[August 14, 2018]

Spectra7 Announces Second Quarter 2018 Financial Results

(TSX:SEV) Spectra7 Microsystems Inc. ("Spectra7" or the "Company"), a leading provider of high-performance analog semiconductor products for broadband connectivity markets, today announced its unaudited financial results for the three and six months ended June 30, 2018. All dollar amounts in this release are expressed in US dollars unless otherwise stated. A copy of the unaudited interim consolidated financial statements for the three and six month periods ended June 30, 2018 and corresponding management's discussion and analysis will be available under the Company's profile on www.sedar.com.

Q2 2018 Financial Results

• Revenue for the quarter ended June 30, 2018 was approximately $0.8 million, representing a slight decrease of approximately 11% from the prior quarter. Spectra7 continues to have a strong position in the virtual reality ("VR") and mixed reality ("MR") markets, which remained weak in the second quarter of 2018.
• Gross margin¹ as a percentage of revenue was approximately 55%, consistent with the prior quarter.
• Non-IFRS expenses² were approximately $2.8 million, representing a decrease of approximately 15% from the prior quarter, while IFRS operating expenses were approximately $3.2 million, representing a decrease of approximately 11% from the prior quarter. The continued sequential decline in expenses is due primarily to continued expense discipline and lower one-time development expenses.

CEO Commentary

"As we enter the second half of 2018, I am encouraged by the business trends in our core VR / MR business as well as the anticipated upcoming production ramp of our Data Center solutions," said Spectra7 CEO Raouf Halim. "Data Center Operators and OEMs in China as well as in the US are increasingly coming under pressure to lower power and carbon emissions. Even operators who used optics at lower speeds are now evaluating Spectra7's low power active copper cables as data rates increase. Interest in Spectra7's technology is increasing. The company's Data Center initiative is on track with revenue ramp expected in the second half of 2018, driven by early adoption in the Asia Pacific market."

Other Quarterly Highlights

• On July 6, 2018, the Company closed an oversubscribed private pacement consisting of 28,336,290 units at a price of CDN $0.105 per unit for gross proceeds of approximately $2.3 million.
• Data Center prototype revenue increased by 50% in the second quarter of 2018 as compared to the prior quarter and remains on track for production in 2018.
• The Company experienced continued strong customer engagement including 7 new Data Center design-ins in the second quarter of 2018 for a total of 23 Data Center design-ins to date.
• Data Center Equipment OEMs and interconnect suppliers continue development and qualification of Active Copper Cables (ACCs) for 100G and 400G deployments with Spectra7 technology.
• Successful achievement of testing Spectra7's Active Copper Cable (ACC) technology with the industry leading K400 test system from Ixia (News - Alert), a Keysight business, demonstrating robust error-free 400Gbps Ethernet traffic.

The Company has entered the third quarter of 2018 with significantly increased backlog compared to the second quarter of 2018 and expects sequential revenue growth in the third quarter of 2018 as it enters the seasonally stronger second half of the year.

About Spectra7 Microsystems Inc.

Spectra7 Microsystems Inc. is a high performance analog semiconductor company delivering unprecedented bandwidth, speed and resolution to enable disruptive industrial design for leading electronics manufacturers in virtual reality, augmented reality, mixed reality, data centers and other connectivity markets. Spectra7 is based in San Jose, California with design centers in Markham, Ontario, Cork, Ireland, and Little Rock, Arkansas. For more information, please visit www.spectra7.com.

Cautionary Notes

Certain statements contained in this press release constitute "forward-looking statements". All statements other than statements of historical fact contained in this press release, including, without limitation, those regarding the Company's future financial position and results of operations, outlook, revenue growth in the third quarter of 2018, strategy, proposed acquisitions, plans, objectives, goals and targets, and any statements preceded by, followed by or that include the words "believe", "expect", "aim", "intend", "plan", "continue", "will", "may", "would", "anticipate", "estimate", "forecast", "predict", "project", "seek", "should" or similar expressions or the negative thereof, are forward-looking statements. These statements are not historical facts but instead represent only the Company's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to the risk factors discussed in the Company's annual MD&A for the year ended December 31, 2017. Management provides forward-looking statements because it believes they provide useful information to investors when considering their investment objectives and cautions investors not to place undue reliance on forward-looking information. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise, except as required by law.

¹ Additional GAAP Measure - Gross margin is presented in this press release consistent with information presented in the Company's financial statements. Gross margin has been calculated by deducting manufacturing cost of sales, and provision for inventory write-downs from revenue. Management of the Company believes that providing this information allows investors to better understand the Company's historical and future financial performance.

² Non-IFRS expenses excludes stock-based compensation, restructuring expenses, impairment expenses and other one-time expenses.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180814005699/en/

[ Back To TMCnet.com's Homepage ]