Sequans Communications Announces Preliminary Fourth Quarter and Full Year 2023 Financial Results
- None.
- Revenue decreased by 38.7% in Q4 2023 compared to Q3 2023 and by 70.0% compared to Q4 2022.
- Gross margin dropped to 12.2% in Q4 2023 from 85.8% in Q3 2023, reflecting lower licensing revenues.
- Operating loss increased to $12.8 million in Q4 2023 from $7.8 million in Q3 2023.
- Net loss was $17.3 million in Q4 2023 compared to $9.6 million in Q3 2023.
- Cash and cash equivalents decreased to $5.7 million at the end of December 2023.
Insights
Sequans Communications' reported financial results signal a significant decline in both quarterly and annual revenue, with Q4 2023 revenue dropping to $4.8 million from $15.9 million in Q4 2022. This substantial decrease, alongside a drop in gross profit from $12.0 million to $0.6 million in the same period, suggests a challenging market environment or operational issues that have affected the company's sales performance. The reported operating loss has widened from $1.0 million in Q4 2022 to $12.8 million in Q4 2023, indicating increased expenses or reduced operational efficiency. Investors should be cautious about the company's ability to manage costs and return to profitability, considering the reported net loss of $17.3 million. The significant non-cash expenses included in the IFRS net loss, such as interest expense and change in value of embedded derivative, reflect complex financial instruments that may pose additional risks to investors.
The IoT sector, particularly 5G/4G solutions for IoT devices, is expected to grow, yet Sequans Communications' results do not align with this trend. Despite the CEO's positive outlook on product revenue growth and strategic engagements with potential partners, the reported figures show a stark contrast in performance. The gross margin decline to 12.2% in Q4 2023 from 75.3% in Q4 2022, exacerbated by a provision for slow-moving inventory, raises concerns about inventory management and product demand. However, the projected revenue of over $7 million with a gross margin greater than 60% for Q1 2024 could signal a recovery if these targets are met. Stakeholders should monitor the company's ability to capitalize on its design pipeline and convert potential revenue into actual sales to assess future performance.
Sequans Communications' emphasis on the ramp-up of LTE-MNB-IoT Monarch 2 and Cat 1 Calliope 2 shipments, as well as the anticipated sales contribution from the 5G Taurus chipset, indicates strategic product development aligned with industry trends towards advanced IoT connectivity. The design win pipeline representing over $400 million suggests a strong potential market if the company can successfully execute these projects. Investors should consider the competitive landscape and Sequans' intellectual property in 5G technology when evaluating the company's long-term growth potential. However, the immediate financial health, as reflected in the latest results, must be balanced against these future prospects.
Paris, France--(Newsfile Corp. - March 7, 2024) - Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G solutions for IoT devices, today announced preliminary financial results for the fourth quarter and full year ended December 31, 2023.
Fourth Quarter and Full Year 2023 Summary Results Table:
| (in US$ millions, except share and per share data) | Q4 2023 (1) | Q3 2023 | Q4 2022 | Full year 2023 (1) | Full year 2022 | |||||
| Revenue | | | | | | |||||
| Gross profit | 0.6 | 6.7 | 12.0 | 24.1 | 42.9 | |||||
| Gross margin (%) | 12.2 | % | 85.8 | % | 75.3 | % | 71.8 | % | 70.8 | % |
| Operating profit (loss) | (12.8) | (7.8) | (1.0) | (30.0) | (3.8) | |||||
| Net profit (loss) | (17.3) | (9.6) | (5.0) | (41.0) | (9.0) | |||||
| Diluted earnings (loss) per ADS | ( | ( | ( | ( | ( | |||||
| Non-IFRS diluted earnings (loss) per ADS * | ( | ( | ( | ( | ( | |||||
| Weighted average number of diluted ADS (IFRS) | 60,933,327 | 58,586,324 | 47,951,407 | 56,295,999 | 46,146,776 | |||||
| Weighted average number of diluted ADS (Non-IFRS) | 60,933,327 | 58,586,324 | 47,951,407 | 56,295,999 | 46,146,776 | |||||
| (1) Preliminary evaluation of the convertible debt would need to be updated if the terms are amended prior to filing the Form 20-F | ||||||||||
| * 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 | ||||||||||
"In the fourth quarter of 2023, our product revenue increased significantly on a sequential basis, indicating a positive trend of growth in this revenue stream that we expect to continue throughout 2024 from the ramp in the shipment of LTE-MNB-IoT Monarch 2 and Cat 1 Calliope 2," stated Georges Karam, CEO of Sequans. "We are extremely pleased with the launches of new projects into mass production by our customers and the improvement in backlog. Furthermore, we expect this momentum to continue into 2025 as new and existing design wins accelerate. Also, later in 2025, sales of our 5G Taurus chipset should begin to contribute. Our overall product design pipeline continues to grow and the design win portion now represents more than
Mr. Karam emphasized, "Concurrently, on the strategic front, the company's board of directors is actively engaging with multiple strategic partners to explore various alternatives. This includes leveraging our unique market position with 5G intellectual property."
Q1 2024 Outlook
The following statement is based on management's current assumptions and expectations. This statement is forward-looking and actual results may differ materially.
