Vimicro Announces Unaudited Second-Quarter 2013 Financial Results

BEIJING, July 30, 2013 — (PRNewswire) —  Vimicro International Corporation (NASDAQ: VIMC) ("Vimicro" or the "Company"), a leading image processing IC and surveillance solution provider, today announced unaudited financial results for the second quarter ended June 30, 2013.

Second-Quarter 2013 Results

Net revenue in the second quarter of 2013 was $11.1 million, as compared to net revenue of $19.5 million from continuing operations in the year-ago quarter and $7.9 million in the first quarter of 2013 (results for the second quarter of 2012 have been adjusted for continuing operations to reflect the divestiture of certain business lines). The 43.2% year-over-year revenue decrease was primarily due to lower sales of PC and notebook multimedia processors. Revenues were below the Company's guidance of $12 to $14 million due to a decline in orders from a major PC-manufacturer customer and delays in the recognition of revenue from one large surveillance contract.

Gross profit in the second quarter was $4.2 million, as compared with $7.1 million in the year-ago quarter and $1.6 million in the first quarter of 2013. The gross margin in the second quarter was 37.5%, as compared with 36.5% in the year-ago quarter and 20.1% in the first quarter of 2013.

Operating expenses in the second quarter were $10.0 million, as compared to $8.0 million in the year-ago quarter. Operating expenses increased year-over-year primarily due to higher research and development expense, which included a $1.7 million purchase of surveillance intellectual property in the second quarter of 2013. The operating loss was $5.9 million in the quarter, as compared to a loss of $0.9 million in the year-ago quarter.

In the second quarter of 2013, non-GAAP net loss attributable to Vimicro International Corporation was $5.5 million, or approximately $0.19 per ADS on a diluted basis, as compared to a non-GAAP net income from continuing operations attributable to Vimicro of $1.1 million, or $0.04 per diluted ADS in the year-ago quarter. Non-GAAP net loss attributable to Vimicro International Corporation in second quarter of 2013 and the year-ago quarter excludes $0.1 and $1.1 million of non-cash, share-based compensation, respectively. GAAP net loss attributable to Vimicro in the second quarter was $5.7 million, or $0.20 per diluted ADS, as compared to a profit from continuing operations of approximately $30,000, or $0.00 per diluted ADS in the year-ago quarter.

As of June 30, 2013, the Company had cash and cash equivalents of approximately $31.9 million and restricted cash of $5.2 million, totaling $37.1 million. Total current assets were approximately $95.8 million, and Vimicro had working capital of approximately $66.2 million and $21.0 million of long-term bank loans and liabilities on its balance sheet, as of June 30, 2013.

Dr. John Deng, Vimicro's Chairman and Chief Executive Officer, commented, "Revenues from sales of PC and notebook multimedia processors decreased sharply year-over year due to the ongoing softness of the global PC market and a decline in orders from a major PC-manufacturer customer. We were pleased to see growth in sales of surveillance products, and we are extremely pleased about the large order we received after the quarter's end. This order will make surveillance our largest business line and complete the transformation of the Company that we started two and a half years ago. We look forward to receiving additional surveillance orders as we grow and expand geographically."

Recent Events

On July 25, 2013, the Company announced that one of its key joint-ventures signed a large contract valued at approximately USD $20 million to provide SVAC-based surveillance products to a major Chinese city.

Business Outlook

For the third quarter of 2013, Vimicro expects revenues of $23 to $26 million, with strong growth in the surveillance segment.

Conference Call Information

The Company will host a conference call at 5:00 p.m. (U.S. Eastern Daylight Time) / 2:00 p.m. (U.S. Pacific Daylight Time) on Tuesday, July 30, 2013 / 5:00 a.m. (Beijing / Hong Kong time) on Wednesday, July 31, 2013 to discuss unaudited second-quarter 2013 financial results.

To participate in the conference call, please dial one of the following numbers five to ten minutes prior to the scheduled conference call time: (800) 901-5241 or (617) 786-2963. The conference call ID number is 56041620.

If you are unable to participate in the call at this time, a replay will be available starting at 7:00 p.m. Eastern Daylight Time on Tuesday, July 30, 2013, through 11:59 a.m. Eastern Daylight Time on Tuesday, August 6, 2013. To access the replay, dial (888) 286-8010 or (617) 801-6888. The replay call ID number is 52500930.

This conference call will also be broadcast live over the Internet and can be accessed by all interested parties by clicking on: Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.

About Vimicro International Corporation

Vimicro International Corporation is a leading multimedia semiconductor and solution provider that designs, develops and markets mixed-signal semiconductor products and system-level solutions that enable multimedia capabilities in a variety of products for PC/notebook, consumer electronics and surveillance markets. Vimicro is aggressively expanding business into the surveillance market with system-level solutions and semiconductor products to capitalize on China's domestic demand. Vimicro's ADSs, each of which represents four ordinary shares, are currently trading on the NASDAQ Global Market under the ticker symbol "VIMC."

Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the quotations from management in this announcement, as well as Vimicro's expectations and forecasts, contain forward-looking statements. Vimicro may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Vimicro's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's ability to develop and sell new mobile multimedia products; the expected growth of the mobile multimedia market; the Company's ability to increase sales of notebook camera multimedia processors; the Company's ability to retain existing customers and acquire new customers and respond to competitive market conditions; the Company's ability to respond in a timely manner to the evolving multimedia market and changing consumer preferences and industry standards and to stay abreast of technological changes; the Company's ability to secure sufficient foundry capacity in a timely manner; the company's ability to effectively protect its intellectual property and the risk that it may infringe on the intellectual property of others; and cyclicality of the semiconductor industry. Further information regarding these and other risks is included in Vimicro's annual report on Form 20-F filed with the Securities and Exchange Commission. Vimicro does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release is as of the date hereof, and Vimicro undertakes no duty to update such information, except as required under applicable law.

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