Mr. Dave Mier reports

SPECTRA7 UPDATES EXPECTED SALES OUTLOOK FOR THE YEAR ENDING DECEMBER 31, 2023

Spectra7 Microsystems Inc. today provided its updated business outlook for the year ending Dec. 31, 2023. Additionally, the company has demonstrated successful interoperability testing with key switch, equipment and cable manufacturers for the expected 2024 hyperscaler build-out at 800 Gbps (GigaBits) and 1,600 Gbps speeds. Unless otherwise indicated, all dollar amounts in this press release are expressed in United States dollars.

Based on revised delivery timetables with customers, Spectra7 now expects fourth quarter revenue to be approximately $100,000 (1), and revenue for the full year 2023 is expected to be approximately $9.7-million (1).

While customer backlog remains strong in Q4, Spectra7 is temporarily delaying order fulfilment 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 800/1,600 Gbps interconnects, with mass production and deployment being accelerated for United States data centres. The company recently attended the Ethernet Alliance Interop Plug Fest where industry leading data centre 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 datacentre 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 800/1,600 Gbps 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 800 Gbps and 1,600 Gbps 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 2024 (2), as the market for our ACC solutions significantly expands in the years to come (3)," said Halim.

Preliminary fourth quarter 2023 revenue results (1)

The company expects to report revenue of approximately $100,000 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.

(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.

About Spectra7 Microsystems Inc.

Spectra7 Microsystems is a high performance analogue 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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