Spectra7 Microsystems Inc. ("Spectra7" or the "Company") (TSX VENTURE:SEV), a
high performance analog semiconductor company delivering unprecedented speed,
resolution and signal fidelity to consumer and wireless infrastructure products,
today announced its audited financial results for the fifteen month period ended
December 31, 2013. A copy of the audited consolidated financial statements for
the fifteen month period ended December 31, 2013 prepared in accordance with
International Financial Reporting Standards and the corresponding Management's
Discussion and Analysis will be available under the Company's profile on
www.sedar.com. All amounts are in US dollars unless otherwise noted.
2013 Highlights
-- Revenue increased 45% for the 12 months ended December 31, 2013 to $3.0
million compared to $2.1 million for the 12 months ended December 31,
2012.
-- Revenue increased 61% for the quarter ended December 31, 2013 to $1.0
million compared to $0.6 million for the prior quarter ended September
30, 2013.
-- Product gross margins(1) were strong at 80% for the quarter ended
December 31, 2013 and 71% for the 12 months ended December 31, 2013.
-- Announcement of five new products during the year ended December 31,
2013.
-- Equity financings of $8.8 million to accelerate product development.
"The Company is now delivering on its vision to develop, launch and command
value for best-in-class products across multiple high growth segments," said
Tony Stelliga, CEO of Spectra7. "Our latest products are being adopted by market
leaders in UltraHD displays, consumer interconnects and wearable computing as we
showcase their extensive capabilities and consumer benefits. The year ended
December 31, 2013 included a major acquisition, with the successful
consolidation and streamlining of operations and costs. Shortly after the year
end, the Company closed an upsized CDN$7.0 million public offering to further
accelerate the roll-out of these new products."
Financial Summary
Following completion of the Company's previously disclosed qualifying
transaction (the "Qualifying Transaction"), the Company changed its financial
year end from September 30 to December 31 which resulted in a 15 month period
(October 1, 2012 to December 31, 2013) for its first reporting period.
Since completing the Qualifying Transaction, the Company has made significant
progress with respect to capital, products and customers. Re-affirming
preliminary financial results announced on January 24, 2014 for the fifteen
month period ended December 31, 2013, the Company had revenue of $3.1 million.
For the three month period ended December 31, 2013, the Company exceeded
previously disclosed results with revenue of $1.0 million, an increase of 61%
over the prior quarter ended September 30, 2013 and exceeded revenue for the
same quarter of the previous year by almost nine fold.
Product gross margins(1) for the three month period ended December 31, 2013 were
80%, above the preliminary results previously announced, due to product mix
consisting of higher margin products. Product margins continue this trend, which
started in the three months ended March 31, 2013, resulting in product gross
margins(1) for the twelve month period ended December 31, 2013 of 71% compared
to 67% for the twelve months ended December 31, 2012.
On March 28, 2014, the Company announced it had closed a public offering of
23,333,333 units for gross proceeds of CDN$7.0 million. The Company intends to
use the proceeds from the offering as disclosed in the final prospectus dated
March 24, 2014.
Results for the fifteen month period ended December 31, 2013 includes RedMere
from the date of acquisition, February 5, 2013. Results prior to February 5,
2013 include Fresco results only.
Fifteen Month
Period Ended Year ended
December 31 September 30
2013 2012
$000 $000
--------------------------------
Revenue 3,100 3,495
Cost of Sales 1,153 1,867
Gross Margin 1,948 1,627
Expenses 14,590 8,854
Other expense 5,445 4,591
Net loss (18,087) (11,818)
The Company believes that the most meaningful presentation of the financial
results is to discuss the results based on the new year-end for twelve months
ended December 31.
The following table outlines key financial information for the twelve month
period ended December 31, 2013 and 2012 and the three month period ended
December 31, and September 30, 2013.
Twelve Twelve Three Three
months months months months
ended ended ended ended
December December December September
31 31 31 30
2013 2012 Percent 2013 2013 Percent
$000 $000 Change $000 $000 Change
----------------------------------------------------------
Product Revenue 2,662 1,796 48% 643 613 5%
License IP Revenue 346 278 346 -
----------------------------------------------------------
Total Revenue 3,008 2,074 45% 989 613 61%
Product Cost 880 690 28% 200 193 4%
Inventory
Provision 186 279 -33% 173 -
----------------------------------------------------------
Total Cost of
Sales 1,066 969 10% 373 193 93%
Gross Margin 1,942 1,105 43% 616 420 47%
Product Gross
Margin % 71% 67% 4% 80% 69% 11%
Total Gross Margin
% 65% 53% 11% 62% 69% -6%
Expenses 10,509 7,246 31% 2,492 2,773 -10%
Amortization of
intangibles other
than licenses 2,726 2,726
Other expense 4,471 4,463 0% 393 856 -54%
Net loss (15,764) (10,604) (4,995) (3,209)
Revenue
Revenue for the twelve months ended December 31, 2013 was $3.0 million compared
to $2.1 million for the year ended December 31, 2012, an increase of 45% year
over year. The Company experienced strong demand for its active cable signal
processing technology which is used by market leading customers to design,
develop and launch next-generation interconnects for HD displays, wearable
computing and second screen viewing.
