ViXS Reports Results for the Second Quarter of Fiscal 2014

TORONTO, Sept. 11, 2013 /CNW/ - ViXS Systems Inc., (TSX:  VXS), a leader in semiconductor System on Chip (SoC) solutions for the advanced consumer electronics multimedia and broadcasting market, today announced results for the second quarter of its fiscal 2014 ("Q2FY14"), ending July 31, 2013. All results are reported in U.S. dollars under International Financial Reporting Standards ("IFRS"), unless otherwise specified. ViXS reported Q2FY14 revenue of $8.1 million, gross margin of 52.7%, total comprehensive income of $7.1 million, and non-IFRS net loss of $1.1 million.

Q2FY14 Financial Highlights:

• Revenue of $8.1 million, up sequentially from $8.0 million in prior quarter
• ViXS has a strong balance sheet with $47.3 million of cash and cash equivalents
• Geographic expansion continued with a broader diversification of customers in North America (14% of revenue), China (19%) and Taiwan (30%)
• Gross margin improved from 47.9% in Q1FY14 to 52.7% in Q2FY14 due to in part to a better mix of higher-featured, higher-margin products plus favourable cost variances
• A sequential improvement of $2.4 million, in non-IFRS net loss from operations during Q2FY14
• ViXS completed its Going Public process on July 12, 2013 via its Amalgamation Agreement with W-7 Acquisition Corp., and began trading under the "VXS" ticker symbol.

Recent Business Highlights:

• Announcement of ViXS' new XCode6 product line on September 11, 2013, with expected revenue slated to ramp next year.
• Appointment of veteran broadcast executive, Andrew Olson of BSkyB to the Company's Board of Directors.
• Appointment of seasoned industry and investment executive, Charlie Glavin as Chief Financial Officer of ViXS.
• Significant multi-year design win with tier-1 player in the pay TV space to design and deliver custom solutions for protecting premium content.
• Mainstream ARRIS Media Streamer 4000 (MS4000) selects ViXS XCode 5190 SoC for broad promotion/adoption planned for TV Anywhere application starting in Q1, 2014.
• Selection of ViXS' XCode 4210 by Sony for Sony's newly launched Personal Content Station (PCS) LLCS-201 consumer media device.
• Achieved Multimedia over Coax "MoCA" 1.1 certification for our XConnex chipset solution.

Q2FY2014 Results:

Revenue for the second quarter of fiscal 2014 was $8.1 million, up sequentially from the $8.0 million in the previous quarter. Revenue was down 5% from the $8.5 million in the same quarter of last year reflecting the company's ongoing diversification strategy as well as the market transition from legacy solutions to new product categories including the MoCA transcoding and video infrastructure markets.

Comprehensive income for the second fiscal quarter was $7.1 million, or $0.30 per share basic, $(0.01) per share diluted. Comprehensive income included the impact of $2.7 million in one-time expenses related to ViXS Going Public Financing. 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.

Non-IFRS net loss for the second fiscal quarter was $1.1 million, or $(0.05) per share (basic and diluted), compared with a non-IFRS net loss of $3.5 million, or $(0.71) per share (basic and diluted), in the prior quarter and non-IFRS net loss of $6.4 million, or $(1.31) per share (basic and diluted), in the same quarter last year.

The total of cash and cash equivalents was $47.3 million as of July 31, 2013, compared to $2.0 million at the end of the previous quarter. The large increase was due to the net proceeds ($50.9M) received from ViXS' Going Public Financing.  During the second quarter, ViXS used $5.5 million of these proceeds to pay down both current and long-term debt balances.

"Operating results for our second fiscal quarter, our first since listing on the TSX in July, showed solid margin growth as we continue to diversify our customer geography base and increase revenue contribution from our infrastructure and networking products," said Sally Daub, President and CEO, ViXS.  "We also recently announced our new XCode6 line of system-on-chip solutions, demonstrating our innovation leadership by integrating support for 10-bit HEVC and UltraHD and positioning ViXS well for long-term growth and greater operating leverage."

