Spectra7 Announces First Quarter 2022 Financial Results

First Quarter Revenue Up 275% from the Same Period a Year Ago

Anticipated First Half Revenue to be Up Over 300% from the Same Period in 2021

SAN JOSE, Calif., May 30, 2022 /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 first quarter of 2022. A copy of the unaudited condensed interim consolidated financial statements for the three months ended March 31, 2022, prepared in accordance with International Financial Reporting Standards 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.

"With more than $11 million of orders in hand year-to-date, Spectra7 is on course for record revenue in 2022. Customers increasingly require high-speed, lower-cost solutions to meet the performance requirements of modern hyperscale data centers, 5G and consumer products," said Ron Pasek, Chairman of the Board. "We are uniquely positioned to meet these demands with a robust solution suited to a number of applications, such as our newly shipping order for AR/VR headset connectivity with a major console gaming company customer, with shipments and revenue expected to grow throughout this year and into 2023.¹"

Q1 2022 Financial Highlights

• Revenue for the first quarter was approximately $2.1 million, up from $0.6 million in the same quarter a year ago, an increase of approximately 275%.
• As previously announced on April 7, 2022, first quarter revenue was impacted by Covid-related business closures in China in late March, which pushed more than $1 million in product shipments into Q2 2022.
• Gross margin² as a percentage of revenue for the first quarter was 43%, compared with 57% in the first quarter of 2021. The change in gross margin was primarily driven by expedite fees and premiums to secure wafers and supply chain availability in order to meet increasing customer demand for data center and AR/VR products.
• Non-IFRS operating expenses³ in the first quarter were $2.4 million, up from $1.0 million in the same period a year ago. For comparative purposes, employees were furloughed in the first quarter of 2021 in response to the impact of Covid-19 at that time, resulting in lower operating expenses. In addition, there were costs to support the ramping up of production for the Company's DreamWeVR™ products.
• Basic and diluted loss per share for the first quarter was $(0.08). This compares with a basic and diluted loss per share of $(0.07) in the same period a year ago.
• EBITDA³ loss in the fourth quarter was $(1.3) million. This compares with a loss of approximately $(0.6) million in the same period a year ago.

The Company has updated its revenue outlook for the first half of 2022 and now expects revenue to be in the range of $5.3 million to $5.6 million.⁵ At the midpoint, this would represent an increase of over 300% from the first half of fiscal 2021.

Non-IFRS operating expenses³ are expected to be between $4.5 million and $5.0 million, which includes items such as the costs of the annual shareholders meeting, the annual audit and headcount growth to support Spectra7's demand from its customers.  Non-IFRS operating expenses were approximately $2.8 million in the first half of 2021, and $3.9 million in the second half of 2021.

• Entered into production with a top global virtual reality gaming company that is using DreamWeVR™ new virtual reality interconnects to power its next generation head mounted display
• Added 5 new hyperscale data center design-ins, for a total of 104 to date
• Announced a partnership with Volex for 800Gbps active copper interconnects
• Demonstrated our GaugeChanger^TM technology including:
• Our new GC1122 chip for 800Gbps interconnects with Volex a UK based international cable supplier
• 400Gbps active copper interconnects with leading ethernet switch suppliers Arista and Juniper
• 200Gbps active copper interconnects with Arista and ethernet test leader Spirent
• 200Gbps active copper server connectivity with leading ethernet switch silicon and NIC supplier Broadcom

¹ This is forward-looking information and is based on a number of assumptions which includes the current customer purchase orders received, supply outlook and anticipated operational expenses.  See "Cautionary Notes".
²  Gross margin is a non-GAAP measure. Refer to "Revenue and Gross Margin" in the MD&A for reconciliation to measures reported in the Company's financial statements.
³ 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-IFRS Operating Expenses" in the MD&A for reconciliation to measures reported in the Company's financial statements.
⁴ 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 "EBITDA" in the MD&A for reconciliation to measures reported in the Company's financial statements.
⁵ The Company had previously announced a revenue outlook for the first half of 2022 in the range of $5.5 million to $7.0 million. Refer to the MD&A for a discussion of the events and circumstances that led to this updated revenue outlook.

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 data centers, 5G infrastructure, virtual and augmented reality, and other connectivity markets. Spectra7 is based in San Jose, California with a design center in Cork, Ireland and technical support location in Dongguan, China.

For more information, please visit www.spectra7.com. 

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

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 expectation for 2022 revenue and supply availability, the Company's expectation regarding product demand in 2022 and 2023, expectation of the Company's operating results, 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 annual information form for the year ended December 31, 2021. 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/Jim Fanucchi
Darrow Associates
214-597-8200
ir@spectra7.com

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

Spectra7 Microsystems Inc.
John Mitchell
Public Relations
650-269-3043
pr@spectra7.com

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SOURCE Spectra7 Microsystems Inc.