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ViXS Reports Third Quarter 2016 Results

TORONTO, ON--(Marketwired - December 09, 2015) - ViXS Systems Inc. ("ViXS" or the "Company") (TSX: VXS) a pioneer and leader in media processing solutions, reported its third quarter results for the quarter ended October 31, 2015 using International Financial Reporting Standards ("IFRS") and in U.S. dollars, unless otherwise specified. ViXS reported Q3FY16 revenue of $5.1 million, total comprehensive loss of $(3.2) million and non-IFRS net loss of $(2.8) million.Q3FY16 Highlights Revenue of $5.1 million, down from $6.0 million in the prior quarter, and down from $10.8 million in the comparable quarter last yearGross margin of 43.9%, an increase from the prior quarter's level of 34.3%, but down from 48.4% in the same quarter last year.IFRS Comprehensive loss of $(3.2) million, compared to a loss of $(3.0) million in the prior quarter, and a loss of $(2.9) million in the same quarter last year. Non-IFRS net loss of $(2.8) million, which was an improvement from a loss of $(3.6) million in the prior quarter, but a $0.6 million increase from a loss of $(2.2) million in the comparable quarter last year.$4.5 million of cash and equivalents, including $4.8 million of drawn bank debt.

Appointed semiconductor industry veteran Sohail Khan as President and Chief Executive Officer.During the quarter, the Company completed an independent third party valuation of its portfolio of 510 patents and applications. This independent valuation was completed by Black Stone IP, LLC ("BSIP"), where BSIP estimated a range of value between $43 Million and $109 Million USD for the VIXS portfolio.Strategic ActionsViXS has initiated a review to identify and examine strategic actions with the purpose of addressing near term liquidity concerns and enhancing shareholder value. The Company has continued support from its commercial bank lender, Comerica and is working with Comerica to increase credit access to assist ViXS' working capital needs through an amendment and other potential credit extensions to the Company's existing credit facility.

The Company believes that these initiatives, along with revenue growth and cost controls will provide sufficient liquidity, while providing time to enable additional steps that are expected to further enhance shareholder returns. The Company has not set a timetable for completion of these initiatives, but is actively pursuing them and will make further disclosures as appropriate or required by law. "As a company we have refocused our efforts to stabilize revenue and engage with both existing and new economy customers in the changing video delivery ecosystems. We are focused on creating video platforms which enable our customers to get to market in a short time period," stated Sohail Khan, President & CEO. "In addition, with the full support of the Board and Senior Management, we are in the midst of a strategic review, including focusing our resources on our core business and the potential sale of certain non-core assets, with the goal of enhancing shareholder value."Q3 FY2016 ResultsRevenues for the third quarter of fiscal 2016 totalled $5.1 million, sequentially lower than $6.0 million recognized in the second quarter of fiscal 2016.

This decrease was primarily due to lower volumes and decreased pricing of MoCA (Multimedia over Coax Alliance) based products, partially offset by higher sales of new XCode5 products and a seasonal uptick in legacy XCode3 and XCode4 products. Revenues decreased by $5.7 million from the same quarter last year, mainly due to lower XCode 6400 sales as first generation Ultra HD TV companion designs came to an end, plus lower MoCA based product sales. These declines were partially offset by increased sales of our XCode5 and XCodePro products, as well as higher NRE contributions.Gross margin for the third quarter of fiscal 2016 was 43.9%, a 9.6% point increase from the previous quarter's level of 34.3% and a 4.5% point decrease from the third quarter of fiscal 2015.