The following table summarizes ViXS' results in the categories and for the periods specified below (in millions of U.S. dollars, except per share data):

		Three Month Period Ended				Six Month Period Ended
		July 31,	April 30,	July 31,		July 31,	July 31,
		2013	2013	2012		2013	2012
Revenue		$8.1	$8.0	$8.5		$16.1	$16.9
Comprehensive income (loss) for the period		$7.1	($24.9)	($6.4)		($17.8)	($14.6)
Income (loss) per share attributed to common equity holders
Basic		$0.3	($5.0)	($1.3)		($1.2)	($3.0)
Diluted		($0.0)	($5.0)	($1.3)		($1.2)	($3.0)
Weighted average number of common shares outstanding
Basic		23,513	4,960	4,883		14,384	4,883
Diluted		47,839	4,960	4,883		14,384	4,883
Non-IFRS net loss		($1.1)	($3.5)	($6.4)		($4.6)	($13.6)
Non-IFRS net loss  per share (basic and diluted)		($0.0)	($0.7)	($1.3)		($0.3)	($2.8)
Weighted average number of common shares outstanding (basic and diluted)		23,513	4,960	4,883		14,384	4,883

Non-IFRS net income (loss) from operations and non-IFRS net income (loss) per share (basic and diluted) are non-IFRS financial measures provided as a complement to financial results prepared in accordance with IFRS.  Please refer to "Non-IFRS Financial Measures" below for a reconciliation of such measures to total comprehensive income (loss) and earnings (loss) per share (basic and diluted) determined in accordance with IFRS.

For More Information

In conjunction with this announcement, ViXS management will be holding a conference call on Wednesday, September 11, 2013, at 5:00 P.M. Eastern time / 2:00 P.M. Pacific time to discuss the Company's results for the second quarter of fiscal 2014.

• Toll-free North America:  1 [phone]
• Local Dial-in:  [phone]
• Conference ID:   42077816

Webcast:   http://bit.ly/18kprgO

A replay of the call will be accessible two hours after the call's completion by dialing [phone] or [phone] and entering conference ID 42077816, and will be available through midnight Eastern time, September 18, 2013. The webcast will be archived and available for 90 days, To view the press release or any additional financial information, please visit the Investor Relations section of the ViXS website at: http://www.vixs.com/investorrelations.

About ViXS Systems Inc.


ViXS is the semiconductor pioneer in designing and developing high-performance media solutions for the consumer electronics and video service provider industries.  With 422 patents issued and pending worldwide, ViXS has been recognized with a number of industry awards for innovation.  ViXS is the world leader in transcoder SoC deployments with over 27 million shipments to date, and still growing.

ViXS has a comprehensive portfolio of products to meet the diverse needs of the global media industry.  Portfolio highlights include the most advanced dense transcoder available for cloud-based solutions, as well as SoCs for home devices capable of doing the most simultaneous number of HD streams in the industry.  Moreover, ViXS is the only company to have integrated transcoding and Multimedia over Coax Alliance (MoCA) technologies to create the lowest-cost media gateway capable of delivering premium content to consumer IP devices, such as the iPad, inside and outside of the home.

ViXS has three primary product lines: XCode, XCodePro and XConnex.  The XCode family of media processors range from stand-alone transcoding chips to full SoC solutions, each capable of handling from one to four simultaneous HD-to-HD transcodes.  XCodePro products address the professional enterprise market and are being deployed today for cloud-based media streaming services.  The XConnex product line is for communications devices, including MoCA 1.1 and 2.0 solutions.  Additionally, ViXS customers are provided with a robust software development kit named Xtensiv.

ViXS is headquartered in Toronto, Canada with global operations and offices in Europe, Asia and North America.  For more information on ViXS, visit our website: www.vixs.com.

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.

