Spectra7 Announces Preliminary Second Quarter 2023 Revenue and Second Half of 2023 Outlook

SAN JOSE, Calif., July 18, 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 preliminary unaudited revenue results for the three months ended June 30, 2023 and its outlook for second half of 2023. Unless otherwise indicated, all dollar amounts in this press release are expressed in US dollars.

"We expect to report second quarter revenues of $3.3 million, resulting in record revenue for the first half 2023 of $6.4 million, further building upon our exceptional growth in 2022. Additionally, we expect to report a strong gross margin for the quarter of 63%, which is consistent with a gross margin of 63% in first quarter of 2023.² While these results demonstrate exciting progress, we believe even more important opportunities lie ahead as our hyperscale data center partners and customers ready for the necessary upgrade to 800G and 1.6TB products needed to support increasingly advanced data intensive applications such as AI and ChatGPT. These technologies are expected to drive a new upgrade cycle in data centers," ¹ said Raouf Halim, Chief Executive Officer.

"Our customers are intensifying their test and qualification activities centered around new switches that require 800G and 1.6TB data rate interconnects – a perfect environment for Spectra7's power and cost-efficient Active Copper Cable solutions (ACC) designed specifically to meet top-of-the-rack and short-run connectivity requirements. This build out is expected to result in an estimated $1 billion ACC connectivity market by 2027.³ We continue to expect this process will generate orders from key data center customers in North America and outside the U.S. in late 2023."¹

"Spectra7 is currently engaged with one of the major data center operators to deploy Active Copper Cable solutions for their AI clusters. While the data center operator is charting its plan, we are preparing for the upcoming supply needs. We expect that this will drive revenue growth in the coming quarters."¹

2H FY 2023 Outlook¹

The Company anticipates revenue for second half of 2023 to be in the range of $5.5 million to $7.0 million. The Company also anticipates maintaining its efficient operating expense structure and non-IFRS operating expenses⁴ for the 2H 2023 at a range of $4.5 million and $4.9 million (non-IFRS operating expenses for 2H 2022 were $3.9 million).

RSU Grants

The Company announced the grant of such number of RSUs to certain directors of the Company as is equal to C$43,474 divided by the closing price of the common shares on the TSX Venture Exchange on the trading day after publication of the Company's financial statements for the three and six months ended June 30, 2023. 

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 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 Company's management's discussion and analysis for the three months ended March 31, 2023, which is available on SEDAR at www.sedar.com, for a reconciliation to measures reported in the Company's financial statements in the previous quarter. A reconciliation to measures reported in the Company's financial statements for the three and six months ended June 30, 2023 will be provided in the Company's management's discussion and analysis for that period.
³ Spectra7 internally generated model based on 650Group silicon chipsets for Ethernet optical transceivers and active cable alternatives posted July 2023.
⁴ 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 expenses, 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 Company's management's discussion and analysis for the three months ended March 31, 2023, which is available on SEDAR at www.sedar.com, for a reconciliation to measures reported in the Company's financial statements in the previous quarter. A reconciliation to measures reported in the Company's financial statements for the three and nine months ended September 30, 2023 and for the year ended December 31, 2023 will be provided in the Company's management's discussion and analysis for those periods.

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 revenue and gross margin in the second quarter of 2023, the expected datacenter upgrade cycle, the expected size of the ACC connectivity market by 2027, the expected orders from datacenter customers in North America, the expected acceleration in the data center market, the Company's expected revenue in the second half of 2023, and the Company's ability to maintain its efficient operating expense structure and working capital management 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.