EX-99.1 4 q12019earningspressrelease.htm EXHIBIT 99.1 - PRESS RELEASED DATED MAY 9, 2019 Exhibit
sequanslogo071318colorweba01.jpg

NEWS

Sequans Communications Announces
First Quarter 2019 Financial Results

PARIS - May 9, 2019 - 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


Sequans reports first quarter 2019 financial results
Page 2


“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.




Sequans reports first quarter 2019 financial results
Page 3

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 first 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)
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 reports first quarter 2019 financial results
Page 5

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 reports first quarter 2019 financial results
Page 6

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 reports first quarter 2019 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,
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