Expects Q4 2021 EBITDA Profitability Based on Revenue Outlook of $2.5 Million - $3.5 Million

 

November 29th, 2021 SAN JOSE, CA - (NewsWire) – (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 financial results for its third quarter of 2021. A copy of the unaudited interim consolidated financial statements for the three and nine month periods ended September 30, 2021, prepared in accordance with International Financial Reporting Standards (IFRS), and the corresponding management’s discussion and analysis (MD&A) will be available under the Company’s profile on the Canadian Securities Administrator’s SEDAR website at www.sedar.com. All amounts reported are in U.S. dollars unless otherwise noted.

 

 

Q3 2021 FINANCIAL HIGHLIGHTS

• Revenue was $1.57 million for Q3 2021, an increase of approximately 114% sequentially from Q2 2021, and an increase of approximately 456% from the third quarter of 2020.
• Gross margin¹ as a percentage of revenue for Q3 2021 was 57%, a decrease of approximately 1% sequentially, and an increase of 2% over the third quarter of 2020.
• Non-IFRS operating expenses² in Q3 2021 were $2.04 million, up approximately $0.25 million from the prior quarter, and up $0.97 million over the same quarter a year ago. The increase was due primarily to increased costs related to production ramp to meet rapidly growing data center customer demand.
• EBITDA³ loss was approximately $0.94 million, compared with a loss of $1.15 million in the prior quarter and $0.72 million in the same quarter a year ago.

 

 

CEO Q3 COMMENTARY

 

“Our revenue continued its positive momentum in the third quarter, supported by increased customer volumes, record order backlog which has continued to grow and several new design-ins for our Active Copper Cable technology,” said Spectra7 CEO Raouf Halim. “To support the rapid increase in orders, we raised approximately CDN $14.8 million in an expanded and oversubscribed private placement transaction during October. A portion of these proceeds have already been deployed for additional foundry allocations and inventory as we scale our business. In Q4 we expect to roughly double our revenue sequentially and forecast reaching EBITDA profitability. Looking further out, I am confident our growth trajectory will continue through fiscal 2022.”⁴

 

 

BUSINESS HIGHLIGHTS

• Began production shipments in Q3 to a major China-based hyperscaler for Spectra7-based 200G PAM4 Active Copper Cable (ACC) interconnects.
• Demonstrated Spectra7’s new GC1122 product for 112Gbps PAM4 based 800Gbps ACC interconnects at both DesignCon in August and CIOE in September.
• Added three new customer design-ins for Spectra7 ACC data center solutions in Q3 2021, for a total of 95.

 

 

Q4 2021 FINANCIAL OUTLOOK⁴

 

Led by strong data center order backlog and increased supply availability, Spectra7 currently estimates total revenue in the fourth quarter of 2021 will be between $2.5 million and $3.5 million, a sequential increase of approximately 91% at the midpoint. Operating expenses are anticipated to be in the range of $1.6 to $2.0 million in support of the anticipated rapid revenue growth⁴. The Company anticipates that it will achieve EBITDA³ profitability in Q4 2021⁴.

 

 

OPTION AND RSU GRANTS

 

As a part of its annual compensation review, Spectra7’s board of directors has approved the grant of an aggregate of 770,000 restricted share units (“RSUs”) to the Company’s executive officers and 41,826 RSUs to certain directors. In addition, the Company has cancelled 24,000 RSUs previously granted to Darrow Associates Texas, Inc., a firm which provides investor relations services to the Company and, in its place, granted options to purchase up to 80,000 common shares, exercisable at CDN$1.90. The options vest quarterly over 12 months and are exercisable until November 29, 2026.

 

 

EARLY WARNING⁵

 

As a result of the grant of RSUs, Ron Pasek acquired 20,335 RSUs (the “Grant”), representing approximately 0.06% of the issued and outstanding common shares⁶ of the Company (the “Common Shares”). As a result of the Grant, Mr. Pasek has beneficial ownership of, or control or direction over, an aggregate of 2,155,831 Common Shares and other securities exercisable into Common Shares, representing approximately 6.56% of the issued and outstanding Common Shares. Immediately prior to the Grant, Mr. Pasek had beneficial ownership of, or control or direction over, an aggregate of 2,135,496 Common Shares and other securities exercisable into Common Shares, representing approximately 6.50% of the issued and outstanding Common Shares. Prior to the Grant, Mr. Pasek’s security holding percentage decreased below 10% of the issued and outstanding Common Shares as a result of Spectra7’s treasury issuances.

 

 

NOTES:

 

¹ Gross margin is a non-GAAP measure. Refer to “Revenue and Gross Margin” in the Company’s interim MD&A for the three and nine months ended September 30, 2021, for reconciliation to measures reported in the Company’s financial statements.

 

² 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 Company’s interim MD&A for the three and nine months ended September 30, 2021, for reconciliation to measures reported in the Company’s financial statements.

 

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 Company’s interim MD&A for the three and nine months ended September 30, 2021, for reconciliation to measures reported in the Company’s financial statements.

 

⁴ 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 expenditures. See “Cautionary Notes”.

 

⁵ The disclosure under the heading “Early Warning” is being included pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues. A copy of the early warning report relating to the Grant will be available on www.SEDAR.com or may be obtained by contacting Mr. Pasek or the Company by telephone at 408-770-2915 or at their offices at 181 Bay Street, Suite 1800, Toronto, Ontario M5J 2T9.

 

⁶ All references to the number of issued and outstanding Common Shares under the heading “Early Warning” are calculated on a partially diluted basis.

 

 

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 technical support location in Dongguan, China.

 

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.

 

 

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 revenue and operating expense expectations in the Q4 of 2021, the Company’s projection of EBIDTA profitability in Q4 2021, 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, 2020. 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