EX-99.1 2 q32022earningspressrelease.htm EX-99.1 - PRESS RELEASE NOVEMBER 2022 Document
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NEWS





Sequans Communications Announces
Third Quarter 2022 Financial Results


PARIS - November 2, 2022 - Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G solutions for IoT devices, today announced financial results for the third quarter ended September 30, 2022.

Third Quarter 2022 Summary Results Table:
(in US$ millions, except share and per share data)Q3 2022Q2 2022Q3 2021
Revenue$16.5 $14.2 $11.9 
Gross profit12.8 8.6 5.8 
Gross margin (%)77.6 %60.7 %49.2 %
Operating profit (loss)1.2 (2.1)(5.1)
Net Profit (Loss)(2.9)(3.2)0.2 
Diluted earnings (loss) per ADS ($0.06)($0.07)$0.00 
Non-IFRS diluted earnings (loss) per ADS *$0.01 ($0.02)($0.15)
Weighted average number of diluted ADS (IFRS)47,802,526 47,656,861 41,024,405 
Weighted average number of diluted ADS (Non-IFRS)52,620,229 47,656,861 41,024,405 
* See Use of Non-IFRS/non-GAAP Financial Measures disclosure on page 3. IFRS Net Profit (Loss) includes significant non-cash interest expense, debt amendment and change in value of embedded derivative that are excluded from Non-IFRS measures
“Third quarter revenue increased by 39% year-over-year and 16% sequentially, reflecting an increase in licensing revenue, including revenue recognized from our new 5G strategic partner agreement announced in August,” said Georges Karam, CEO of Sequans. “This lifted gross margin to 77.6% and turned the Company to non-IFRS profitability of $0.01 per ADS on a fully diluted basis. The higher licensing revenue more than offset the as-expected lower product revenue in the third quarter. Product revenue in the quarter was primarily impacted by various supply chain factors temporarily affecting our customers' ability to ship or launch their products. We still expect product shipments to grow in the coming quarters."

“Our pipeline continues to grow and, in particular, we are excited by the demand we are seeing for our next generation Cat 1 Calliope 2”, continued Georges Karam. “We secured two sizeable design wins for Calliope 2, adding to the already strong funnel for Cat M/NB Monarch 2 and reinforcing our leadership in Massive IoT. In addition, the recently announced 5G strategic deal is progressing well and confirms market interest in our 5G technology, creating a licensing revenue pipeline on top of our product business.”


Q4 2022 Outlook

The following statement is based on management’s current assumptions and expectations and assumes no increase in the severity or duration of the COVID-19 pandemic or supply chain constraints. This statement is forward-looking and actual results may differ materially.

Taking into consideration current customer demand and the ongoing impact of supply chain constraints on the Company’s ability to ship orders, management expects revenue to be flat or slightly down sequentially for the quarter ending December 31, 2022, while still representing significant growth compared with the fourth quarter of 2021, with gross margin expected to exceed 65%.

Third Quarter 2022 Highlights:

Revenue: Revenue was $16.5 million, an increase of 16.2% compared to the second quarter of 2022 and an increase of 39.0% compared to the third quarter of 2021.The increase for the third quarter was primarily due to increased services and license revenue as a result of the new 5G strategic partnership, partially offset by decreases in product revenue.

Gross margin: Gross margin was 77.6% compared to 60.7% in the second quarter of 2022 and compared to 49.2% in the third quarter of 2021 due to the higher proportion of services and license revenue versus product sales in the revenue mix.



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Operating profit / loss: Operating profit was $1.2 million compared to operating losses of $2.1 million in the second quarter of 2022 and $5.1 million in the third quarter of 2021.

Net profit / loss: Net loss was $2.9 million, or ($0.06) per diluted ADS, compared to a net loss of $3.2 million, or ($0.07) per ADS, in the second quarter of 2022 and a net profit of $0.2 million, or $0.01 per ADS, in the third quarter of 2021. Net loss in the third quarter of 2022 includes a $1.2 million loss on the change in fair value of the convertible debt derivative compared to a $0.7 million gain in the second quarter of 2022 and a $7.7 million gain in the third quarter of 2021. Net loss in the third quarter of 2022 includes a $0.5 million gain on the impact of the convertible debt amendment.

Non-IFRS Net profit / loss and diluted profit / loss per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value, the amendment and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, non-IFRS net gain was $0.4 million, or $0.01 per diluted ADS, compared to non-IFRS net losses of $1.2 million, or ($0.02) per diluted ADS in the second quarter of 2022, and $5.3 million, or ($0.14) per diluted ADS, in the third quarter of 2021. The non-IFRS net gain / loss includes foreign exchange gains of $1.0 million, or $0.02 per diluted ADS, in the third quarter of 2022, $1.2 million, or $0.02 per diluted ADS, in the second quarter of 2022 and $0.4 million, or $0.01 per diluted ADS, in the third quarter of 2021.

