EX-99.1 2 q12017earningspressrelease.htm EXHIBIT 99.1 Document
q12016earningspressreimage6a.jpg

NEWS

Sequans Communications Announces First Quarter 2017
Financial Results
PARIS - May 2, 2017 - 4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the first quarter ended March 31, 2017.

First Quarter 2017 Highlights:
Revenue: Revenue of $12.4 million decreased 10.9% compared to the fourth quarter of 2016 primarily as a result of the typical pattern of seasonality. Revenue increased 33.9% compared to the first quarter of 2016, due to higher product sales partly offset by lower license and service revenues.
   
Gross margin: Gross margin was 47.1% compared to gross margin of 38.2% in the fourth quarter of 2016 due to a more favorable product mix, and compared to 47.5% in the first quarter of 2016, due to a less favorable revenue mix in the first quarter of 2017 as a result of lower license and service revenues.

Operating loss: Operating loss was $4.2 million compared to an operating loss of $4.9 million in the fourth quarter of 2016 and an operating loss of $5.2 million in the first quarter of 2016.

Net loss: Net loss was $5.6 million, or ($0.07) per diluted share/ADS, compared to a net loss $5.4 million, or ($0.07) per diluted share/ADS, in the fourth quarter of 2016 and a net loss of $9.2 million, or ($0.16) per diluted share/ADS, in the first quarter of 2016.

Non-IFRS Net loss: Excluding the non-cash items of stock-based compensation and the fair-value (in 2016) and effective interest adjustments related to the convertible debt and other financings, non-IFRS net loss was $4.7 million, or ($0.06) per diluted share/ADS, compared to a non-IFRS net loss of $4.2 million, or ($0.06) per diluted share/ADS in the fourth quarter of 2016, and a non-IFRS net loss of $5.5 million, or ($0.09) per diluted share/ADS, in the first quarter of 2016.

Cash: Cash, cash equivalents and short-term deposit at March 31, 2017 totaled $14.5 million compared to $20.5 million at December 31, 2016.
In millions of US$ except percentages, shares and per share amounts
Key Metrics
Q1 2017

%*

Q4 2016

%*

Q1 2016

%*

Revenue

$12.4

 

$14.0

 

$9.3

 
Gross profit
5.9

47.1
 %
5.3

38.2
 %
4.4

47.5
 %
Operating loss
(4.2
)
(34.2
)%
(4.9
)
(34.9
)%
(5.2
)
(56.0
)%
Net loss
(5.6
)
(45.1
)%
(5.4
)
(38.5
)%
(9.2
)
(99.4
)%
Diluted EPS

($0.07
)
 

($0.07
)
 

($0.16
)
 
Weighted average number of diluted shares/ADS
75,043,865

 
74,501,387

 
59,196,482

 
Cash flow from (used in) operations
(9.9
)
 
(5.7
)
 
3.9

 
Cash, cash equivalents and short-term deposit at quarter-end
14.5

 
20.5

 
6.5

 
 
 
 
 
 
 
 
Additional information on non-cash items:
 
 
 
 
 
 
 - Stock-based compensation included in operating result
0.3

 
0.5

 
0.3

 
 - Change in the fair value of convertible debt embedded derivative
—

 
—

 
3.1

 
 - Non-cash interest on convertible debt and other financing
0.6

 
0.7

 
0.4

 
Non-IFRS diluted EPS (excludes stock-based compensation, fair value and effective interest adjustments related to the convertible and other debt and embedded derivative)

($0.06
)
 

($0.06
)
 

($0.09
)
 
 
 
 
 
 
 
 
* Percentage of revenue

Sequans reports first quarter 2017 financial results
Page 2

“We are off to a good start in 2017, with key metrics meeting or exceeding expectations,” said Georges Karam, Sequans’ CEO. “Demand for our broadband solutions continues to increase; we have a backlog of IoT-related orders supporting the ramp of Cat 1 devices during the year, and we remain on track to grow at least 40% in 2017. Meanwhile, our design win momentum across our entire product line, with particularly strong interest in our Monarch Cat M1/NB1 platform for IoT, continues to position us to achieve even higher growth next year.”

Q2 2017 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 2017 to be in the range of $13.5 to $15.5 million with non-IFRS gross margin above 40%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.05) and ($0.07) for the second quarter of 2017, based on approximately 75.1 million weighted average number of diluted shares/ADSs. Non-IFRS EPS guidance excludes the impact of stock based compensation, the non-cash fair-value and effective interest adjustments related to the convertible debt and other financings, and any other relevant non-cash or non-recurring expenses.


Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the first quarter of 2017 today, May 2, 2017 at 8:00 a.m. EDT /14:00 CEST. To participate in the live call, analysts and investors should dial 800-230-1074 (or +1 651-291-5254 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 2, 2017 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: 421729.

Forward Looking Statements
This press release contains projections and 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 and potential strategic partnerships, 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, and (xi) 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 relating to stock-based compensation and the non-cash financial expense related to the convertible debt and its embedded derivative issued in April 2015 and April 2016. 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

Sequans reports first quarter 2017 financial results
Page 3

release. We are not able to provide a non-GAAP reconciliation for forward-looking IFRS estimates for gross margin and net loss per diluted share without unreasonable efforts, because certain adjustments are not known until the end of the period. The impact of these adjustments could be significant to our actual IFRS results.


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 first quarter 2017 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)
March 31,
2017

Dec 31,
2016

March 31,
2016

 
 
 
 
 
 
 
 
 
 
 
 
Revenue :
 
 
 
 
 
Product revenue
$
9,640

$
11,947

$
5,412

 
 
Other revenue
2,790

2,006

3,873

 
Total revenue
12,430

13,953

9,285

 
Cost of revenue
 
 
 
 
 
Cost of product revenue
5,989

7,879

4,128

 
 
Cost of other revenue
589

740

747

 
Total cost of revenue
6,578

8,619

4,875

 
Gross profit
5,852

5,334

4,410

 
Operating expenses :
 
 
 
 
 
Research and development
6,194

6,327

6,727

 
 
Sales and marketing
2,496

2,204

1,501

 
 
General and administrative
1,411

1,669

1,378

 
 
 
 
 
 
 
 
Total operating expenses
10,101

10,200

9,606

 
Operating loss
(4,249
)
(4,866
)
(5,196
)
 
Financial income (expense):
 
 
 
 
 
Interest income (expense), net
(1,038
)
(1,080
)
(628
)
 
 
Change in the fair value of convertible debt embedded derivative
—

—

(3,127
)
 
 
Foreign exchange gain (loss)
(246
)
670

(212
)
 
Loss before income taxes
(5,533
)
(5,276
)
(9,163
)
 
Income tax expense (benefit)
71

95

66

 
Loss
$
(5,604
)
$
(5,371
)
$
(9,229
)
 
Attributable to :
 
 
 
 
 
Shareholders of the parent
(5,604
)
(5,371
)
(9,229
)
 
 
Minority interests
—

—

—

 
Basic loss per share

($0.07
)

($0.07
)

($0.16
)
 
Diluted loss per share

($0.07
)

($0.07
)

($0.16
)
 
Weighted average number of shares used for computing:
 
 
 
 
— Basic
75,043,865

74,501,387

59,196,482

 
— Diluted
75,043,865

74,501,387

59,196,482

 
 
 
 
 
 
 
 





Sequans reports first quarter 2017 financial results
Page 5

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
 
At March 31,
At December 31,
(in thousands of US$)
2017

2016

 
 
 
 
ASSETS
 
 
 
Non-current assets
 
 
 
Property, plant and equipment
$
6,302

$
6,659

 
Intangible assets
7,450

7,707

 
Deposits and other receivables
338

332

 
Available for sale assets
315

310

 
     Total non-current assets
14,405

15,008

 
Current assets
 
 
 
Inventories
8,184

8,693

 
Trade receivables
17,189

15,285

 
Prepaid expenses and other receivables
2,923

3,172

 
Recoverable value added tax
434

470

 
Research tax credit receivable
2,980

1,902

 
Short term deposit
345

345

 
Cash and cash equivalents
14,162

20,202

 
     Total current assets
46,217

50,069

Total assets
$
60,622

$
65,077

 
 
 
 
EQUITY AND LIABILITIES
 
 
 
Equity
 
 
 
Issued capital, euro 0.02 nominal value, 75,122,137 shares authorized, issued and outstanding at March 31, 2017 (75,030,078 at December 31, 2016)
$
1,925

$
1,923

 
Share premium
189,233

189,029

 
Other capital reserves
28,598

28,257

 
Accumulated deficit
(215,157
)
(209,553
)
 
Other components of equity
(602
)
(796
)
 
     Total equity (deficit)
3,997

8,860

 
Non-current liabilities
 
 
 
