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 and six month periods ended June 30, 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 three and six month periods ended June 30, 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.
Q2 2019 Financial Summary
- Revenue of approximately $1.0 million, up 20% year-over-year but down 29% sequentially. Revenue was lighter than expected as constrained working capital impacted product supply, resulting in approximately $0.6 million of unfilled orders for Q2;
- Gross margin1 as a percentage of revenue was approximately 55%, flat from the prior quarter and approximately flat from the same period in the prior year;
- Non-IFRS operating expenses were $2.5 million, representing a decrease of $0.3 million from the prior quarter and down approximately $0.4 million from the same period in the prior year; and
- EBITDA2 loss of approximately $1.6 million compared to a loss of approximately $1.7 million in the prior quarter and a $0.5 million improvement from the same period in the prior year due to strong operating expense management.
“Before commenting on our second quarter results, I am delighted with the strong demand as well as insider participation in our recently announced equity financing. We welcome new investors from the U.S. and other regions and appreciate the continued participation and support from existing investors. The net proceeds of the financings will help to alleviate the supply constraints experienced by the Company in Q2 and will also strengthen the balance sheet as we begin our data center production ramp,” said Raouf Halim, Spectra7’s CEO. “Interest for our data center semiconductor products remains strong from both our cable interconnect partners and their customers, who represent some of the largest data center operators in the world. I am also pleased with the formation of the Copper Reach Extension (CRX) Consortium with Tencent, a significant milestone and evidence of the success of our Active Copper Cable (“ACC”) technology in the data center market.”
- Tencent and Spectra7 announced CRX Consortium to accelerate the adoption of ACC technology with initial deployments expected in the second half of 2019;
- Spectra7 continued to experience strong traction with its data center solutions and announced nine new customer design-ins in Q2 2019, for a total of 64 to date; and
- Key partnerships with 4 of the top 5 global cable data center interconnect companies remain strong with their promotion of ACCs to Tier 1 OEMs and Hyperscalers increasing.
As previously announced, the Company filed a short form prospectus on August 9, 2019 in connection with a public offering of units (each, a “Unit”) at a price of CDN$0.05 per Unit for aggregate gross proceeds of CDN$3,262,774. Each Unit consists of one common share in the capital of the Company and one-half of one common share purchase warrant (each, a “Unit”), with each whole warrant exercisable at a price of CDN$0.08 per share for a period of 5 years from the date of closing, subject to acceleration in certain circumstances. Also as previously announced, the Company has received subscription agreements in connection with a concurrent private placement in respect of 93,176,081 Units for additional gross proceeds of CDN$4,658,804. The Company expects to close the public offering and private placement concurrently on or about August 21, 2019.
The Company has entered the third quarter of 2019 with significantly increased backlog compared to the starting backlog for the second quarter of 2019. The Company also expects the start of its data center production ramp in the third quarter.
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 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 and the Company’s short form prospectus dated August 9, 2019. 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 Gross margin is a non-IFRS 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-IFRS measure. EBITDA excludes share-based compensation, amortization, depreciation, interest, and tax expenses.