Spectra7 Announces Preliminary Fourth Quarter 2021 Revenue and Record Order Backlog Entering 2022

Q4 2021 Revenue Expected to Be Up Approximately 600% Year-Over-Year

2022 Unconstrained Demand Expected to Exceed $20 million, Driven by $9 Million Starting Backlog

SAN JOSE, Calif., Jan. 24, 2022 /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 preliminary selected and unaudited financial results and a business update for the three month period ended December 31, 2021, and its initial outlook for fiscal 2022. Unless otherwise indicated, all dollar amounts in this press release are expressed in US dollars.

• Preliminary fourth quarter revenue of $2.6 million, up approximately 600% year-over-year¹
• Gross margin² as a percentage of revenue in the fourth quarter increased to approximately 59%¹
• Total order backlog of approximately $9 million entering 2022, with Q1 order demand starting at $6 million
• Full-year 2022 unconstrained product demand is expected to exceed $20 million, with revenue realization within the year potentially constrained by supply availability ³

"We had a very strong close to fiscal 2021 with hyperscale product sales driving fourth quarter revenue to a record high since our pivot into the data center market," said Raouf Halim, Chief Executive Officer. "Our visibility into 2022 has improved significantly as we start the new year with total order backlog of more than $9 million. First quarter demand is starting at $6 million. While industry-wide supply chain constraints are causing delays in delivering our customers' orders, we believe that we can satisfy at least half of our first quarter demand based on our current visibility to supply. Importantly, we expect our supply constraints to ease in the second half of 2022. We have also increased our total design ins from 95 to 98, to end the year of 2021 on a high note."³   

Preliminary fourth quarter 2021 revenue results¹
The Company expects to report revenue of approximately $2.6 million for the fourth quarter of 2021, compared with $1.6 million in the third quarter of 2021 and $0.4 million in the fourth quarter of 2020. This represents an increase of approximately 67% from the prior quarter and approximately 600% year-over-year.

Gross margin² as a percentage of revenue in the fourth quarter is forecasted to be approximately 59% compared with 57% in the third quarter of 2021 and 51% in the fourth quarter of 2020. Non-IFRS operating expenses⁴ are expected to be $1.9 million as the Company continues to focus on its production ramp to meet rapidly growing demand from its data center customers. Third quarter 2021 non-IFRS operating expenses⁴ were $2.0 million.

Industry-wide supply constraints impacted the Company's ability to meet customer demand in the fourth quarter. As a result, EBITDA⁵ loss for the fourth quarter of 2021 is expected to be $0.1 million, improving from the prior quarter EBITDA⁵ loss of $0.9 million and an EBITDA⁵ loss of $0.6 million from the same quarter in the prior year.

Following its customary reporting timeline, Spectra7 anticipates releasing its audited annual financial results for the year ended December 31, 2021 on or before the applicable regulatory deadline of May 2, 2022.

Preliminary Q1 FY2022 and FY2022 Outlook ³
Based on current order trends and $9 million in total backlog, Spectra7 expects revenue for the first quarter of 2022 will be in the range of $3.0 million to $4.0 million, given current constraints in the semiconductor supply chain.³

For fiscal 2022, the Company currently expects revenue to increase each quarter with an acceleration in the second half of the year. With the potential for improvement across the supply chain and continued strong demand driving order and backlog growth, unconstrained product demand for fiscal 2022 is expected to exceed $20 million, with full-year revenue realization potentially constrained by supply availability.³

NOTES:
¹ All information herein is subject to change based on the reported audited annual financial results, expected to be reported no later than May 2, 2022.
²  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.
³ 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 expenses.  See "Cautionary Notes".
⁴ 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.
⁵ 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.

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 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 expectation for 2022 revenue and supply availability, the Company's expectation regarding product demand in 2022, the Company's timeline for publication of its annual financial statements, 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 
[email protected]

Spectra7 Microsystems Inc.
Bonnie Tomei
Chief Financial Officer
669-212-1089
[email protected]

Spectra7 Microsystems Inc.
John Mitchell
Public Relations
650-269-3043
[email protected]

SOURCE Spectra7 Microsystems Inc.