This sequential increase in margin was primarily due to higher volumes of XCodePro products sold in the cloud infrastructure market during the quarter. The decrease in margin from the third quarter of fiscal 2015 was primarily due to lower volumes of the higher margin XCode6400 products being sold plus weaker MoCA pricing. Excluding the effects of amortization, support contracts, Software Development Kits (SDKs), non-recurring inventory adjustments, the product margin in the third quarter of fiscal 2016 was 49.8%. Total operating expenses for the third quarter of fiscal 2016 were $5.2 million compared to $4.6 million in the prior quarter. Research & Development (R&D) spending increased to $3.2 million compared to $2.7 million in the previous quarter, due primarily to higher CAD software tool usage as well as additional R&D consulting costs in the third quarter. Selling, general and administrative expenses for the third quarter increased slightly to $2.0 million compared to $1.9 million in the prior quarter.IFRS comprehensive loss for the third quarter of fiscal 2016 was $(3.2) million, or a loss of $(0.06) per share basic and diluted. This is compared to a loss of $(3.0) million in the previous quarter, and a $0.3 million increase from the $(2.9) million loss in the third quarter of fiscal 2015. Non-IFRS net loss for the current quarter (as defined in the Non-IFRS Financial Measures section) totalled $(2.8) million, a $0.8 improvement compared to the $(3.6) million loss in the previous quarter but a $0.6 million increase from the $(2.2) million loss in the third quarter of fiscal 2015.

The Non-IFRS loss for the fiscal year to date 2016 was $(8.7) million compared to $(10.9) million in the same period last year. This year-over-year improvement in non-IFRS net loss from operations is a result of cost efficiencies and controls we continue to implement in our operations and fluctuations in foreign exchange rates.As at October 31, 2015, the Company's cash and cash equivalents was $4.5 million with $4.8 million of drawn bank debt. This decrease in cash was primarily due to lower than expected revenue levels in the quarter, certain working capital cash outlays in support of our continued operations and product development.For More InformationIn conjunction with this announcement, ViXS management will be holding a conference call on Wednesday December 9, 2015 at 5:00 P.M. Eastern Time to discuss the Company's results for Q3 fiscal 2016.FISCAL 3Q16 CONFERENCE CALL DETAILS:

DATE:               Wednesday December 9, 2015                              
TIME:               5:00 P.M. EST                                           
DIAL IN NUMBER:     North American Toll: Free: 1-(866)-215-5508             
                    International: (514) 841-2157                           
                    Passcode: 4120 9884#                                    
REPLAY NUMBER:      North American Toll: Free: 1-(888)-843-7419             
                    International:(630) 652-3042                            
                    Passcode: 4120 9884#                                    
WEBSITE:            To view the press release or any additional financial   
                    information, please visit the Investor Relations section
                    of the ViXS website at:                                 


The following table sets forth selected financial information derived from the Company's unaudited interim condensed consolidated financial statements for the three and nine months ended October 31, 2015, July 31, 2015 and October 31, 2014. 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.

                                                          Nine-month Period 
                             Three-month Period Ended           Ended       
                            October             October   October   October 
                              31,    July 31,     31,       31,       31,   
Dollar amounts in U.S.                                                      
 dollars                     2015      2015      2014      2015      2014   
Amounts in thousands,                                                       
 except loss per share                                                      
Revenue                      $5,138    $5,974   $10,757   $21,074   $27,187 
  Cost of sales               2,884     3,927     5,552    12,084    14,952 
                          ------------------------------ -------------------
Gross margin                  2,254     2,047     5,205     8,990    12,235 
                          ------------------------------ -------------------
Operating expenses                                                          
  Research and development    3,215     2,698     4,669    10,017    12,579 
  Selling, general and                                                      
   administrative             1,970     1,923     3,077     6,478    11,578 
                          ------------------------------ -------------------
Total operating expenses                                                    
 (1)                          5,185     4,621     7,746    16,495    24,157 
                          ------------------------------ -------------------
Loss before finance costs                                                   
 and income, currency                                                       
 gains                       (2,931)   (2,574)   (2,541)   (7,505)  (11,922)
                          ------------------------------ -------------------
Other income (expense):                                                     
  Finance costs                 (89)     (155)      (33)     (336)      (90)
  Finance income                  3         8        19        33        65 
  Currency gains (losses)      (173)     (274)     (302)     (133)      225 
                          ------------------------------ -------------------
Total other income                                                          
 (expense)                     (259)     (421)     (316)     (436)      200 
                          ------------------------------ -------------------
Loss before taxes           ($3,190)  ($2,995)  ($2,857)  ($7,941) ($11,722)
  Income tax expense             (4)       (5)      (22)      (18)      (27)
                          ------------------------------ -------------------
Net loss for the period      (3,194)   (3,000)   (2,879)   (7,959)  (11,749)
Other comprehensive income                                                  
Item subject to                                                             
  Exchange difference on                                                    
   translating foreign                                                      
   operations                    11       (13)      (27)       (7)      (45)
                          ------------------------------ -------------------
Comprehensive loss for the                                                  
 period                     ($3,183)  ($3,013)  ($2,906)  ($7,966) ($11,794)
                          ============================== ===================
Loss per share attributed                                                   
 to common equity holders                                                   
  Basic                      ($0.06)   ($0.06)   ($0.06)   ($0.16)   ($0.23)
  Diluted                    ($0.06)   ($0.06)   ($0.06)   ($0.16)   ($0.23)
Weighted average number of                                                  
 common shares outstanding                                                  
  Basic                      50,377    50,377    50,375    50,377    50,368 
  Diluted                    50,377    50,377    50,375    50,377    50,368 
(1) Includes share-based                                                    
 transaction expense of:                                                    
Research and development         92      (130)      251       125       702 
Selling, general and                                                        
 administrative                 111        55       156       (48)      815 
                          ------------------------------ -------------------
                               $203      ($75)     $407       $77    $1,517 
                          ============================== ===================


