4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the first quarter ended
March 31, 2019.
First Quarter Highlights:
Revenue: Revenue was $7.0 million, an increase of 15.9%
compared to the fourth quarter of 2018, primarily due to higher
revenue in broadband and IoT, while the postponement of a project
caused revenue from the vertical business to be lower than the Q1
target for that business. Q1 revenue represented a decrease of
37.4% compared to the first quarter of 2018, reflecting primarily a
decline in broadband revenue and the impact of Cat M customer
project delays in IoT.
Gross margin: Gross margin was 41.0% compared to 43.3% in
the fourth quarter of 2018, due to an increase in module sales, and
compared to 41.7% in the first quarter of 2018, primarily due to a
decrease in non-product revenue.
Operating loss: Operating loss was $7.4 million compared
to an operating loss of $9.3 million in the fourth quarter of 2018
and an operating loss of $7.3 million in the first quarter of
2018.
Net loss: Net loss was $9.0 million, or ($0.10) per
diluted share/ADS, compared to a net loss of $9.5 million, or
($0.10) per diluted share/ADS, in the fourth quarter of 2018 and a
net loss of $8.7 million, or ($0.10) per diluted share/ADS, in the
first quarter of 2018.
Non-IFRS Net loss: Excluding 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,
non-IFRS net loss was $7.6 million, or ($0.08) per diluted
share/ADS, compared to a non-IFRS net loss of $9.4 million, or
($0.10) per diluted share/ADS in the fourth quarter of 2018, and a
non-IFRS net loss of $7.5 million, or ($0.08) per diluted
share/ADS, in the first quarter of 2018.
Cash: Cash and cash equivalents at March 31, 2019
totaled $7.6 million compared to $12.1 million at December 31, 2018
and exclude the $3 million of proceeds from the issuance of new
convertible in May 2019.
In millions of US$ except percentages, shares and per share
amounts
Key Metrics Q1 2019 %*
Q4 2018 (1) %* Q1 2018 %*
Revenue
$7.0 $6.1 $11.2
Gross profit
2.9 41.0 % 2.6 43.3 % 4.7
41.7 % Operating loss
(7.4 ) (105.2 )% (9.3 ) (153.7
)% (7.3 ) (64.9 )% Net loss
(9.0 ) (128.4 )% (9.5 )
(156.0 )% (8.7 ) (77.9 )% Diluted EPS
($0.10 ) ($0.10
) ($0.10 ) Weighted average number of diluted shares/ADS
94,788,726 94,599,554 91,465,178 Cash flow from (used in)
operations
(4.6 ) (7.5 ) (6.0 ) Cash, cash
equivalents and short-term deposit at quarter-end
7.6 12.1
15.0 Additional information on non-cash items: - Stock-based
compensation included in operating result
0.5 0.3 0.5 -
Non-cash interest on convertible debt and other financing
0.9 0.8 0.7 - Non-cash impact of convertible debt amendment
— (0.4 ) — - Non-cash impact of deferred tax income (loss)
0.1 (0.7 ) — 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 ) ($0.10 ) ($0.08 ) *Percentage of
revenue (1)
Updated from the 2018 earnings release
provided on February 19, 2019. See Sequans’ Form 20-F filed on May
1, 2019
“We are pleased to see the broadband business improving, the Cat
1 business growing nicely, and momentum continuing to build in the
Cat M/NB business as expected during the first quarter,” said
Georges Karam, Sequans CEO. “We have already begun to receive
orders related to Cat M/NB devices that are scheduled to go into
mass production around mid-year, and we expect growth in this
business to accelerate in the second half of the year. Even though
we are still at the beginning of the market ramp for 4G LTE for
IoT, we are fully engaged in 5G, having already conducted five
years of research activity. With near-term growth driven by helping
customers get the most from 4G technology, enabling them to make a
seamless transition to 5G can continue our growth well into the
next decade.”
Q2 2019 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.
Sequans expects revenue for the second quarter of 2019 to
continue the trend seen in Q1 and be better than the first quarter
- with continued sequential improvement through the balance of the
year, driven by increasing LTE-M revenue as more Sequans-powered
devices go into mass production.
Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to
discuss the preliminary financial results for the first quarter of
2019 today, May 9, 2019 at 8:00 a.m. EDT /14:00 CET. To
participate in the live call, analysts and investors should dial
800-230-1092 (or 612-288-0340 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 June 9, 2019 by dialing
toll free 800-475-6701 or 320-365-3844 from outside the U.S., using
the following access code: 465836.