Based on recent current customer demand and backlog, management is targeting revenues of over
Fourth Quarter 2023 Financial Summary:
Revenue: Revenue was
Gross margin: Gross margin was
Operating loss: Operating loss was
Net loss: Net loss was
Non-IFRS loss and diluted 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 loss was
Cash: Cash and cash equivalents at December 31, 2023 totaled
Conference Call
Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the fourth quarter of 2023 today, March 7, 2024 at 8:00 a.m. ET /14:00 CET. To participate in the live call, analysts and investors should dial 888-886-7786 or +1 416-764-8658 if outside the U.S. When prompted, provide the event title or access code: 63655581. A live and archived webcast of the call will be available from the Investors section of the Sequans website at https://sequans.com/webcasts-and-presentations/. An audio replay of the conference call will be available until March 14, 2024 at 11:59 PM ET by dialing toll free 844-512-2921 in the U.S., or +1 412-317-6671 from outside the U.S., using the following access code: 63655581.
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 Q1 2024 outlook our business strategy, expectation for increasing product revenue, strategic options, the ability to enter into new strategic agreements, expectations for Massive IoT sales, 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, 2022, 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 and rising interest rates, including manufacturing and operating expenses and interest expense, (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 fluctuations 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 and Israeli-Hamas conflicts on our independent contractors located in Ukraine and operations in Israel, (xiii) our ability to raise debt and equity financing, and (xiv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. The financial results described in this earnings release should be considered preliminary and are subject to change.
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, conversions and repayments, effective interest adjustments related to the convertible debt with embedded derivatives and other financings; 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 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
SEQUANS COMMUNICATIONS S.A.
PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three months ended | ||||||||||||
| (in thousands of US$, except share and per share amounts) | Dec 31, 2023 (1) | Sept 30, 2023 | Dec 31, 2022 | |||||||||
| Revenue : | ||||||||||||
| Product revenue | $ | 3,971 | $ | 753 | $ | 4,990 | ||||||
| License and services revenue | 802 | 7,033 | 10,921 | |||||||||
| Total revenue | 4,773 | 7,786 | 15,911 | |||||||||
| Cost of revenue | 4,190 | 1,105 | 3,935 | |||||||||
| Gross profit | 583 | 6,681 | 11,976 | |||||||||
| Operating expenses : | ||||||||||||
| Research and development | 6,336 | 5,974 | 7,361 | |||||||||
| Sales and marketing | 3,054 | 2,935 | 2,561 | |||||||||
| General and administrative | 3,976 | 5,618 | 3,040 | |||||||||
| Total operating expenses | 13,366 | 14,527 | 12,962 | |||||||||
| Operating profit (loss) | (12,783 | ) | (7,846 | ) | (986 | ) | ||||||
| Financial income (expense): | ||||||||||||
| Interest income (expense), net | (3,175 | ) | (2,802 | ) | (2,543 | ) | ||||||
| Change in fair value of convertible debt derivative | 134 | 439 | 1,011 | |||||||||
| Impact of debt amendment and reimbursement | - | 247 | - | |||||||||
| Foreign exchange gain (loss) | (829 | ) | 513 | (1,536 | ) | |||||||
| Profit (Loss) before income taxes | (16,653 | ) | (9,449 | ) | (4,054 | ) | ||||||
| Income tax expense | 681 | 104 | 907 | |||||||||
| Profit (Loss) | $ | (17,334 | ) | $ | (9,553 | ) | $ | (4,961 | ) | |||
| Attributable to : | ||||||||||||
| Shareholders of the parent | (17,334 | ) | (9,553 | ) | (4,961 | ) | ||||||
| Minority interests | - | - | - | |||||||||
| Basic loss per ADS | ( | ) | ( | ) | ( | ) | ||||||
| Diluted loss per ADS | ( | ) | ( | ) | ( | ) | ||||||
| Weighted average number of ADS used for computing: | ||||||||||||
| - Basic | 60,933,327 | 58,586,324 | 47,951,407 | |||||||||
| - Diluted | 60,933,327 | 58,586,324 | 47,951,407 | |||||||||
| (1) Preliminary evaluation of the convertible debt would need to be updated if the terms are amended prior to filing the Form 20-F | ||||||||||||
SEQUANS COMMUNICATIONS S.A.
PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Twelve months ended Dec 31, | ||||||||
| (in thousands of US$, except share and per share amounts) | 2023 (1) | 2022 | ||||||
| Revenue : | ||||||||
| Product revenue | $ | 8,060 | $ | 22,974 | ||||
| License and services revenue | 25,556 | 37,577 | ||||||
| Total revenue | 33,616 | 60,551 | ||||||
| Cost of revenue | 9,476 | 17,671 | ||||||
| Gross profit | 24,140 | 42,880 | ||||||
| Operating expenses : | ||||||||
| Research and development | 26,144 | 26,610 | ||||||
| Sales and marketing | 12,004 | 10,027 | ||||||
| General and administrative | 16,000 | 10,082 | ||||||
| Total operating expenses | 54,148 | 46,719 | ||||||
| Operating profit (loss) | (30,008 | ) | (3,839 | ) | ||||
| Financial income (expense): | ||||||||
| Interest income (expense), net | (11,288 | ) | (10,857 | ) | ||||
| Change in fair value of convertible debt derivative | 3,200 | 6,878 | ||||||
| Impact of debt amendment and reimbursement | 247 | 476 | ||||||
| Foreign exchange gain (loss) | (521 | ) | 1,082 | |||||
| Profit (Loss) before income taxes | (38,370 | ) | (6,260 | ) | ||||
| Income tax expense | 2,674 | 2,748 | ||||||
| Profit (Loss) | $ | (41,044 | ) | $ | (9,008 | ) | ||
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