Non-IFRS Financial Measures

This press release makes reference to non-IFRS net income (loss) and non-IFRS net income (loss) per share (basic and diluted), which are non-IFRS measures. These non-IFRS measures are disclosed as a complement 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 apparent solely from IFRS financial 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 stock-based compensation expense, finance costs, share offering costs expensed, listing fees, finance income, convertible preferred share revaluation adjustment, fair value adjustment on warrant liability, provision for repayable government assistance, income tax expense and exchange difference related to translating foreign operations. Non-IFRS net income and non-IFRS net income per share (basic and diluted) do not have any standardized meanings prescribed by IFRS and may not be comparable to similar measures presented by other companies.  Non-IFRS net income and non-IFRS net income per share (basic and diluted) should not be considered in isolation or as a substitute for total comprehensive income (loss) and earnings (loss) per share (basic and diluted) prepared in accordance with IFRS.

The following table reconciles total comprehensive income (loss) to non-IFRS net income (loss), which management believes is the most directly comparable IFRS measure, for the periods shown:

					Three Month Period Ended				Six Month Period Ended
(in thousands of U.S. dollars)					July 31,	April 30,	July 31,		July 31,	July 31,
					2013	2013	2012		2013	2012
Comprehensive income (loss) for the period					$7,116	($24,869)	($6,361)		($17,762)	($14,593)
R&D adjustments
	Stock-based compensation expense				(663)	61	461		(602)	976
	Provision for repayment of government assistance				(2,012)	1,121	(1,094)		(891)	(1,094)
Selling, general and administrative
	Stock based compensation expense				(722)	74	420		(648)	607
	Listing Fees				2,432	300	-		2,742	-
Other Income/Expense adjustments
	Finance costs				364	316	182		670	509
	Finance Income				(93)	-	(30)		(93)	(30)
	Fair value adjustment on warranty liability				-	18,219	-		18,219	-
	Adjustment to Taxes				11	56	(2)		67	12
Other adjustments
	Convertible preferred share revaluation				(7,550)	1,184	-		(6,365)	-
	Exchange differences on translating foreign operations				(6)	33	15		34	12
Non-IFRS net loss					($1,123)	($3,505)	($6,409)		($4,629)	($13,601)

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 arsing 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 standads 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 W7's Information Circular, 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.  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.
Interim Consolidated Statements of Comprehensive Income
(in thousands of U.S. dollars)
(unaudited)

			Three Month Period Ended					Six Month Period Ended
			July 31,		April	July 31,		July 31,	July 31,
			2013		2013	2012		2013	2012
Revenues			$8,059		$8,024	$8,483		$16,083	$16,946
Cost of sales			3,812		4,177	4,790		7,990	9,510
Gross margin			4,247		3,847	3,693		8,093	7,436
Operating expenses
Research and development			931		6,041	6,292		6,972	13,976
Selling, general and administrative			1,042		2,567	3,627		3,609	7,550
Total operating expenses			1,973		8,608	9,919		10,581	21,526
Income (loss) before finance costs and income, convertible preferred share revaluation adjustment and income taxes			2,274		(4,761)	(6,226)		(2,488)	(14,090)
Other income (expense):
Finance costs			(2,796)		(18,835)	-		(21,631)	-
Share offering costs			-		-	(182)		-	(509)
Finance income			93		-	30		93	30
Convertible preferred share revaluation adjustment			7,550		(1,184)	-		6,365	-
Total other income (expense)			4,847		(20,019)	(152)		(15,173)	(479)
Net Income (loss) before taxes			$7,121		($24,780)	($6,378)		($17,661)	($14,569)
Income tax expense			(11)		(56)	2		(67)	(12)
Net income (loss) for the period			7,110		(24,836)	(6,376)		(17,728)	(14,581)
Exchange difference on translating foreign operations			6		(33)	15		(34)	(12)
Comprehensive income (loss) for the period			$7,116		($24,869)	($6,361)		($17,762)	($14,593)
Income (loss) per share attributed to common equity holders
Basic			$0.30		($5.01)	($1.31)		($1.23)	($2.99)
Diluted			($0.01)		($5.01)	($1.31)		($1.23)	($2.99)
Weighted average number of common shares outstanding
Basic			23,513		4,960	4,883		14,384	4,883
Diluted			47,839		4,960	4,883		14,384	4,883

ViXS Systems Inc.
Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
(unaudited)

