Sequans Communications Announces Third Quarter 2022 Financial Results

PARIS, Nov. 2, 2022 /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 third quarter ended September 30, 2022.

"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.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