Sequans Communications Announces Third Quarter 2022 Financial Results
November 2, 2022

PARIS – November 2, 2022 – Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G solutions for IoT devices, today announced financial results for the third quarter ended September 30, 2022.

 

Third Quarter 2022 Summary Results Table:

(in US$ millions, except share and per share data) Q3 2022 Q2 2022 Q3 2021
Revenue           $16.5           $14.2          $11.9
Gross profit             12.8               8.6              5.8
Gross margin (%) 77.6  % 60.7  % 49.2  %
Operating profit (loss)              1.2             (2.1)            (5.1)
Net Profit (Loss)             (2.9)            (3.2)              0.2
Diluted earnings (loss) per ADS          ($0.06)       ($0.07)          $0.00
Non-IFRS diluted earnings (loss) per ADS *           $0.01       ($0.02)         ($0.15)
Weighted average number of diluted ADS (IFRS) 47,802,526 47,656,861 41,024,405
Weighted average number of diluted ADS (Non-IFRS) 52,620,229 47,656,861 41,024,405
* See Use of Non-IFRS/non-GAAP Financial Measures disclosure on page 3. IFRS Net Profit (Loss) includes significant non-cash interest expense, debt amendment  and change in value of embedded derivative that are excluded from Non-IFRS measures

 

“Third quarter revenue increased by 39% year-over-year and 16% sequentially, reflecting an increase in licensing revenue, including revenue recognized from our new 5G strategic partner agreement announced in August,” said Georges Karam, CEO of Sequans. “This lifted gross margin to 77.6% and turned the Company to non-IFRS profitability of $0.01 per ADS on a fully diluted basis. The higher licensing revenue more than offset the as-expected lower product revenue in the third quarter. Product revenue in the quarter was primarily impacted by various supply chain factors temporarily affecting our customers’ ability to ship or launch their products. We still expect product shipments to grow in the coming quarters.”

 

“Our pipeline continues to grow and, in particular, we are excited by the demand we are seeing for our next generation Cat 1 Calliope 2”, continued Georges Karam.  “We secured two sizeable design wins for Calliope 2, adding to the already strong funnel for Cat M/NB Monarch 2 and reinforcing our leadership in Massive IoT.  In addition, the recently announced 5G strategic deal is progressing well and confirms market interest in our 5G technology, creating a licensing revenue pipeline on top of our product business.”

 

 

Q4 2022 Outlook

 

The following statement is based on management’s current assumptions and expectations and assumes no increase in the severity or duration of the COVID-19 pandemic or supply chain constraints. This statement is forward-looking and actual results may differ materially.

 

Taking into consideration current customer demand and the ongoing impact of supply chain constraints on the Company’s ability to ship orders, management expects revenue to be flat or slightly down sequentially for the quarter ending December 31, 2022, while still representing significant growth compared with the fourth quarter of 2021, with gross margin expected to exceed 65%.

 

 

Third Quarter 2022 Highlights:

 

Revenue: Revenue was $16.5 million, an increase of 16.2% compared to the second quarter of 2022 and an increase of 39.0% compared to the third quarter of 2021.The increase for the third quarter was primarily due to increased services and license revenue as a result of the new 5G strategic partnership, partially offset by decreases in product revenue.

 

Gross margin: Gross margin was 77.6% compared to 60.7% in the second quarter of 2022 and compared to 49.2% in the third quarter of 2021 due to the higher proportion of services and license revenue versus product sales in the revenue mix.

 

Operating profit / loss: Operating profit was $1.2 million compared to operating losses of $2.1 million in the second quarter of 2022 and $5.1 million in the third quarter of 2021.

 

Net profit / loss: Net loss was $2.9 million, or ($0.06) per diluted ADS, compared to a net loss of $3.2 million, or ($0.07) per ADS, in the second quarter of 2022 and a net profit of $0.2 million, or $0.01 per ADS, in the third quarter of 2021. Net loss in the third quarter of 2022 includes a $1.2 million loss on the change in fair value of the convertible debt derivative compared to a $0.7 million gain in the second quarter of 2022 and a $7.7 million gain in the third quarter of 2021. Net loss in the third quarter of 2022 includes a $0.5 million gain on the impact of the convertible debt amendment.

