ViXS Reports Results for the Third Quarter of Fiscal 2014

TORONTO, Dec. 10, 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 third quarter of its fiscal 2014 ("Q3FY14"), ending October 31, 2013. All results are reported in U.S. dollars under International Financial Reporting Standards ("IFRS"), unless otherwise specified. ViXS reported Q3FY14 revenue of $7.9 million, gross margin of 47.5%, total comprehensive loss of $4.6 million, and non-IFRS net loss of $4.2 million.

Q3FY14 Financial Highlights:

  • Revenue of $7.9 million.
  • Repayment of last outstanding loans in August, and is now bank debt free.
  • Finished the quarter with over $33.6 million of cash and cash equivalents.
  • Continued geographic and product expansion with a broader diversification of customers: North America (6% of revenue YTD), Japan (16%), Europe (12%), China (16%) and Taiwan (43%).
  • Renegotiated its development agreement with Technology Partners Canada, lowering its royalty cap from $22.8M to $6.0M, and reduced ViXS' repayment obligation by $1.1M from F2Q13.
  • A year-over-year improvement of $1.3 million in non-IFRS net loss from Q3FY13.

Recent Business Highlights:

  • Surpassed 1 million shipments of MoCA chipsets in December, becoming the leading provider of MoCA 2.0-ready solutions.
  • New XCode6 product successfully completed tape-out and begun sampling, marking the eighth consecutive time ViXS has achieved a production ready chip on its first attempt. ViXS received its first firm orders for the XCode6.
  • Added $91 million of incremental business to its pipeline in the last quarter, expected to be monetized over the next four years.
  • Continued increase in design activity for joint HEVC (new H.265 standard) and UltraHD (4K) format solutions.
  • XCode™ 6403 selected by a tier-one Consumer Electronics company to power its flagship next-generation product due to full support for HEVC and Ultra HD 4K.
  • ViXS signed a new licensing agreement with Synopsys, to further advance its innovative designs;
  • New development agreement with a tier-1 customer in the pay-TV market, which involved non-recurring engineer (NRE) revenue in the quarter to accelerate design efforts.

Q3FY2014 Results:

Revenue for the third quarter of fiscal 2014 was $7.9 million, down 2% sequentially from the $8.1 million in the previous quarter. This lower revenue was primarily due to timing of revenue recognized from a new development contract with an existing customer and a Japanese customer reducing existing inventory before migrating to a new design using a ViXS chip. Revenue was down 14% from the $9.2 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 to more integrated next-generation SoC products, partially offset by ViXS' entry into the MoCA and cloud video infrastructure markets. Gross margin of 47.5% in Q3FY14 declined from the 52.7% level in Q2FY14 due to a higher mix of discrete MoCA products and cost variances in the period, partially offset by new contributions from development contracts and infrastructure sales. Product gross margin was 49.4% in the quarter.

Comprehensive loss for the third fiscal quarter was $4.6 million, or a loss of $(0.10) per share basic and diluted. This compared with second quarter comprehensive income of $7.1 million, or $0.30 per share basic and a per share loss of ($0.01) diluted.   The sequential increase in IFRS loss was primarily due to $7.6 million of convertible share revaluation adjustment and a $1.4 million positive impact from the reversal of the stock compensation expense in the second quarter, along with a $1.2 million in foreign currency loss and $3.1 million decrease in the provision for repayable government assistance (TPC) in the third quarter. A detailed explanation of these and other changes in operating expenses is described in the Company's filed MD&A.

Non-IFRS net loss for the third fiscal quarter was $4.2 million, or $(0.08) per share (basic and diluted), compared with a non-IFRS net loss of $1.4 million, or $(0.06) per share (basic and diluted), in the prior quarter and non-IFRS net loss of $5.5 million, or $(1.12) 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.

The total of cash and cash equivalents was $33.6 million as of October 31, 2013, compared to $47.3 million at the end of the previous quarter. The decrease was due to $5.0 million in operating loss and working capital needs plus several planned actions, including: paying off the reminder of its bank debt in August ($7.1 million); repayment of Technology Partners Canada obligations ($0.2 million); and the purchase of several new IP licenses necessary for new customer design engagements.

"ViXS has established a leadership position in MoCA 2.0 ready chipsets and SoC's that support the new HEVC and Ultra HD 4K standards, and we are continuing to build momentum with existing and new customers," said Sally Daub, President and CEO, ViXS.  "Even though we encountered some revenue timing challenges in this most recent quarter, it is more important to note that our backlog has increased to the highest levels in eight quarters and the long term prospects for sustainable and profitable growth are stronger than ever."

