Spectra7 Reports Financial Results for the Third Quarter of 2017

SAN JOSE, CALIFORNIA--(Marketwired - Nov. 6, 2017) - Spectra7 Microsystems Inc. (TSX:SEV) ("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 and nine months ended September 30, 2017. The unaudited consolidated financial statements for the three and nine months ended September 30, 2017 prepared in accordance with International Financial Reporting Standards and the corresponding management's discussion and analysis 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.

Financial Highlights for the Quarter ended September 30, 2017

• Revenue for the three months ended September 30, 2017 was $2.0 million, representing a decrease of 35% from the prior quarter and an increase of 100% compared to the third quarter of the prior year. The decrease in revenues from Q2 resulted from manufacturing delays and supply-side push outs encountered late in the quarter.
  
  
• Gross margin as a percentage of revenue was 55% for the three months ended September 30, 2017, and 60% for the nine months ended September 30, 2017. The below average gross margin percentage in the quarter resulted from new product ramp-up costs. Gross margin is expected to increase in the fourth quarter from third quarter levels.
  
  
• Operating expenses for the quarter, excluding non-cash items, increased by $0.3 million as the Company experienced one time prototype build costs. 

CEO Commentary

"I am happy to report that the supply chain issues we experienced in our third quarter have now been resolved", said Raouf Halim, Spectra7's CEO. "Bringing on board semiconductor industry veteran Antony Ng Yukshing should ensure smooth supply going forward. We continue to strengthen our supplier partnerships, improve our planning discipline, and minimize lead times, amongst other actions. Most importantly, we are regaining our customers' confidence as we ramp up our supply chain and fulfill their orders. We currently expect fourth quarter revenues to show strong sequential growth".

Other Quarterly Highlights

• Closed a Cdn. $1.4 million private placement.
• Announced that all of the Windows 10 OEM mixed reality (MR) headsets to date have selected Spectra7's active copper cable interconnect technology.
• Announced that over one million HT8181 devices have shipped, leading the industry in HDMI 2.0 chip sales.

Update on Data Center Market traction

• The Company continues to experience strong traction with its data center solutions, and is now engaged in joint development of Active Copper Cables with over 6 major Data Center Interconnect suppliers, targeting over 10 major Data Center operators and server manufacturers
• The Company received its first prototype orders for GaugeChanger Plus™ in Q3
• The Company continues to expect Data Center revenue to ramp in 2018

Subsequent to Quarter-end

• Recruited Antony Ng Yukshing as Vice President of Operations. Antony comes to Spectra7 from Marvell Technology Group, where his most recent role was as Senior Director of the Operations Group.

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 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.