 

Non-IFRS Net profit / loss and diluted profit / loss per ADS:  Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value, the amendment and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, non-IFRS net gain was $0.4 million, or $0.01 per diluted ADS, compared to non-IFRS net losses of $1.2 million, or ($0.02) per diluted ADS in the second quarter of 2022, and $5.3 million, or ($0.14) per diluted ADS, in the third quarter of 2021. The non-IFRS net gain / loss includes foreign exchange gains of $1.0 million, or $0.02 per diluted ADS, in the third quarter of 2022, $1.2 million, or $0.02 per diluted ADS, in the second quarter of 2022 and $0.4 million, or $0.01 per diluted ADS, in the third quarter of 2021.

 

Cash: Cash and cash equivalents and short-term deposits at September 30, 2022 totaled $5.8 million compared to $16.8 million at June 30, 2022. The amount at September 30, 2022 excludes cash received from the 5G [1] strategic partnership of $13.5 million received in October 2022.

 

 

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the third quarter of 2022 today, November 2, 2022 at 8:00 a.m. ET /13:00 CET. To participate in the live call, analysts and investors should dial 877-407-0792 or +1 201-689-8263 if outside the U.S. When prompted, provide the event title or access code: 13733000. A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/. An audio replay of the conference call will be available until November 16, 2022 by dialing toll free 844-512-2921 or +1 412-317-6671 from outside the U.S., using the following access code:13733000.

 

Forward Looking Statements

This press release contains projections and other forward-looking statements regarding future events  and our future financial performance. All statements other than present and historical facts and conditions contained in this release, including any statements regarding future results of operations and financial positions, business strategy and plans,  expectations for future product sales, the impact of the Covid-19 on our supply chain and on customer demand,  the impact of component shortages and manufacturing capacity, our ability to convert our pipeline to revenue and our objectives for future operations, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risk and uncertainties and subject to change at any time. We undertake no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not rely on or place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. In addition to the risk factors contained in our Form 20-F for the fiscal year ended December 31, 2021, some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are sold, (ii) unexpected increases in our expenses resulting from inflationary pressures, including manufacturing and operating expenses, (iii) our inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject due to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers, (viii) our inability to achieve new design wins or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, (ix) our inability to enter into and execute on strategic alliances, (x) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain, (xii) the impact of the Ukraine-Russia conflict on our independent contractors located in Ukraine, (xiii) the impact of Covid-19 on the ability to operate our business and research, production of our products or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders or Covid-19 workforce shortages, (xiv) our ability to raise debt and equity financing, and (xv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission.

 

Use of Non-IFRS/non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements prepared in accordance with IFRS, we disclose certain non-IFRS, or non-GAAP, financial measures.  These measures exclude the non-cash stock-based compensation and the non-cash impacts of convertible debt amendments, conversions and repayments, effective interest adjustments related to the convertible debt with embedded derivatives and other financings; and deferred tax benefit or expense related to the convertible debt and other financings.  We believe that these measures can be useful to facilitate comparisons among different companies.  These non-GAAP measures have limitations in that the non-GAAP measures we use may not be directly comparable to those reported by other companies.  We seek to compensate for this limitation by providing a reconciliation of the non-GAAP financial measures to the most directly comparable IFRS measures in the table attached to this press release.

 

 

About Sequans Communications

Sequans Communications S.A. (NYSE: SQNS) is a leading developer and provider of 5G and 4G chips and modules for IoT devices. For 5G/4G massive IoT applications, Sequans provides a comprehensive product portfolio based on its flagship Monarch LTE-M/NB-IoT and Calliope Cat 1 chip platforms, featuring industry-leading low power consumption, a large set of integrated functionalities, and global deployment capability. For 5G/4G broadband and critical IoT applications, Sequans offers a product portfolio based on its Cassiopeia 4G Cat 4/Cat 6 and planned high-end Taurus 5G chip platforms, optimized for low-cost residential, enterprise, and industrial applications. Founded in 2003, Sequans is based in Paris, France with additional offices in the United States, United Kingdom, Israel, Hong Kong, Singapore, Finland, Taiwan, South Korea, and China.

