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ViXS Reports First Quarter Fiscal 2015 Results

TORONTO, ONTARIO -- (Marketwired) -- 06/05/14 -- ViXS Systems Inc. (TSX:VXS) a pioneer and leader in media processing solutions, reported its first quarter fiscal 2015 results for the period ended April 30, 2014. All results are reported under International Financial Reporting Standards ("IFRS") and in U.S. dollars, unless otherwise specified. ViXS reported Q1FY15 revenue of $7.4 million, total comprehensive loss of $5.1 million and non-IFRS net loss of $4.5 million.

Q1FY15 Financial Summary

--  Revenue of $7.4 million, a sequential increase over the previous
    quarter's revenue of $7.0 million. Revenue from new products accounted
    for 61% of sales in F1Q15 versus 54% in the previous quarter, and 37% in
    the same quarter last year. 
--  Gross margin of 42.1% 
--  Product margin of 47.4% which excludes the effects of amortization of IP
    and mask-sets, support contracts, and design kits. 
--  IFRS Comprehensive loss of $5.1 million, or a loss of $(0.10) per share
    basic and diluted, a 34% improvement over the previous quarter. 
--  Non-IFRS net loss totalled $4.4 million, as compared to a $6.9 million
    loss in the previous quarter, and a $6.1 million loss in the same
    quarter last year. 
--  $19.7 million of cash and equivalents, with no bank debt outstanding at
    end of quarter. 

Customer and Product Announcements

--  Sharp selected ViXS to power its Ultra High Definition (UHD) 4K Recorder
    and Television products that are expected to begin shipment during June
    in Japan. 
--  ViXS launches UHD HEVC 4K Golden Reference Decoder providing the
    broadcast industry with a standardized tool to test, validate, and
    enable UHD 4K/HEVC content. 
--  ViXS demonstrated industry-first RDK client on UHD 4K Platform at The
    Cable Show. 
--  Astra and NTT-Plala commence trails of UHD 4K HEVC 60p using ViXS XCode
    6. 
--  ViXS received the top award for Outstanding Business Innovation from the
    Hong Kong-Canada Business Achievement Awards. 

Q1FY2015 Results:

Revenue for the first quarter of fiscal 2015 was $7.4 million, up 6% sequentially from the $7.0 million in the previous quarter.

Revenue from new products (XCode6, XConnex) accounted for 61% of sales in F1Q15 versus 54% in the previous quarter, and 37% in the same quarter last year.

Revenue was down 7% from the $8.0 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 (such as the XCode5000 and older products) to more integrated next-generation SoC products for the MoCA (XConnex) and cloud video infrastructure (XCodePro) markets. As evidence of this transition, ViXS' new XCode6 product completed its first full quarter of sales, exceeding 20% of revenue, and remains the only commercial shipping product to support UHD4K-60 and HEVC 10-bit.

Gross margin was 42.1% in Q1FY15, an increase from the 40.1% level in Q4FY14 due to the higher mix of XCode6 and other integrated SoC products. Product gross margin was 47.4% in the quarter. Unlike most semiconductor companies, ViXS amortizes its IP and mask-sets, and certain other design costs, at the COGS level but we believe our product margin is a useful metric for assessing and comparing ViXS margins within our industry. ViXS has included the product margin for each of the last eight quarters in the "Selected Consolidated Quarterly Financial Information" section in Company's filed MD&A.

Comprehensive loss for the first fiscal quarter was $5.1 million, or a loss of $(0.10) per share basic and diluted, a 34% improvement compared with the comprehensive income loss in the fourth quarter of FY2014 of $7.6 million, or $(0.15) per share basic and diluted. The sequential improvement in IFRS loss was primarily due to higher revenue from XCode6 and MoCA products, plus ongoing cost controls. The Company also had a $0.3 million gain from currency gains which is now reported below the operating expense line for this and previous quarters. A detailed explanation of these and other changes in operating expenses is also described in the Company's filed MD&A.

Non-IFRS net loss for the third fiscal quarter was $4.2 million, or $(0.09) per share (basic and diluted), compared with a non-IFRS net loss of $6.9 million, or $(0.14) per share (basic and diluted), in the prior quarter and non-IFRS net loss of $6.1 million, or $(1.23) 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.

Total of cash and cash equivalents was $19.7 million as of April 30, 2014, compared to $25.6 million at the end of the previous quarter. The decrease was due to $5.1 million in operating loss and the timing of certain working capital needs (including IP licenses) needed for growth this year.

"ViXS made a strategic decision to invest early in technologies that we saw disrupting the global video industry, and as a result we are the first and only commercially shipping solution to support both UHD 4K 60p and 10-bit HEVC," said Sally Daub, President and CEO of ViXS Systems Inc. "Our customer wins, Intel partnership, and incremental revenue from new products in Q1FY15 clearly demonstrate that our investment is starting to pay off, and we expect that UHD and HEVC will drive continued revenue and earnings growth for years to come."

Based on the strength of our new products, ViXS expects sequential revenue growth for the second quarter of fiscal 2015, and continued growth is expected through the rest of the year.

For More Information

In conjunction with this announcement, ViXS management will be holding a conference call on Thursday, June 5, 2014, at 5:00 P.M. Eastern time to discuss the Company's results for the first quarter fiscal 2015.