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, 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, (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) the impact of natural disasters on our
sourcing operations and supply chain, (xi) 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 (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 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
Condensed financial tables follow
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
(in thousands of US$, except share and per share amounts)
March 31, 2019 (2) Dec 31,
2018 (1) March 31,2018
Revenue : Product
revenue $ 4,681 $ 3,856 $ 7,635 Other revenue
2,357 2,217 3,599
Total
revenue 7,038 6,073
11,234 Cost of revenue Cost of
product revenue 3,575 2,943 5,861 Cost of other revenue
574 503 689
Total cost of revenue 4,149
3,446 6,550 Gross
profit 2,889 2,627
4,684 Operating expenses :
Research and development 6,157 6,488 7,519 Sales and marketing
2,221 2,179 2,485 General and administrative 1,913 3,294 1,971
Total operating expenses 10,291
11,961 11,975
Operating loss (7,402 ) (9,334 )
(7,291 ) Financial income (expense): Interest
income (expense), net (1,976 ) (1,631 ) (1,227 ) Other financial
expenses — (400 ) — Convertible debt amendment — 420 —
Foreign exchange gain (loss) 322 332
(212 )
Loss before income taxes
(9,056 ) (10,613 )
(8,730 ) Income tax expense (benefit)
(17 ) (1,139 ) 19
Loss $
(9,039 ) $ (9,474 ) $
(8,749 ) Attributable to : Shareholders of the
parent (9,039 ) (9,474 ) (8,749 ) Minority interests
— — Basic loss per share
($0.10 ) ($0.10 ) ($0.10 ) Diluted loss
per share ($0.10 ) ($0.10 ) ($0.10 )
Weighted average number of shares used for computing: — Basic
94,788,726 94,599,554 91,465,178 — Diluted 94,788,726
94,599,554 91,465,178 (1)
Updated from the 2018 earnings release
provided on February 19, 2019. See Sequans’ Form 20-F filed on May
1, 2019
(2) In 2019, the Company adopted IFRS 16 using the modified
retrospective application approach. Accordingly, prior period
amounts have not been restated.
SEQUANS
COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
At March 31,
At Dec 31, (in thousands of US$) 2019
(2) 2018 (1) ASSETS
Non-current assets Property, plant and equipment $ 9,679 $
6,271 Intangible assets 15,183 12,409 Deposits and other
receivables 388 394 Other non-current financial assets 331
337
Total non-current assets
25,581 19,411
Current assets
Inventories 7,639 8,243 Trade receivables 8,309 13,177 Contract
assets 3,270 2,707 Prepaid expenses and other receivables 4,441
3,237 Recoverable value added tax 683 565 Research tax credit
receivable 3,878 3,148 Cash and cash equivalents 7,555
12,086
Total current assets
35,775 43,163
Total assets $
61,356 $ 62,574 EQUITY AND
LIABILITIES Equity Issued capital, euro 0.02 nominal
value, 94,788,726 shares authorized, issued and outstanding at
March 31, 2019 (94,732,539 shares at December 31, 2018) $ 2,384 $
2,384 Share premium 233,820 225,470 Other capital reserves 40,256
39,768 Accumulated deficit (281,076 ) (272,036 ) Other components
of equity (625 ) (605 )
Total equity
(5,241 ) (5,019 )
Non-current liabilities Government
grant advances and loans 6,567 5,674 Venture Debt 10,495 11,811
Convertible debt and accrued interest 20,889 19,723 Lease
liabilities 4,591 — Provisions 1,734 1,689 Deferred tax liabilities
616 691 Deferred revenue 687 808
Total non-current liabilities 45,579
40,396
Current liabilities Trade payables 7,497 9,412
Interest-bearing receivables financing 3,661 10,295 Venture Debt
2,042 823 Lease liabilities 2,126 — Government grant advances and
loans 738 688 Other current liabilities 3,881 4,654 Deferred
revenue 777 973 Provisions 296 352
Total
current liabilities 21,018 27,197
Total
equity and liabilities $ 61,356 $
62,574 (1)
Updated from the 2018 earnings release
provided on February 19, 2019. See Sequans’ Form 20-F filed on May
1, 2019
(2) In 2019, the Company adopted IFRS 16 using the modified
retrospective application approach. Accordingly, prior period
amounts have not been restated.
SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
Three months ended March 31, (in
thousands of US$) 2019 2018
Operating activities Loss before income taxes
$ (9,056 ) $ (8,730 )
Non-cash adjustment to reconcile income before tax to net cash from
(used in) operating activities Depreciation and impairment of
property, plant and equipment 1,262 769 Amortization and impairment
of intangible assets 1,078 767 Share-based payment expense 488 531
Increase (decrease) in provisions (21 ) 22 Financial expense
(income) 1,976 1,227 Foreign exchange loss (gain) (425 ) 146 Loss
(Gain) on disposal of property, plant and equipment (32 ) — Working
capital adjustments Decrease (Increase) in trade receivables and
other receivables 2,980 3,958 Decrease (Increase) in inventories
604 8 Decrease (Increase) in research tax credit receivable (597 )
(982 ) Decrease in trade payables and other liabilities (2,478 )
(3,315 ) Decrease in deferred revenue (317 ) (34 ) Decrease in
government grant advances (99 ) (410 ) Income tax paid
13 34
Net cash flow used in
operating activities (4,624 )
(6,009 ) Investing activities Purchase of
intangible assets and property, plant and equipment (585 ) (329 )
Capitalized development expenditures (1,080 ) (463 ) Sale
(purchase) of financial assets 12 (20 ) Interest received
3 35
Net cash flow used in
investments activities (1,650 )
(777 ) Financing activities Proceeds from
issue of warrants, exercise of stock options/warrants — 27 Public
equity offering proceeds, net of transaction costs paid — 20,890
Proceeds from issuing of warrants, net of transaction costs paid
8,350 — Proceeds (Repayment of) from interest-bearing receivables
financing (6,634 ) (2,095 ) Proceeds from interest-bearing research
project financing 1,126 — Payment of lease liabilities (727 ) —
Repayment of government loans — (118 ) Interest paid
(373 ) (230 )
Net cash flows from financing
activities 1,742 18,474 Net increase (decrease)
in cash and cash equivalents (4,532 ) 11,688 Net foreign exchange
difference 1 2 Cash and cash equivalent at January 1
12,086 2,948
Cash and cash equivalents at
end of the period $ 7,555
$ 14,638 SEQUANS
COMMUNICATIONS S.A. UNAUDITED RECONCILIATION OF NON-IFRS
FINANCIAL RESULTS (in thousands of US$,
except share and per share amounts) Three months ended
March 31,2019 Dec 31,
2018 (3) March 31,2018 Net
IFRS loss as reported $ (9,039 )
$ (9,474 ) $ (8,749
) Add back Stock-based compensation expense according
to IFRS 2 (1) 488 308 532 Non-cash interest on convertible debt and
other financing (2) 872 831 671 Non-cash impact of deferred tax
income (loss) 76 (656 ) — Non-cash impact of convertible debt
amendment — (420 ) —
$ (7,603 )
$ (9,411 ) $
(7,546 ) IFRS basic loss per share as reported ($0.10
) ($0.10 ) ($0.10 ) Add back Stock-based compensation expense
according to IFRS 2 (1) $0.01 $0.00 $0.01 Non-cash interest on
convertible debt and other financing (2) $0.01 $0.01 $0.01 Non-cash
impact of deferred tax income (loss) $0.00 ($0.01 ) $0.00 Non-cash
impact of convertible debt amendment $0.00 $0.00 $0.00
Non-IFRS basic loss per
share ($0.08 ) ($0.10 ) ($0.08 ) IFRS diluted
loss per share ($0.10 ) ($0.10 ) ($0.10 ) Add back Stock-based
compensation expense according to IFRS 2 (1) $0.01 $0.00 $0.01
Non-cash interest on convertible debt and other financing (2) $0.01
$0.01 $0.01 Non-cash impact of deferred tax income (loss) $0.00
($0.01 ) $0.00 Non-cash impact of convertible debt amendment $0.00
$0.00 $0.00
Non-IFRS diluted loss per share ($0.08 ) ($0.10 )
($0.08 ) (1) Included in the IFRS loss as follows:
Cost of product revenue $ 2 $ — $ 3 Research and development 140
147 139 Sales and marketing 68 6 80 General and administrative 278
155 310 (2) Related to the difference between contractual and
effective interest rates
(3) Updated from the 2018 earnings release
provided on February 19, 2019. See Sequans’ Form 20-F filed on May
1, 2019
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