Spectra7 Reports Record Revenues , Higher Gross Margins2, and Growing Acceptance of its Data Center Solutions

SAN JOSE, CA – July 5, 2017 – (TSX: SEV) Spectra7 Microsystems Inc, (“Spectra7” or the “Company”), a leading provider of high-performance analog semiconductor products for broadband connectivity markets today announced preliminary selected unaudited financial results for the three month period ended June 30, 2017. Unless otherwise indicated, all dollar amounts in this press release are expressed in US dollars.



PRELIMINARY Q2 2017 RESULTS

The Company expects to report revenues of approximately $3.1 million1 for the second quarter of 2017, representing an increase of approximately 15% from the prior quarter and 19% from the same quarter in 2016. Second quarter growth was driven by broad-based adoption of the Company’s patented active copper cable (“ACC”) technology. Gross margin as a percentage of revenue is expected to be approximately 62%-64%, up from 60% in the previous quarter, driven by an improved product mix. Operating expenses for the Company, excluding non-cash items, are expected to be lower by approximately $100,000 from the prior quarter operating expenses which the Company expects to continue through 2017. As a result of the higher revenues, increased gross margin rate, and lower operating expenses, the Company’s operating losses are expected to have decreased by over 26% sequentially quarter over quarter.



CEO COMMENTARY

“Our record revenue1 in the second quarter was driven by continued execution across our targeted markets,” said Spectra7 CEO Raouf Halim. “We are also very pleased with the expected increase to our gross margin and reduction of our operating expenditures sequentially, further improving the profitability of the Company. Initial trials of GaugeChangerPlus, Spectra7’s ACC data center solution, have completed successfully at two Tier-one customers. Growing traction with key data center customers, leadership in the augmented, virtual and mixed reality markets, plus the closing of our recent financing put the Company in a strong position to continue our execution.”



OTHER QUARTERLY HIGHLIGHTS

  • The Company successfully completed the first round technical evaluation of its GaugeChanger Plus solution by two Tier-one data center customers and continued strong market traction.
  • The Company secured two additional industry-leading mixed reality (MR) design wins in Q2.
  • Significant Tier-one MR design wins secured in Q1 are moving forward with material revenue growth expected in the second half of 2017.
  • On June 27, 2017, the Company closed a bought deal offering of units for aggregate gross proceeds of CAD$4,600,000 and the first tranche of a private placement of units for additional gross proceeds of CAD$1,312,300.
  • Amendments to the senior secured term loan facility with MidCap Financial (the “Loan Facility”) became effective on June 27, 2017, which amendments, among other things, (i) extend the commencement date for principal payments under the Loan Facility from June 1, 2017 to June 1, 2018, and (ii) provide the Company to extend the maturity date of the Loan Facility by one year upon satisfaction of certain conditions precedent.

Unaudited financial statements for the Company’s second quarter ended June 30, 2017 are expected to be released in August 2017. The Company looks forward to providing further updates on its progress this 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 broadband 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, 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, 2016. 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.


For more information, please contact:


Spectra7 Microsystems Inc.
Sean Peasgood
Investor Relations
416-565-2805
ir@spectra7.com


Spectra7 Microsystems Inc.
Dave Mier
Chief Financial Officer
669-284-3170
pr@spectra7.com



1. All information contained herein is subject to change based on the reported unaudited Q2 results, expected in August 2017.
2. 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.

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