EX-99.1 2 q32019earningspressrelease.htm EXHIBIT 99.1 - PRESS RELEASED DATED NOVEMBER 6, 2019 Exhibit
sequanslogo071318colorweba01.jpg

NEWS

Sequans Communications Announces
Third Quarter 2019 Financial Results

Signed multi-year strategic agreement with an estimated total value exceeding $35 million; received an upfront payment of $18 million in October


PARIS - November 6, 2019 - 4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the third quarter ended Sept 30, 2019.

Third Quarter Highlights:
Revenue: Revenue was $7.5 million, a decrease of 7.8% compared to the second quarter of 2019, primarily due to lower product revenue in Cat 1 IoT, partially offset by an increase in other revenue. Q3 2019 revenue represented a decrease of 27.4% compared to the third quarter of 2018, reflecting primarily the decline in the broadband revenue from emerging markets and lower verticals revenue.
     
Gross margin: Gross margin was 38.0% compared to 40.1% in the second quarter of 2019, compared to 35.0% in the third quarter of 2018.

Operating loss: Operating loss was $7.5 million compared to an operating loss of $6.6 million in the second quarter of 2019 and an operating loss of $7.9 million in the third quarter of 2018.

Net loss: Net loss was $8.7 million, or ($0.09) per diluted share/ADS, compared to a net loss of $8.9 million, or ($0.09) per diluted share/ADS, in the second quarter of 2019 and a net loss of $8.7 million, or ($0.09) per diluted share/ADS, in the third quarter of 2018.

Non-IFRS Net loss: Excluding the non-cash stock-based compensation, the non-cash impact of convertible debt amendments, effective interest adjustments related to the convertible debt and other financings, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $7.5 million, or ($0.08) per diluted share/ADS, compared to a non-IFRS net loss of $7.6 million, or ($0.08) per diluted share/ADS in the second quarter of 2019, and a non-IFRS net loss of $8.0 million, or ($0.08) per diluted share/ADS, in the third quarter of 2018.

Cash: Cash and cash equivalents at Sept 30, 2019 totaled $6.3 million. This excludes an upfront payment of $18 million received in October 2019, related to a new strategic agreement that was executed after the quarter closed. Cash and cash equivalents at June 30, 2019 totaled $5.9 million.

“IoT revenue was temporarily affected in Q3 by a short-term channel inventory issue with one Cat 1 customer. We expect this inventory issue to be resolved during Q4, overall Cat 1 demand remains good, and we expect significant growth next year,” said Georges Karam, Sequans CEO. “We continue to see momentum building in Cat M/NB and a major new design win should contribute to our ramp next year. Broadband demand remains steady, and we continue to expect gradual improvement in broadband revenue, mainly from new design wins.

“On the strategic front, we are very pleased to have signed a multi-year non-exclusive license and services agreement with an estimated value exceeding $35 million over 3+ years, subject to Sequans achieving pre-agreed milestones,” added Dr. Karam. “Also, during Q4 we have concluded another strategic agreement, and we see an expanding list of potential new strategic opportunities. This demonstrates a growing recognition that Sequans represents a scarce resource with obvious technology leadership. In addition, we are happy to announce we are sampling our NB-only solution, making us the only company worldwide to offer a complete range of cellular IoT solutions, including NB-only, dual-mode Cat M/NB as well as a fully-optimized Cat 1 solution.”




Sequans reports third quarter 2019 financial results
Page 2

In millions of US$ except percentages, shares and per share amounts
Key Metrics
Q3 2019

%*

Q2 2019

%*

Q3 2018(1)

%*

Revenue

$7.5

 

$8.1

 

$10.3

 
Gross profit
2.8

38.0
 %
3.3

40.1
 %
3.6

35.0
 %
Operating loss
(7.5
)
(99.9
)%
(6.6
)
(81.3
)%
(7.9
)
(77.1
)%
Net loss
(8.7
)
(116.5
)%
(8.9
)
(109.7
)%
(8.7
)
(84.3
)%
Diluted EPS

($0.09
)
 

