EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO    NEWS

Sequans Communications Announces Second Quarter 2011 Financial Results

PARIS, France – July 28, 2011 – Sequans Communications S.A. (NYSE: SQNS), a 4G chipmaker supplying LTE and WiMAX chips to equipment manufacturers for mobile operators worldwide, today announced financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Highlights:

Revenue: Revenue of $30.6 million increased 21% sequentially from the first quarter of 2011 and 84% compared to the second quarter of 2010.

Gross margin: Gross margin of 46.6% was lower than the gross margin in the first quarter of 2011, which was 51.2%, due to a significant sequential increase in volume with a key customer, which triggered a previously negotiated volume-based price reduction, combined with a delay in the introduction of lower cost components into production.

Operating income (loss): Operating income of $1.9 million decreased 18% sequentially from the first quarter of 2011, primarily due to the increase of non-cash stock-based compensation expense. Operating margin in the second quarter was 6.2% compared to 9.1% in the first quarter of 2011. In the second quarter of 2010, the operating loss was $0.2 million.

Net Profit: Net profit was $0.1 million, or $0.00 per diluted share/ADS, compared to a net profit of $1.9 million, or $0.07 per share/ADS in the first quarter of 2011 and a net profit of $0.6 million, or $0.02 per share/ADS in the second quarter of 2010.

Non-IFRS Net Profit: Excluding stock-based compensation and the change in the fair value of the option component of convertible notes, non-IFRS net profit was $2.8 million ($0.08 per diluted share/ADS), compared to a non-IFRS net profit of $2.4 million ($0.08 per diluted share/ADS) in the first quarter of 2011, and a non-IFRS net profit of $0.7 million ($0.03 per diluted share/ADS) in the second quarter of 2010.

 

In millions of $US except percentages, shares and per share amounts

   Key Metrics  
   Q2 2011     %*     Q1 2011      %*     Q2 2010     %*  

Revenues

   $ 30.6        $ 25.4         $ 16.6     

Gross profit

     14.3        46.6     13.0         51.2     8.5        50.9

Operating income (loss)

     1.9        6.2     2.3         9.1     (0.2     (1.4 %) 

Net profit (loss)

     0.1        0.2     1.9         7.5     0.6        3.6

Diluted EPS

   $ 0.00        $ 0.07         $ 0.02     

Number of diluted shares/ADS

     35,209,641          29,164,738           24,588,406     

Cash flow from (used in) operations

     (0.3       0.3           —       

Additional information:

             

Stock-based compensation included in operating result

     1.1          0.5           0.3     

Change in the fair value of convertible notes option component included in financial result

     1.7          —             —       

Non-IFRS diluted EPS (excludes stock-based compensation and change in fair value of the option component)

   $ 0.08        $ 0.08         $ 0.03     
             

 

* Percentage of revenues

“The revenue growth in the second quarter reflects our expanding role in mobile WiMAX applications in the first half of the year,” said Georges Karam, Sequans CEO. “From supplying the 4G chip for the first WiMAX smartphone a year ago, we have expanded to powering 7 different 4G devices for operators in three countries. As expected, the significant volume increase associated with the launch of new 4G smartphones and tablets triggered a price reduction in the second quarter. This will temporarily impact gross margin until more linear product cost reductions are fully reflected in our results.


Sequans reports second quarter 2011 financial results

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“After rapid volume growth in the first two quarters of 2011, we recently have seen more cautious order patterns, which we believe are driven by some uncertainty related to several new WiMAX smartphone models being introduced into the U.S. market. This is occurring during a particularly dynamic phase in the evolution of 4G as various carriers plan their migration to LTE. With both a smartphone-optimized LTE chip and a dual-mode WiMAX/LTE chip in our roadmap for the second half, we are well-positioned to participate in any strategy operators choose, but LTE is not expected to contribute materially to our revenue until the second half of 2012.

“During the second quarter, we made good progress in diversifying our customer base. A new portable router began shipping in Korea and we won new WiMAX business in Japan. We also achieved early success in LTE with new design wins in some of the smaller geographic markets, while continuing with LTE testing and trials in China and India. We are executing to our plan, our roadmap is on schedule, and our initial traction in LTE enhances our confidence that we are on track toward to our 3 to 5-year target financial model which includes gross margin of at least 50% and operating margin of 20% or higher.”

Outlook

The following statements are based on management’s current assumptions and expectations. These statements are forward-looking and actual results may differ materially. Sequans undertakes no obligation to update these statements.

