EX-99.1 2 q32017earningspressrelease.htm EXHIBIT 99.1 - PRESS RELEASED DATED OCTOBER 31, 2017 Exhibit
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NEWS


Sequans Communications Announces Third Quarter 2017
Financial Results
PARIS - October 31, 2017 - 4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the third quarter ended September 30, 2017.

Third Quarter 2017 Highlights:
Revenue: Revenue was $11.3 million. Revenue for the third quarter of 2017 decreased 14.5% compared to the second quarter of 2017 and decreased 9.3% compared to the third quarter of 2016, reflecting decreases in both product and other revenue.
   
Gross margin: Gross margin was 44.3% compared to 42.1% in the second quarter of 2017 and compared to 46.8% in the third quarter of 2016, reflecting an increase in the proportion of chip sales in the product mix in the third quarter of 2017compared to the prior quarter and the impact of fixed costs on a lower product revenue base in the third quarter of 2017 compared to the same quarter in the prior year.

Operating loss: Operating loss was $5.6 million compared to an operating loss of $4.1 million in the second quarter of 2017 and an operating loss of $4.0 million in the third quarter of 2016.

Net loss: Net loss was $6.9 million, or ($0.09) per diluted share/ADS, compared to a net loss $6.0 million, or ($0.08) per diluted share/ADS, in the second quarter of 2017 and a net loss of $5.1 million, or ($0.08) per diluted share/ADS, in the third quarter of 2016.

Non-IFRS Net loss: Excluding the non-cash items of stock-based compensation and the effective interest adjustments related to the convertible debt and other financings, non-IFRS net loss was $5.9 million, or ($0.07) per diluted share/ADS, compared to a non-IFRS net loss of $4.9 million, or ($0.06) per diluted share/ADS in the second quarter of 2017, and a non-IFRS net loss of $4.3 million, or ($0.07) per diluted share/ADS, in the third quarter of 2016.

Cash: Cash, cash equivalents and short-term deposit at September 30, 2017 totaled $13.3 million compared to $19.5 million at June 30, 2017.
In millions of US$ except percentages, shares and per share amounts
Key Metrics
Q3 2017

%*

Q2 2017

%*

Q3 2016

%*

Revenue

$11.3

 

$13.2

 

$12.5

 
Gross profit
5.0

44.3
 %
5.6

42.1
 %
5.8

46.8
 %
Operating loss
(5.6
)
(49.2
)%
(4.1
)
(30.9
)%
(4.0
)
(31.7
)%
Net loss
(6.9
)
(61.2
)%
(6.0
)
(45.3
)%
(5.1
)
(41.1
)%
Diluted EPS

($0.09
)
 

($0.08
)
 

($0.08
)
 
Weighted average number of diluted shares/ADS
79,774,103

 
75,896,815

 
61,642,549

 
Cash flow from (used in) operations
(5.3
)
 
(4.4
)
 
(9.5
)
 
Cash, cash equivalents and short-term deposit at quarter-end
13.3

 
19.5

 
24.7

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

 
0.3

 
0.2

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

 
—

 
—

 
 - Non-cash interest on convertible debt and other financing
0.8

 
0.8

 
0.6

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

($0.07
)
 

($0.06
)
 

($0.07
)
 
 
 
 
 
 
 
 
* Percentage of revenue


Sequans reports third quarter 2017 financial results
Page 2

"Our IoT business continues to grow as expected," said Georges Karam, Sequans' CEO. "Our visibility is improving as our Cat 1 customers continue to ramp and are pursuing plans to serve more operators. We expect accelerating growth from IoT next year, based on a full year of Cat 1 revenue as well as the Cat M1/NB1 ramp from design wins already in hand. We also expect our broadband business to stabilize during Q4 and to improve during the course of 2018. 