($0.09
)
 

($0.09
)
 
Weighted average number of diluted shares/ADS
95,082,574

 
94,970,749

 
94,533,229

 
Cash flow from (used in) operations
(1.0
)
 
(5.7
)
 
(1.3
)
 
Cash, cash equivalents and short-term deposit at quarter-end
6.3

 
5.9

 
5.2

 
Additional information on non-cash items:
 
 
 
 
 
 
 - Stock-based compensation included in operating result
0.4

 
0.4

 
0.4

 
 - Non-cash interest on convertible debt and other financing
1.2

 
1.0

 
0.8

 
 - Non-cash impact of convertible debt amendment
—

 
—

 
0.3

 
 - Non-cash impact of deferred tax expense (benefit)
(0.3
)
 
(0.2
)
 
(0.8
)
 
Non-IFRS diluted EPS (excludes non-cash stock-based compensation, impact of convertible debt amendments, effective interest adjustments related to the convertible and other debt and embedded derivative, impact of revaluation of interest-free government loan) and related deferred tax benefit (expense)

($0.08
)
 

($0.08
)
 

($0.08
)
 
* Percentage of revenue
(1) Updated from the 2018 earnings release provided on October 30, 2018


Q4 2019 Outlook
The following statement is based on management’s current assumptions and expectations. This statement is forward-looking and actual results may differ materially. Sequans undertakes no obligation to update this statement.

Sequans expects revenue for the fourth quarter of 2019 to show sequential improvement.

Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the third quarter of 2019 today, November 6, 2019 at 8:00 a.m. EST /14:00 CET. To participate in the live call, analysts and investors should dial 800-230-1059, or 612-234-9959 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 December 6, 2019 by dialing toll free 800-475-6701 or 320-365-3844 from outside the U.S., using the following access code: 472756.

Forward Looking Statements
This press release contains projections and other forward-looking statements regarding future events or our future financial performance and potential financing sources. 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 and plans, expectations for IoT and Broadband sales, the expected value of a recent strategic agreement, the potential for new strategic transactions 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


Sequans reports third quarter 2019 financial results
Page 3

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, (ii) unexpected increases in our expenses, including manufacturing 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) our ability to remediate material weaknesses in our internal controls relating to the impact of accounting changes relating to deferred tax assets and deferred tax liabilities related to the application of IFRS to deferred taxes on debt instruments with equity components, and (xiii) 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 the non-cash stock-based compensation and the non-cash impacts of convertible debt amendments, effective interest adjustments related to the convertible debt 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 provider of single-mode 4G LTE wireless semiconductor solutions for Internet of Things (IoT) and a wide range of broadband data devices. Founded in 2003, Sequans has developed and delivered seven generations of 4G technology and its chips are certified and shipping in 4G networks around the world. Today, Sequans offers two LTE product lines: StreamliteLTE™, optimized for IoT and M2M devices and StreamrichLTE™, optimized for feature-rich mobile computing and home and portable router devices. The company is based in Paris, France with additional offices in the United States, United Kingdom, Sweden, Israel, Hong Kong, Singapore, Taiwan, South Korea, and China.
Visit Sequans online at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans

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


Sequans reports third quarter 2019 financial results
Page 4


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, 2019

 
June 30, 2019

 
Sept 30,
2018 (1)

 



 




 

 

 
Revenue :

 

 

 

Product revenue
$
5,872

 
$
6,966

 
$
7,526

 

Other revenue
1,598

 
1,136

 
2,759

 
Total revenue
7,470

 
8,102

 
10,285

 
Cost of revenue

 

 

 

Cost of product revenue
4,234

 
4,368

 
6,026

 

Cost of other revenue
394

 
482

 
664

 
Total cost of revenue
4,628

 
4,850

 
6,690

 
Gross profit
2,842

 
3,252

 
3,595

 
Operating expenses :

 

 

 

Research and development
6,205

 
5,773

 
6,750

 

Sales and marketing
1,857

 
2,026

 
2,229

 

General and administrative
2,245

 
2,038

 
2,545

 




