Spectra7 Announces Fourth Quarter and Annual Financial Results for the Year Ended December 31, 2018
18 March 2019 - 9:10PM
Business Wire
Strong Second Half Virtual Reality (“VR”)
Recovery with Active Copper Cable Traction in the Data Center
Market Carrying into 2019
(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 audited financial results for the year ended December
31, 2018. A copy of the audited consolidated financial statements
for the 12 months ended December 31, 2018 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.
Q4 2018 Financial Summary
- Revenue for Q4 2018 was approximately
$1.4 million, representing a 37% increase over the prior quarter
and 51% decrease over the same period in the prior year.
- Gross margin1 as a percentage of
revenue for Q4 2018 was 53%, approximately flat sequentially and
from the same period in the prior year.
- Non-IFRS operating expenses in Q4 2018
was $2.6 million, a slight increase from $2.5 million from the
prior quarter and down approximately $1.2 million or 32% from the
same period in the prior year.
- EBITDA2 loss of approximately $1.5
million compared to a loss of approximately $1.7 million in the
prior quarter. Despite lower revenue, Q4 2018 EBITDA loss improved
by $0.3 million from the same period in the prior year due to
strong operating expense management.
- A $1.9 million non-cash impairment
charge was taken predominantly due to the lower than anticipated
sales of older mixed reality solutions. The Company continues to
maintain its strong position in the virtual reality market.
2018 Financial and Operational Summary
- Revenue for the year ended December 31,
2018 was $4.2 million as compared to $10.6 million in the previous
year, representing a 60% decrease driven primarily by weakness in
the VR market during the first half of 2018.
- Gross margin1 as a percentage of
revenue for the year ended December 31, 2018 was 53%, a decrease of
5% from the previous year driven by shipment of lower margin VR
products.
- Non-IFRS operating expenses for the
year ended December 31, 2018 were $11.2 million, representing a
decrease of $2.6 million from the previous year.
- EBITDA2 loss of approximately $7.7
million for the year ended December 31, 2018 compared to a loss of
approximately $6.0 million in 2017.
- Closed an aggregate of CAD $15.3
million bought deal public offering in January 2018 and CAD $7.9
million in private placement equity financings in July and October
2018.
CEO COMMENTARY
“After a very difficult first half of 2018 driven by VR market
softness, the VR markets recovered nicely in the second half of
2018 as revenues in the second half of 2018 increased by
approximately 44% compared to revenue in the first half of 2018,”
said Spectra7 CEO Raouf Halim. “We are also delighted by our strong
momentum in the Data Center market and expect multiple Data Center
deployments of our Active Copper Cable solutions in the second half
of 2019.”
Quarterly Highlights
- The Company continues to experience
strong traction with its data center solutions and announced nine
new customer design-ins in Q4 2018, for a total of 45 to date.
- The Company announced a key partnership
with Molex, a major Data Center Interconnect supplier.
- The Company achieved Low Latency Error
Free Performance with Mellanox ConnectX-5 Network Adapters.
- The Company has now announced key
partnerships with 4 of the top 5 global cable assembly
companies.
- A major China Hyperscaler Data Center
Operator has selected Spectra7 Active Copper Cable technology to
deploy starting in the second half of 2019.
- The Company showcased 25/100/200/400
Gbps Data Center Interconnects at DesignCon and OFC in early 2019
including demonstrations with leading system OEMs including:
Arista, Cisco, Intel, Juniper and Mellanox.
- With increased Data Center prototype
revenue in the Q4 2018, the Company expects to achieve production
revenue ramp in the second half of 2019.
Outlook
Despite seasonal weakness in the first quarter, the Company
entered the first quarter of 2019 with its highest starting backlog
to date. The Company expects significant annual year over year
revenue growth in 2019 driven by the expected ramp of Data Center
products coupled with the recovery of the VR market. The Company is
currently evaluating various capital raise options, including but
not limited to, a loan based on its valuable patent portfolio.
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, expected recovery of
the VR market, revenue growth, revenue in the 2019 financial year,
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, 2018. 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 Gross margin is a non-GAAP measure. Refer to “Revenue and
Gross Margin” in the Company’s annual MD&A for the year ended
December 31, 2018 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.
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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