Sequans Provides Key Business Updates
Sequans Communications, a developer of 5G/4G semiconductors and IoT modules, announced key business updates and Q1 2024 financial results. The company extended its debt standstill agreements until August 2024 and signed a $15 million licensing deal for its Monarch2 LTE platform. Sequans reoriented its R&D focus from 5G fixed wireless to low-power 5G for IoT, aiming for break-even in 2025. Q1 revenue was $6.0 million, a 26.3% increase QoQ but a 49.3% decrease YoY. The gross margin was 63.9%, and net loss was $11.8 million. Cash reserves stood at $0.5 million, excluding new funding.
- Extended debt standstill agreements until August 2024, providing additional time for strategic negotiations.
- Signed a $15 million licensing agreement for Monarch2 LTE platform, potentially increasing future revenues.
- Shifted R&D focus to low-power 5G for IoT, expected to reduce expenses and aim for break-even in 2025.
- Q1 2024 revenue was $6.0 million, a 26.3% increase compared to Q4 2023.
- Gross margin improved significantly to 63.9% from 12.2% in Q4 2023.
- Revenue decreased by 49.3% compared to Q1 2023.
- Product revenue fell by 37.8% QoQ.
- Operating loss was $8.5 million, though lower than the previous quarter, it increased YoY.
- Net loss of $11.8 million, higher compared to Q1 2023.
- Cash reserves were critically low at $0.5 million as of March 31, 2024.
Insights
Sequans Communications has provided a comprehensive update on its business activities and financial performance for the first quarter of 2024. From a financial perspective, several key points are noteworthy. Firstly, by extending its standstill agreements with its debt holders until August, Sequans gains additional time to negotiate a strategic transaction which could potentially improve its balance sheet. This maneuver is important to avoid default and maintain investor confidence during turbulent times.
The licensing agreement for the Monarch2 LTE platform brings in an initial
However, the suspension of the 5G Taurus product development represents a double-edged sword. While it reduces R&D expenses and aligns the company’s focus on low-power 5G for IoT, it also results in a
Financially, the company's revenue has increased by
The shift in strategy towards low-power 5G for Massive IoT applications, specifically RedCap and eRedCap, is a calculated move by Sequans to tap into a burgeoning market. Low-power 5G technologies are important for supporting a wide array of IoT devices, from wearables to smart meters, which require prolonged battery life and consistent connectivity. This area is expected to witness exponential growth, driven by industries seeking efficient monitoring and data collection solutions.
By reallocating resources from the 5G Taurus product, Sequans is streamlining its focus on a segment of the market with substantial growth potential. This decision could position the company as a key player in the Massive IoT ecosystem, potentially leading to increased market share and revenue diversification in the long term. However, investors should be aware of the competitive landscape, as numerous firms are also vying for dominance in this space.
The new licensing agreement for the Monarch2 LTE platform not only provides immediate financial relief but also validates Sequans' technology in a competitive market. The successful execution of this deal could catalyze further partnerships and revenue opportunities, reinforcing the company's strategic pivot.
The decision to focus on low-power 5G technologies like RedCap and eRedCap is technologically sound and forward-looking. RedCap, or Reduced Capability New Radio, is a streamlined version of 5G designed for simpler, cost-effective devices that need less bandwidth and power. This makes it ideal for applications in IoT, where connectivity requirements differ significantly from traditional consumer or enterprise use cases.
Sustaining the development of the 5G Taurus product could have diverted resources from initiatives better aligned with industry trends and customer demand. By channeling efforts into low-power 5G variants, Sequans is likely to enhance its technological edge in a market poised for expansion, particularly as industrial IoT and smart city projects gain traction globally.
Moreover, the licensing of the Monarch2 platform signifies recognition from industry peers and could lead to accelerated innovation through collaborative efforts. However, technological advancements in this space are rapid, necessitating continuous innovation and flexibility. Sequans must ensure that its technology remains ahead of the curve to maintain competitive advantage.
Advances on Key Business Initiatives.
Reports First Quarter 2024 Summary Financial Results.
