Sequans Communications Announces First Quarter 2023 Financial Results

PARIS, May 3, 2023 /PRNewswire/ -- Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G solutions for IoT devices, today announced financial results for the first quarter ended March 31, 2023,

First Quarter 2023 Summary Results Table:

"The first quarter revenue was in line with our guidance, which reflected the impact of delayed project launches and customers' inventory rationalization that we discussed last quarter, " said Georges Karam, CEO of Sequans. "We anticipate a clear step up in revenue from the first half to the second half of 2023, primarily driven by the expected transition of some of our design wins into full production. We are especially encouraged by seeing a couple of projects reaching this phase already in Q1. Additionally, we continue gaining traction in our design win pipeline, with new design wins for both Monarch 2 and Calliope 2, bringing the potential total 3-year life revenue pipeline above $750 million."

Mr. Karam concluded, "Additionally, we are making strides toward sampling our 5G Taurus chipset later this year while actively engaging with customers on this platform. These efforts are also aiding our progress in our 5G IP licensing discussions, and we remain optimistic that we can finalize an agreement before the end of the year. Furthermore,  the recent achievement of a $20 million private placement in April has strengthened the company's position in our ongoing discussions engaged by the Board strategic committee. We remain committed to delivering value to our shareholders and customers and are excited about the opportunities ahead."

Q2 2023 Outlook

The following statement is based on management's current assumptions and expectations. This statement is forward-looking and actual results may differ materially.

As a result of our primary 5G IP agreement's payment structure, licensing revenue is expected to normalize to a lower quarterly level beginning in Q2. As product shipments are not expected to accelerate before Q3, management expects revenue to be in the range of $9 million to $11 million, with gross margin expected to be around 65% for the quarter ending June 30, 2023.

First Quarter 2023 Highlights:

Revenue: Revenue was $11.9 million, a decrease of 25.2% compared to the fourth quarter of 2022 and a decrease of 14.3% compared to the first quarter of 2022.

Gross margin: Gross margin was 78.5% compared to 75.3% in the fourth quarter of 2022 and compared to 68.1% in the first quarter of 2022.

Operating profit / loss: Operating loss was $4.0 million compared to operating profit of $1.0 million in the fourth quarter of 2022 and operating loss of $2.0 million in the first quarter of 2022.

Net profit / loss: Net loss was $5.0 million, or ($0.10) per diluted ADS, compared to a net loss of $5.0 million, or ($0.10) per diluted ADS, in the fourth quarter of 2022 and net profit of $2.0 million, or $0.05 per diluted ADS, in the first quarter of 2022. Net loss in the first quarter of 2023 includes a $2.3 million gain on the change in fair value of the convertible debt derivative whereas in the fourth quarter of 2022 there was a gain of $1.0 million and a gain of $6.4 million in the first quarter of 2022.

Non-IFRS loss and diluted 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 loss was $4.2 million, or ($0.09) per diluted ADS, compared to non-IFRS net loss of $2.8 million, or ($0.06) per diluted ADS in the fourth quarter of 2022, and a non-IFRS net loss of $1.8 million, or ($0.04) per diluted ADS, in the first quarter of 2022. The non-IFRS net loss includes foreign exchange losses of $0.2 million, or ($0.00) per diluted ADS, in the first quarter of 2023, $1.5 million, or ($0.03) per diluted ADS in the fourth quarter of 2022 and foreign exchange gain of $0.4 million, or $0.01 per diluted ADS, in the first quarter of 2022.

Cash: Cash and cash equivalents and short-term deposits at March 31, 2023 totaled $5.3 million compared to $10.7 million at December 31, 2022. The quarter-end cash balance does not reflect the $20 million proceeds from the private placement, which closed on April 12, 2023.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the first quarter of 2023 today, May 3, 2023 at 8:00 a.m. ET /14:00 CET. To participate in the live call, analysts and investors should dial 844-826-3033 or ++1 412-317-5185 if outside the U.S. When prompted, provide the event title or access code: 10177160. A live and archived webcast of the call will be available from the Investors section of the Sequans website at https://www.sequans.com/company/investor-relations/webcasts-and-presentations/. An audio replay of the conference call will be available until May 10, 2023, by dialing toll free 844-512-2921 or 412-317-6671 from outside the U.S., using the following access code: 10177160.

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 our future results of operations and financial positions, business strategy, plans, including the ability to enter into new 5G strategic agreements, the exploration of strategic options, expectations for Massive IoT sales,  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, 2022, 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 and rising interest rates, including manufacturing and operating expenses and interest expense, (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 fluctuations 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) our ability to raise debt and equity financing, and (xiv) 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.com; www.facebook.com/sequans; www.twitter.com/sequans

Media Relations:  Kimberly Tassin, +1.425.736.0569, [email protected]   
Investor Relations: Kimberly Rogers, +1 385.831-7337, [email protected]

Condensed financial tables follow

SOURCE Sequans Communications