FISCAL 1Q15 CONFERENCE CALL DETAILS:

DATE:                Thursday June 5, 2014                              
TIME:                5:00 P.M. EST                                      
DIAL IN NUMBER:      Local / International: 647-426-1845                
                     North American Toll: Free: 1-866-782-8903          
REPLAY NUMBER:       Local / International: 416-915-1035                
                     North American Toll: Free: 1-866-245-6755          
                     Passcode: 271960                                   
WEBCAST:             http://public.viavid.com/index.php?id=108940       
                     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:          
                     http://investor.vixs.com/investor-relations/

SELECTED CONSOLIDATED FINANCIAL INFORMATION

                                                                            
                                              Three Month Period Ended      
                                          April 30,  January 31,  April 30, 
Dollar amounts in U.S. dollars              2014        2014        2013    
                                        ------------------------------------
   Amounts in thousands                                                     
                                                                            
Revenues                                      $7,441      $7,039      $8,024
   Cost of sales                               4,305       4,173       4,178
                                        ------------------------------------
Gross margin                                   3,136       2,866       3,846
                                        ------------------------------------
Operating expenses                                                          
   Research and development                    4,255       4,548       6,041
   Selling, general and administrative         4,246       4,230       2,577
                                        ------------------------------------
Total operating expenses (1)                   8,501       8,778       8,618
                                        ------------------------------------
Loss before finance costs and income,                                       
 currency gain, convertible preferred                                       
 share revaluation adjustment and                                           
 income taxes                                (5,365)     (5,912)     (4,772)
                                        ------------------------------------
Other income (expense):                                                     
   Finance costs                                (20)       (152)    (18,835)
   Finance income                                 24          33           -
   Currency gain                                 291     (1,578)          10
  Convertible preferred share                                               
   revaluation adjustment                          -           -     (1,185)
                                        ------------------------------------
Total other income (expense)                     295     (1,697)    (20,010)
                                        ------------------------------------
Loss before taxes                           ($5,070)    ($7,609)   ($24,782)
   Income tax expense                           (13)        (10)        (56)
                                        ------------------------------------
Net loss for the period                      (5,083)     (7,619)    (24,838)
Items subject to reclassification                                           
   Exchange difference on translating                                       
   foreign operations                           (30)           -        (40)
                                        ------------------------------------
Comprehensive loss for the period           ($5,113)    ($7,619)   ($24,878)
                                        ------------------------------------
                                        ------------------------------------
Loss per share attributed to common                                         
 equity holders                                                             
   Basic and Diluted                         ($0.10)     ($0.15)     ($5.01)
Weighted average number of common                                           
 shares outstanding                                                         
   Basic and Diluted                          50,352      50,225       4,960
                                                                            
(1) Includes share-based transaction                                        
 expense of:                                                                
Research and development                         345         250          60
Selling, general and administrative              199         251          75
                                        ------------------------------------
                                                $544        $501        $135
                                        ------------------------------------
                                        ------------------------------------
                                                                            
                                                                            
Consolidated Balance Sheet                                                  
 Data                      As at April 30, As at January 31, As at April 30,
                                 2014             2014             2013     
                          ---------------- ----------------- ---------------
Cash and cash equivalents          $19,667           $25,588          $2,069
Trade accounts receivable            7,045             6,959           6,544
Inventory                            3,321             5,293           2,175
Total assets                        40,706            47,359          22,304
                                                                            
Bank Debt                                -                 -          10,772
Total liabilities                   12,782            15,048         132,006
Shareholders' equity                                                        
 (deficiency)                       27,924            32,311       (109,702)

NON-IFRS FINANCIAL MEASURES

Non-IFRS net income (loss) is defined as total comprehensive income (loss) before share-based transaction expense, exchange difference related to translating foreign operations 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, 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:

                                                                            
                                             Three Month Period Ended       
(in thousands of U.S. dollars)          April 30,   January 31,   April 30, 
                                          2014         2014         2013    
                                      --------------------------------------
Comprehensive loss for the period         ($5,113)     ($7,619)    ($24,878)
R&D adjustments                                                             
 Stock-based compensation expense              345          250           60
 Provision for repayment of                                                 
  government assistance                        111            -      (1,121)
Selling, general and administrative                                         
 Stock based compensation expense              199          251           75
Other Income/Expense adjustments                                            
 Listing Fees                                    -           15          300
 Accreted interest on provision for                                         
  repayment of government assistance             -          165            -
 Fair value adjustment on warranty                                          
  liability                                      -            -       18,219
Other adjustments                                                           
 Convertible preferred share                                                
  revaluation                                    -            -        1,185
 Exchange differences on translating                                        
  foreign operations                            30            -           40
                                      --------------------------------------
Non-IFRS net loss                         ($4,429)     ($6,938)     ($6,120)
                                      --------------------------------------
                                      --------------------------------------
                                                                            
Non-IFRS EPS                               ($0.09)      ($0.14)      ($0.28)
                                                                            

About ViXS Systems Inc.

ViXS is the pioneer and market leader in designing revolutionary media processing semiconductor solutions for the broadcasting and consumer electronics industries, with over 461 patents issued and pending worldwide, numerous industry awards for innovation, and over 30 million media processor shipments 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 10 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(TM), the ViXS® logo, XCode®, XCodePro(TM), XConnex(TM) and Xtensiv(TM) 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.

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 the Annual Information Form of ViXS Systems, 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.

Contacts:
ViXS Systems Inc.
Charlie Glavin
+1 416 646-2000
[email protected]

Investor Relations
ViXS Systems Inc.
+1 416 646-2000 ext. 3
[email protected]

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