SOURCE: ViXS Systems Inc.

ViXS Systems Inc.

December 11, 2014 16:01 ET

ViXS Reports Third Quarter Fiscal 2015 Results

20% Q/Q and 48% Y/Y Revenue Growth; Product Margin Increases to 51%

TORONTO, ON--(Marketwired - December 11, 2014) - ViXS Systems Inc. (TSX: VXS) a pioneer and leader in media processing solutions, reported its third quarter fiscal 2015 results for the period ending October 31, 2014 today. All results are reported under International Financial Reporting Standards ("IFRS") and in U.S. dollars, unless otherwise specified. ViXS reported Q3FY15 revenue of $10.8 million, total comprehensive loss of $(2.9) million and non-IFRS net loss of $(2.2) million.

Q3FY15 Financial Summary

  • Revenue of $10.8 million, a 20% sequential increase quarter over quarter and 48% increase over the same quarter last year.
  • Gross margin of 48.4%, a 5.1% point sequential improvement quarter over quarter.
  • Product margin of 50.7%, a 3.3% point sequential improvement quarter over quarter.
  • IFRS Comprehensive loss of $(2.9) million, or $(0.06) per share, a 23% improvement on a loss of ($3.8) million or $(0.07) per share in the previous quarter.
  • Non-IFRS net loss of ($2.2) million, or $(0.04) per share, a 42% improvement on loss of $(3.8) million or $(0.07) per share in the previous quarter.
  • $16.6 million of cash and equivalents, with no outstanding bank debt at end of quarter.

Customer, Product and Corporate Announcements

  • Toshiba launched its new line of Ultra HD TVs powered by ViXS XCode 6400.
  • ViXS assisted Panasonic achieve Netflix streaming certification for Panasonic's AX800 Ultra HD TVs.
  • Using a ViXS SoC, Sling Media launched a "TV Anywhere" video streaming consumer product that is being deployed by pay television service providers.
  • ViXS launched Ethernet over Coax chipsets for video over IP streaming.
  • ViXS and Entropic settled all litigation and executed a cross-license patent agreement.
  • Sally Daub, President, CEO and co-founder, named as one of Canada's Top 100 Most Powerful Women and inducted into the WXN Hall of Fame.
  • Sally Daub appointed to the Board of the Consumer Electronics Association.

"ViXS delivered its second sequential quarter of double-digit revenue increase, reflecting strong demand for the XCode 6000 family and our overall product portfolio," said Sally Daub, President and CEO. "Accompanied by improving product margin and tight management of our operating expenses, this quarter is an impressive performance by our team."

Q3FY2015 Results:

Q3 revenue increased sequentially by 20% to $10.8 million compared to $9.0 million in the previous quarter and a 48% increase over the same quarter last year. This higher revenue is primarily due to increased shipments of the company's next generation products including strong sales of the XCode 6000. Gross margin as a percentage of revenue for the current quarter totalled 48.4%, which represents a 5.1% point increase from the previous quarter.

Product margin, which excludes the effects of amortization of mask-sets & IP (mainly from new products), support contracts and SDK's, was 50.7% for the current quarter, versus 47.4% in the previous quarter.

Total operating expenses decreased by $0.2 million over the previous quarter to $7.7 million. Research & development spending increased by $1 million from the lower than normal level in the previous quarter to $4.7 million. This increase is due to spending on next generation product development and a non cash related decrease in the provision for repayable government assistance relating to the Technology Partnerships Canada program. Selling, general and administrative expenses decreased by $1.2 million from the previous quarter to $3.1 million. This decrease is primarily due to $0.7 million in lower legal expenses related to the successful defense of the company's IP portfolio which was settled in the third quarter.

IFRS Comprehensive loss for the third quarter of fiscal 2015 was $(2.9) million, or a loss of ($0.06) per share basic and diluted. This represents a $0.9 million improvement from the loss in the second quarter of fiscal 2015 of $(3.8) million. 

Non-IFRS net loss for the current quarter (as defined in the Non-IFRS Financial Measures section of the press release and the Company's filings) totaled $(2.2) million, a $1.6 million improvement from the $(3.8) million loss in the previous quarter and $1.9 million improvement compared to the same period last year. The quarter-over-quarter decrease in non-IFRS net loss from operations reflects the impact of higher product sales and lower operating expenses as the company focuses on returning to profitability.

ViXS finished the quarter with total cash and cash equivalents of $16.6 million as of October 31, 2014.

For More Information

In conjunction with this announcement, ViXS management will be holding a conference call on Thursday, December 11, 2014, at 5:00 P.M. Eastern Time to discuss the Company's results for Q3 fiscal 2015.

