Sequans Communications (SQNS) Reports Prelim Q3 Results

Sequans Communications S.A. (NYSE: SQNS) ("Sequans" or the "Company"), a leading developer and provider of 5G/4G semiconductors and IoT modules, today announced preliminary financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Summary Preliminary Results Table:

"We are excited about our position in the IoT market following the successful closure of our Qualcomm deal, which significantly strengthened our balance sheet," said Georges Karam, CEO of Sequans. "As we look ahead, we anticipate growth in product revenue beginning in the fourth quarter of 2024 and continuing into 2025. With operating expenses targeted to decrease in 2025, we expect to reach breakeven in 2026."

Dr. Karam continued, "Our financial stability ensures that customers can rely on us for their multi-year application deployments, securing our design wins pipeline and accelerating its growth. With proven technology leadership, an experienced team, and a strategic go-to-market approach tailored for the IoT market, we are more confident than ever in our competitive edge, which we intend to maintain with an innovative product strategy that includes enhancements to our existing 4G IoT platforms and the introduction of next-generation 5G RedCap/eRedCap products."

Q4 2024 Outlook

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

Management anticipates approximately 10% sequential growth in Q4 2024. Product revenue is expected to double from Q3, and licensing and services revenue will remain significant, including a licensing component related to the Qualcomm deal.

Third Quarter 2024 Financial Summary:

Revenue: Revenue was $10.1 million, an increase of 4.2% compared to the second quarter of 2024 and an increase of 29.5% compared to the third quarter of 2023. Product revenue was $2.4 million, flat compared to the second quarter of 2024 and an increase of 144.5% compared to the third quarter of 2023. License and services revenue was $7.7 million, largely driven by the recognition of a portion of the Taurus 5G license to Qualcomm as part of the overall transaction. This compares to $7.2 million in the second quarter primarily related to Monarch 2 manufacturing license agreement announced on June 18, 2024.

Gross margin: Gross margin was 82.5% compared to 84.0% in the second quarter of 2024 and 85.8% in the third quarter of 2023.

Operating profit (loss): Operating profit was $87.0 million compared to operating losses of ($3.7 million) in the second quarter of 2024 and ($7.8 million) in the third quarter of 2023. Operating profit in the third quarter of 2024 includes the net gain on sale of the 4G IP assets to Qualcomm for $152.7 million, partially offset by a $56.6 million loss on the impairment of 5G Taurus assets and operating expenses of $17.5 million.

Net profit (loss): Net profit was $72.3 million, or $2.61 per diluted ADS, compared to net losses of ($0.9 million), or ($0.04) per diluted ADS, in the second quarter of 2024 and ($9.6 million), or ($0.41) per diluted ADS, in the third quarter of 2023.

Non-IFRS profit (loss) and diluted profit (loss) per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value, the effective interest adjustments related to the convertible debt with embedded derivatives and other financings, non-IFRS net profit was $80.5 million, or $2.91 per diluted ADS, compared to non-IFRS net losses of ($5.8 million), or ($0.23) per diluted ADS in the second quarter of 2024, and ($6.8 million), or ($0.29) per diluted ADS, in the third quarter of 2023.

Cash: Cash and cash equivalents at September 30, 2024 totaled $173.6 million compared to $13.1 million at June 30, 2024. Subsequent to September 30, 2024, $85 million in matured convertible debt, related party loans and accrued interest was repaid.

Conference Call Details

Date: Tuesday, November 5, 2024
Time: 8:00 a.m. ET / 14:00 CET
Dial in: U.S. toll-free: 1-800-717-1738
International: +1-646-307-1865
Access: When prompted, provide the event title or access code 1178271

A live and archived webcast of the call will be available from the Investor Relations section of the Sequans website at www.sequans.com/investors/webcasts-and-presentations. An audio replay of the conference call will be available until November 12, 2024, by dialing toll-free 1-844-512-2921 in the U.S. or +1 412-317-6671 from outside the U.S., using the following access coder: 1178271

Forward-Looking Statements

This press release contains certain statements that are, or may be deemed to be, forward-looking statements with respect to the financial condition, results of operations and business of Sequans, including the impact of the recently closed Qualcomm strategic transaction on our continuing operations, revenue expectations in Q4 2024 and continuing into 2025 and anticipated breakeven timeline. These forward-looking statements include, but are not limited to, statements that are not historical fact. These forward-looking statements can be identified by the fact that they do not relate to historical or current facts. Forward-looking statements also often use words such as "anticipate," "target," "continue," "estimate," "expect," "forecast," "intend," "may," "plan," "goal," "believe," "hope," "aims," "continue," "could," "project," "should," "will" or other words of similar meaning. These statements are based on assumptions and assessments made by Sequans in light of its experience and perception of historical trends, current conditions, future developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct, and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement.

Forward-looking statements are not guarantees of future performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Such risks and uncertainties include, but are not limited to, potential adverse reactions or changes to business relationships resulting from the completion of the transaction; significant or unexpected costs, charges or expenses resulting from the transaction; and negative effects of this announcement or the consummation of the transaction on the market price of Sequans' ADS and ordinary shares. Many factors could cause actual results to differ materially from those projected or implied in any forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global, political, economic, business and competitive environments, market and regulatory forces. If any one or more of these risks or uncertainties materialize or if any one or more of the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Such forward-looking statements should therefore be construed in the light of such factors. A more complete description of these and other material risks can be found in Sequans' filings with the SEC, including its annual report on Form 20-F for the year ended December 31, 2023, subsequent filings on Form 6-K and other documents that may be filed from time to time with the SEC. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this announcement. Sequans undertakes no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by applicable law. We are still completing the purchase accounting for the recently closed transaction with Qualcomm, which could result in changes to our preliminary third quarter 2024 financial results.

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 extensions, effective interest adjustments related to the convertible debt with embedded derivatives and other financings; 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.

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