Visit Sequans online at www.sequans.comwww.facebook.com/sequanswww.twitter.com/sequans

 

Media Relations:  Kimberly Tassin, +1.425.736.0569, Kimberly@sequans.com

Investor Relations: Kimberly Rogers, +1 385.831-7337, krogers@sequans.com

 

 

 

 

SEQUANS COMMUNICATIONS S.A.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

        Three months ended
  (in thousands of US$, except share and per share amounts) Sept 30,
2022
  June 30, 2022   Sept 30,
2021
       
                 
  Revenue :          
    Product revenue $          4,385   $          7,674   $          7,545
    License and services revenue           12,143               6,547               4,346
  Total revenue           16,528             14,221             11,891 
  Cost of revenue             3,708                5,592                6,043 
  Gross profit           12,820                8,629                5,848 
  Operating expenses :          
    Research and development             6,960               5,875               6,634
    Sales and marketing             2,446               2,499               2,116
    General and administrative             2,199               2,351               2,181
                 
  Total operating expenses           11,605             10,725             10,931 
  Operating profit (loss)             1,215              (2,096)             (5,083)
  Financial income (expense):          
    Interest income (expense), net           (2,784)             (2,858)             (2,685)
    Change in fair value of convertible debt derivative           (1,193)                  663               7,706
    Impact of debt amendment                476                    —                    —
    Foreign exchange gain (loss)             1,030               1,218                  409
  Profit (Loss) before income taxes           (1,256)             (3,073)                  347 
  Income tax expense             1,617                  120                  155
  Profit (Loss) $        (2,873)   $        (3,193)   $             192 
  Attributable to :          
    Shareholders of the parent           (2,873)             (3,193)                  192
    Minority interests                   —                    —                    —
  Basic loss per ADS            ($0.06)             ($0.07)               $0.01
  Diluted loss per ADS            ($0.06)             ($0.07)               $0.00
  Weighted average number of ADS used for computing:          
  — Basic    47,802,526     47,656,861     37,382,595
  — Diluted    47,802,526     47,656,861     41,024,405

 

 

SEQUANS COMMUNICATIONS S.A.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

      Nine months ended Sept 30,
(in thousands of US$, except share and per share amounts) 2022   2021
           
Revenue :      
  Product revenue $           17,984   $           23,486
  License and services revenue              26,656                13,583
Total revenue              44,640                 37,069 
Cost of revenue              13,736                 17,768 
Gross profit              30,904                 19,301 
Operating expenses :      
  Research and development              19,249                19,736
  Sales and marketing                7,466                  6,707
  General and administrative                7,042                  7,148
           
Total operating expenses              33,757                 33,591 
Operating profit (loss)               (2,853)               (14,290)
Financial income (expense):      
  Interest income (expense), net               (8,314)                 (8,807)
  Change in fair value of convertible debt derivative                5,867                  5,024
  Impact of debt amendment                   476                  5,177
  Foreign exchange gain (loss)                2,618                     803
Profit (Loss) before income taxes               (2,206)               (12,093)
Income tax expense                1,841                     452
Profit (Loss) $            (4,047)   $          (12,545)
Attributable to :      
  Shareholders of the parent               (4,047)               (12,545)
  Minority interests                      —                        —
Basic loss per ADS               ($0.09)                 ($0.34)
Diluted loss per ADS               ($0.09)                 ($0.34)
Weighted average number of ADS used for computing:      
— Basic       45,538,645         36,396,026
— Diluted       45,538,645         36,396,026

 

 

 

 

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

    At Sept 30,   At Dec 31,
(in thousands of US$) 2022   2021
ASSETS      
  Non-current assets      
  Property, plant and equipment $                  9,253   $                   8,010
  Intangible assets                  46,741                      37,984
  Deposits and other receivables                       620                        2,311
  Other non-current financial assets                       307                          357
       Total non-current assets                  56,921                      48,662
  Current assets      
  Inventories                  10,102                        6,433
  Trade receivables                  17,258                      13,622
  Contract assets                       420                          789
  Prepaid expenses                    1,905                        2,108
  Other receivables                    3,980                        7,252
  Research tax credit receivable                    7,972                        5,863
  Cash and cash equivalents                    5,831                        4,835
       Total current assets                  47,468                      40,902
Total assets $              104,389    $                 89,564 
EQUITY AND LIABILITIES      
  Equity      
  Issued capital, euro 0.01 nominal value, 191,714,374  shares authorized, issued and outstanding at September 30, 2022 (151,419,322  shares at December 31, 2021 and euro 0.02 nominal value) $                  2,295   $                   3,687
  Share premium                    2,443                    298,389
  Other capital reserves                  61,060                      57,198
  Accumulated deficit                 (60,138)                   (383,554)
  Other components of equity                      (812)                           (26)
       Total equity                    4,848                    (24,306)
  Non-current liabilities      
  Government grant advances, loans and other liabilities                    5,132                        9,354
  Convertible debt                  41,437                      36,373
  Convertible debt embedded derivative                    4,213                      10,081
  Lease liabilities                    2,338                        3,373
  Trade payables                    2,486                          964
  Provisions                    2,158                        2,137
  Deferred tax liabilities                       113                          138
  Contract liabilities                    1,717                        2,706
       Total non-current liabilities                  59,594                      65,126
  Current liabilities      
  Trade payables                  10,103                      13,916
  Interest-bearing receivables financing                    9,857                        9,518
  Lease liabilities                    1,213                        1,247
  Government grant advances and loans                    3,985                        6,206
  Contract liabilities                    6,901                        8,677
  Other current liabilities and provisions                    7,888                        9,180
       Total current liabilities                  39,947                      48,744
Total equity and liabilities $              104,389    $                 89,564 
   