									July 31,		January 31,
									2013		2013
Assets
Current assets
Cash and cash equivalents									47,304		2,043
Trade accounts receivable									7,781		5,543
Other amounts receivable									4,613		3,872
Inventories									1,905		1,944
Prepayments									2,169		2,650
Total current assets									63,772		16,052
Non-current assets
Property, plant and equipment									2,483		3,224
Intangible assets									17		51
Prepayments									2,188		2,193
Total non-current assets									4,688		5,468
Total assets									68,460		21,520
Liabilities and Equity
Liabilities
Current liabilities
Revolving bank loan payable									7,122		5,672
Repayable government assistance									870		886
Trade and other payables									11,662		10,873
Deferred revenues									92		30
Subordinated loan									-		1,500
Convertible debt and warrant liability									-		-
Current portion of long-term debt									-		1,600
Total current liabilities									19,746		20,561
Non-current liabilities
Accrued non-current liabilities									39		40
Term bank  loan									-		2,400
Repayable government assistance									3,284		4,377
Preferred share liability									-		79,137
Total non-current liabilities									3,323		85,954
Total liabilities									23,069		106,515
Equity
Issued capital									155,447		5,881
Share-based payment transactions reserve									9,310		10,728
Cumulative translation adjustment									(7)		27
Deficit									(119,359)		(101,631)
Equity (deficiency)									45,391		(84,995)
Total liabilities and equity									68,460		21,520

ViXS Systems Inc.
Interim Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
(unaudited)

				Three Months Ended				Six Months Ended
				July 31,				July 31,
				2013		2012		2013		2012
Operating activities
Net income (loss) for the period				7,110		(6,375)		(17,728)		(14,581)
Items not affecting cash
Depreciation of property, plant and Equipments				117		209		296		419
Amortization of intangible assets				18		25		36		36
Decrease (increase) in non-current prepayments				63		(75)		65		(760)
Adjustment to provision for repayable government assistance				(2,012)		(1,094)		(891)		(1,094)
Share-based payment transaction expense				(1,385)		881		(1,250)		1,688
Finance costs				2,871		181		21,631		508
Finance income				(93)		(30)		(93)		(30)
Convertible preferred share revaluation adjustment				(7,549)		-		(6,365)		-
Working capital adjustments:				-		-
Decrease (increase) in trade and other receivables and current prepayments				(1,629)		1,799		(2,574)		6,651
Decrease (increase) in inventories				270		2,154		39		3,699
Increase (decrease) in trade and other payables				1,339		(4,458)		779		(4,018)
Increase (decrease) in deferred revenues				(49)		(367)		62		-
Cash flows used in operating activities				($929)		($7,150)		($5,993)		($7,482)
Investing activities
Interest received				93		30		93		30
Additions (disposal) to property, plant and equipment				232		(311)		440		(388)
Cash flows from (used in) investing activities				$325		($281)		$533		($358)
Financing activities
Proceeds from exercise of share options				184		30		212		30
Net proceeds from issue of share capital				44,945		9,000		50,945		9,000
Proceeds from credit facility				6,000		-		6,000		-
Repurchase and cancellation of common shares				-		(50)		-		(50)
Net draw (repayment) of bank borrowings				1,850		(3,853)		1,450		(3,353)
Proceeds from (repayment of) term bank loan				(4,000)		4,000		(4,000)		4,000
Increase in provision for repayable government assistance				(117)		(298)		(224)		(631)
Repayment of subordinated loan				(1,500)		-		(1,500)		-
Listing fees				(1,098)		-		(1,398)		-
Interest paid				(439)		(183)		(755)		(375)
Cash flows from financing activities				$45,825		$8,646		$50,730		$8,621
Net increase in cash and cash equivalents				45,221		1,215		45,270		781
Effect of foreign exchange on cash balances				13		(109)		(9)		(109)
Cash and cash equivalents, beginning of period				-		2,042		2,043		1,021
Cash and cash equivalents, end of period				$45,234		$3,148		$47,304		$1,693

 

SOURCE: ViXS Systems Inc.

Craig Armitage
TMX Equicom
[email protected]
T:  416-815-0700 ext. 278   

Rob Kelly
TMX Equicom
 [email protected]
T:  416-815-0700 ex. 253