Spectra7 Announces Third Quarter 2018 Financial Results
November 14 2018 - 4:00PM
Business Wire
Private Placement Strengthens Working
Capital to Support Data Center Ramp
(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 nine
months ended September 30, 2018. All dollar amounts in this release
are expressed in US dollars unless otherwise stated. A copy of the
unaudited interim consolidated financial statements for the three
and nine month periods ended September 30, 2018 and corresponding
management’s discussion and analysis will be available under the
Company’s profile on www.sedar.com.
Q3 2018 Financial Results
- Revenue for the quarter ended September
30, 2018 was approximately $1.1 million, representing an increase
of approximately 30% from the prior quarter. Data Center prototype
revenue nearly doubled in the third quarter of 2018 as compared to
the prior quarter, while Spectra7 continues to enjoy a strong
position in the virtual reality (“VR”) and mixed reality (“MR”)
markets.
- Gross margin1 as a percentage of
revenue was approximately 50%, a decrease from 55% the prior
quarter driven by a higher mix of lower margin parts for older
generation VR programs.
- Non-IFRS expenses2 were approximately
$2.5 million, representing a decrease of approximately 11% from the
prior quarter, while IFRS operating expenses were approximately
$3.5 million, representing a decrease of approximately 3% from the
prior quarter. The continued sequential decline in Non-IFRS
expenses is due primarily to continued cost reductions and expense
management.
- Adjusted EBITDA3 loss was $1.7 million,
which was a 19% improvement from the $2.1 million EBITDA loss in
the prior quarter.
CEO COMMENTARY
“Our investment in Active Copper Cable solutions for the
burgeoning Data Center Interconnect market is starting to pay off
as we expect significant revenue growth in this current quarter,”
said Spectra7 CEO Raouf Halim. “Additionally, we are seeing
seasonal recovery in our core VR business as we maintain our strong
position in that market.”
Quarterly Highlights
- On July 6, 2018, the Company closed an
oversubscribed private placement consisting of 28,336,290 units at
a price of CDN $0.105 per unit for gross proceeds of approximately
$2.3 million.
- The Company experienced continued
strong customer engagement including 9 new Data Center design-ins
in the third quarter of 2018 for a total of 36 Data Center
design-ins to date.
- The Company received multiple orders
from cable partners for its first Data Center deployments in
China.
- The Company announced a major Data
Center partner, Zhaolong Interconnect Technology Co., who is now
offering data center cable assemblies featuring Spectra7’s embedded
GaugeChangerTM chips.
- The Company announced a new HDMI 2.1
device to support Active Copper Cables for connecting to enhanced
4K and emerging 8K displays.
Highlights Subsequent to Quarter End
- On October 30, 2018, the Company closed
an oversubscribed, non-brokered private placement consisting of
32,412,228 units at a price of CDN $0.15 per unit for gross
proceeds of approximately CDN $4.9 million.
- On November 8, 2108, the Company
announced a key partnership with Molex, a major Data Center
Interconnect supplier.
Outlook
The Company has entered the fourth quarter of 2018 with its
highest starting backlog of 2018 and expects sequential revenue
growth in the fourth quarter of 2018. Currently, the Company has
record Data Center order backlog on the books to be shipped in the
fourth 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.
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, outlook, revenue growth in the
fourth quarter of 2018, 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.
3 Non-GAAP Financial Measure - Adjusted EBITDA does not have any
standardized meaning prescribed by GAAP and is therefore unlikely
to be comparable to similar measures presented by other issuers.
Adjusted EBITDA is defined as net earnings before interest, taxes,
other expense (income), net, depreciation and amortization,
including amortization of intangibles, stock-based compensation,
and acquisition and strategic activities related costs. Management
believes adjusted EBITDA and the other non-GAAP and non-IFRS
financial measures are important indicators of the ongoing
operations of Spectra7’s business, provide an additional metric for
comparability between reporting periods and provide an additional
baseline for analyzing trends in Spectra7’s operations. Management
believes these financial measures provide a view of the Company’s
operations that excludes items that management believes are not
reflective of the Company’s operating performance, such as items
traditionally removed from net earnings in the calculation of
adjusted EBITDA as well as other expense (income), net. As a
result, these non-GAAP measures are provided to supplement
investors’ overall understanding of, and an enhanced level of
transparency into, Spectra7’s financial performance. Adjusted
EBITDA is not a calculation based on GAAP, and, in measuring the
Company’s performance, should not be considered as an alternative
to net income/(loss), which is the most directly comparable GAAP
financial measure.
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Spectra7 Microsystems Inc.Sean PeasgoodInvestor
Relations647-503-1034ir@spectra7.com
Spectra7 Microsystems Inc.Darren MaChief Financial
Officer669-284-3170pr@spectra7.com