Spectra7 Announces First Quarter 2019 Financial Results

Revenue up 56% Year-over-Year; Virtual Reality Revenues Stabilized
and Strong Momentum in Data Center Market

SAN JOSE, Calif.–(BUSINESS WIRE)–(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 month period ended March 31, 2019. A copy of the
unaudited consolidated financial statements prepared in accordance with
International Financial Reporting Standards and the corresponding
management’s discussion and analysis (“MD&A”) for the quarter ended
March 31, 2019, can be found under the Company’s profile at www.sedar.com.
Unless otherwise indicated, all amounts in this release are expressed in
US dollars.

Q1 2019 Financial Summary

  • Revenue was approximately $1.4 million, nearly flat from the prior
    quarter and representing a 56% increase over the same period in the
    prior year;
  • Gross margin1 as a percentage of revenue was 55%, an
    approximately 2% increase from the prior quarter and flat from the
    same period in the prior year;
  • Non-IFRS operating expenses were $2.8 million, representing a slight
    increase from $2.6 million in the prior quarter and down approximately
    $0.4 million or 13% from the same period in the prior year; and
  • EBITDA2 loss of approximately $1.7 million compared to a
    loss of approximately $1.5 million in the prior quarter and a $0.7
    million improvement from the same period in the prior year due to
    strong operating expense management.


“I am pleased with our Q1 performance that we had pre-announced,
particularly given that the first quarter is seasonally a slow quarter
in our industry. We continue to drive strong design win traction in the
data center market while maintaining a majority share of the tethered VR
market with industry-leading OEMs,” said Spectra7 CEO Raouf Halim. “We
continue to anticipate the production ramp of our data center active
copper cable solutions in the second half of the year with a major China
hyperscale operator and believe that we are track to achieve significant
revenue growth.”

Quarterly Highlights

  • Spectra7 continued to experience strong traction with its data center
    solutions and announced ten new customer design-ins in Q1 2019, for a
    total of 55 to date;
  • A major China hyperscale data center Operator is on track to deploy
    active copper cables enabled by Spectra7 technology starting in the
    second half of 2019;
  • A major Ethernet Switch OEM has chosen to develop their own branded
    active copper cables with Spectra7 embedded integrated circuits for
    production shipments beginning this year;
  • The Company announced that it now has key partnerships with 4 of the
    top 5 global cable data center interconnect companies; and
  • The Company showcased 25/100/200/400 Gbps data center interconnects at
    DesignCon and OFC in the first quarter including demonstrations with
    leading system OEMs.

Capital Raise Update

The Company continues to evaluate various capital raise options,
including but not limited to, a loan based on its valuable patent
portfolio and is currently evaluating multiple term sheets for an
asset-based loan. The Company is looking to bolster its capital
structure to support the ramp of its innovative, low power GaugeChanger™ active
copper cable interconnect technology for the growing hyperscale Data
Center market and expects to complete its capital raise by or before the
end of the second quarter.


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 Cork, Ireland and Little Rock,
Arkansas. For more information, please visit www.spectra7.com.


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, revenue in the 2019
financial year, deployment of the Company’s technology by its customers,
timing of the Company’s capital raising activities, 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, 2018. 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

1 Gross margin is a non-GAAP measure. Refer to “Revenue and
Gross Margin” in the Company’s annual MD&A for the year ended December
31, 2018 for reconciliation to measures reported in the Company’s
financial statements.

2 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.


For more information, please contact:

Spectra7 Microsystems Inc.
Sean Peasgood
Investor Relations

Spectra7 Microsystems Inc.
Darren Ma
Chief Financial Officer

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