Paris, France--(Newsfile Corp. - June 18, 2024) - Sequans Communications S.A. (NYSE: SQNS) ("Sequans" or the "Company"), a leading developer and provider of 5G/4G semiconductors and IoT modules, today provided updates on several key business initiatives and an overview of the first quarter financial results ended March 31, 2024.
Georges Karam, Sequans CEO, stated, "We have made significant progress on multiple fronts, beginning with the extension of our standstill agreements with our debt holders until the end of August and the signature of a
Extension of Standstill Agreements with Debt Holders
Having met the milestones set forth in the initial standstill agreement announced in April 2024, in May Sequans secured an extension of the maturities of its debt obligations held by its three largest debt holders Lynrock Lake, Nokomis and Renesas, until August 26, 2024. Extending the debt maturities grants the Company additional time to secure a long-term solution and negotiate a strategic transaction that serves the interests of all its stakeholders.
New Licensing Deal
Sequans announced today a manufacturing licensing agreement for its Monarch2 LTE platform with a leading technology company, demonstrating the Company's ability to enhance and expand its licensing business strategy. The deal includes an initial payment of
Focus on Massive IoT and Opex Optimization
To enhance its long-term financial health while strengthening its focus on the Massive IoT business, Sequans has suspended the development of its 5G Taurus product for Fixed Wireless Access applications and reoriented its product roadmap towards low-power 5G variants for Massive IoT, specifically RedCap and eRedCap. This shift is expected to significantly reduce R&D expenses as part of the Company's plan to achieve break-even in 2025. While this decision is expected to reduce revenue recognition from the license agreement with Sequans' Chinese strategic partner by
Advances in Strategic Discussions
Sequans confirms that it continues to be in active discussions for a long-term strategic transaction that would address its debt maturities and significantly strengthen its balance sheet.
First Quarter 2024 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 March 31, 2024 totaled
Note Regarding 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 potential strategic options, cost optimization and our objectives for future operations and achieving break-even, 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, 2023, 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.
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 supplier of cellular IoT connectivity solutions, providing chips and modules for 5G/4G massive and broadband IoT. 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 IoT applications, Sequans offers a product portfolio based on its Cassiopeia Cat 4/Cat 6 4G and 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.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | Three months ended | |||||||||||
| (in thousands of US$, except share and per share amounts) | | March 31, 2024 | Dec 31, 2023 | March 31, 2023 | ||||||||
| | ||||||||||||
| | ||||||||||||
| Revenue : | ||||||||||||
| Product revenue | $ | 2,468 | $ | 3,971 | $ | 2,340 | ||||||
| License and services revenue | 3,559 | 802 | 9,559 | |||||||||
| Total revenue | 6,027 | 4,773 | 11,899 | |||||||||
| Cost of revenue | 2,173 | 4,190 | 2,556 | |||||||||
| Gross profit | 3,854 | 583 | 9,343 | |||||||||
| Operating expenses : | ||||||||||||
| Research and development | 6,613 | 6,336 | 7,488 | |||||||||
| Sales and marketing | 2,872 | 3,054 | 3,033 | |||||||||
| General and administrative | 2,902 | 3,976 | 2,818 | |||||||||
| Total operating expenses | 12,387 | 13,366 | 13,339 | |||||||||
| Operating profit (loss) | (8,533 | ) | (12,783 | ) | (3,996 | ) | ||||||
| Financial income (expense): | ||||||||||||
| Interest income (expense), net | (3,318 | ) | (3,175 | ) | (2,515 | ) | ||||||
| Change in fair value of convertible debt derivative | (36 | ) | 134 | 2,302 | ||||||||
| Foreign exchange gain (loss) | 264 | (829 | ) | (165 | ) | |||||||
| Profit (Loss) before income taxes | (11,623 | ) | (16,653 | ) | (4,374 | ) | ||||||