"We also reached an agreement with the institutional holders of our convertible notes maturing in April, 2018 and in April, 2019 to extend each maturity by one year in exchange for adjustments to certain terms, as described in the filing we made today on Form 6-K. We believe this agreement is in the best interests of all our shareholders because it removes a significant near-term cash requirement and allows us to focus on the business."

Q4 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 fourth quarter of 2017 to be in the range of $11 to $13 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 ($0.06) and ($0.08) for the fourth quarter of 2017, based on approximately 79.8 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 third quarter of 2017 today, October 31, 2017 at 8:00 a.m. EDT /13:00 CET. To participate in the live call, analysts and investors should dial 800-230-1074 (or +1 612-234-9959 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 1, 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: 430997.

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


Sequans reports third quarter 2017 financial results
Page 3

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 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 third 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)
Sept 30, 2017

 
June 30,
2017

 
Sept 30, 2016

 



 




 

 

 
Revenue :

 

 

 

Product revenue
$
8,869

 
$
10,159

 
$
9,523

 

Other revenue
2,430

 
3,058

 
2,934

 
Total revenue
11,299

 
13,217

 
12,457

 
Cost of revenue

 

 

 

Cost of product revenue
5,678

 
7,064

 
5,900

 

Cost of other revenue
615

 
591

 
731

 
Total cost of revenue
6,293

 
7,655

 
6,631

 
Gross profit
5,006

 
5,562

 
5,826

 
Operating expenses :

 

 

 

Research and development
6,769

 
6,254

 
6,391

 

Sales and marketing
2,014

 
2,072

 
1,926

 

General and administrative
1,786

 
1,323

 
1,459

 




 

 

 
Total operating expenses
10,569

 
9,649

 
9,776

 
Operating loss
(5,563
)
 
(4,087
)
 
(3,950
)
 
Financial income (expense):

 

 

 

Interest income (expense), net
(1,202
)
 
(1,194
)
 
(1,062
)
 

Foreign exchange gain (loss)
(90
)
 
(626
)
 
(61
)
 
Loss before income taxes
(6,855
)
 
(5,907
)
 
(5,073
)
 
Income tax expense (benefit)
65

 
83

 
53

 
Loss
$
(6,920
)
 
$
(5,990
)
 
$
(5,126
)
 
Attributable to :

 

 

 

Shareholders of the parent
(6,920
)
 
(5,990
)
 
(5,126
)
 

Minority interests
—

 
—

 
—

 
Basic loss per share

($0.09
)
 

($0.08
)
 

($0.08
)
 
Diluted loss per share

($0.09
)
 

($0.08
)
 

($0.08
)
 
Weighted average number of shares used for computing:

 

 

 
— Basic
79,774,103

 
75,896,815

 
61,642,549

 
— Diluted
79,774,103

 
75,896,815

 
61,642,549

 
 
 
 
 
 
 
 
 





Sequans reports third quarter 2017 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)
2017
 
2016




 

Revenue :

 


Product revenue
$
28,668

 
$
22,634


Other revenue
8,278

 
8,992

Total revenue
36,946

 
31,626

Cost of revenue
 
 
 

Cost of product revenue
18,731

 
14,695


Cost of other revenue
1,795

 
2,282

Total cost of revenue
20,526

 
16,977

Gross profit
16,420

 
14,649

Operating expenses :
 
 
 

Research and development
19,217

 
20,007


Sales and marketing
6,582

 
4,922


General and administrative
4,520

 
4,598




 
 
 
Total operating expenses
30,319

 
29,527

Operating loss
(13,899
)
 
(14,878
)
Financial income (expense):
 
 
 

Interest income (expense), net
(3,434
)
 
(2,606
)
 
Other financial expense
—

 
(83
)
 
Change in the fair value of convertible debt embedded derivative
—

 
(1,583
)

Foreign exchange gain (loss)
(962
)
 
(77
)
Loss before income taxes
(18,295
)
 
(19,227
)
Income tax expense (benefit)
219

 
189

Loss
$
(18,514
)
 
