Expects Q4 2021 EBITDA Profitability Based on Revenue Outlook
of $2.5 Million - $3.5 Million
SAN JOSE, Calif., Nov. 29, 2021 /CNW/ -- (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 a technical support location
in Dongguan, China. For more
information, please visit www.spectra7.com.
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
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SOURCE Spectra7 Microsystems Inc.