Spectra7 Updates Expected Sales Outlook for the Year Ending December 31, 2023

Successful Testing Event with Leading Datacenter Equipment and Cable Manufacturers Advances Hyper-Scale Development Plans for 2024

SAN JOSE, Calif., Dec. 27, 2023 /PRNewswire/ -- (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 updated its business outlook for the year ending December 31, 2023. Additionally, the Company announces that it has demonstrated successful interoperability testing with key switch, equipment and cable manufacturers for the expected 2024 hyperscaler build-out at 800Gbps and 1600Gbps speeds. Unless otherwise indicated, all dollar amounts in this press release are expressed in US dollars.

Based on revised delivery timetables with customers, Spectra7 now expects fourth quarter revenue to be approximately $0.1 million¹, and revenue for the full year 2023 is expected to be approximately $9.7 million¹.

While customer backlog remains strong in Q4, Spectra7 is temporarily delaying order fulfillment in the quarter to manage distributor inventories at optimal levels. Based on existing customer orders placed in 2023 to date and these actions, Spectra7 expects volume and revenue to increase strongly in the first half of 2024 as orders are fulfilled.²

The Company also reported successful validation of its latest chips for 800/1600Gbps interconnects, with mass production and deployment being accelerated for U.S. data centers. The Company recently attended the Ethernet Alliance Interop Plug Fest where industry leading data center equipment suppliers tested interoperability among devices, including using Spectra7-based cables with major switch and server configurations to be built beginning in 2024. These new datacenter architectures are performing well and provide important confirmatory data for hyperscale buildout plans in the year ahead.

Also as a result of this event, key marketing and sales activities will be advancing, including two leading cable partners planning to demonstrate Spectra7 enabled Active Copper Cables (ACCs) interoperating with equipment from several leading data center infrastructure suppliers at a major industry trade show in January 2024.²  

"Recent industry events confirmed that cables enabled by the latest Spectra7 chips interoperate well with top high performance networking hardware designed for next generation AI and machine learning environments. This has generated significant activity with key partners and customers that are readying deployments of 800/1600Gbps installations. Our hyperscale customers remain focused on using ACC interconnect technologies to secure critical improvement to power and latency performance metrics as they move toward leading edge 800Gbps and 1600Gbps data rate deployments. With an increased focus on AI infrastructure buildout, we believe the ACC connectivity market opportunity is growing rapidly³," said Raouf Halim, Chief Executive Officer of Spectra7.

"We also made the decision to hold certain Q4 shipments to align with revised buildout schedules with our China-based datacenter users. This decision keeps inventory better aligned to current deployment schedules as these programs continue to move forward. We also anticipate an additional distributor joining us in 2024², as the market for our ACC solutions significantly expands in the years to come³," said Halim. 

Preliminary fourth quarter 2023 revenue results¹

The Company expects to report revenue of approximately $0.1 million for the fourth quarter of 2023, bringing revenue in the second half of 2023 to $3.3 million. The Company previously forecasted revenue for the second half of 2023 to be in the range of $6.0 million to $6.8 million, which included $3.2 million in reported third quarter 2023 revenue.

The change in revenue outlook for Q4 and the second half of 2023 reflects slower buildout activity in China, which has caused distributor inventories to grow, and would continue to do so if shipments were maintained at the prior order pace. The Company has decided to withhold a portion of the ordered shipments to the distributors in Q4 2023, except for critical shipments based on end customer demand, to better align to the timing and pace of the continued buildout activity. The Company expects that revenues should substantially increase in the first half of 2024².

NOTES:

¹  All information herein is subject to change based on the reported audited annual financial results, expected to be reported no later than April 29, 2024.
² This is forward-looking information and is based on a number of assumptions which include the current and anticipated customer purchase orders received, supply outlook and anticipated operational expenditures. See "Cautionary Notes".
³ Spectra7 internally generated model based on 650Group silicon chipsets for Ethernet optical transceivers and active cable alternatives posted July 2023. This is forward looking information. See "Cautionary Notes."

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 a technical support location in Dongguan, China. For more information, please visit www.spectra7.com. 

Neither the TSX Venture Exchange nor its regulation services provider (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 expected hyperscaler build-out in 2024, the Company's expected Q4 revenue, expectation for revenue in the first half of 2024, the Company's intention to accelerate mass production and deployment of its latest chips, the Company's intention to demonstrate ACCs at a trade show in January 2024, 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, 2022. 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, Managing Director
Darrow Associates Investor Relations
mkreps@darrowir.com 
214-597-8200

Spectra7 Microsystems Inc.
Dave Mier
Interim Chief Financial Officer
925-858-7011
ir@spectra7.com

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SOURCE Spectra7 Microsystems Inc.