$
(19,416
)
Attributable to :
 
 
 

Shareholders of the parent
(18,514
)
 
(19,416
)

Minority interests
—

 
—

Basic loss per share

($0.24
)
 

($0.32
)
Diluted loss per share

($0.24
)
 

($0.32
)
Weighted average number of shares used for computing:
 
 
 
— Basic
76,918,723

 
60,049,335

— Diluted
76,918,723

 
60,049,335





Sequans reports third quarter 2017 financial results
Page 6

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
 
At Sept 30,

 
At December 31,
(in thousands of US$)
2017

 
2016

 
 
 
 
 
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Property, plant and equipment
$
6,567

 
$
6,659

 
Intangible assets
8,752

 
7,707

 
Deposits and other receivables
396

 
332

 
Available for sale assets
347

 
310

 
     Total non-current assets
16,062

 
15,008

 
Current assets
 
 
 
 
Inventories
8,848

 
8,693

 
Trade receivables
16,327

 
15,285

 
Prepaid expenses and other receivables
4,086

 
3,172

 
Recoverable value added tax
539

 
470

 
Research tax credit receivable
2,386

 
1,902

 
Short term deposit
345

 
345

 
Cash and cash equivalents
12,982

 
20,202

 
     Total current assets
45,513

 
50,069

Total assets
$
61,575

 
$
65,077

 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
Equity
 
 
 
 
Issued capital, euro 0.02 nominal value, 79,842,318 shares authorized, issued and outstanding at September 30, 2017 (75,030,078 at December 31, 2016)
$
2,030

 
$
1,923

 
Share premium
204,936

 
189,029

 
Other capital reserves
29,215

 
28,257

 
Accumulated deficit
(228,067
)
 
(209,553
)
 
Other components of equity
(634
)
 
(796
)
 
     Total equity
7,480

 
8,860

 
Non-current liabilities
 
 
 
 
Government grant advances, loans and other liabilities
6,245

 
5,144

 
Convertible debt and accrued interest
5,953

 
16,338

 
Provisions
1,687

 
1,306

 
Other Liabilities
24

 
22

 
Deferred revenue
1,405

 
1,940

 
     Total non-current liabilities
15,314

 
24,750

 
Current liabilities
 
 
 
 
Trade payables
11,587

 
18,358

 
Interest-bearing receivables financing
7,581

 
7,712

 
Government grant advances
796

 
601

 
Convertible debt and accrued interest
13,154

 
—

 
Other current liabilities
4,679

 
4,415

 
Deferred revenue
758

 
335

 
Provisions
226

 
46

 
     Total current liabilities
38,781

 
31,467

Total equity and liabilities
$
61,575

 
$
65,077

 
 
 
 
 




Sequans reports third quarter 2017 financial results
Page 7

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
 
 
Nine months ended Sept 30
(in thousands of US$)
2017

 
2016

 
 
 
 
 
 
 
Operating activities
 
 
 
 
Loss before income taxes
$
(18,295
)
 
$
(19,227
)
 
Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
 
 
 
 
 
Depreciation and impairment of property, plant and equipment
2,025

 
2,353

 
 
Amortization and impairment of intangible assets
1,758

 
1,532

 
 
Share-based payment expense
958

 
663

 
 
Increase in provisions
675

 
50

 
 
Financial expense (income)
3,434

 
2,616

 
 
Change in the fair value of convertible debt embedded derivative
—

 
1,583

 
 
Foreign exchange loss (gain)
567

 
181

 
Working capital adjustments
 
 
 
 
 
Decrease (Increase) in trade receivables and other receivables
(2,057
)
 
1,504

 
 
Increase in inventories
(155
)
 
(2,903
)
 
 
Decrease (Increase) in research tax credit receivable
(484
)
 
940

 
 
Increase (Decrease) in trade payables and other liabilities
(7,299
)
 
1,893

 
 
Decrease in deferred revenue
(112
)
 