 

 

 
Total operating expenses
10,307

 
9,837

 
11,524

 
Operating loss
(7,465
)
 
(6,585
)
 
(7,929
)
 
Financial income (expense):

 

 

 

Interest income (expense), net
(2,293
)
 
(2,214
)
 
(1,278
)
 
 
Convertible debt amendment
—

 
—

 
(265
)
 

Foreign exchange gain (loss)
874

 
(303
)
 
58

 
Loss before income taxes
(8,884
)
 
(9,102
)
 
(9,414
)
 
Income tax expense (benefit)
(179
)
 
(213
)
 
(739
)
 
Loss
$
(8,705
)
 
$
(8,889
)
 
$
(8,675
)
 
Attributable to :

 

 

 

Shareholders of the parent
(8,705
)
 
(8,889
)
 
(8,675
)
 

Minority interests
—

 
—

 
—

 
Basic loss per share

($0.09
)
 

($0.09
)
 

($0.09
)
 
Diluted loss per share

($0.09
)
 

($0.09
)
 

($0.09
)
 
Weighted average number of shares used for computing:

 

 

 
— Basic
95,082,574

 
94,970,749

 
94,533,229

 
— Diluted
95,082,574

 
94,970,749

 
94,533,229

(1) Updated from the 2018 earnings release provided on October 30, 2018





Sequans reports third quarter 2019 financial results
Page 5

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)
2019
 
2018(1)




 

Revenue :

 


Product revenue
$
17,519

 
$
25,082


Other revenue
5,091

 
9,095

Total revenue
22,610

 
34,177

Cost of revenue
 
 
 

Cost of product revenue
12,177

 
19,014


Cost of other revenue
1,450

 
1,902

Total cost of revenue
13,627

 
20,916

Gross profit
8,983

 
13,261

Operating expenses :
 
 
 

Research and development
18,135

 
21,421


Sales and marketing
6,104

 
7,232


General and administrative
6,196

 
6,792




 
 
 
Total operating expenses
30,435

 
35,445

Operating loss
(21,452
)
 
(22,184
)
Financial income (expense):
 
 
 

Interest income (expense), net
(6,483
)
 
(3,745
)
 
Convertible debt amendment

—

 
(265
)

Foreign exchange gain (loss)
893

 
34

Loss before income taxes
(27,042
)
 
(26,160
)
Income tax expense (benefit)
(409
)
 
(646
)
Loss
$
(26,633
)
 
$
(25,514
)
Attributable to :
 
 
 

Shareholders of the parent
(26,633
)
 
(25,514
)

Minority interests
—

 
—

Basic loss per share

($0.28
)
 

($0.27
)
Diluted loss per share

($0.28
)
 

($0.27
)
Weighted average number of shares used for computing:
 
 
 
— Basic
94,947,800

 
93,486,416

— Diluted
94,947,800

 
93,486,416


(1) Updated from the 2018 earnings release provided on October 30, 2018



Sequans reports third quarter 2019 financial results
Page 6

SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
 
At Sept 30,

 
At Dec 31,

(in thousands of US$)
2019

 
2018

 
 
 
 
 
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Property, plant and equipment
$
9,110

 
$
6,271

 
Intangible assets
15,653

 
12,409

 
Deposits and other receivables
379

 
394

 
Other non-current financial assets
320

 
337

 
     Total non-current assets
25,462

 
19,411

 
Current assets
 
 
 
 
Inventories
7,396

 
8,243

 
Trade receivables
11,948

 
13,177

 
Contract assets
3,021

 
2,707

 
Prepaid expenses and other receivables
3,995

 
3,237

 
Recoverable value added tax
507

 
565

 
Research tax credit receivable
2,196

 
3,148

 
Cash and cash equivalents
6,251

 
12,086

 
     Total current assets
35,314

 
43,163

Total assets
$
60,776

 
$
62,574

 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
Equity
 
 
 
 
Issued capital, euro 0.02 nominal value, 95,163,202 shares authorized, issued and outstanding at September 30, 2019 (94,732,539 shares at December 31, 2018)
$
2,393

