TORONTO, ON–(Marketwired – June 07, 2017) – ViXS Systems Inc. (TSX: VXS), a pioneer and leader in advanced media processing solutions, reported today its first quarter fiscal 2018 results for the period ending April 30, 2017. All results are reported under International Financial Reporting Standards (“IFRS”) and in U.S. dollars, unless otherwise specified.
Q1FY18 Financial Summary
- Revenues for the first quarter of fiscal 2018 totaled $4.8 million, down from $7.7 million recognized in the fourth quarter of fiscal 2017. This sequential decrease was primarily due to XConnex sales that were roughly one half the level in the prior quarter given the sale of the XConnex (MoCA) product line during the first quarter along with expected lower seasonal sales of legacy products, partially offset by slightly higher sequential sales of XCode 5000 and 6000 products. Revenues decreased by 15.6%, or $0.9 million, from $5.7 million recognized a year ago in the first quarter, due to lower XConnex sales (down nearly 40%) and lower shipments of other legacy products, offset by strong year-over-year growth in both XCode 5000 and XCode 6000 products being sold into new designs.
- Gross margin for the first quarter of fiscal 2018 was 31.7%, a 0.9% point increase from the previous quarter’s level of 30.8%, and a 0.5% point increase from the fourth quarter of fiscal 2017 gross margin of 31.2%. The sequential increase in margin was due a better product mix away from the lower margin XConnex products, post sale of the legacy MoCA product line, and new XCode 5000 and 6000 designs ramping during the fourth quarter. Product margin in the first quarter of fiscal 2017 was 48.7%, up from 36.3% in the fourth quarter and the 32.7% level in the first quarter of last year.
- IFRS comprehensive gain for the first quarter of fiscal 2018 was $1.2 million, or a $0.02 gain per basic and diluted share. This is compared to a loss of $(1.9) million, or $(0.03) per share, in the previous quarter, and a $4.4 million improvement from the $(3.2) million loss, or $(0.05) per share, in the first quarter of fiscal 2017. Both the sequential and year-over-year improvement in comprehensive income were primarily due to the net gain from the sale of our XConnex (MoCA) product line of $4.8 million.
- Non-IFRS net loss for the quarter totaled $(3.0) million, or $(0.04) per share, a $0.4 million increase compared to the $(2.6) million loss, or $(0.04) per share, in the previous quarter and a $0.9 million increase from the $(2.1) million loss, or $(0.04) per share, in the same quarter last year.
- As at April 30, 2017, the Company’s cash and cash equivalents was $6.8 million.
Customer, Product and Corporate Announcements
- On April 12, 2017, ViXS completed the sale of its legacy XConnex (MoCA) product line to Maxlinear, Inc. Revenue for the first quarter of fiscal 2017 include only two months of XConnex sales from the MoCA product line.
- On May 8, 2017, ViXS completed an amendment to its Comerica loan agreement, which extended the term of the loan to October 31, 2017, plus an extension on the EDC-backed inventory portion.
- On May 18, 2017, ViXS announced the proposed sale of the Company to Pixelworks, with the close targeted for early August, 2017.
- Renewed interest has been expressed by multiple Service Providers and MSO’s to include OTA functionality as part of their product offering. ViXS is engaged with multiple North American and Korean providers to evaluate ViXS’ offering.
- Strong design activity has occurred with tier-1 Japanese customers in the area of BD Player, Android OTT/OTA Box, as well as next-generation ADSB video standard products. As evidence of this, in March 2017 Sharp announced three new BD Recorder products for Ultra HD Blu-ray based on the XCode 6800 and XCode 5190 System on Chips, with initial production starting now and volume ramp expected later this year.
- Successful NAB and Computex trade shows where VIXS demonstrated its 12-bit 100mbs HDR stream decoding, with ViXS being the only company able to offer this unique capability — as confirmed by multiple studios. New opportunities were identified for the Professional 4K Decoder with both existing and new customers.
- In February, Fred Shlapak was appointed to the Company Board of Directors, bringing over three decades of leadership and operational experience, coupled with deep knowledge of the semiconductor industry.
“I am pleased to share that our customers are excited about our new strategy which focuses on our core video business, where we provide industry leading capabilities, such as our new 12 bit HDR 100mbs stream decoding. We have also received very positive feedback from our customers, shareholders, and employees on the pending acquisition of ViXS by Pixelworks.” stated Sohail Khan, President and CEO of ViXS. “As a combined entity, customers should benefit from our industry leading capabilities in Video and Visual processing for both Mobile and Video Delivery market segments.”
Following the release, 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.