Thousands of US Dollars                                                     
                         As at October 31, As at July 31,  As at January 31,
                               2015             2015             2015       
Cash and cash                                                               
 equivalents (1)         $           4,758$           6,582$          15,289
Trade accounts                                                              
 receivable                          3,408            2,853            4,104
Inventories                          3,339            4,281            2,868
Non-Current Assets (2)              10,770            8,289            9,615
Total assets             $          24,386$          26,242$          35,844
Trade payables                       2,644            3,932$           6,465
Accrued liabilities                  3,224            3,013            6,656
Revolving bank loan                                                         
 payable                             4,800            2,500                0
Deferred revenues                       14               72              168
Total liabilities                   12,958           11,833           16,525
Total liabilities and                                                       
 shareholders' equity    $          24,386$          26,242$          35,844


In addition to disclosing results in accordance with IFRS as issued by the International Accounting Standards Board, 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, 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 and 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:

                                                          Nine Month Period 
                             Three Month Period Ended           Ended       
                            October             October   October   October 
                              31,    July 31,     31,       31,       31,   
                             2015      2015      2014      2015      2014   
Comprehensive loss for the                                                  
 period                     ($3,183)  ($3,013)  ($2,906)  ($7,967) ($11,794)
R&D adjustments                                                             
 Stock-based compensation                                                   
  expense                        92      (130)      251       125       702 
 Provision for repayment                                                    
  of government assistance      (47)     (854)      (14)     (901)     (419)
Selling, general and                                                        
 administrative                                                           - 
 Stock based compensation                                                   
  expense                       111        55       156       (48)      815 
Other Income/Expense                                                        
 adjustments                                                              - 
 Unrealized currency loss                                                   
  (gain)                        233       290       304       104      (255)
Other adjustments                                                         - 
 Exchange differences on                                                    
  translating foreign                                                       
  operations                    (11)       13        27         7        45 
                          ------------------------------ -------------------
Non-IFRS net loss           ($2,805)  ($3,639)  ($2,182)  ($8,680) ($10,906)
                          ============================== ===================
Non-IFRS EPS basic           ($0.06)   ($0.07)   ($0.04)   ($0.15)   ($0.17)
Non-IFRS EPS Diluted         ($0.06)   ($0.07)   ($0.04)   ($0.15)   ($0.17)


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 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 consolidation 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 ability of the Company to monetize its patent portfolio, and the market conditions for such monetization initiatives; 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; ability to raise need capital; ongoing liquidity requirements; and other factors discussed in the "Risk Factors" section of the Company's Annual Information Form dated May 7, 2015, 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 510 patents issued and pending worldwide, numerous industry awards for innovation, and over 33 million media processors 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.

For further information, please contact:

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

Email Contact 

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

Email Contact