 
$
2,384

 
Share premium
233,729

 
225,470

 
Other capital reserves
43,135

 
39,768

 
Accumulated deficit
(298,669
)
 
(272,036
)
 
Other components of equity
(686
)
 
(605
)
 
     Total equity
(20,098
)
 
(5,019
)
 
Non-current liabilities
 
 
 
 
Government grant advances and loans
6,756

 
5,674

 
Venture debt
7,982

 
11,811

 
Convertible debt and accrued interest
22,031

 
19,723

 
Lease liabilities
2,978

 
—

 
Trade payables
1,344

 
—

 
Provisions
1,865

 
1,689

 
Deferred tax liabilities
937

 
691

 
Deferred revenue
445

 
808

 
     Total non-current liabilities
44,338

 
40,396

 
Current liabilities
 
 
 
 
Trade payables
10,325

 
9,412

 
Interest-bearing receivables financing
7,995

 
10,295

 
Venture Debt
4,455

 
823

 
Convertible debt and accrued interest
6,927

 
—

 
Lease liabilities
827

 
—

 
Government grant advances and loans
814

 
688

 
Other current liabilities
4,223

 
4,654

 
Deferred revenue
705

 
973

 
Provisions
265

 
352

 
     Total current liabilities
36,536

 
27,197

Total equity and liabilities
$
60,776

 
$
62,574




Sequans reports third quarter 2019 financial results
Page 7

SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
 
 
Nine months ended Sept 30,
(in thousands of US$)
2019

 
2018(1)

Operating activities
 
 
 
 
Loss before income taxes
$
(27,042
)
 
$
(26,160
)
 
Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
 
 
 
 
 
Depreciation and impairment of property, plant and equipment
2,900

 
2,372

 
 
Amortization and impairment of intangible assets
3,310

 
2,334

 
 
Share-based payment expense
1,279

 
1,505

 
 
Increase (decrease) in provisions
68

 
66

 
 
Financial expense (income)
6,483

 
3,745

 
 
Convertible debt amendment

—

 
265

 
 
Foreign exchange loss (gain)

(1,059
)
 
(174
)
 
 
Loss (Gain) on disposal of property, plant and equipment
(32
)
 
—

 
Working capital adjustments
 
 
 
 
 
Decrease (Increase) in trade receivables and other receivables
704

 
847

 
 
Decrease (Increase) in inventories
847

 
89

 
 
Decrease in research tax credit receivable
1,376

 
407

 
 
Increase in trade payables and other liabilities
466

 
114

 
 
Increase (decrease) in deferred revenue
(631
)
 
94

 
 
Increase (decrease) in government grant advances
245

 
(744
)
 
Income tax paid
(247
)
 
(80
)
Net cash flow used in operating activities
(11,333
)
 
(15,320
)
Investing activities
 
 
 
 
Purchase of intangible assets and property, plant and equipment
(2,888
)
 
(4,456
)
 
Capitalized development expenditures
(3,537
)
 
(2,224
)
 
Sale (purchase) of financial assets
32

 
25

 
Interest received
5

 
71

Net cash flow used in investments activities
(6,388
)
 
(6,237
)
Financing activities
 
 
 
 
Proceeds from issue of warrants, exercise of stock options/warrants
—

 
30

 
Public equity offering proceeds, net of transaction costs paid
—

 
20,840

 
Proceeds from issuing of warrants, net of transaction costs paid
8,269

 
—

 
Proceeds (Repayment of) from interest-bearing receivables financing
(2,300
)
 
2,136

 
Proceeds from interest-bearing research project financing

1,126

 
1,574

 
Proceeds from convertible debt, net of transaction costs

7,970

 
—

 
Payment of lease liabilities
(1,048
)
 
—

 
Repayment of government loans
(335
)
 
(352
)
 
Interest paid
(1,788
)
 
(438
)
Net cash flows from financing activities
11,894

 
23,790

 
Net increase (decrease) in cash and cash equivalents
(5,827
)
 
