Spectra7 Announces Financial Results for Three Month Period Ended March 31, 2014
29 May 2014 - 11:03AM
Marketwired Canada
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 unaudited financial results for the three month period ended
March 31, 2014 ("Q1"). A copy of the unaudited condensed interim consolidated
financial statements for the three month period ended March 31, 2014 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.
Q1 Highlights
-- Revenue for the quarter ended March 31, 2014 was $0.9 million, an
increase of more than three times the revenue in the same quarter of
2013.
-- Revenue from the Company's interconnect products increased 30% for the
quarter ended March 31, 2014 to $0.8 million compared to $0.6 million
for the quarter ended December 31, 2013.
-- Overall gross margins as a percent of revenue increased to 76% for the
quarter ended March 31, 2014, compared to 63% for the quarter ended
December 31, 2013 and 42% for the three month ended March 31, 2013.
-- Gross margins for the Company's interconnect products increased to 75%
for the quarter ended March 31, 2014, compared to 74% for the quarter
ended December 31, 2013 and from 70% for the quarter ended March 31,
2013. The introduction of new products and retail channel strategies
continues to contribute to the Company's strong gross margin trend.
-- Significant progress made in expanding the Company's retail channel for
CouchConnect(TM) with the addition of Walmart.com and Newegg.com
authorized retailers shipping CouchConnect(TM) across the United States.
-- Completed equity public offering of over CDN$7 million to accelerate
product development.
"The Company has achieved significant milestones this quarter. We believe that
the unique value premise of our technology and products resonates well with our
customers, investors and partners as we expand our footprint into segments
requiring high bandwidth, ultra-thin and low latency connections from "wearable"
visual displays to next-generation wall-mounted 4K UltraHD panels," said Tony
Stelliga, CEO of Spectra7. "Our recent equity fundraising will help accelerate
new product development to meet the broadening demand for this unique
capability."
Financial Summary
For the three month period ended March 31, 2014, the revenue remained strong at
$0.9 million, over three times the revenue in the same quarter in the previous
year.
Gross margins for the three month period ended March 31, 2014 were $0.7 million
which was 5% higher than the previous quarter. Gross margin percent improved
from 63% in the previous quarter to 76% in the current quarter.
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. On April 28, 2014, the
Company issued an additional 3,500,000 units pursuant to the exercise in full of
the agent's over-allotment option at a price of CDN$0.30 for a gross proceeds of
CDN$1,050,000. The Company intends to use the proceeds from the offering as
disclosed in the final prospectus dated March 24, 2014.
The following table is a summary of the financial information presented in the
financial statements.
Three months
Three months ended
ended December 31,
March 31, 2014 2013
(unaudited) (unaudited) Percent Change
$000 $ $ Q1 over Q4
---------------------------------------------
Revenue
Wireless 102 404 -75%
Interconnect 759 585 30%
---------------------------------------------
Revenue 861 989 -13%
Product Gross Margin %
Wireless 79% 88% -9%
Interconnect 75% 74% 1%
---------------------------------------------
Product Gross Profit 76% 80% -4%
Provision for Write Down - 167 0%
Percent of Revenue 0% 17% -17%
Total Gross Margin 652 623 5%
Total Gross Margin % 76% 63% 13%
Operating Expenses 2,376 2,492 -5%
Other Expenses 1,055 2,977 -65%
---------------------------------------------
Net loss (2,779) (4846) -43%
Revenue
Revenue for the three months ended March 31, 2014 was $0.9 million compared to
$1.0 million for the previous quarter. The Company continues to experience
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.
The Company's wireless SimplyRF(TM) analog intellectual property ("IP")
technology continued to generate strong revenue in the quarter. SimplyRF(TM)
licensing revenue in the previous quarter was $0.3 million due to a milestone
payment under a contract with a large TV manufacturer. Monthly royalty payments
under that contract started in January 2014 and are expected to continue for the
remainder of 2014.
Gross Margins
Percentage of total gross margin improved from 63% in the previous quarter to
76% for the three months ended March 31, 2014.
Percentage of product gross margins(1) for interconnect products improved in the
three months ended March 31, 2014 over the previous quarter by 1% while
decreasing for wireless by 9% due to a lower mix of IP licensing revenue.
Product gross margins(1) represent revenue less the direct costs of
manufacturing including yield loss and freight costs. Total gross margin in the
prior quarter represents product gross margin less a provision to write-down
surplus, obsolete, or on-hand inventory to its recoverable amount which was done
for the older product line including demodulators, tuner and cable components.
The Company does not expect further significant provisions in the foreseeable
future as the Company continues its transition to new, higher average selling
prices and higher gross margins.
Expenses
Operating expenses decreased from the previous quarter by 5% as the Company
continues to carefully control both resources and related expenses. The Company
has recently hired a small number of engineers that will be used to accelerate
new product development. This will increase expenses nominally in the next
quarter.
Other expenses decreased 65% from the previous quarter due mainly to a year-end
adjustment made in December 2013 that will not occur in 2014.
For a complete discussion of expenses please refer to the financial statements
and management's discussion and analysis for the three months ended March 31,
2014.
Product and Customer Development
During the three month period ended March 31, 2014, the Company continued to
advance its product offering and expanded into new retail sales channels.
Product Announcements
In January 2014, the Company announced the launch of CouchConnect(TM), a
portable five meter/16 foot plug'n'play solution capable of delivering true,
real time 1080p HD or 4K UltraHD content from a mobile device to a main screen.
Also in January 2014, the Company unveiled its Detectiv4K(TM) integrated
audio/video performance monitoring technology and announced that Detectiv4K(TM)
was embedded in Monster(R) Cable's ("Monster") 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.
In May 2014, the Company announced that the Company's DisplayDirect(TM) Virtual
Reality VR7100 product had commenced production based on purchase orders to use
the Company's product in leading wearable computing and virtual reality
platforms.
Customer Announcements
During the first quarter 2014, the Company made significant progress in
expanding its retail channel for CouchConnect(TM) to both "bricks and mortar"
storefront retailers and leading online e-tailers. The Company expanded its
online presence with the addition of Newegg.com, Walmart.com, Amazon.ca,
Kmart.com and Sears.com as authorized retailers shipping CouchConnect(TM) across
the United States.
In March 2014, the Company announced that Newegg was shipping the entire
CouchConnect(TM) product line. Newegg is an award-winning electronics-focused
e-retailer. The product also became available on Kmart.com and Sears.com in
April 2014.
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.
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 and product gross margin are additional GAAP measures. 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Spectra7 Microsystems Inc.
Sean Peasgood
Investor Relations
416.565.2805
ir@spectra7.com
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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