Spectra7 Announces First Quarter Financial Results

(TSX-V: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 period ended March 31, 2020. A copy of the unaudited consolidated financial statements for the three months ended March 31, 2020 prepared in accordance with International Financial Reporting Standards and the corresponding management’s discussion and analysis (“MD&A”) will be available under the Company’s profile on www.sedar.com. All amounts are in US dollars unless otherwise noted.

Q1 2020 Financial Summary

• Revenue for Q1 2020 was approximately $0.1 million, representing a decrease of approximately 89% over the prior quarter and approximately 93% over the same period in the prior year primarily driven by supply and demand interruptions from the impact of COVID-19.

• Gross margin¹ as a percentage of revenue for Q1 2020 was 54%, representing an increase of approximately 3% sequentially and a 1% decrease from the same period in the prior year.

• Non-IFRS operating expenses in Q1 2020 was $1.3 million, down approximately $1.2 million sequentially and down $1.5 million from the same period in the prior year driven by temporary employee furloughs.

• EBITDA² loss of approximately $0.9 million compared to a loss of approximately $1.7 million in the prior quarter, and a loss of $1.7 million in the same period in the prior year.

Update on Data Center Market Traction

• On June 3, 2020, the Company announced that cable assembly customers have ordered over $1.0 million in Spectra7 products in the second quarter to support ramping demand from Hyperscaler Data Center Operators both in China and the US.

Q2 2020 Outlook

While the Company’s customer demand and supply chain were adversely impacted by COVID-19³ in the first quarter of 2020, the Company has received record order backlog for its Data Center solutions in Q2 2020 and expects significant sequential revenue growth.

CEO COMMENTARY

“After a challenging first quarter due to the COVID-19 global pandemic, we are pleased with our continued momentum in the data center market as evidenced by record data center orders”, said Spectra7 CEO Raouf Halim. “Early design wins of our GaugeChanger technology are now hitting volume production. The compelling CAPEX reductions and OPEX savings of our technology continue to resonate well with operators, and we expect a strong ramp throughout 2020.”