Cash: Cash and cash equivalents and short-term deposits at September 30, 2022 totaled $5.8 million compared to $16.8 million at June 30, 2022. The amount at September 30, 2022 excludes cash received from the 5G [1] strategic partnership of $13.5 million received in October 2022.



Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the third quarter of 2022 today, November 2, 2022 at 8:00 a.m. ET /13:00 CET. To participate in the live call, analysts and investors should dial 877-407-0792 or +1 201-689-8263 if outside the U.S. When prompted, provide the event title or access code: 13733000. A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/. An audio replay of the conference call will be available until November 16, 2022 by dialing toll free 844-512-2921 or +1 412-317-6671 from outside the U.S., using the following access code:13733000.

Forward Looking Statements
This press release contains projections and other forward-looking statements regarding future events and our future financial performance. All statements other than present and historical facts and conditions contained in this release, including any statements regarding future results of operations and financial positions, business strategy and plans, expectations for future product sales, the impact of the Covid-19 on our supply chain and on customer demand, the impact of component shortages and manufacturing capacity, our ability to convert our pipeline to revenue 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 undertake no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release. 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 rely on or 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. In addition to the risk factors contained in our Form 20-F for the fiscal year ended December 31, 2021, 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 resulting from inflationary pressures, including manufacturing and operating 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) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain, (xii) the impact of the Ukraine-Russia conflict on our independent contractors located in Ukraine, (xiii) the impact of Covid-19 on the ability to operate our business and research, production of our products or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders or Covid-19 workforce shortages, (xiv) our ability to raise debt and equity financing, and (xv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission.

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


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the non-cash impacts of convertible debt amendments, conversions and repayments, effective interest adjustments related to the convertible debt with embedded derivatives 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 developer and provider of 5G and 4G chips and modules for IoT devices. For 5G/4G massive IoT applications, Sequans provides a comprehensive product portfolio based on its flagship Monarch LTE-M/NB-IoT and Calliope Cat 1 chip platforms, featuring industry-leading low power consumption, a large set of integrated functionalities, and global deployment capability. For 5G/4G broadband and critical IoT applications, Sequans offers a product portfolio based on its Cassiopeia 4G Cat 4/Cat 6 and planned high-end Taurus 5G chip platforms, optimized for low-cost residential, enterprise, and industrial applications. Founded in 2003, Sequans is based in Paris, France with additional offices in the United States, United Kingdom, Israel, Hong Kong, Singapore, Finland, Taiwan, South Korea, and China.
Visit Sequans online at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans

Media Relations: Kimberly Tassin, +1.425.736.0569, Kimberly@sequans.com
Investor Relations: Kimberly Rogers, +1 385.831-7337, krogers@sequans.com

Condensed financial tables follow


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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,
2022		June 30, 2022Sept 30,
2021
Revenue :
Product revenue$4,385 $7,674 $7,545 
License and services revenue12,143 6,547 4,346 
Total revenue16,528 14,221 11,891 
Cost of revenue3,708 5,592 6,043 
Gross profit12,820 8,629 5,848 
Operating expenses :
Research and development 6,960 5,875 6,634 
Sales and marketing 2,446 2,499 2,116 
General and administrative 2,199 2,351 2,181 
Total operating expenses11,605 10,725 10,931 
Operating profit (loss)1,215 (2,096)(5,083)
Financial income (expense):
Interest income (expense), net(2,784)(2,858)(2,685)
Change in fair value of convertible debt derivative(1,193)663 7,706 
Impact of debt amendment476 — — 
Foreign exchange gain (loss)1,030 1,218 409 
Profit (Loss) before income taxes(1,256)(3,073)347 
Income tax expense1,617 120 155 
Profit (Loss)$(2,873)$(3,193)$192 
Attributable to :
Shareholders of the parent(2,873)(3,193)192 
Minority interests— — — 
Basic loss per ADS($0.06)($0.07)$0.01 
Diluted loss per ADS($0.06)($0.07)$0.00 
Weighted average number of ADS used for computing:
— Basic47,802,526 47,656,861 37,382,595 
— Diluted47,802,526 47,656,861 41,024,405 