(444
)
 
 
Decrease in government grant advances
(403
)
 
(559
)
 
Income tax paid
(206
)
 
(175
)
Net cash flow used in operating activities
(19,594
)
 
(9,910
)
 
 
 
 
 
 
 
Investing activities
 
 
 
 
Purchase of intangible assets and property, plant and equipment
(4,096
)
 
(3,724
)
 
Sale (purchase) of financial assets
(101
)
 
(11
)
 
Sale of short-term deposit
—

 
49

 
Interest received
47

 
10

Net cash flow used in investments activities
(4,150
)
 
(3,676
)
 
 
 
 
 
 
 
Financing activities
 
 
 
 
Proceeds from issue of warrants, exercise of stock options/warrants
906

 
267

 
Public equity offering proceeds, net of transaction costs paid
14,942

 
23,445

 
Repayment of interest-bearing receivables financing
(131
)
 
(843
)
 
Proceeds from interest-bearing research project financing
1,126

 
—

 
Proceeds from convertible debt, net of transaction cost
—

 
6,932

 
Repayment of government loans
(56
)
 
—

 
Repayment of borrowings and finance lease liabilities
—

 
(12
)
 
Interest paid
(272
)
 
(159
)
Net cash flows from financing activities
16,515

 
29,630

 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(7,229
)
 
16,044

 
Net foreign exchange difference
9

 
(25
)
 
Cash and cash equivalent at January 1
20,202

 
8,288

Cash and cash equivalents at end of the period
$
12,982

 
$
24,307




Sequans reports third quarter 2017 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, 2017

 
June 30,
2017

 
Sept 30, 2016

Net IFRS loss as reported
$
(6,920
)
 
$
(5,990
)
 
$
(5,126
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
310

 
307

 
183

 
Non-cash interest on Convertible debt and other financing (2)
756

 
759

 
626

Non-IFRS loss adjusted
$
(5,854
)
 
$
(4,924
)
 
$
(4,317
)
IFRS basic loss per share as reported

($0.09
)
 

($0.08
)
 

($0.08
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.01

 

$0.00

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

$0.01

 

$0.01

 

$0.01

Non-IFRS basic loss per share

($0.07
)
 

($0.06
)
 

($0.07
)
IFRS diluted loss per share

($0.09
)
 

($0.08
)
 

($0.08
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.01

 

$0.00

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

$0.01

 

$0.01

 

$0.01

Non-IFRS diluted loss per share

($0.07
)
 

($0.06
)
 

($0.07
)
 
 
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
 
 
Cost of product revenue
$
2

 
$
2

 
$
4

 
 
Research and development
87

 
97

 
79

 
 
Sales and marketing
55

 
65

 
31

 
 
General and administrative
166

 
143

 
69

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





Sequans reports third quarter 2017 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
2017
 
2016
Net IFRS loss as reported
$
(18,514
)
 
$
(19,416
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
958

 
663

 
Change in the fair value of convertible debt embedded derivative
—

 
1,583

 
Non-cash interest on Convertible debt and other financing (2)
2,119

 
1,547

Non-IFRS loss adjusted
$
(15,437
)
 
$
(15,623
)
IFRS basic loss per share as reported

($0.24
)
 

($0.32
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.00

 
Change in the fair value of convertible debt embedded derivative

$0.00

 

$0.03

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

$0.03

 

$0.03

Non-IFRS basic loss per share

($0.20
)
 

($0.26
)
IFRS diluted loss per share

($0.24
)
 

($0.32
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.00

 
Change in the fair value of convertible debt embedded derivative

$0.00

 

$0.03

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

$0.03

 

$0.03

Non-IFRS diluted loss per share

($0.20
)
 

($0.26
)
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
Cost of product revenue
$
7

 
$
12

 
 
Research and development
293

 
283

 
 
Sales and marketing
199

 
105

 
 
General and administrative
459

 
263

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