For the third quarter of 2011, Sequans expects revenue to be in the range of $25 to $28 million, with gross margin increasing to close to 50%. Based on this revenue range and gross margin, non-IFRS net profit per diluted share/ADS is expected to be between $0.00 and $0.05 for the third quarter of 2011, with approximately 36.7 million weighted average number of diluted shares/ADSs. Non-IFRS net profit per share/ADS, excludes any gain or loss from the option component of bank convertible notes, which will be outstanding until October 2011. The amount of any such gain or loss will depend on the price of Sequans’ ADSs at the end of the quarter. Non-IFRS EPS guidance also excludes the impact of stock based compensation.

Given the lack of visibility, Sequans currently expects revenue in the second half of 2011 is likely to be lower than $50 million.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the second quarter of 2011 today, July 28, 2011 at 8:00 a.m. EDT / 14:00 CEST. To participate in the live call, analysts and investors should dial 800-230-1093 (or +1 612-288-0337 if outside the U.S.). A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/. A replay of the conference call will be available until August 28, 2011, by dialing toll free 800-475-6701 in the U.S., or +1 320-365-3844 from outside the U.S., using the following access code: 208917.

Forward Looking Statements

This press release may contain projections or other forward-looking statements regarding future events or 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 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 operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not 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. 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, including WiMAX and LTE markets, (ii) unexpected increases in our expenses, including manufacturing expenses, (iii) 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


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and future needs of our customers, (viii) our inability to achieve new design wins, and (xii) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

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 non-cash charges. 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 detailed 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 is a 4G chipmaker, supplying LTE and WiMAX chips to equipment manufacturers for mobile operators worldwide. Founded in 2003 to address the WiMAX market, the company expanded in early 2009 to address the LTE market. Sequans chips are inside 4G networks around the world. Sequans is based in Paris, France with additional offices throughout the world, including United States, United Kingdom, Israel, Hong Kong, Singapore, Taiwan, and China. www.sequans.com

SOURCE: Sequans Communications S.A.

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

Investor Relations: Claudia Gatlin, +1 212.830.9080, Claudia@sequans.com

Condensed financial tables follow


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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three months ended  

(in thousands of US$, except share and per share amounts)

   June 30,
2011
    March 31,
2011 (*)
    June 30,
2010
 

Revenue:

      

Product revenue

     30,006        24,845        15,700   

Other revenue

     601        545        938   
  

 

 

   

 

 

   

 

 

 

Total revenue

     30,607        25,390        16,638   
  

 

 

   

 

 

   

 

 

 

Cost of revenue

      

Cost of product revenue

     16,287        12,300        8,077   

Cost of other revenue

     44        85        85   
  

 

 

   

 

 

   

 

 

 

Total cost of revenue

     16,331        12,385        8,162   
  

 

 

   

 

 

   

 

 

 

Gross profit

     14,276        13,005        8,476   
  

 

 

   

 

 

   

 

 

 

Operating expenses:

      

Research and development

     6,767        5,978        4,260   

Sales and marketing

     3,488        3,129        3,545   

General and administrative

     2,126        1,582        898   
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     12,381        10,689        8,703   
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     1,895        2,316        (227
  

 

 

   

 

 

   

 

 

 

Financial income (expense):

      

Interest income (expense), net

     (151     (184     (13

Foreign exchange gain (loss)

     103        (206     716   

Change in the fair value of convertible notes option component

     (1,651     —          119   
  

 

 

   

 

 

   

 

 

 

Profit before income taxes

     196        1,926        595   
  

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

     138        30        —     

Profit

     58        1,896        595   

Attributable to:

      

Shareholders of the parent

     58        1,896        595   

Minority interests

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.00      $ 0.07      $ 0.03   
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.00      $ 0.07      $ 0.02   
  

 

 

   

 

 

   

 

 

 

Number of shares used for computing:

      

— Basic

     33,435,416        27,723,199        23,777,885   

— Diluted

     35,209,641        29,164,738        24,588,406   
  

 

 

   

 

 

   

 

 

 

 

(*) As adjusted to reflect the classification of foreign exchange gains and losses related to hedges of euro based operating expenses from financial result to operating expenses. The effect on the three months ended March 31, 2011 was to reduce operating expenses by $57. There was no outstanding hedging transaction during the three months ended June 30, 2010.