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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)20222021
Revenue :
Product revenue$17,984 $23,486 
License and services revenue26,656 13,583 
Total revenue44,640 37,069 
Cost of revenue13,736 17,768 
Gross profit30,904 19,301 
Operating expenses :
Research and development 19,249 19,736 
Sales and marketing 7,466 6,707 
General and administrative 7,042 7,148 
Total operating expenses33,757 33,591 
Operating profit (loss)(2,853)(14,290)
Financial income (expense):
Interest income (expense), net(8,314)(8,807)
Change in fair value of convertible debt derivative5,867 5,024 
Impact of debt amendment476 5,177 
Foreign exchange gain (loss)2,618 803 
Profit (Loss) before income taxes(2,206)(12,093)
Income tax expense1,841 452 
Profit (Loss)$(4,047)$(12,545)
Attributable to :
Shareholders of the parent(4,047)(12,545)
Minority interests— — 
Basic loss per ADS($0.09)($0.34)
Diluted loss per ADS($0.09)($0.34)
Weighted average number of ADS used for computing:
— Basic45,538,645 36,396,026 
— Diluted45,538,645 36,396,026 





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SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At Sept 30,At Dec 31,
(in thousands of US$)20222021
ASSETS
Non-current assets
Property, plant and equipment$9,253 $8,010 
Intangible assets46,741 37,984 
Deposits and other receivables620 2,311 
Other non-current financial assets307 357 
     Total non-current assets56,921 48,662 
Current assets
Inventories10,102 6,433 
Trade receivables17,258 13,622 
Contract assets420 789 
Prepaid expenses1,905 2,108 
Other receivables3,980 7,252 
Research tax credit receivable7,972 5,863 
Cash and cash equivalents 5,831 4,835 
     Total current assets47,468 40,902 
Total assets$104,389 $89,564 
EQUITY AND LIABILITIES
Equity
Issued capital, euro 0.01 nominal value, 191,714,374 shares authorized, issued and outstanding at September 30, 2022 (151,419,322 shares at December 31, 2021 and euro 0.02 nominal value)$2,295 $3,687 
Share premium2,443 298,389 
Other capital reserves61,060 57,198 
Accumulated deficit(60,138)(383,554)
Other components of equity(812)(26)
     Total equity4,848 (24,306)
Non-current liabilities
Government grant advances, loans and other liabilities5,132 9,354 
Convertible debt41,437 36,373 
Convertible debt embedded derivative4,213 10,081 
Lease liabilities2,338 3,373 
Trade payables2,486 964 
Provisions2,158 2,137 
Deferred tax liabilities113 138 
Contract liabilities1,717 2,706 
     Total non-current liabilities59,594 65,126 
Current liabilities
Trade payables10,103 13,916 
Interest-bearing receivables financing9,857 9,518 
Lease liabilities1,213 1,247 
Government grant advances and loans3,985 6,206 
Contract liabilities6,901 8,677 
Other current liabilities and provisions7,888 9,180 
     Total current liabilities39,947 48,744 
Total equity and liabilities$104,389 $89,564 


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SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Nine months ended Sept 30,
(in thousands of US$)20222021
Operating activities
Profit (Loss) before income taxes$(2,206)$(12,093)
Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
Depreciation and impairment of property, plant and equipment2,901 2,733 
Amortization and impairment of intangible assets5,574 5,417 
Share-based payment expense3,667 3,273 
Increase in provisions298 463 
Interest expense, net8,314 8,807 
Change in the fair value of convertible debt embedded derivative(5,867)(5,024)
Impact of debt reimbursement(476)(5,177)
Foreign exchange loss (gain)(897)(743)
Loss (Gain) on disposal of property, plant and equipment— 7 
Working capital adjustments
Decrease (Increase) in trade receivables and other receivables(3,412)5,973 
Decrease (increase) in inventories(3,669)342 
Increase in research tax credit receivable(636)(2,700)
Increase (Decrease) in trade payables and other liabilities(7,499)5,324 
Decrease in contract liabilities(3,703)(9,506)
Decrease in government grant advances(2,292)(574)
Income tax paid(683)(542)
Net cash flow provided by (used in) operating activities(10,586)(4,020)
Investing activities
Purchase of intangible assets and property, plant and equipment(5,892)(8,511)
Capitalized development expenditures(11,308)(14,926)
Sale (Purchase) of financial assets1,741 (1,760)
Decrease of short-term deposit— 2,900 
Interest received47 36 
Net cash flow provided by (used in) investments activities(15,412)(22,261)
Financing activities
Proceeds from issue of warrants, exercise of stock options/warrants— 99 
Public and private equity offering proceeds, net of transaction costs paid30,125 9,881 
Proceeds (Repayment of) from interest-bearing receivables financing342 (128)
Proceeds from convertible debt, net of transaction cost— 39,647 
Payment of lease liabilities(929)(810)
Repayment of convertible debt — (8,750)
Repayment of government loans(633)(356)
Repayment of venture debt— (8,042)
Repayment of interest-bearing research project financing(812)(804)
Interest paid(1,096)(4,800)
Net cash flows from (used in) financing activities26,997 25,937 
Net increase (decrease) in cash and cash equivalents999 (344)
Net foreign exchange difference(3)2 
Cash and cash equivalents at January 14,835 7,574 
Cash and cash equivalents at end of the period5,831 7,232 