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     Nine Month Period Ended 
       October 31,  July 31,  October 31,     October 31,  October 31, 
      2013 2013 2012   2013 2012
                 
Revenue     $7.9 $8.1 $9.2   $24.0 $26.1
Comprehensive income (loss) for the period     ($4.6) $7.1 $23.3   ($22.3) $8.7
Income (loss) per share attributed to common equity holders                
  Basic     ($0.10) $0.30 $4.77   ($0.85) $1.78
  Diluted     ($0.10) ($0.01) ($0.23)   ($0.85) ($0.77)
Weighted average number of common shares outstanding                
  Basic     50,169 23,513 4,881   26,477 4,883
  Diluted     51,404 47,839 28,003   43,546 27,115
                 
Non-IFRS net loss     ($4.2) ($1.4) ($5.5)   ($9.4) ($19.4)
                 
Non-IFRS net loss  per share (basic and diluted)     ($0.08) ($0.06) ($1.12)   ($0.36) ($3.98)
Weighted average number of common shares outstanding (basic and diluted)     50,169 23,513 4,881   26,477 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, December 10, 2013, at 5:00 P.M. Eastern time / 2:00 P.M. Pacific time to discuss the Company's results for the third quarter of fiscal 2014.

  • Toll-free North America:  1 (888) 231-8191
  • Local Dial-in:  (647) 427-7450
  • Conference ID:   16584099

Webcast:   http://bit.ly/17A9oz0

A replay of the call will be accessible two hours after the call's completion by dialing (855) 859-2056 or (416) 849-0833 and entering conference ID 16584099, and will be available through midnight Eastern time, December 17, 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 pioneer in designing and developing high-performance semiconductor solutions for media processing equipment for the cloud, distribution network, and consumer homes.  With over 428 patents issued and pending worldwide, many industry awards for innovation, and a leader in advanced media processors with over 28 million shipments to date, ViXS has established a clear leadership position.

ViXS has a comprehensive portfolio of products to meet the diverse needs of the global media industry.  The XCODE line of system-on-chip (SoC) products enable device manufacturers to create set-tops and gateways that support advanced services while keeping costs and power consumption low.   ViXS MoCA 1.1 and 2.0 solutions, whether stand-alone or integrated into the XCODE SoC, create home networks capable of handling high-bandwidth video.  The latest addition to the portfolio is encoding, decoding and transcoding of High-Efficiency Video Coding (HEVC) streams, up to 10-bit main profile.  HEVC will reduce video bandwidth by 50%, allowing UltraHD 4k and 8k content to proliferate at a rapid pace.

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. Multimedia over Coax Alliance (MoCA) is an industry standard.

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    Nine Month Period Ended
(in thousands of U.S. dollars)  October 31,  July 31,  October 31,     October 31,   October 31, 
  2013 2013 2012   2013 2012
Comprehensive income (loss) for the period ($4,552) $7,116 $23,263   ($22,314) $8,670
R&D adjustments            
  Stock-based compensation expense 276 (663) 350   (326) 1,326
  Provision for repayment of government assistance 264 (2,012) (224)   (627) (1,318)
Selling, general and administrative            
  Stock based compensation expense 198 (722) 222   (450) 935
Other Income/Expense adjustments            
  Listing Fees (336) 2,432 -   2,406 -
  Share offering costs     509     509
  Fair value adjustment on warranty liability - - -   18,219 -
Other adjustments            
  Convertible preferred share revaluation - (7,550) (29,584)   (6,365) (29,584)
  Exchange differences on translating foreign operations (3) (6) 1   31 13
Non-IFRS net loss ($4,153) ($1,405) ($5,463)   ($9,426) ($19,449)

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 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     Nine Month Period Ended 
   October 31,  July 31,  October 31,     October 31,   October 31, 
Dollar  amounts in U.S. dollars 2013 2013 2012   2013 2012
Amounts in thousands             
             
Revenues $7,902 $8,059 $9,175   $23,985 $26,121
  Cost of sales 4,151 3,812 4,680   12,141 14,190
Gross margin   3,751   4,247   4,495     11,844   11,931
Operating expenses             
  Research and development 4,432 931 7,309   11,404 21,285
  Selling, general and administrative 4,238 1,042 3,249   7,847 10,799
Total operating expenses (1)   8,670   1,973   10,558     19,251   32,084
             
Income (loss) before finance costs and income, convertible
preferred share revaluation adjustment and income taxes
(4,919)   2,274 (6,063)   (7,407) (20,153)
Other income (expense):            
  Finance costs   290 (2,796) (245)   (21,341) (245)
  Share offering costs - - -   - (509)
  Finance income   58   93 -     151   30
 Convertible preferred share revaluation adjustment  -   7,550   29,584     6,365   29,584
Total other income (expense)   348   4,847   29,339   (14,825)   28,860
Net income (loss) before taxes ($4,571) $7,121 $23,276   ($22,232) $8,707
  Income tax expense   16 (11) (12)   (51) (24)
Net income (loss) for the period (4,555)   7,110   23,264   (22,283)   8,683
  Exchange difference on translating foreign operations   3   6 (1)   (31) (13)
Comprehensive income (loss) for the period ($4,552) $7,116 $23,263   ($22,314) $8,670
Income (loss) per share attributed to common equity holders            
  Basic ($0.10) $0.30 $4.77   ($0.85) $1.78
  Diluted ($0.10) ($0.01) ($0.23)   ($0.85) ($0.77)
Weighted average number of common shares outstanding            
  Basic 50,169 23,513 4,881   26,477 4,883
  Diluted 51,404 47,839 28,003   43,546 27,115