Sequans reports second quarter 2011 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Six months ended  

(in thousands of US$, except share and per share amounts)

   June 30 ,
2011
    June 30 ,
2010
 

Revenue:

    

Product revenue

     54,850        24,555   

Other revenue

     1,147        2,261   
                

Total revenue

     55,997        26,816   
                

Cost of revenue

    

Cost of product revenue

     28,587        12,191   

Cost of other revenue

     129        170   
                

Total cost of revenue

     28,716        12,361   
                

Gross profit

     27,281        14,455   
                

Operating expenses:

    

Research and development

     12,745        8,774   

Sales and marketing

     6,617        6,400   

General and administrative

     3,707        1,694   
                

Total operating expenses

     23,069        16,868   
                

Operating income (loss)

     4,212        (2,413
                

Financial income (expense):

    

Interest income (expense), net

     (336     (217

Foreign exchange gain (loss)

     (104     1,733   

Change in the fair value of convertible notes option component

     (1,651     137   
                

Profit (Loss) before income taxes

     2,121        (760
                

Income tax expense (benefit)

     168        —     

Profit (Loss)

     1,953        (760

Attributable to:

    

Shareholders of the parent

     1,953        (760

Minority interests

     —          —     
                

Basic earnings (loss) per share

   $ 0.06      ($ 0.03
                

Diluted earnings (loss) per share

   $ 0.06      ($ 0.03
                

Number of shares used for computing:

    

— Basic

     30,595,087        23,737,438   

— Diluted

     32,369,312        23,737,438   
                


Sequans reports second quarter 2011 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

(in thousands of US$)

   At June 30,
2011
    At December 31,
2010
 

ASSETS

    

Non-current assets

    

Property, plant and equipment

     8,027        5,291   

Intangible assets

     3,952        3,144   

Loan and other receivables

     1,510        1,485   

Available for sales assets

     753        432   
                

Total non-current assets

     14,242        10,352   
                

Current assets

    

Inventories

     11,132        8,768   

Trade receivables

     16,665        14,163   

Prepaid expenses and other receivables

     2,533        3,333   

Recoverable value added tax

     1,117        1,361   

Research tax credit receivable

     3,337        2,001   

Cash and cash equivalents

     61,857        9,739   
                

Total current assets

     96,641        39,365   
                

Total assets

     110,883        49,717   

EQUITY AND LIABILITIES

    

Equity

    

Issued capital

     908        710   

Share premium

     129,073        68,972   

Other capital reserves

     6,791        5,194   

Accumulated deficit

     (52,309     (54,262

Accumulated other comprehensive income (loss)

     341        85   
                

Total equity

     84,804        20,699   
                

Non-current liabilities

    

Government grant advances and interest-free loans

     214        1,278   

Provisions

     224        184   

Other non-current financial liabilities

     1,651        —     
                

Total non-current liabilities

     2,089        1,462   
                

Current liabilities

    

Trade payables

     13,064        15,508   

Interest-bearing loans and borrowings

     3,666        3,564   

Government grant advances and interest-free loans

     1,003        1,889   

Other current liabilities

     5,505        5,270   

Deferred revenue

     513        893   

Provisions

     239        432   
                

Total current liabilities

     23,990        27,556   
                

Total equity and liabilities

     110,883        49,717   


Sequans reports second quarter 2011 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Six months ended June 30,  

(in thousands of US$)

   2011     2010  

Operating activities

    

Profit (Loss) before income taxes

     2,121        (760

Non-cash adjustment to reconcile income (loss) before tax to net cash from (used in) operating activities

    

Depreciation and impairment of property, plant and equipment

     1,829        1,202   

Amortization and impairment of intangible assets

     897        533   

Share-based payment expense

     1,597        544   

Decrease in provisions

     (153     (403

Change in fair value of convertible notes option component

     1,651        (137

Financial expense

     49        365   

Foreign exchange loss (gain)

     474        (2,003

Interest free financing benefit

     178        (216

Working capital adjustments

    

Decrease (Increase) in trade receivables and other receivables

     (1,938     (3,514

Decrease (Increase) in inventories

     (2,364     (1,019

Decrease (Increase) in research tax credit receivable

     (1,336     (595

Increase (Decrease) in trade payables and other liabilities

     (2,216     5,093   

Increase (Decrease) in deferred revenue

     (380     (708

Increase (Decrease) in government grant advances

     (311     22   

Income tax paid

     (160     (61

Net cash flow used in operating activities

     (62     (1,657

Investing activities

    

Purchase of intangible assets and property, plant and equipment

     (6,236     (2,551

Purchase of financial assets

     (346     (808

Net cash flow used in investments activities

     (6,582     (3,359

Financing activities

    

Proceeds from issue of shares and warrants, net of transaction costs

     343        137   

Proceeds from borrowings

     —          1,753   

Repayment of borrowings

     (36     —     

IPO proceeds, net of costs

     59,956        —     

Interest paid

     (184     (153

Proceeds from interest-free loan

     —          789   

Repayment of interest-free loans

     (1,321     (913

Net cash flows from financing activities

     58,758        1,613   

Net increase (decrease) in cash and cash equivalents

     52,114        (3,403

Net foreign exchange difference

     4     

Cash and cash equivalent at January 1

     9,739        7,792   

Cash and cash equivalents at year end

     61,857        4,389   


Sequans reports second quarter 2011 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