 

 

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

        Nine months ended Sept 30,
(in thousands of US$) 2022   2021
Operating activities      
  Profit (Loss) before income taxes $          (2,206)   $       (12,093)
  Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities      
    Depreciation and impairment of property, plant and equipment              2,901               2,733
    Amortization and impairment of intangible assets              5,574               5,417
    Share-based payment expense              3,667               3,273
    Increase in provisions                 298                  463
    Interest expense, net              8,314               8,807
    Change in the fair value of convertible debt embedded derivative             (5,867)              (5,024)
    Impact of debt reimbursement                (476)              (5,177)
    Foreign exchange loss (gain)                (897)                (743)
    Loss (Gain) on disposal of property, plant and equipment                   —                      7
  Working capital adjustments      
    Decrease (Increase) in trade receivables and other receivables             (3,412)               5,973
    Decrease (increase) in inventories             (3,669)                  342
    Increase  in research tax credit receivable                (636)              (2,700)
    Increase (Decrease) in trade payables and other liabilities             (7,499)               5,324
    Decrease in contract liabilities             (3,703)              (9,506)
    Decrease in government grant advances             (2,292)                (574)
  Income tax paid                (683)                (542)
Net cash flow provided by (used in) operating activities           (10,586)              (4,020)
Investing activities      
  Purchase of intangible assets and property, plant and equipment             (5,892)              (8,511)
  Capitalized development expenditures           (11,308)            (14,926)
  Sale (Purchase) of financial assets              1,741              (1,760)
  Decrease of short-term deposit                   —               2,900
  Interest received                   47                    36
Net cash flow provided by (used in) investments activities           (15,412)            (22,261)
Financing activities      
  Proceeds from issue of warrants, exercise of stock options/warrants                   —                    99
  Public and private equity offering proceeds, net of transaction costs paid             30,125               9,881
  Proceeds (Repayment of) from interest-bearing receivables financing                 342                (128)
  Proceeds from convertible debt, net of transaction cost                   —             39,647
  Payment of lease liabilities                (929)                (810)
  Repayment of convertible debt                   —              (8,750)
  Repayment of government loans                (633)                (356)
  Repayment of venture debt                   —              (8,042)
  Repayment of interest-bearing research project financing                (812)                (804)
  Interest paid             (1,096)              (4,800)
Net cash flows from (used in) financing activities             26,997              25,937 
  Net increase (decrease) in cash and cash equivalents                 999                (344)
  Net foreign exchange difference                   (3)                      2
  Cash and cash equivalents at January 1              4,835               7,574
Cash and cash equivalents at end of the period              5,831               7,232

 

 

 

SEQUANS COMMUNICATIONS S.A. 

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US$, except share and per share amounts) Three months ended
Sept 30,
2022
  June 30, 2022   Sept 30,
2021
Net IFRS gain (loss) as reported $        (2,873)   $         (3,193)   $             192 
Add back          
  Non-cash stock-based compensation expense according to IFRS 2 (1)             1,133               1,219               1,022
  Non-cash change in the fair value of convertible debt embedded derivative             1,193                 (663)             (7,706)
  Non-cash interest on convertible debt  and other financing (2)             1,447               1,452               1,193
  Non-cash impact of convertible debt amendment              (476)                            —                           —
Non-IFRS gain (loss) adjusted $             424   $         (1,185)   $        (5,299)
IFRS basic gain (loss) per ADS as reported            ($0.06)              ($0.07)               $0.01 
Add back          
  Non-cash stock-based compensation expense according to IFRS 2 (1)             $0.02                $0.03                $0.03 
  Non-cash change in the fair value of convertible debt embedded derivative             $0.03               ($0.01)             ($0.21)
  Non-cash interest on convertible debt  and other financing (2)             $0.03                $0.03                $0.03 
  Non-cash impact of convertible debt amendment             $0.00                $0.00                $0.00 
Non-IFRS basic gain (loss) per ADS             $0.01               ($0.02)             ($0.14)
IFRS diluted gain (loss) per ADS            ($0.06)              ($0.07)                  $—
Add back          
  Non-cash stock-based compensation expense according to IFRS 2 (1)             $0.02                $0.03                $0.03 
  Non-cash change in the fair value of convertible debt embedded derivative             $0.03               ($0.01)             ($0.21)
  Non-cash interest on convertible debt  and other financing (2)             $0.03                $0.03                $0.03 
  Non-cash impact of convertible debt amendment             $0.00                $0.00                $0.00 
Non-IFRS diluted gain (loss) per ADS             $0.01               ($0.02)             ($0.15)
               
