Spectra7 Microsystems is making “significant” progress, says PI

Third quarter results from Spectra7 Microsystems (Spectra7 Microsystems Stock Quote, Chart, News: TSXV:SEV) show that the company is making “significant progress” with its Virtual Reality chipsets, says PI analyst Pardeep Sangha.

Yesterday, Spectra7 reported its Q3, 2014 results. The company lost (U.S.) $1.88-million on revenue of $1.65-million, up 49% from last year’s third quarter topline of $612,902.

“Spectra7’s success with our new and existing customers reflects the unique value of our products including virtual reality, wearable computing and consumer interconnects, and has resulted in record revenue and gross margins for the second consecutive quarter,” said CEO Tony Stelliga. “The momentum in revenue, combined with the commencement of warrants being exercised has strengthened the capital structure of the company.”

Sangha notes that Spectra7 has decided to double down its focus on the Virtual Reality market, where it sees immediate revenue opportunities. He points out that the company recently announced an a half-million unit order for its Virtual Reality chipsets and continues to work closely with two major television manufacturers. Management hopes to have design wins for 4K TVs announced early next year.

In a research update to clients this morning, Sangha said he is decreasing his fiscal 2015 revenue forecast for Spectra7 because of the delay in announcing a win with a major TV manufacturer. He now expects the company will generate an EBITDA loss of $230,000 on revenue of $15.7-million, not an EBITDA loss of $700,000 on revenue of $18.2-million, which he had previously modeled. He explains that the improvement in EBITDA comes from a decrease in the company’s costs.

Sangha’s new forecast, he explains, is based on $9-million in Virtual Reality-related revenue, $3.2-million in TV-related revenue and $3.5-million in wireless and home theatre revenue. Sangha says Spectra7 is a stock on his Technology Watchlist, and as such he does not provide a target price or recommendation.