EX-99.1 2 q12018earningspressrelease.htm EXHIBIT 99.1 - PRESS RELEASED DATED MAY 2, 2018 Exhibit
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NEWS

Sequans Communications Announces First Quarter 2018
Financial Results
PARIS - May 2, 2018 - 4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Highlights:
Revenue: Revenue was $11.2 million, flat compared to the fourth quarter of 2017 and a decrease of 9.6% compared to the first quarter of 2017, reflecting a decrease in broadband product revenue partially offset by an increase in other revenue. IoT related revenue was up significantly, both sequentially and compared to the first quarter of 2017.
     
Gross margin: Gross margin was 41.7% in both the first quarter of 2018 and the fourth quarter of 2017 compared to 47.1% in the first quarter of 2017, primarily due to a shift in product mix toward a lower proportion of chips.

Operating loss: Operating loss was $7.3 million compared to an operating loss of $5.6 million in the fourth quarter of 2017 and an operating loss of $4.2 million in the first quarter of 2017.

Net loss: Net loss was $8.7 million, or ($0.10) per diluted share/ADS, compared to a net loss $7.6 million, or ($0.10) per diluted share/ADS, in the fourth quarter of 2017 and a net loss of $5.6 million, or ($0.07) per diluted share/ADS, in the first quarter of 2017.

Non-IFRS Net loss: Excluding the non-cash items of stock-based compensation, the non-cash impact of convertible debt amendments and effective interest adjustments 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 $5.9 million, or ($0.07) per diluted share/ADS in the fourth quarter of 2017, and a non-IFRS net loss of $4.7 million, or ($0.06) per diluted share/ADS, in the first quarter of 2017.

Cash: Cash, cash equivalents and short-term deposit at March 31, 2018 totaled $15 million compared to $3.3 million at December 31, 2017.
In millions of US$ except percentages, shares and per share amounts
Key Metrics
Q1 2018

%*

Q4 2017

%*

Q1 2017

%*

Revenue

$11.2

 

$11.3

 

$12.4

 
Gross profit
4.7

41.7
 %
4.7

41.7
 %
5.9

47.1
 %
Operating loss
(7.3
)
(64.9
)%
(5.6
)
(49.7
)%
(4.2
)
(34.2
)%
Net loss
(8.7
)
(77.9
)%
(7.6
)
(67.6
)%
(5.6
)
(45.1
)%
Diluted EPS

($0.10
)
 

($0.10
)
 

($0.07
)
 
Weighted average number of diluted shares/ADS
91,465,178

 
79,844,151

 
75,043,865

 
Cash flow from (used in) operations
(6.0
)
 
(9.3
)
 
(9.9
)
 
Cash, cash equivalents and short-term deposit at quarter-end
15.0

 
3.3

 
14.5

 
Additional information on non-cash items:
 
 
 
 
 
 
 - Stock-based compensation included in operating result
0.5

 
0.7

 
0.3

 
 - Non-cash impact of Convertible debt amendments
—

 
0.3

 
—

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

 
—

 
—

 
 - Non-cash interest on convertible debt and other financing
0.7

 
0.7

 
0.6

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

($0.08
)
 

($0.07
)
 

($0.06
)
 
 
 
 
 
 
 
 
* Percentage of revenue


Sequans reports first quarter 2018 financial results
Page 2

"Our IoT business continued to gain momentum during the first quarter, with IoT revenue increasing more than 50% from Q4, driven by strong Cat 1 growth," said Georges Karam, Sequans' CEO. "The strength in IoT mostly offset the expected weakness of broadband business in Q1, and we believe broadband will pick up gradually during the balance of the year. We are continuing to gain traction with our Monarch Cat M1/NB1 solution and derivative products for a growing list of IoT devices and look forward to seeing several of them launch during the second half of the year. This IoT momentum, together with new opportunities in our broadband business, plus our expanding customer relationships in vertical markets, supports our confidence in further acceleration of our long-term growth."



Q2 2018 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 2018 to be in the range of $12.5 to $14.5 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 ($0.07) and ($0.08) for the second quarter of 2018, based on approximately 94.5 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 2018 today, May 2, 2018 at 8:00 a.m. EDT /14:00 CET. To participate in the live call, analysts and investors should dial 800-553-0272 (or +1 612-234-9960 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, 2018 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: 446860.


