Spectra7 Announces Preliminary First Quarter 2019 Financial Results

Revenue up 55% Year-over-Year; Strong Momentum in Data Center Market

SAN JOSE, Calif.–(BUSINESS WIRE)–(TSX:SEV) Spectra7 Microsystems Inc. (“Spectra7” or the “Company”), a
leading provider of high-performance analog semiconductor products for
broadband connectivity markets, today announced preliminary selected
unaudited financial results for the three month period ended March 31,
2019. Unaudited financial results for the three months ending March 31,
2019 will be released in May 2019. The information contained herein may
change based on final results. Unless otherwise indicated, all amounts
in this release are expressed in US dollars.

PRELIMINARY Q1 2019 RESULTS

The Company expects to report revenues of approximately $1.4 million for
the first quarter of 2019, flat versus the prior quarter and up 55% from
the same quarter in 2018. The quarter’s revenue was driven primarily by
the continued recovery of Spectra7’s core virtual reality (“VR”)
business as well as the ramp of new VR design wins, coupled with
continued pre-production revenue from its patented active copper cable
solutions for the Data Center market. Gross margin1 as a
percentage of revenue is expected to be approximately 55%, up from 53%
in the prior quarter due to a richer mix of higher margin products and
flat versus the year-ago quarter. Non-IFRS operating expenditures are
expected to be approximately $ 2.8 million, a slight increase from Q4
2018 and down 13% from the same quarter a year ago, due to strong
operating expense discipline.

CEO COMMENTARY

“I am pleased with our Q1 performance in what is seasonally a down
quarter in our industry. I am particularly encouraged by our continued
design win traction in the data center market coupled with continued
strong share of the VR market with industry-leading OEMs,” said Spectra7
CEO Raouf Halim. “The anticipated production deployment of our data
center active copper cable solutions with a major China hyperscale
operator in the second half of this year, recovery in our core VR
business, and continued operational discipline puts us in a strong
position in 2019.”

Quarterly Highlights

  • Spectra7 continues to experience strong traction with its data center
    solutions and announced ten new customer design-ins in Q1 2019, for a
    total of 55 to date.
  • A major China Hyperscaler Data Center Operator is on track to deploy
    active copper cables enabled by Spectra7 technology starting in the
    second half of 2019.
  • A major Ethernet Switch OEM has chosen to develop their own branded
    active copper cables with Spectra7 embedded ICs for production
    shipments beginning this year.
  • The Company announced that it now has key partnerships with 4 of the
    top 5 global cable data center interconnect companies.
  • The Company showcased 25/100/200/400 Gbps data center interconnects at
    DesignCon and OFC in the first quarter including demonstrations with
    leading system OEMs such as Arista, Cisco Systems, Intel, Juniper and
    Mellanox.
  • The Company believes it is on track to achieve significant revenue
    growth in the second half of the year.

The Company continues to evaluate 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. Gross margin is
presented in this press release consistent with information presented in
the Company’s financial statements. Gross margin has been calculated by
deducting manufacturing cost of sales, and provision for inventory
write-downs from revenue. Management of the Company believes that
providing this information allows investors to better understand the
Company’s historical and future financial performance.

Contacts

For more information, please contact:

Spectra7 Microsystems Inc.
Sean Peasgood
Investor Relations
647-503-1034
ir@spectra7.com

Spectra7 Microsystems Inc.
Darren Ma
Chief Financial Officer
669-284-3170
pr@spectra7.com

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