FISCAL 3Q15 CONFERENCE CALL DETAILS:

DATE:
Thursday December 11, 2014

TIME:
5:00 P.M. EST  

DIAL IN NUMBER:
Local / International: 416-850-9144
North American Toll: Free: 1-866-400-3310 

REPLAY NUMBER:
Local / International: 416-915-1035
North American Toll: Free: 1-866-245-6755
Passcode: 834479 
  
WEBCAST:
http://public.viavid.com/index.php?id=112032
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: http://investor.vixs.com/investor-relations/

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information derived from the Company's unaudited condensed consolidated interim financial statements for the three and nine month periods ended October 31, 2014. The selected financial information was prepared in accordance with IFRS 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-month Period Ended    Nine-month Period Ended  
  October 31,  July 31,  October 31,    October 31,  October 31,  
Dollar amounts in U.S. dollars 2014  2014  2013    2014  2013  
Amounts in thousands                  
                   
Revenue $10,757  $8,989  $7,294    $27,187  $23,377  
 Cost of sales 5,552  5,095  4,017    14,952  12,007  
Gross margin 5,205  3,894  3,277    12,235  11,370  
Operating expenses                  
 Research and development 4,669  3,655  4,572    12,579  12,632  
 Selling, general and administrative 3,077  4,255  3,550    11,578  8,698  
Total operating expenses (1) 7,746  7,910  8,122    24,157  21,330  
Loss before finance costs and income, currency gain, convertible preferred share revaluation adjustment and income taxes (2,541 )(4,016 )(4,845 )  (11,922 )(9,960 )
Other income (expense):                  
 Finance costs (33 )(37 )290    (90 )(21,341 )
 Finance income 19  22  58    65  151  
 Currency gains/(losses) (302 )236  (683 )  225  (128 )
 Convertible preferred share revaluation adjustment -  -  -    -  6,365  
Total other income (expense) (316 )221  (335 )  200  (14,953 )
Loss before taxes ($2,857 )($3,795 )($5,180 )  ($11,722 )($24,913 )
 Income tax recovery (expense) (22 )8  16    (27 )(51 )
Loss for the period (2,879 )(3,787 )(5,164 )  (11,749 )(24,964 )
                   
 Exchange difference on translating foreign operations (27 )12  3    (45 )(31 )
Comprehensive loss for the period ($2,906 )($3,775 )($5,161 )  ($11,794 )($24,995 )
Loss per share attributed to common equity holders                  
 Basic ($0.06 )($0.07 )($0.10 )  ($0.23 )($0.94 )
 Diluted ($0.06 )($0.07 )($0.10 )  ($0.23 )($0.94 )
Weighted average number of common shares outstanding                  
 Basic 50,375  51,890  50,169    50,368  26,477  
 Diluted 50,375  51,890  50,169    50,368  26,477  
                   
(1) Includes share-based transaction expense of:                  
Research and development 251  106  277    702  763  
Selling, general and administrative 156  460  197    815  534  
  $407  $566  $474    $1,517  $1,297  
 
 
CONSOLIDATED BALANCE SHEET DATA
          
                   
Thousands of USD   As at October 31,   As at July 31,   As at April 30,   As at January 31,  
    2014   2014   2014   2014  
                   
Cash and cash equivalents   16,607   19,826   19,667   25,588  
Trade accounts receivable   5,597   6,146   7,045   6,959  
Inventories   3,392   4,004   3,321   5,293  
Total assets   37,661   41,254   40,706   47,359  
                   
Trade and other payables   11,684   12,979   8,896   11,018  
Total liabilities   15,201   16,538   12,782   15,048  
Total liabilities and shareholders' equity   37,661   41,254   40,706   47,359  
          

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 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  Nine Month Period Ended 
(in thousands of U.S. dollars)October 31, July 31, October 31,  October 31, October 31, 
 2014 2014 2013  2014 2013 
Comprehensive (loss) for the period($2,906)($3,775)($5,161) ($11,794)($24,995)
R&D adjustments           
 Stock-based compensation expense251 106 277  702 763 
 Provision for repayment of government assistance(14)(294)264  (419)(627)
Selling, general and administrative           
 Stock based compensation expense156 460 197  815 534 
Other Income/Expense adjustments           
 Listing Fees- - (336) - 2,396 
 Accreted interest on provision for repayment of government assistance  - -  - 18,219 
 Unrealized currency gain (loss)304 (264)648  (255)99 
Other adjustments           
 Convertible preferred share revaluation- - -  - (6,365)
 Exchange differences on translating foreign operations27 (12)(3) 45 31 
Non-IFRS net loss($2,182)($3,779)($4,114) ($10,906)($9,945)
            

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.

Factors that could cause results or events to differ materially from current expectations express or implied by forward looking statements continued 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), 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 ViXS Systems Inc.'s Annual Information Form dated May 7, 2014, a copy of which is available on SEDAR at www.sedar.com. All forward-looking statements are qualified in their entirety by this cautionary statement, except as may be required by applicable securities laws. 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.

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 467 patents issued and pending worldwide, numerous industry awards for innovation, and over 31 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™, 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.

Contact Information

  • For further information, please contact:

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

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