 

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

  As at October  31,   As at January 31,
Dollar  amounts in U.S. dollars 2013   2013
Amounts in thousands       
   
Assets  
Current assets      
Cash and cash equivalents  33,555   2,043
Trade accounts receivable  9,684   5,543
Other amounts receivable  1,595   3,872
Inventories  3,448   1,944
Prepayments  3,283   2,650
Total current assets  51,565   16,052
Non-current assets      
Property, plant and equipment  2,068   3,224
Intangible assets  334   51
Prepayments  1,485   2,193
Total non-current assets  3,887   5,468
Total assets  55,452   21,520
       
Liabilities and Equity   
Liabilities      
Current liabilities      
Revolving bank loan payable    5,672
Repayable government assistance  658   886
Trade and other payables  10,612   10,873
Deferred revenues  936   30
Subordinated loan    1,500
Current portion of term bank loan   1,600
Total current liabilities  12,206   20,561
Non-current liabilities      
Accrued non-current liabilities 39   40
Term bank  loan    2,400
Repayable government assistance  3,465   4,377
Preferred share liability    79,137
Total non-current liabilities  3,504   85,954
Total liabilities  15,710   106,515
Shareholder's Equity       
Issued capital  153,493   5,881
Contributed surplus  10,167   10,728
Cumulative translation adjustment   (4)   27
Deficit  (123,914)   (101,631)
Shareholder's Equity  (deficiency)  39,742   (84,995)
Total liabilities and shareholder's equity   55,452   21,520

 

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

  Three Month Period Ended   Nine Month Period Ended
  October 31,   October 31,
Dollar  amounts in U.S. dollars 2013   2012   2013   2012
Amounts in thousands               
               
Operating activities              
Net income (loss) for the period (4,552)   23,263   (22,314)   8,670
Items not affecting cash              
  Depreciation of property, plant and equipment 187   186   483   605
  Amortization of intangible assets 17   18   53   54
  Decrease (increase) in non-current prepayments -   93   65   (667)
  Adjustment to provision for repayable government assistance 264   1,094   (627)    
  Share-based payment transaction expense 474   572   (776)   2,261
  Finance costs (290)   245   21,341   754
  Finance income (58)   (1)   (151)   (31)
  Convertible preferred share revaluation adjustment (0)   (29,584)   (6,365)   (29,584)
Working capital adjustments: -   -        
  Decrease (increase) in trade and other receivables and current prepayments 704   (1,990)   (1,870)   4,661
  Decrease (increase) in inventories (1,543)   499   (1,504)   4,198
  Increase (decrease) in trade and other payables (1,025)   401   (246)   (3,617)
  Increase (decrease) in deferred revenues 830   -   892    
 Cash flows used in operating activities ($4,991)   ($5,204)   ($11,018)   ($12,696)
               
               
Investing activities              
  Interest received 58   1   151   31
  Additions (disposal) to property, plant and equipment 229   142   669   (246)
  Acquisition of intangible assets (351)       (351)    
Cash flows from (used in) investing activities ($64)   $143   $469   ($215)
               
               
Financing activities              
  Proceeds from exercise of share options  214   300   426   330
  Net proceeds from issue of share capital 1   1,783   50,946   10,783
  Proceeds from credit facility -   -   6,000    
  Repurchase and cancellation of common shares (1,600)   -   (1,600)   (50)
  Net draw (repayment) of bank borrowings (7,065)   1,687   (5,615)   (1,666)
  Proceeds from (repayment of) term bank loan -   -   (4,000)   4,000
  Increase in provision for repayable government assistance (353)   422   (577)   (209)
  Repayment of subordinated loan -   1,500   (1,500)   1,500
  Listing fees (0)   -   (1,398)    
  Interest paid 36   (245)   (719)   (620)
Cash flows from financing activities ($8,767)   $5,447   $41,963   $14,068
               
Net increase in cash and cash equivalents (13,822)   386   31,414   1,157
Effect of foreign exchange on cash balances 73   (77)   98   (175)
Cash and cash equivalents, beginning of period 47,304   1,694   2,043   1,021
Cash and cash equivalents, end of period $33,555   $2,003   $33,555   $2,003

SOURCE ViXS Systems Inc.

For further information:

Craig Armitage
TMX Equicom
carmitage@tmxequicom.com
T:  416-815-0700 ext. 278   

Rob Kelly
TMX Equicom
rkelly@tmxequicom.com
T:  416-815-0700 ex. 253