| Income tax expense | 167 | 681 | 666 | | ||||||||
| Profit (Loss) | $ | (11,790 | ) | $ | (17,334 | ) | $ | (5,040 | ) | |||
| Attributable to : | ||||||||||||
| Shareholders of the parent | (11,790 | ) | (17,334 | ) | (5,040 | ) | ||||||
| Minority interests | - | - | - | |||||||||
| Basic loss per ADS | ( | ) | ( | ) | ( | ) | ||||||
| Diluted loss per ADS | ( | ) | ( | ) | ( | ) | ||||||
| Weighted average number of ADS used for computing: | ||||||||||||
| - Basic | 61,613,761 | 60,933,327 | 48,382,629 | |||||||||
| - Diluted | 61,613,761 | 60,933,327 | 48,382,629 | |||||||||
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| At March 31, | At Dec 31, | ||||||
| (in thousands of US$) | 2024 | 2023 | |||||
| ASSETS | |||||||
| Non-current assets | |||||||
| Property, plant and equipment | $ | 6,185 | $ | 6,815 | |||
| Intangible assets | 71,595 | 64,300 | |||||
| Deposits and other receivables | 6,792 | 801 | |||||
| Other non-current financial assets | 353 | 360 | |||||
| Total non-current assets | 84,925 | 72,276 | |||||
| Current assets | |||||||
| Inventories | 5,246 | 6,335 | |||||
| Trade receivables | 6,862 | 8,115 | |||||
| Contract assets | 550 | 497 | |||||
| Prepaid expenses | 1,936 | 1,422 | |||||
| Other receivables | 6,662 | 4,839 | |||||
| Research tax credit receivable | 6,789 | 9,983 | |||||
| Cash and cash equivalents | 474 | 5,705 | |||||
| Total current assets | 28,519 | 36,896 | |||||
| Total assets | $ | 113,444 | $ | 109,172 | |||
| EQUITY AND LIABILITIES | |||||||
| Equity | |||||||
| Issued capital, | $ | 2,891 | $ | 2,878 | |||
| Share premium | 14,556 | 14,568 | |||||
| Other capital reserves | 71,531 | 70,431 | |||||
| Accumulated deficit | (105,152 | ) | (93,416 | ) | |||
| Other components of equity | (616 | ) | (416 | ) | |||
| Total equity | (16,790 | ) | (5,955 | ) | |||
| Non-current liabilities | |||||||
| Government grant advances, loans and other liabilities | 10,765 | 3,789 | |||||
| Lease liabilities | 1,357 | 1,645 | |||||
| Provisions | 2,142 | 2,222 | |||||
| Deferred tax liabilities | 263 | 264 | |||||
| Total non-current liabilities | 14,527 | 7,920 | |||||
| Current liabilities | |||||||
| Trade payables | 18,485 | 16,281 | |||||
| Interest-bearing receivables financing | 6,335 | 9,428 | |||||
| Lease liabilities | 1,349 | 1,471 | |||||
| Convertible debt | 54,685 | 52,278 | |||||
| Convertible debt embedded derivative | 39 | 3 | |||||
| Unsecured related party loan | 18,257 | 8,922 | |||||
| Government grant advances and loans | 4,118 | 4,073 | |||||
| Contract liabilities | 3,238 | 5,852 | |||||
| Other current liabilities and provisions | 9,201 | 8,899 | |||||
| Total current liabilities | 115,707 | 107,207 | |||||
| Total equity and liabilities |
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FAQ
What were Sequans' Q1 2024 financial results?
Sequans reported a Q1 2024 revenue of $6.0 million, a 26.3% increase QoQ but a 49.3% decrease YoY. The net loss was $11.8 million.
What is the significance of Sequans' new $15 million licensing agreement?
The $15 million licensing agreement for Sequans' Monarch2 LTE platform underscores the company's ability to expand its licensing business, potentially leading to increased future revenues.
Why did Sequans extend its debt standstill agreements?
Sequans extended its debt standstill agreements to buy additional time for negotiating a long-term strategic transaction that would serve all stakeholders.
What strategic shift has Sequans made in its R&D focus?
Sequans has suspended development of its 5G fixed wireless product to focus on low-power 5G for massive IoT applications, aiming for operational break-even by 2025.
How did Sequans' operating loss change in Q1 2024?
Sequans' operating loss was $8.5 million in Q1 2024, lower than the $12.8 million loss in Q4 2023 but higher than the $4.0 million loss in Q1 2023.
What were Sequans' cash reserves at the end of Q1 2024?
As of March 31, 2024, Sequans had cash and cash equivalents totaling $0.5 million.
Sequans Communications S.A. American Depositary Shares (each representing ten (10) Ordinary Shares)
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