Spectra7 Announces 50% Y-o-Y Revenue Growth in First Quarter 2023, Affirms Outlook for Q2 2023

New 800G/1.6TB Datacenter Products Expected to Begin Generating Revenue in Second Half of 2023

SAN JOSE, Calif., May 9, 2023 /PRNewswire/ -- (TSXV:SEV) (OTCQB:SPVNF) Spectra7 Microsystems Inc. ("Spectra7" or the "Company"), a leading provider of high-performance analog semiconductor products for broadband connectivity markets, today announced its financial results for the three months ended March 31, 2023 and re-affirmed its outlook for Q2 2023. A copy of the consolidated financial statements for the three months ended March 31, 2023 and the corresponding management's discussion and analysis (the "MD&A") will be available under the Company's profile on www.sedar.com. Unless otherwise indicated, all dollar amounts in this press release are expressed in US dollars.

"We are off to a strong start in the first quarter, increasing revenue by 50% year over year, following exceptional growth in 2022. Our gross margin for the quarter increased to 63%. In addition, we continue to advance key relationships across all our end markets, including AR/VR and hyperscale data centers. The hyperscale data center partners and customers are readying 800G and 1.6TB products for expected deployment in the second half of this year, a critical part of the next data center upgrade cycle," ¹ said Raouf Halim, Chief Executive Officer.

"Test and qualification activities are increasingly focused on new switches that require 800G and 1.6TB data rate interconnects. These tests continue to demonstrate that Active Copper Cables enabled by Spectra7 are the most power and cost-efficient solutions to meet the requirements for top-of-the-rack and short-run connectivity, an estimated $1 billion market by 2026.² We expect this process to generate orders from key data center customers in North America in the second half of 2023."¹

"Based on these activities and indications that supply availability will improve steadily throughout 2023 and support a return to higher margins, we have established a goal of EBITDA³ profitability by the end of the year,"¹ said Mr. Halim.

First quarter 2023 financial highlights

• First quarter 2023 revenue of $3.1 million, up approximately 50% year-over-year.
• Gross margin⁴ as a percentage of revenue in the first quarter increased to 63%, from 43% in the same quarter in the prior year.
• Non-IFRS operating expenses⁵ were $2.2 million in the first quarter, down from $2.5 million in the same quarter in the prior year as the Company continues to control its spending.
• Basic and diluted loss per share for the first quarter was $(0.03), compared with a basic and diluted loss per share of $(0.08) in the same period a year ago.
• EBITDA³ loss in the first quarter was $70,000, compared with an EBITDA loss of $1.3 million in the same period a year ago.
• The Company strengthened its balance sheet with gross proceeds of a CDN$6.0 million private placement in March 2023.

Q2 2023 Outlook¹

The Company anticipates revenue for second quarter of 2023 to be in the range of $3.1 million to $3.3 million.

Notes:

¹ This is forward-looking information and is based on a number of assumptions, which include the current and anticipated customer purchase orders received, supply outlook and anticipated operational expenditures. See "Cautionary Notes".
² Spectra7 internally generated model based on 650Group silicon chipsets for Ethernet optical transceivers and active cable alternatives posted June 3, 2022.
³ EBITDA or earnings before interest, tax, depreciation, and amortization is a non-GAAP measure. EBITDA excludes share-based compensation, amortization, depreciation, interest, and tax expenses. Refer to "Non-GAAP Measures" in the MD&A for reconciliation to measures reported in the Company's financial statements for the three months ended March 31, 2023.
⁴ Gross margin is a non-GAAP measure which is computed as revenue less cost of sales divided by revenue. Refer to "Revenue and Gross Margin" in the MD&A, for reconciliation to measures reported in the Company's financial statements for the three months ended March 31, 2023.
⁵ Non-IFRS operating expenses is a non-GAAP measure which includes research and development, sales and marketing, general and administrative expenses and depreciation and amortization for capital equipment and right-of-use assets and excludes share-based compensation expense, non-recurring termination costs, interest and related financing costs, change in fair value of warrant liabilities, foreign exchange gain/loss and gain/loss from property and equipment disposal. Refer to "Non-GAAP Measures" in the MD&A for reconciliation to measures reported in the Company's financial statements.

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 a design center in Cork, Ireland and a technical support location in Dongguan, China. For more information, please visit www.spectra7.com. 

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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, the Company's expected sales in the second half of 2023, the expected datacenter upgrade cycle, expected Q2 revenue, expected EBITDA results, expected improvement in supply availability, expected orders from datacenter customers in North America, and expected acceleration in the data center market, and the Company's strategy, 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 management's discussion and analysis for the year ended December 31, 2022. 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:

Matt Kreps
Darrow Associates
214-597-8200
ir@spectra7.com

Spectra7 Microsystems Inc.
Bonnie Tomei
Chief Financial Officer
669-212-1089
ir@spectra7.com

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SOURCE Spectra7 Microsystems Inc.