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, anticipation for IoT and broadband sales, 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


Sequans reports first quarter 2018 financial results
Page 3

compensation and the non-cash financial income and 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 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 2018 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,
2018

 
Dec 31,
2017

 
March 31,
2017

 



 




 

 

 
Revenue :

 

 

 

Product revenue
$
7,635

 
$
8,685

 
$
9,640

 

Other revenue
3,599

 
2,632

 
2,790

 
Total revenue
11,234

 
11,317

 
12,430

 
Cost of revenue

 

 

 

Cost of product revenue
5,861

 
5,994

 
5,989

 

Cost of other revenue
689

 
602

 
589

 
Total cost of revenue
6,550

 
6,596

 
6,578

 
Gross profit
4,684

 
4,721

 
5,852

 
Operating expenses :

 

 

 

Research and development
7,519

 
5,985

 
6,194

 

Sales and marketing
2,485

 
2,203

 
2,496

 

General and administrative
1,971

 
2,159

 
1,411

 




 

 

 
Total operating expenses
11,975

 
10,347

 
10,101

 
Operating loss
(7,291
)
 
(5,626
)
 
(4,249
)
 
Financial income (expense):

 

 

 

Interest income (expense), net
(1,227
)
 
(1,178
)
 
(1,038
)
 
 
Convertible debt amendments
—

 
(322
)
 
—

 

Foreign exchange gain (loss)
(212
)
 
(439
)
 
(246
)
 
Loss before income taxes
(8,730
)
 
(7,565
)
 
(5,533
)
 
Income tax expense (benefit)
19

 
81

 
71

 
Loss
$
(8,749
)
 
$
(7,646
)
 
$
(5,604
)
 
Attributable to :

 

 

 

Shareholders of the parent
(8,749
)
 
(7,646
)
 
(5,604
)
 

Minority interests
—

 
—

 
—

 
Basic loss per share

($0.10
)
 

($0.10
)
 

($0.07
)
 
Diluted loss per share

($0.10
)
 

($0.10
)
 

($0.07
)
 
Weighted average number of shares used for computing:

 

 

 
— Basic
91,465,178

 
79,844,151

 
75,043,865

 
— Diluted
91,465,178

 
79,844,151

 
75,043,865

 
 
 
 
 
 
 
 
 





Sequans reports first quarter 2018 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$)
2018

 
2017

 
 
 
 
 
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Property, plant and equipment
$
6,866

 
$
6,993

 
Intangible assets
10,110

 
9,561

 
Deposits and other receivables
412

 
402

 
Available for sale assets
363

 
353

 
     Total non-current assets
17,751

 
17,309

 
Current assets
 
 
 
 
Inventories
7,368

 
7,376

 
Trade receivables
17,535

 
20,826

 
Prepaid expenses and other receivables
3,223

 
4,214

 
Recoverable value added tax
895

 
688

 
Research tax credit receivable
4,230

 
3,248

 
Short term deposit
347

 
347

 
Cash and cash equivalents
14,638

 
2,948

 
     Total current assets
48,236

 
39,647

Total assets
$
65,987

 
$
56,956

 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
Equity
 
 
 
 
Issued capital, euro 0.02 nominal value, 94,453,448 shares authorized, issued and outstanding at March 31, 2018 (80,024,707 shares at December 31, 2017)
$
2,384

 
$
2,031

 
Share premium
225,517

 
204,952

 
Other capital reserves
33,844

 
33,313

 
Accumulated deficit
(244,562
)
 
(235,813
)
 
Other components of equity
(493
)
 
(435
)
 
     Total equity
16,690

 
4,048

 
Non-current liabilities
 
 
 
 
Government grant advances, loans and other liabilities
4,516

 
5,030

 
Convertible debt and accrued interest
18,084

 
17,063

 
Provisions and other liabilities
1,647

 
1,584

 
Deferred revenue
1,172

 
1,293

 
     Total non-current liabilities
25,419

 
24,970

 
Current liabilities
 
 
 
