations along with fluctuations in foreign currency exchange rates and the fair value adjustments to convertible debt; and

--As at October 31, 2016, the Company's cash and cash equivalents was $4.3 million.

Following the release of the results, management of the Company will host a conference call to discuss the financial results. The call will be hosted by Sohail Kahn, President & CEO and Charlie Glavin, CFO of ViXS.

Q3 FISCAL 2017 CONFERENCE CALL DETAILS:

DATE:December 14, 2016

TIME:5:00 P.M. EST

DIAL IN NUMBER:North American Toll: Free: 1-(866)-215-5508
 International: (514) 841-2157

 Passcode: 4389 7320#

REPLAY NUMBER: North American Toll: Free: 1-(888)-843-7419
 International: (630) 652-3042


 Passcode: 4389 7320#


WEBSITE: To view the press release or any additional financial
 information, please visit the Investor Relations
 section of the ViXS website at:
 http://investor.vixs.com/investor-relations/


SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected financial information derived from the Company's unaudited interim consolidated financial statements for the three months ended October 31, 2016 and July 31, 2016, as well as for the three months ended October 31, 2015. The selected financial information was prepared in accordance with IAS 34 in a manner consistent with the Company's annual financial statements. The following information should be read in conjunction with these statements and the accompanying notes.

Three-monthNine-month
 Period Ended Period Ended
October October October October
31,July 31, 31, 31, 31,
Dollar amounts in U.S.
 dollars 20162016201520162015
 ----------------------------- -------------------
Amounts in thousands,
 except loss per share

Revenue$8,268$7,875$5,138 $21,845 $21,074
Cost of sales 6,005 5,413 2,88415,34312,084
 ----------------------------- -------------------
Gross margin2,263 2,462 2,254 6,502 8,990
 ----------------------------- -------------------
Operating expenses
Research and development2,655 3,256 3,215 8,88310,017
Selling, general and
 administrative 2,093 1,947 1,970 6,078 6,478
 ----------------------------- -------------------
 Total operating expenses
 (1)4,748 5,203 5,18514,96116,495
 ----------------------------- -------------------
Loss before finance costs
 and income and currency
 gains (2,485) (2,741) (2,931) (8,459) (7,505)
 ----------------------------- -------------------
Other income (expenses):
Finance costs(371)153 (89) (372) (336)
Finance income- - 3 133
Currency gains (144)(28) (173)(31) (133)
 ----------------------------- -------------------
Total other income
 (expenses)(515)125(259) (402) (436)
 ----------------------------- -------------------
Loss before income taxes($3,000)($2,616)($3,190)($8,861)($7,941)
Income tax expense (9)-(4)(18)(18)
 ----------------------------- -------------------
Net loss for the period(3,009) (2,616) (3,194) (8,879) (7,959)
Other comprehensive income
 (loss)
Item subject to
 reclassification
Exchange difference on
 translating foreign
 operations(132)(60) 11(139) (7)
 ----------------------------- -------------------
Comprehensive loss for the
 period ($3,141)($2,676)($3,183)($9,018)($7,966)
 ============================= ===================
Loss per share attributed
 to common equity holders .
Basic($0.05) ($0.05) ($0.06) ($0.15) ($0.16)
Diluted($0.05) ($0.05) ($0.06) ($0.15) ($0.16)
Weighted average number of
 common shares outstanding
Basic61,25361,15150,37761,25450,377
Diluted61,25361,15150,37761,25450,377

(1) Includes share-based
 transaction expense
 (recovery) of:
Research and development$291492$300 125
Selling, general and
 administrative 15996 111 528 (48)
 ----------------------------- -------------------
 $188$110$203$828 $77
 ============================= ===================


BALANCE SHEET SUMMARY

As atAs atAs at
 October 31, July 31,October 31,
in thousands of US Dollars2016 2016 2015
--------------------------------------

Cash and cash equivalents $4,256 $2,182 $4,758
Trade accounts receivable2,1541,9363,408
Inventories2,6882,9283,339
Prepayments3,2692,4951,422
--------------------------------------
Total assets $23,230$21,061$24,386
--------------------------------------

Trade payables$3,187 $2,935 $2,644
Accrued liabilities1,7052,1403,224
Revolving bank loan payable5,7556,2854,800
Deferred revenues539345 14
Total liabilities 18,169 15,840 12,958
--------------------------------------
Total liabilities and shareholders'
 equity$23,230$21,061$24,386
======================================


NON-IFRS FINANCIAL MEASURES

In addition to disclosing results in accordance with IFRS as issued by the International Accounting Standards Board ("IASB"), the Company also provides supplementary non-IFRS financial measures as a method of evaluating the Company's performance. These non-IFRS measures are disclosed as a supplement to financial results prepared in accordance with IFRS in order to provide a further understanding of ViXS' results of operations from management's perspective. In particular, ViXS uses non-IFRS measures to provide investors with supplemental measures of its operating performance and highlight trends in its core business that may not otherwise be readily apparent solely from IFRS measures. ViXS management uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess ViXS' ability to meet its future capital expenditure and working capital requirements. ViXS believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers.