2,233

 
Net foreign exchange difference
(8
)
 
(2
)
 
Cash and cash equivalent at January 1
12,086

 
2,948

Cash and cash equivalents at end of the period
$
6,251

 
$
5,179

(1) Updated from the 2018 earnings release provided on October 30, 2018





Sequans reports third quarter 2019 financial results
Page 8



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,
2019

 
June 30, 2019

 
Sept 30,
2018 (3)

Net IFRS loss as reported
$
(8,705
)
 
$
(8,889
)
 
$
(8,675
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
362

 
429

 
446

 
Non-cash interest on convertible debt and other financing (2)
1,180

 
1,041

 
761

 
Non-cash impact of convertible debt amendment
—

 
—

 
265

 
Non-cash impact of deferred tax income (loss)
(287
)
 
(166
)
 
(817
)
 
 
 
$
(7,450
)
 
$
(7,585
)
 
$
(8,020
)
IFRS basic loss per share as reported

($0.09
)
 

($0.09
)
 

($0.09
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.00

 

$0.00

 

$0.01

 
Non-cash interest on convertible debt and other financing (2)


$0.01

 

$0.01

 

$0.01

 
Non-cash impact of convertible debt amendment


$0.00

 

$0.00

 

$0.00

 
Non-cash impact of deferred tax income (loss)


$0.00

 

$0.00

 

($0.01
)
Non-IFRS basic loss per share

($0.08
)
 

($0.08
)
 

($0.08
)
IFRS diluted loss per share

($0.09
)
 

($0.09
)
 

($0.09
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.00

 

$0.00

 

$0.01

 
Non-cash interest on convertible debt and other financing (2)


$0.01

 

$0.01

 

$0.01

 
Non-cash impact of convertible debt amendment


$0.00

 

$0.00

 

$0.00

 
Non-cash impact of deferred tax income (loss)


$0.00

 

$0.00

 

($0.01
)
Non-IFRS diluted loss per share

($0.08
)
 

($0.08
)
 

($0.08
)
 
 
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
 
 
Cost of product revenue
$
2

 
$
3

 
$
2

 
 
Research and development
110

 
121

 
116

 
 
Sales and marketing
54

 
60

 
66

 
 
General and administrative
196

 
245

 
262

 
(2) Related to the difference between contractual and effective interest rates
 
(3)
Updated from the 2018 earnings release provided on October 30, 2018
 
 
 
 



Sequans reports third quarter 2019 financial results
Page 9

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,
2019
 
2018
Net IFRS loss as reported
$
(26,633
)
 
$
(25,514
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
1,279

 
1,504

 
Non-cash interest on convertible debt and other financing (2)
3,093

 
2,177

 
Non-cash impact of convertible debt amendment

—

 
265

 
Non-cash impact of deferred tax income (loss)
(529
)
 
(817
)

$
(22,790
)
 
$
(22,385
)
IFRS basic loss per share as reported

($0.28
)
 

($0.27
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.02

 
Non-cash interest on convertible debt and other financing (2)

$0.03

 

$0.02

 
Non-cash impact of convertible debt amendment


$0.00

 

$0.00

 
Non-cash impact of deferred tax income (loss)

$0.00

 

($0.01
)
Non-IFRS basic loss per share

($0.24
)
 

($0.24
)
IFRS diluted loss per share

($0.28
)
 

($0.27
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.02

 
Non-cash interest on convertible debt and other financing (2)

$0.03

 

$0.02

 
Non-cash impact of convertible debt amendment


$0.00

 

$0.00

 
Non-cash impact of deferred tax income (loss)


$0.00

 

($0.01
)
Non-IFRS diluted loss per share

($0.24
)
 

($0.24
)
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
Cost of product revenue
$
7

 
$
8

 
 
Research and development
371

 
382

 
 
Sales and marketing
182

 
219

 
 
General and administrative
719

 
895

 
 
 
 
 
 
 
(2) Related to the difference between contractual and effective interest rates
 
 
 
 
(3) Updated from the 2018 earnings release provided on October 30, 2018