Data Center Demand Ramps even as COVID-19 Impacts the Company

(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.”

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 months ended March 31, 2020 for reconciliation to measures reported in the Company’s financial statements.

2 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.

3 Refer to the Company’s interim MD&A for the three months ended March 31, 2020 for more details on the impact of the COVID-19 on the Company’s operations.

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, 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 Information Form and annual MD&A for the year ended December 31, 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.

Spectra7 Microsystems Inc. James Bergeron Investor Relations 289-512-0541 ir@spectra7.com Spectra7 Microsystems Inc. Darren Ma Chief Financial Officer 669-284-3170 pr@spectra7.com

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