  (1) Included in the IFRS loss as follows:          
    Cost of product revenue $                41   $                44   $               14
    Research and development                 370                   317                  487
    Sales and marketing                 268                   287                  200
    General and administrative                 454                   571                  321
  (2) Related to the difference between contractual and effective interest rates

 

 

SEQUANS COMMUNICATIONS S.A. 

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US$, except share and per share amounts) Nine months ended Sept 30,
2022   2021
Net IFRS gain (loss) as reported $          (4,047)   $         (12,545)
Add back      
  Non-cash stock-based compensation expense according to IFRS 2 (1)              3,667                 3,274
  Non-cash change in the fair value of convertible debt embedded derivative             (5,867)                (5,024)
  Non-cash interest on convertible debt  and other financing (2)              4,117                 3,465
  Impact of debt reimbursement                    —                (5,177)
  Non-cash impact of convertible debt amendment                (476)                       —
Non-IFRS gain (loss) adjusted $          (2,606)   $         (16,007)
IFRS basic gain (loss) per ADS as reported             ($0.09)                ($0.34)
Add back      
  Non-cash stock-based compensation expense according to IFRS 2 (1)              $0.08                  $0.09 
  Non-cash change in the fair value of convertible debt embedded derivative             ($0.13)                ($0.15)
  Non-cash interest on convertible debt  and other financing (2)              $0.09                  $0.10 
  Impact of debt reimbursement              $0.00                 ($0.14)
  Non-cash impact of convertible debt amendment             ($0.01)                 $0.00 
Non-IFRS basic gain (loss) per ADS             ($0.06)                ($0.44)
IFRS diluted gain (loss) per ADS             ($0.09)                ($0.34)
Add back      
  Non-cash stock-based compensation expense according to IFRS 2 (1)              $0.08                  $0.09 
  Non-cash change in the fair value of convertible debt embedded derivative             ($0.13)                ($0.15)
  Non-cash interest on convertible debt  and other financing (2)              $0.09                  $0.10 
  Impact of debt reimbursement              $0.00                 ($0.14)
  Non-cash impact of convertible debt amendment             ($0.01)                 $0.00 
Non-IFRS diluted gain (loss) per ADS             ($0.06)                ($0.44)
           
  (1) Included in the IFRS loss as follows:      
    Cost of product revenue $               114   $                  44
    Research and development              1,157                 1,554
    Sales and marketing                  846                     623
    General and administrative              1,550                 1,053
  (2) Related to the difference between contractual and effective interest rates    

Recent Posts

New Business Models Enabled by iSIM

Olivier Amiot, senior director of product marketing at Sequans, discussed iSIM with industry leaders at Kigen’s iSIM Pioneers summit in London, October 25. On the panel with him were Jean-Philippe Betoin of Kigen, Matt Hatton of Transforma Insights, and Paul Marshall...

T-Mobile Certifies Sequans Monarch 2 GM02S LTE-M/NB-IoT Module

Industry’s most advanced cellular IoT solution now ready to connect T-Mobile IoT customers Sequans’ 5G cellular IoT module, Monarch 2 GM02S, delivering LTE-M and NB-IoT connectivity, is now certified by T-Mobile and ready to bring new IoT devices to life for...

Spark New Zealand Certifies Sequans Monarch 2 GM02S 

Industry’s most advanced cellular IoT module now approved and ready to support Spark New Zealand IoT customers Sequans’ 5G cellular IoT module, Monarch 2 GM02S, delivering LTE-M and NB-IoT connectivity, is now certified by Spark New Zealand and can be found on Spark’s...

Recent Blog Posts

Find the Chip or Module That's Perfect for Your Application

Sequans has a solution for every type of IoT application from the smallest sensor device to the most sophisticated voice activated alarm system.