Non-IFRS net loss is defined as total comprehensive loss before share-based transaction expense, exchange difference related to translating foreign operations, unrealized currency gains/losses 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 convertible debt and provision for repayable government assistance. Non-IFRS net 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 loss from operations should not be considered in isolation or as a substitute for comprehensive loss prepared in accordance with IFRS.

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




Three MonthNine Month
 Period Ended Period Ended
October October October October
31,July 31, 31, 31, 31,
 20162016201520162015
 ----------------------------- -------------------
Comprehensive loss for the
 period ($3,141)($2,676)($3,183)($9,004)($7,967)
R&D adjustments
Stock-based compensation
 expense 291492 300 125
Provision for repayment
 of government
 assistance(157)(54)(47) 26(901)
Selling, general and
 administrative
Stock based compensation
 expense15996 111 528 (48)
Legal fee settlement-
Other Income/Expense
 adjustments
Listing Fees- - -15
Unrealized currency loss
 (gain)(133) 20 23335 104
Other adjustments
Fair value adjustment on
 convertible debt and
 warrant liability328(276)-98 -
Exchange differences on
 translating foreign
 operations(132)(60)(11) (125)7
 ----------------------------- -------------------
Non-IFRS net loss ($3,047)($2,936)($2,805)($8,127)($8,680)
 ----------------------------- -------------------


Non-IFRS EPS basic ($0.05) ($0.05) ($0.05) ($0.13) ($0.15)
Non-IFRS EPS Diluted ($0.05) ($0.05) ($0.05) ($0.13) ($0.15)


FORWARD LOOKING STATEMENTS

Certain statements in this press release which are not historical facts constitute forward-looking statements or information within the meaning of applicable securities laws ("forward-looking statements"). 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. Accordingly, there can be no assurance that forward-looking statements will prove to be accurate and readers are therefore cautioned not to place undue reliance upon any such forward-looking statements.

Factors that could cause results or events to differ materially from current expectations expressed or implied by forward looking statements contained herein include, but are not limited to: our history of losses and the risks associated with not achieving or sustaining profitability; the Company's dependence on a limited number of customers for a substantial portion of 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; competitive risks and pressures from further consoldiation amongst competitors, customers, and suppliers; market share risks and timing of revenue recognition associated with product transitions; risks associated with changing industry standards such as HEVC (High Efficiency Video Codec), HDR (High Dynamic Range) and Ultra HD resolution; risks related to intellectual property, including third party licensing or patent infringement claims; the loss of any of the Company's key personnel could seriously harm its business; risks associated with adverse economic conditions; delays in the launch of customer products; price re-negotiations by existing customers; the Company's dependence on a limited number of supply chain partners for the manufacture of its products, legal proceedings arising from the ordinary course of business; ability to raise needed capital; ongoing liquidity requirements;and other factors discussed in the "Risk Factors" section of the Company's Annual Information Form dated March 31, 2016, a copy of which is available under the Company's profile on SEDAR at www.sedar.com. All forward-looking statements are qualified in their entirety by this cautionary statement. ViXS is providing this information as of the current date and does not undertake any obligation to update any forward-looking statements contained herein as a result of new information, future events or otherwise except as may be required by applicable securities laws.

About ViXS Systems Inc.

ViXS is a pioneer and market leader in designing revolutionary media processing semiconductor solutions for video over IP streaming solutions, with over 482 patents issued and pending worldwide, numerous industry awards for innovation, and over 33 million media processor shipped 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 12 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™, the ViXS® logo, XCode®, XCodePro™, XConnex™ and Xtensiv™ 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: www.vixs.com.

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.

FOR FURTHER INFORMATION PLEASE CONTACT:

FOR FURTHER INFORMATION PLEASE CONTACT:

Charlie Glavin
ViXS Systems Inc.
T: +1 416 646-2000
cglavin@vixs.com

Nicole Marchand
Investor Relations
T: +1 416 646-2000 ext. 3
ir@vixs.com




Source: ViXS Systems Inc.