Revenue for the quarter ended December 31, 2013 was $1.0 million, an increase of
61% over the previous quarter. There was strong interest for the Company's
broader analog IP technology from major system on chip companies which
contributed to the revenue increase in the quarter.
Gross Margins
Product gross margins(1) improved year over year from 67% in 2012 to 71% in 2013
reflecting the
Company's strategy to modify traditional distribution channel modes and focus on
higher margin products.
Product gross margins(1) represent revenue less the direct costs of
manufacturing including yield loss and freight costs. Total gross margin
represents product gross margin less a provision to write-down surplus,
obsolete, or on-hand inventory to its recoverable amount which was done for
demodulators, tuner and cable components. The Company does not expect further
significant provisions in the foreseeable future.
Expenses
Expenses increased year over year by 31% as a result of certain one-time
expenses relating to the completion of the Qualifying Transaction and opening of
the Company's office in Silicon Valley.
For the quarter ended December 31, 2013, expenses were 10% lower than the
previous quarter as a result of cost control programs to reduce variable
expenses such as travel.
For a complete discussion of expenses please refer to the financial statements
and management's discussion and analysis.
Product and Customer Development
During the quarter ended December 31, 2013, the Company announced the VR7100
chip which delivers the speed and low latency to enable new levels and lengths
of ultra-light and wearable connectivity between virtual reality ("VR") headsets
and compute cluster or gaming machine. The VR7100 seeks to address the bulk and
weight of previous VR platforms.
On September 24, 2013, the Company announced CouchConnect(TM), a portable, five
meter / 16 foot, plug'n'play, ultra-light and ultra-long active HDMI cable
capable of delivering true, real-time 1080p HD or 4K UltraHD content from any
mobile device to any large screen display. On January 7, 2014, the Company
announced that CouchConnect(TM) would be sold on Walmart.com. In March 2014, the
Company announced that it had expanded its retailer presence with the
availability of CouchConnect(TM) on Newegg.com.
On January 7, 2014, the Company unveiled its Detectiv4K(TM) integrated
audio/video performance monitoring technology and announced that Detectiv4K(TM)
was now embedded in Monster(R) Cable's Black Platinum(R) cable, adding to the
existing use of the Company's home theatre technology in Monster's Core Power(R)
and MSeries(R) cable lines.
ABOUT SPECTRA7 MICROSYSTEMS INC.
Spectra7 Microsystems Inc. is a high performance analog semiconductor company
delivering unprecedented speed, resolution and signal fidelity to consumer and
wireless infrastructure products. Spectra7's new system-level components address
throughput bottlenecks and satisfy the exponential demand for more bandwidth and
lower costs in mobile and internet infrastructure equipment, including handsets,
tablets, base stations and microwave backhaul systems. Spectra7 is headquartered
in Markham, Ontario with development centers in Silicon Valley, Irvine,
California and Cork, Ireland. For more information, please visit
www.spectra7.com.
ADDITIONAL GAAP MEASURES
Gross margin is an additional GAAP measure. Gross margin is presented in this
press release as additional information regarding the Company's financial
performance. The Company's method of calculating gross margin may differ from
other methods used. Gross margin has been calculated by deducting manufacturing
cost of sales from revenue excluding any provision for inventory write- downs.
Gross margin helps the Company to plan and forecast for future periods as well
as being a close proximity to cash. Management of the Company believes that
providing this information, in addition to IFRS measures, allows investors to
see the Company's results through the eyes of management, and to better
understand its historical and future financial performance.
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, 2013. 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.
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.
(1) Gross margin is an additional GAAP measure. See "Additional GAAP Measures".
FOR FURTHER INFORMATION PLEASE CONTACT:
Spectra7 Microsystems Inc.
Melissa Chee, Vice President,
Corporate Marketing and Product Management
647-472-2468
pr@spectra7.com
www.spectra7.com
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