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Spectra7 Announces First Quarter 2018 Financial Results

May 16, 2018

SAN JOSE, Calif.--(BUSINESS WIRE)--May 15, 2018--(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 months ended March 31, 2018. All dollar amounts in this release are expressed in US dollars unless otherwise stated.

Q1 2018 Financial Results

Revenue for the quarter ended March 31, 2018 was approximately $0.9 million, representing a decrease of approximately 69% from the prior quarter. Spectra7 continues to have a strong position in the virtual reality (“VR”) and mixed reality (“MR”) markets, which experienced overall demand weakness in the first quarter of 2018. Gross margin 1 as a percentage of revenue was approximately 55%, consistent with the prior quarter. Non-IFRS expenses 2 were approximately $3.2 million, representing a decrease of approximately 16% from the prior quarter, while IFRS operating expenses were approximately $3.6 million, representing a decrease of approximately 12% from the prior quarter. The significant sequential decline in expenses is due primarily to restructuring in response to weak demand in the first quarter. The Company has strategically pivoted internal resources to better align with its strong traction of the data center market.

CEO COMMENTARY

“As anticipated when we released our fiscal 2017 results, demand for our VR and MR solutions was particularly weak following the strong holiday season,” said Spectra7 CEO Raouf Halim. “We continue to hold a dominant position in the tethered VR and MR markets and expect a stronger second half of 2018. We are encouraged by the continued increase of prototype data center revenues and believe the production ramp of our data center solutions will contribute meaningful revenue during the second half of 2018.”

Other Quarterly Highlights

Data Center prototype revenue more than tripled in the first quarter of 2018 as compared to the prior quarter and remains on track for production revenue to increase in the second half of 2018. The Company experienced continued strong customer engagement including 10 new Data Center design-ins in the first quarter of 2018. Data Center Equipment OEMs and interconnect suppliers continue development and qualification of Active Copper Cables for 100G and 400G applications with Spectra7 technology.

Outlook

The Company has entered the second quarter of 2018 with increased VR backlog compared to the first quarter of 2018 and expects sequential revenue growth in the second quarter of 2018. Non-IFRS operating expenses are expected to remain stable, or decrease, in the second quarter as compared to the first quarter of 2018, as the Company works to maintain operating expense discipline and identify opportunities to reduce costs. The Company is also pursuing strategic financing options after the repayment of the $6.5 million term loan.

A copy of the unaudited interim consolidated financial statements for the three month period ended March 31, 2018 and corresponding management’s discussion and analysis will be available under the Company’s profile on www.sedar.com.

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, 2017. 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.

1 Additional GAAP Measure – Gross margin is presented in this press release consistent with information presented in the Company’s financial statements. Gross margin has been calculated by deducting manufacturing cost of sales, and provision for inventory write-downs from revenue. Management of the Company believes that providing this information allows investors to better understand the Company’s historical and future financial performance.

2 Non-IFRS expenses excludes stock-based compensation, restructuring expenses, impairment expenses and other one-time expenses.

View source version on businesswire.com:https://www.businesswire.com/news/home/20180515006834/en/

CONTACT: Spectra7 Microsystems Inc.

Sean Peasgood, 647-503-1034

Investor Relations

ir@spectra7.com

or

Spectra7 Microsystems Inc.

Darren Ma, 669-284-3170

Chief Financial Officer

pr@spectra7.com

KEYWORD: UNITED STATES NORTH AMERICA CANADA CALIFORNIA

INDUSTRY KEYWORD: TECHNOLOGY CONSUMER ELECTRONICS DATA MANAGEMENT NETWORKS SEMICONDUCTOR

SOURCE: Spectra7 Microsystems Inc.

Copyright Business Wire 2018.

PUB: 05/15/2018 10:30 PM/DISC: 05/15/2018 10:30 PM

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