 
Trade payables
11,053

 
13,023

 
Interest-bearing receivables financing
5,318

 
7,413

 
Government grant advances
1,638

 
1,592

 
Provisions and other current liabilities
5,042

 
5,170

 
Deferred revenue
827

 
740

 
     Total current liabilities
23,878

 
27,938

Total equity and liabilities
$
65,987

 
$
56,956

 
 
 
 
 




Sequans reports first quarter 2018 financial results
Page 6

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
 
 
Three months ended March 31,
(in thousands of US$)
2018

 
2017

 
 
 
 
 
 
 
Operating activities
 
 
 
 
Loss before income taxes
$
(8,730
)
 
$
(5,533
)
 
Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
 
 
 
 
 
Depreciation and impairment of property, plant and equipment
769

 
691

 
 
Amortization and impairment of intangible assets
767

 
569

 
 
Share-based payment expense
531

 
341

 
 
Increase (decrease) in provisions
22

 
16

 
 
Financial expense (income)
1,227

 
1,061

 
 
Foreign exchange loss (gain)
146

 
69

 
Working capital adjustments
 
 
 
 
 
Decrease (Increase) in trade receivables and other receivables
3,958

 
(1,671
)
 
 
Decrease (Increase) in inventories
8

 
509

 
 
Decrease (Increase) in research tax credit receivable
(982
)
 
(1,078
)
 
 
Increase (Decrease) in trade payables and other liabilities
(3,315
)
 
(4,726
)
 
 
Decrease in deferred revenue
(34
)
 
89

 
 
Decrease in government grant advances
(410
)
 
(250
)
 
Income tax paid
34

 
2

Net cash flow used in operating activities
(6,009
)
 
(9,911
)
 
 
 
 
 
 
 
Investing activities
 
 
 
 
Purchase of intangible assets and property, plant and equipment
(329
)
 
(410
)
 
Capitalized development expenditures
(463
)
 
(9
)
 
Sale (purchase) of financial assets
(20
)
 
(11
)
 
Interest received
35

 
23

Net cash flow used in investments activities
(777
)
 
(407
)
 
 
 
 
 
 
 
Financing activities
 
 
 
 
Proceeds from issue of warrants, exercise of stock options/warrants
27

 
206

 
Public equity offering proceeds, net of transaction costs paid
20,890

 
—

 
Proceeds (Repayment of) from interest-bearing receivables financing
(2,095
)
 
4,170

 
Repayment of government loans
(118
)
 
—

 
Interest paid
(230
)
 
(101
)
Net cash flows from financing activities
18,474

 
4,275

 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
11,688

 
(6,043
)
 
Net foreign exchange difference
2

 
3

 
Cash and cash equivalent at January 1
2,948

 
20,202

Cash and cash equivalents at end of the period
$
14,638

 
$
14,162

 
 
 
 
 
 
 





Sequans reports first quarter 2018 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,
2018

 
Dec 31,
2017

 
March 31,
2017

Net IFRS loss as reported
$
(8,749
)
 
$
(7,646
)
 
$
(5,604
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
532

 
680

 
341

 
Non-cash interest on Convertible debt and other financing (2)
671

 
706

 
610

 
Non-cash impact of Convertible debt amendments
—

 
322

 
—

 
 
 
$
(7,546
)
 
$
(5,938
)
 
$
(4,653
)
IFRS basic loss per share as reported

($0.10
)
 

($0.10
)
 

($0.07
)
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-cash impact of Convertible debt amendments

$0.00

 

$0.01

 

$0.00

Non-IFRS basic loss per share

($0.08
)
 

($0.07
)
 

($0.06
)
IFRS diluted loss per share

($0.10
)
 

($0.10
)
 

($0.07
)
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-cash impact of Convertible debt amendments

$0.00

 

$0.01

 

$0.00

Non-IFRS diluted loss per share

($0.08
)
 

($0.07
)
 

($0.06
)
 
 
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
 
 
Cost of product revenue
$
3

 
$
—

 
$
3

 
 
Research and development
139

 
143

 
109

 
 
Sales and marketing
80

 
96

 
79

 
 
General and administrative
310

 
441

 
150

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