Spectra7 Announces Preliminary Fourth Quarter 2015

PALO ALTO, CA and TORONTO, ON--(Marketwired - January 21, 2016) - Spectra7 Microsystems Inc. (TSX: SEV) ("Spectra7" or the "Company") today announced preliminary selected unaudited financial results for the three and twelve months ended December 31, 2015. Audited financial statements for the 2015 financial year will be released in late March 2016. The information contained herein may change based on final results. Unless otherwise indicated, all amounts are expressed in US dollars. 

The Company expects to report revenue of approximately $1.6 million for the fourth quarter of 2015, representing an increase of 82% over the third quarter revenue of $0.9 million. The majority of this growth was driven by bookings for the Company's new high performance embedded products which are used in high growth consumer market segments including virtual reality, augmented reality and media interconnects. Gross margin¹ as a percentage of revenue for the fourth quarter is expected to be approximately 46%, down 15% from the prior quarter. These reductions are due in large part to pre-production costs in connection with several of the Company's new products. The Company expects pre-production costs to decrease, and gross margins to increase as production levels ramp up during the first quarter of 2016. 

Q1 2016 OUTLOOK: Orders in Q1 2016 Already Exceed Expected Q4 2015 Revenue

The Company also announced that it has already received customer orders for the first quarter of 2016 that exceed the $1.6 million in expected revenue for the fourth quarter of 2015.

"The year 2016 is off to a great start as new product design-ins begin to convert into volume orders," stated Tony Stelliga, CEO of Spectra7. "We believe that 2016 is going to be a break-out year across a variety of product categories that could use Spectra7's patented technology."

DESIGN-IN UPDATE: Design-in Activity Remains Strong

The Company also announced that during the fourth quarter of 2015, ten additional design-ins were added to the Company's roster across four new market segments. Over six products containing the Company's technology were showcased at the recent Consumer Electronics Show ("CES") held in Las Vegas, earning a total of 10 innovation awards.

The Company's patented ultra-thin interconnect technology earned three new patents during the fourth quarter of 2015, bringing the Company's total patent portfolio to 47. The Company's ultra-thin interconnect technology is now embedded in over 50 brands worldwide.

"We believe that Spectra7's 2015 design-in activity is progressing nicely through order book to revenues. This activity continues to reflect the unique value of the Company's products, technology and business model across a growing range of high growth market segments including virtual reality, augmented reality, wearable computing and consumer electronics," said Mr. Stelliga. "Consumer product news flow accelerated at CES and we believe this will further accelerate adoption of Spectra7's products."

ABOUT SPECTRA7 MICROSYSTEMS INC.

Spectra7 Microsystems Inc. is a high performance consumer connectivity company delivering unprecedented bandwidth, speed and resolution to enable disruptive industrial design for leading consumer electronics manufacturers in virtual reality, augmented reality, wearable computing and ultra-HD 4K/8K Displays. Spectra7 is based in Palo Alto, California and Markham, Ontario with a Design Center in Cork, Ireland. 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, 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, 2014 and the interim MD&A for the nine months ended September 30, 2015. 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) Additional 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.