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SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and per share amounts)Three months ended
Sept 30,
2022		June 30, 2022Sept 30,
2021
Net IFRS gain (loss) as reported$(2,873)$(3,193)$192 
Add back
Non-cash stock-based compensation expense according to IFRS 2 (1)
1,133 1,219 1,022 
Non-cash change in the fair value of convertible debt embedded derivative1,193 (663)(7,706)
Non-cash interest on convertible debt and other financing (2)
1,447 1,452 1,193 
Non-cash impact of convertible debt amendment(476)— — 
Non-IFRS gain (loss) adjusted$424 $(1,185)$(5,299)
IFRS basic gain (loss) per ADS as reported($0.06)($0.07)$0.01 
Add back
Non-cash stock-based compensation expense according to IFRS 2 (1)
$0.02 $0.03 $0.03 
Non-cash change in the fair value of convertible debt embedded derivative$0.03 ($0.01)($0.21)
Non-cash interest on convertible debt and other financing (2)
$0.03 $0.03 $0.03 
Non-cash impact of convertible debt amendment$0.00 $0.00 $0.00 
Non-IFRS basic gain (loss) per ADS $0.01 ($0.02)($0.14)
IFRS diluted gain (loss) per ADS($0.06)($0.07)$— 
Add back
Non-cash stock-based compensation expense according to IFRS 2 (1)
$0.02 $0.03 $0.03 
Non-cash change in the fair value of convertible debt embedded derivative$0.03 ($0.01)($0.21)
Non-cash interest on convertible debt and other financing (2)
$0.03 $0.03 $0.03 
Non-cash impact of convertible debt amendment$0.00 $0.00 $0.00 
Non-IFRS diluted gain (loss) per ADS$0.01 ($0.02)($0.15)
(1) Included in the IFRS loss as follows:
Cost of product revenue$41 $44 $14 
Research and development370 317 487 
Sales and marketing268 287 200 
General and administrative454 571 321 
(2) Related to the difference between contractual and effective interest rates


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SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and per share amounts)Nine months ended Sept 30,
20222021
Net IFRS gain (loss) as reported$(4,047)$(12,545)
Add back
Non-cash stock-based compensation expense according to IFRS 2 (1)
3,667 3,274 
Non-cash change in the fair value of convertible debt embedded derivative(5,867)(5,024)
Non-cash interest on convertible debt and other financing (2)4,117 3,465 
Impact of debt reimbursement— (5,177)
Non-cash impact of convertible debt amendment(476)— 
Non-IFRS gain (loss) adjusted$(2,606)$(16,007)
IFRS basic gain (loss) per ADS as reported($0.09)($0.34)
Add back
Non-cash stock-based compensation expense according to IFRS 2 (1)
$0.08 $0.09 
Non-cash change in the fair value of convertible debt embedded derivative($0.13)($0.15)
Non-cash interest on convertible debt and other financing (2)
$0.09 $0.10 
Impact of debt reimbursement$0.00 ($0.14)
Non-cash impact of convertible debt amendment($0.01)$0.00 
Non-IFRS basic gain (loss) per ADS ($0.06)($0.44)
IFRS diluted gain (loss) per ADS($0.09)($0.34)
Add back
Non-cash stock-based compensation expense according to IFRS 2 (1)
$0.08 $0.09 
Non-cash change in the fair value of convertible debt embedded derivative($0.13)($0.15)
Non-cash interest on convertible debt and other financing (2)
$0.09 $0.10 
Impact of debt reimbursement$0.00 ($0.14)
Non-cash impact of convertible debt amendment($0.01)$0.00 
Non-IFRS diluted gain (loss) per ADS($0.06)($0.44)
(1) Included in the IFRS loss as follows:
Cost of product revenue$114 $44 
Research and development1,157 1,554 
Sales and marketing846 623 
General and administrative1,550 1,053 
(2) Related to the difference between contractual and effective interest rates