 

     Three months ended  

(in thousands of US$, except share and per share amounts)

   June 30, 2011     March 31,
2011
    June 30,
2010
 
     IFRS (as reported)     Adjustments (*)     Non-IFRS     Non-IFRS     Non-IFRS  

Revenue:

          

Product revenue

     30,006          30,006        24,845        15,700   

Other revenue

     601          601        545        938   
                                        

Total revenue

     30,607        —          30,607        25,390        16,638   
                                        

Cost of revenue

          

Cost of product revenue

     16,287        60        16,227        12,288        8,073   

Cost of other revenue

     44          44        85        85   
                                        

Total cost of revenue

     16,331        60        16,271        12,373        8,158   
                                        

Gross profit

     14,276        (60     14,336        13,017        8,480   
                                        

Operating expenses:

          

Research and development

     6,767        287        6,480        5,842        4,165   

Sales and marketing

     3,488        244        3,244        2,948        3,402   

General and administrative

     2,126        543        1,583        1,448        877   
                                        

Total operating expenses

     12,381        1,074        11,307        10,238        8,444   
                                        

Operating income (loss)

     1,895        (1,134     3,029        2,779        36   
                                        

Financial income (expense):

          

Interest income (expense), net

     (151       (151     (184     (13

Foreign exchange gain (loss)

     103          103        (206     716   

Change in the fair value of convertible notes option component

     (1,651     (1,651     —          —          —     
                                        

Profit (Loss) before income taxes

     196        (2,785     2,981        2,389        739   
                                        

Income tax expense (benefit)

     138          138        30        —     

Profit (Loss)

     58        (2,785     2,843        2,359        739   

Attributable to:

          

Shareholders of the parent

     58          2,843        2,359        739   

Minority interests

     —                —     
                                  

Basic earnings (loss) per share

   $ 0.00        $ 0.09      $ 0.09      $ 0.03   
                                  

Diluted earnings (loss) per share

   $ 0.00        $ 0.08      $ 0.08      $ 0.03   
                                  

Number of shares used for computing:

          

— Basic

     33,435,416          33,435,416        27,723,199        23,777,885   

— Diluted

     35,209,641          35,209,641        29,164,738        24,588,406   
                                  

 

(*) Adjustments related to stock based compensation expenses according to IFRS 2 and to the change in the fair value of option component according to IAS 39


Sequans reports second quarter 2011 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

 

     Six months ended  

(in thousands of US$, except share and per share amounts)

   June 30, 2011     June 30,
2010
 
      IFRS (as reported)     Adjustments (*)     Non-IFRS     Non-IFRS  

Revenue:

        

Product revenue

     54,850          54,850        24,555   

Other revenue

     1,147          1,147        2,261   
                                

Total revenue

     55,997        —          55,997        26,816   
                                

Cost of revenue

        

Cost of product revenue

     28,587        72        28,515        12,182   

Cost of other revenue

     129          129        170   
                                

Total cost of revenue

     28,716        72        28,644        12,352   
                                

Gross profit

     27,281        (72     27,353        14,464   
                                

Operating expenses:

        

Research and development

     12,745        423        12,322        8,550   

Sales and marketing

     6,617        425        6,192        6,132   

General and administrative

     3,707        677        3,030        1,649   
                                

Total operating expenses

     23,069        1,525        21,544        16,331   
                                

Operating income (loss)

     4,212        (1,597     5,809        (1,867
                                

Financial income (expense):

        

Interest income (expense), net

     (336       (336     (217

Foreign exchange gain (loss)

     (104       (104     1,733   

Change in the fair value of convertible notes option component

     (1,651     (1,651     —          —     
                                

Profit (Loss) before income taxes

     2,121        (3,248     5,369        (351
                                

Income tax expense (benefit)

     168          168        —     

Profit (Loss)

     1,953        (3,248     5,201        (351

Attributable to:

        

Shareholders of the parent

     1,953          5,201        (351

Minority interests

     —              —     
                                

Basic earnings (loss) per share

   $ 0.06        $ 0.17      ($ 0.01
                                

Diluted earnings (loss) per share

   $ 0.06        $ 0.16      ($ 0.01
                                

Number of shares used for computing:

        

— Basic

     30,595,087          30,595,087        23,737,438   

— Diluted

     32,369,312          32,369,312        23,737,438   
                                

 

(*) Adjustments related to stock based compensation expenses according to IFRS 2 and to the change in the fair value of option component according to IAS 39