Mr. Raouf Halim reports

SPECTRA7 ANNOUNCES THIRD QUARTER 2023 FINANCIAL RESULTS

Spectra7 Microsystems Inc. has released its financial results for the three and nine months ended Sept. 30, 2023. A copy of the interim consolidated financial statements for the three and nine months ended Sept. 30, 2023, and the corresponding management's discussion and analysis (MD&A) will be available under the company's profile on SEDAR+. Unless otherwise indicated, all dollar amounts in this press release are expressed in United States dollars.

"We are excited to report third quarter revenues of $3.2-million, maintaining our record revenue pace through the first nine months of the year of $9.6-million, even with the delayed hyperscaler upgrade cycle that we believe will offer significant sales opportunities for our active copper cable solutions ahead. We have also maintained our cost-efficient operating structure, with non-IFRS [international financial reporting standard] operating expenses of approximately $2.5-million for the third quarter," said Raouf Halim, chief executive officer.

"We are pleased to see clear signs of progress toward leading edge 800G and 1.6TB data rate interconnects to be deployed in the most advanced implementations at our hyperscale customers. New high-growth applications, such as artificial intelligence, are increasingly sensitive to not only bandwidth demands, but also the high-power requirements of other cabling options, some of which even exceed the power required by the switch itself. Spectra7's ACC cables provide a unique solution to this challenge, reducing both the capital cost and operating cost of a hyperscale data centre. We believe the ACC connectivity market opportunity is estimated to reach $1-billion by 2027," said Mr. Halim.

"We are actively engaged with a major data centre operator to deploy our ACC solutions in their AI clusters, and working with a range of industry players to support additional data centre needs at other customers as they upgrade to next-generation switches. Given our continued record sales pace, we have updated our second-half revenue outlook to between $6-million and $6.8-million as we continue to build upon our technology leadership position in ultrahigh-speed cabling for data centres and hyperscalers," said Mr. Halim.

Third quarter 2023 financial highlights:

• Third quarter 2023 revenue of $3.2-million, and $9.6-million through the first nine months of 2023, compared with $2.7-million and $8.3-million in the respective 2022 periods.
• Gross margin as a percentage of revenue in the third quarter was 50 per cent compared with 55 per cent in the same quarter in the prior year, due to certain inventory produced with additional cost during wafer shortages, and is expected to improve in the fourth quarter.
• Non-IFRS operating expenses were $2.5-million in the third quarter, compared with $1.9-million in the same quarter in the prior year and $2.4-million in the second quarter of 2023 as the company continues to maintain a cost-efficient operating approach.
• Basic and diluted loss per share for the third quarter was four cents, compared with a basic and diluted loss per share of four cents in the same period of 2022.
• EBITDA (earnings before interest, taxes, depreciation and amortization) loss in the third quarter was $700,000, compared with an EBITDA loss of $200,000 in the same period of 2022 and EBITDA loss of $100,000 in the second quarter 2023, due to increased investment in product development to address growing market opportunities.

H2 2023 outlook

The company anticipates revenue for the second half of 2023 to be in the range of $6-million to $6.8-million, updated from a range of $5.5-million to $7-million. The company also anticipates maintaining its efficient operating expense structure and non-IFRS operating expenses for H2 2023 at a range of $4.5-million to $4.9-million (non-IFRS operating expenses for H1 2023 were $4.6-million).

Chief financial officer leave of absence

The company also announces that its chief financial officer, Bonnie Tomei, is taking a personal leave of absence effective Dec. 1, 2023, due to a family medical matter. The leave is expected to be for approximately three months but may be adjusted as necessary. Spectra7 expects to hire an interim CFO and does not anticipate any interruption to its continuing business plans or outlook.

About Spectra7 Microsystems Inc.

Spectra7 Microsystems 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 centres and other connectivity markets. Spectra7 is based in San Jose, Calif., with a design centre in Cork, Ireland, and a technical support location in Dongguan, China.

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