ViXS Reports Second Quarter 2016 Results

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Companies mentioned in this article: ViXS Systems Inc.
TORONTO, ON--(Marketwired - September 10, 2015) - ViXS Systems Inc. (TSX: VXS), a pioneer and leader in media processing solutions, reported its second quarter results for the period ending July 31, 2015 today. All results are reported under International Financial Reporting Standards ("IFRS") and in U.S. dollars, unless otherwise specified. ViXS reported Q2FY16 revenue of $6.0 million, total comprehensive loss of $(3.0) million and non-IFRS net loss of $(3.6) million.
Q2FY16 Highlights Revenue of $6.0 million, down from $10.0 million in the prior quarter. Gross margin of 34.3%, a decrease from the prior quarter's level of 47.1%. IFRS Comprehensive loss of $(3.0) million, compared to a loss of $(1.8) million in the prior quarter, but an improvement from a loss of $(3.8) million last year. Non-IFRS net loss of $(3.6) million, compared to a loss of $(2.2) million in the prior quarter, and a slight improvement from a loss of $(3.8) million last year. $6.6 million of cash and equivalents, including $2.5 million of bank debt. Contributing member of the Secure Content Storage Association, with public demonstration of VIDITY player and secure content at upcoming IBC trade show. "Q2 was a challenging quarter for ViXS. While I'm disappointed in the company's recent financial performance, we are undergoing an important refocusing effort that includes the appointment of a CEO, which we anticipate announcing shortly. Our focus remains returning to profitability through the monetization and commercialization of ViXS' leading technology and products," stated Peter Currie, ViXS' Board Chair.
Q2 FY2016 Results Revenues for the second quarter of fiscal 2016 totalled $6.0 million, sequentially lower than $10.0 million recognized in the first quarter of fiscal 2016. This decrease was primarily due to quarterly fluctuations and timing of MoCA based products that had higher shipments in Q1, though partially offset by increased sales of our XCode5 and legacy XCode4 products. Revenues decreased by $3.0 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 sales of legacy products and partially offset by higher MoCA sales.
Gross margin for the second quarter of fiscal 2016 was 34.3%, a decrease from the previous quarter's level of 47.1% and a 9.0% point decrease from the second quarter of fiscal 2015. This decrease in margin from the first quarter was primarily due to lower discrete MoCA pricing that took full effect in the quarter, along with additional testing of XCode products and higher amortization costs.
Total operating expenses for the second quarter of fiscal 2016 decreased by $2.1 million to $4.6 million. Research & Development (R&D) spending decreased to $2.7 million compared to $4.1 million in the previous quarter, due primarily to a $0.9 positive non-cash adjustment to the repayable government assistance provision. Selling, general and administrative expenses for the second quarter decreased by $0.7 million compared to previous quarter due to a reduction in stock compensation expense and lower professional services and overhead.
IFRS comprehensive loss for the second quarter of fiscal 2016 was $(3.0) million, or a loss of $(0.06) per share basic and diluted. This is compared to a loss of $(1.8) million in the previous quarter, but despite the lower revenue levels was still a $0.8 million improvement from the $(3.8) million loss in the second quarter of fiscal 2015.
Non-IFRS net loss for the current quarter (as defined in the Non-IFRS Financial Measures section) totalled $(3.6) million, compared to a $(2.2) million loss in the previous quarter and a $0.2 million improvement from the $(3.8) million loss in the second quarter of fiscal 2015. The Non-IFRS loss for the fiscal year to date 2016 was $(5.9) million compared to $(8.7) million in the same period last year. This continued 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 July 31, 2015, the Company's cash and cash equivalents was $6.6 million including $2.5 million in outstanding 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. In addition, the company incurred a one-time payment to a customer to settle an unresolved contract payment rather than litigate. For More Information
In conjunction with this announcement, ViXS management will be holding a conference call on Thursday September 10, 2015, at 5:00 P.M. Eastern Time to discuss the Company's results for Q2 fiscal 2016.
FISCAL 2Q16 CONFERENCE CALLS DETAILS: DATE: Thursday September 10, 2015 TIME: 5:00 P.M. EDT 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: 860832 WEBCAST: 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: relations/ SELECTED CONSOLIDATED FINANCIAL INFORMATION The following table sets forth selected financial information derived from the Company's unaudited interim condensed consolidated financial statements for the three and six months ended July 31, 2015, April 30, 2015 and July 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. Six Month Period Three Month Period Ended Ended Dollar amounts in U.S. July 31, April 30, July 31, July 31, July 31, dollars 2015 2015 2014 2015 2014 Amounts in thousands, except loss per share Revenue $5,974 $9,962 $8,989 $15,936 $16,430 Cost of sales 3,927 5,273 5,095 9,200 9,400 Gross margin 2,047 4,689 3,894 6,736 7,030 Operating expenses Research and development 2,698 4,104 3,655 6,802 7,910 Selling, general and administrative 1,923 2,585 4,255 4,508 8,501 Total operating expenses (1) 4,621 6,689 7,910 11,310 16,411 Loss before finance costs and income, currency gains (2,574) (2,000) (4,016) (4,574) (9,381) Other income (expense): Finance costs (155) (92) (37) (247) (57) Finance income 8 22 22 30 46 Currency gains (losses) (274) 314 236 40 527 Total other income (expense) (421) 244 221 (177) 516 Loss before taxes ($2,995) ($1,756) ($3,795) ($4,751) ($8,865) Income tax recovery (expense) (5) (10) 8 (15) (5) Loss for the period (3,000) (1,766) (3,787) (4,766) (8,870) Other comprehensive income (loss) Item subject to reclassification Exchange difference on translating foreign operations (13) (5) 12 (18) (18) Comprehensive loss for the period ($3,013) ($1,771) ($3,775) ($4,784) ($8,888) Loss per share attributed to common equity holders Basic ($0.06) ($0.03) ($0.08) ($0.09) ($0.18) Diluted ($0.06) ($0.03) ($0.08) ($0.09) ($0.18) Weighted average number of common shares outstanding Basic 50,377 50,376 50,375 50,377 50,375 Diluted 50,377 50,376 50,375 50,377 50,375 (1) Includes share-based transaction expense of: Research and development (130) 163 106 33 451 Selling, general and administrative 55 (214) 460 (159) 659 ($75) ($51) $566 ($126) $1,110 BALANCE SHEET Thousands of US Dollars As at As at July 31, January 31, As at July 31, 2015 2015 2014 Cash and cash equivalents $6,582 $15,289 $19,826 Trade accounts receivable 2,853 4,104 6,146 Inventories 4,281 2,868 4,004 Total assets $26,242 $35,844 $41,254 Trade payables $3,932 $6,465 $6,037 Accrued liabilities 3,013 6,656 6,942 Deferred revenues 72 168 55 Total liabilities 11,833 16,525 16,538 Total liabilities and shareholders' equity $26,242 $35,844 $41,254 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, 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: Six Month Period Three Month Period Ended Ended July 31, April 30, July 31, July 31, July 31, 2015 2015 2014 2015 2014 Comprehensive loss for the period ($3,013) ($1,771) ($3,775) ($4,784) ($8,888) R&D adjustments Stock-based compensation expense (130) 163 106 33 451 Provision for repayment of government assistance (854) (294) (854) (405) Selling, general and administrative Stock based compensation expense 55 (214) 460 (159) 659 Other Income/Expense adjustments Unrealized currency loss (gain) 290 (419) (264) (129) (559) Other adjustments Exchange differences on translating foreign operations 13 5 (12) 18 18 Non-IFRS net loss ($3,639) ($2,236) ($3,779) ($5,875) ($8,724)