FISCAL 1Q18 CONFERENCE CALL DETAILS:
| DATE: | Wednesday, June 7, 2017 |
| TIME: | 5:00 P.M. EDT |
| DIAL IN NUMBER: |
North American Toll: Free: 1-(866)-215-5508 |
| International: (514) 841-2157 | |
| Passcode: 4502 7012# | |
| REPLAY NUMBER: |
North American Toll: Free: 1-(888)-843-7419 |
| International: (630) 652-3042 | |
| Passcode: 4502 7012# | |
| WEBSITE: | To view the press release or any additional financial information, please visit the Investor Relations section of the ViXS website at: https://www.vixs.com/ir-presentations/ |
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 April 30, 2017 and January 31, 2017, as well as for the three months ended April 30, 2016. 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-month Period Ended | |||||
| Dollar amounts in U.S. dollars | April 30, | January 31, | April 30, | ||
| Amounts in thousands, except loss per share | 2017 | 2017 | 2016 | ||
| Revenue | $4,812 | $7,668 | $5,702 | ||
| Cost of sales | 3,286 | 5,306 | 3,925 | ||
| Gross margin | 1,526 | 2,362 | 1,777 | ||
| Operating expenses (1) | |||||
| Research and development | 2,041 | 3,094 | 2,972 | ||
| Selling, general and administrative | 2,261 | 1,992 | 2,038 | ||
| Total operating expenses | 4,302 | 5,086 | 5,010 | ||
| Loss before income (expense), currency gain (losses) | (2,776) | (2,724) | (3,233) | ||
| Other income (expenses): | |||||
| Finance income (expense) | (780) | 684 | (153) | ||
| Currency gain (loss) | (12) | 47 | 141 | ||
| Gain on sale of MoCA asset | 4,786 | – | – | ||
| Total other income (expenses) | 3,994 | 731 | (12) | ||
| Income (loss) before income taxes | $1,218 | ($1,993) | ($3,245) | ||
| Income tax recovery | (10) | (84) | (9) | ||
| Net income (loss) for the year | $1,208 | ($2,077) | ($3,254) | ||
| Other comprehensive income | |||||
| Item subject to reclassification | |||||
| Exchange difference on translating foreign operations | 3 | 157 | 67 | ||
| Comprehensive income (loss) for the period | $1,211 | ($1,920) | ($3,187) | ||
| Earning (loss) per share attributed to common equity holders | |||||
| Basic | $0.02 | ($0.03) | ($0.05) | ||
| Diluted | $0.02 | ($0.03) | ($0.05) | ||
| Weighted average number of common shares outstanding | |||||
| Basic | 73,322 | 72,860 | 60,452 | ||
| Diluted | 73,322 | 72,860 | 60,452 | ||
| (1) Includes share-based transaction expense of: | |||||
| Research and development | 92 | 81 | 257 | ||
| Selling and administrative | 153 | 248 | 273 | ||
| $245 | $329 | $530 | |||
| As at | As at | |||
| April 30, | As January 31, | |||
| in thousands of US Dollars | 2017 | 2017 | ||
| Current Assets | ||||
| Cash and cash equivalents | $6,761 | $2,857 | ||
| Trade accounts receivable | 2,600 | 2,626 | ||
| Other amounts receivable | 486 | 445 | ||
| Inventories | 1,576 | 3,232 | ||
| Prepayments | 412 | 951 | ||
| Total Current Assets | 11,835 | 10,111 | ||
| Non-Current Assets | ||||
| Property, plant and equipment | 2,236 | 2,419 | ||
| Intangible assets | 6,328 | 6,860 | ||
| Prepayments | 464 | 203 | ||
| Total Non-current Assets | 9,028 | 9,482 | ||
| Total assets | $20,863 | $19,593 | ||
| Current Liabilities | ||||
| Revolving bank loan payable | $5,647 | $5,685 | ||
| Current portion of repayable government assistance | 312 | 159 | ||
| Deferred revenue | 348 | 173 | ||
| Trade payables | 1,688 | 2,462 | ||
| Accrued liabilities | 1,696 | 1,556 | ||
| Total Current Liabilities | 9,691 | 10,035 | ||
| Non-Current Liabilities | ||||
| Accrued non-current liabilities | 125 | 126 | ||
| Convertible debt | 5,475 | 4,685 | ||
| Warrant liability | 4 | 130 | ||
| Repayable government assistance | 853 | 1,388 | ||
| Total Non-Current Liabilities | 6,457 | 6,329 | ||
| Total Liabilities | 16,148 | 16,364 | ||
| Shareholder’s Equity | 4,715 | 3,229 | ||
| Total Liabilities and Shareholders’ Equity | $20,863 | $19,593 | ||
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 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 Month Period Ended | ||||||||
| April 30, | January 31, | April 30, | ||||||
| 2017 | 2017 | 2016 | ||||||
| Comprehensive gain (loss) for the period | $1,211 | ($1,920 | ) | ($3,187 | ) | |||
| R&D adjustments | ||||||||
| Stock-based compensation expense | 92 | 81 | 257 | |||||
| Provision for repayment of government assistance | (342 | ) | 64 | 238 | ||||
| Selling, general and administrative | ||||||||
| Stock based compensation expense | 153 | 248 | 273 | |||||
| Other Income/Expense adjustments | ||||||||
| Listing Fees | – | (4 | ) | 15 | ||||
| Gain on Sale of MoCA assets | (4,786 | ) | ||||||
| Unrealized currency loss (gain) | 8 | 36 | 148 | |||||
| Other adjustments | ||||||||
| Fair value adjustment on convertible debt and warrant liability | 664 | (1,220 | ) | 46 | ||||
| Exchange differences on translating foreign operations | 3 | 157 | 67 | |||||
| Non-IFRS net loss | ($2,997 | ) | ($2,558 | ) | ($2,143 | ) | ||
| Non-IFRS EPS basic | ($0.04 | ) | ($0.04 | ) | ($0.04 | ) | ||
| Non-IFRS EPS Diluted | ($0.04 | ) | ($0.04 | ) | ($0.04 | ) | ||
ViXS’ unaudited interim condensed consolidated financial statements and management’s discussion & analysis (“MD&A”), for the three-month period ended April 30, 2017, are available via ViXS’ website www.ViXS.com and will be available on SEDAR at www.sedar.com.
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, 2017, 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 approximately 470 patents issued and pending worldwide, numerous industry awards for innovation, and over 39 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™, and Xtensiv™ are trademarks and/or registered trademarks of ViXS. XConnex™ and 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 protected]
Nicole Marchand
Investor Relations, Consultant
T: +1 416 646-2000 ext. 3
[email protected]