Government grant advances, loans and other liabilities
5,001

5,144

 
Convertible debt and accrued interest
17,199

16,338

 
Provisions
1,332

1,306

 
Other Liabilities
22

22

 
Deferred revenue
1,940

1,940

 
     Total non-current liabilities
25,494

24,750

 
Current liabilities
 
 
 
Trade payables
12,585

18,358

 
Interest-bearing receivables financing
11,882

7,712

 
Government grant advances
560

601

 
Other current liabilities
5,633

4,415

 
Deferred revenue
424

335

 
Provisions
47

46

 
     Total current liabilities
31,131

31,467

Total equity and liabilities
$
60,622

$
65,077

 
 
 
 




Sequans reports first quarter 2017 financial results
Page 6

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
 
 
Three months ended March 31,
(in thousands of US$)
2017

2016

 
 
 
 
 
 
Operating activities
 
 
 
Loss before income taxes
$
(5,533
)
$
(9,163
)
 
Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
 
 
 
 
Depreciation and impairment of property, plant and equipment
691

796

 
 
Amortization and impairment of intangible assets
569

489

 
 
Share-based payment expense
341

253

 
 
Increase in provisions
16

75

 
 
Financial expense (income)
1,061

631

 
 
Change in the fair value of convertible debt embedded derivative
—

3,127

 
 
Foreign exchange loss (gain)
69

243

 
Working capital adjustments
 
 
 
 
Decrease (Increase) in trade receivables and other receivables
(1,671
)
7,041

 
 
Decrease (Increase) in inventories
509

482

 
 
Decrease (Increase) in research tax credit receivable
(1,078
)
(787
)
 
 
Increase (Decrease) in trade payables and other liabilities
(4,726
)
1,367

 
 
Increase (Decrease) in deferred revenue
89

(267
)
 
 
Increase (Decrease) in government grant advances
(250
)
(382
)
 
Income tax paid
2

(41
)
Net cash flow from (used in) operating activities
(9,911
)
3,864

 
 
 
 
 
 
Investing activities
 
 
 
Purchase of intangible assets and property, plant and equipment
(419
)
(1,234
)
 
Sale (purchase) of financial assets
(11
)
(31
)
 
Sale of short-term deposit
—

(3
)
 
Interest received
23

3

Net cash flow used in investments activities
(407
)
(1,265
)
 
 
 
 
 
 
Financing activities
 
 
 
Proceeds from issue of warrants, exercise of stock options/warrants
206

129

 
Proceeds from Interest-bearing receivables financing
4,170

(4,916
)
 
Repayment of borrowings and finance lease liabilities
—

(12
)
 
Interest paid
(101
)
(30
)
Net cash flows from (used in) financing activities
4,275

(4,829
)
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(6,043
)
(2,230
)
 
Net foreign exchange difference
3

1

 
Cash and cash equivalent at January 1
20,202

8,288

Cash and cash equivalents at end of the period
$
14,162

$
6,059




Sequans reports first quarter 2017 financial results
Page 7

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,
2017

Dec 31,
2016

March 31,
2016

Net IFRS loss as reported
$
(5,604
)
$
(5,371
)
$
(9,229
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
341

459

254

 
Change in the fair value of convertible debt embedded derivative
—

—

3,127

 
Non-cash interest on Convertible debt and other financing (2)
610

671

365

Non-IFRS loss adjusted
$
(4,653
)
$
(4,241
)
$
(5,483
)
 
 
 
 
 
 
IFRS basic loss per share as reported

($0.07
)

($0.07
)

($0.16
)
Add back
 
 
 
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.00


$0.00


$0.01

 
Change in the fair value of convertible debt embedded derivative

$0.00


$0.00


$0.05

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

$0.01


$0.01


$0.01

Non-IFRS basic loss per share

($0.06
)

($0.06
)

($0.09
)
IFRS diluted loss per share

($0.07
)

($0.07
)

($0.16
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.00


$0.00


$0.01

 
Change in the fair value of convertible debt embedded derivative

$0.00


$0.00


$0.05

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

$0.01


$0.01


$0.01

Non-IFRS diluted loss per share

($0.06
)

($0.06
)

($0.09
)
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
Cost of product revenue
$
3

$
—

$
4

 
 
Research and development
109

192

108

 
 
Sales and marketing
79

131

39

 
 
General and administrative
150

136

103

 
 
 
 
 
 
 
(2) Related to the difference between contractual and effective interests