4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the second quarter ended June 30,
2016.
Second Quarter 2016 Highlights:
Revenue: Revenue of $9.9 million increased 6.5% compared
to the first quarter of 2016, with significantly higher product
revenues more than offsetting lower other revenues. Revenue
increased 31.9% compared to the second quarter of 2015, due to both
higher product sales and higher other revenue.
Gross margin: Gross margin was 44.6% compared to gross
margin of 47.5% in the first quarter of 2016, and compared to 36.3%
in the second quarter of 2015.
Operating loss: Operating loss was $5.7 million, compared
to an operating loss of $5.2 million in the first quarter of 2016
and an operating loss of $6.0 million in the second quarter of
2015.
Net loss: Net loss was $5.1 million, or ($0.09) per
diluted share/ADS, compared to a net loss of $9.2 million, or
($0.16) per diluted share/ADS in the first quarter of 2016 and a
net loss of $7.1 million, or ($0.12) per diluted share/ADS in the
second quarter of 2015.
Non-IFRS Net loss: Excluding the non-cash items of
stock-based compensation, the fair-value and effective interest
adjustments related to the convertible debt and other financings,
non-IFRS net loss was $5.8 million, or ($0.10) per diluted
share/ADS, compared to a non-IFRS net loss of $5.5 million, or
($0.09) per diluted share/ADS in the first quarter of 2016, and a
non-IFRS net loss of $6.4 million, or ($0.11) per diluted
share/ADS, in the second quarter of 2015.
Cash and cash equivalents: Cash position at June 30, 2016
of $7.5 million does not reflect the net proceeds of approximately
$3 million from government grants and research tax credit expected
to be received in the third quarter of 2016.
In millions of US$ except percentages, shares and per share
amounts
Key Metrics
Q2 2016
%* Q1 2016 %* Q2 2015 %*
Revenue
$9.9 $9.3 $7.5
Gross profit
4.4 44.6% 4.4 47.5% 2.7 36.3% Operating
loss
(5.7) (58.0%) (5.2) (56.0%) (6.0) (80.6%) Net loss
(5.1) (51.2%) (9.2) (99.4%) (7.1) (94.3%) Diluted EPS
($0.09) ($0.16) ($0.12) Weighted average number of diluted
shares/ADS
59,280,702 59,196,482 59,144,741 Cash flow from
(used in) operations
(4.2) 3.9 (8.2) Cash, cash equivalents
and short-term deposit at quarter-end
7.5 6.5 13.0
Additional information on non-cash items: - Stock-based
compensation included in operating result
0.2 0.3 0.2 -
Change in the fair value of convertible debt embedded derivative
(1.5) 3.1 0.3 - Non-cash interest on convertible debt and
other financing
0.6 0.4 0.2
Non-IFRS diluted EPS (excludes stock-based
compensation,fair value and effective interest adjustments related
tothe convertible debt and its embedded derivative, and theimpact
of revaluation of interest-free government loan)
($0.10) ($0.09) ($0.11)
*
Percentage of revenue
“During Q2 we saw a significant increase in product revenue as
our home and portable router business continues to grow by serving
a more diverse group of end-market customers and operators. In
addition, we have begun volume shipments of Cat 1 chips for various
M2M/IoT applications,” said Georges Karam, Sequans CEO. “Building
on what we have achieved in Q2, we continue to expect revenues from
product shipments to accelerate during the second half of the
year.”
“We bolstered our commanding lead in Cat M technology for IoT by
performing advanced interoperability testing with operators and
network equipment vendors, gaining substantial traction by securing
design wins in Q2 and developing a very encouraging pipe of new
business opportunities. Projects with strategic partners in the IoT
space are moving well. Furthermore, we are actively engaged in
discussions with existing partners to expand and strengthen our
relationships as well as with prospective partners to broaden the
scope of our strategic activities.”
2016 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 third quarter of 2016 to be in
the range of $11.5 to $13.5 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
($0.08) and ($0.10) for the third quarter of 2016, based on
approximately 59.3 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.
Meaningful sequential revenue growth is expected throughout the
remainder of the year as new devices are launched in addition to
the product already shipping. In addition, discussions with several
potential strategic partners are continuing. When finalized, these
alliances are expected to contribute to company financing and
incremental revenue.
Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to
discuss the financial results for the second quarter of 2016 today,
July 28, 2016 at 8:00 a.m. EDT /14:00 CEST. To participate in the
live call, analysts and investors should dial 800-230-1085 (or +1
612-332-0107 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/webcasts-and-presentations/. A replay of
the conference call will be available until August 28, 2016 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: 397180.
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, 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 compensation, the non-cash
financial expense related to the convertible debt and its embedded
derivative issued in April 2015 and the impact of revaluation of an
interest-free government loan. 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 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 adjustment could
be significant to our actual IFRS results.
About Sequans Communications
Sequans Communications S.A. (NYSE: SQNS) is a 4G chipmaker and
leading provider of single-mode LTE chipset solutions to wireless
device manufacturers worldwide. Founded in 2003, Sequans has
developed and delivered six generations of 4G technology and its
chips are certified and shipping in 4G networks, both LTE and
WiMAX, around the world. Today, Sequans offers two LTE product
lines: StreamrichLTE™, optimized for feature-rich mobile computing
and home/portable router devices, and StreamliteLTE™, optimized for
M2M devices and other connected devices for the Internet of Things.
Sequans is based in Paris, France with additional offices in the
United States, United Kingdom, Israel, Hong Kong, Singapore,
Taiwan, South Korea, and China. Visit Sequans online
at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans
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) June 30 March 31 June 30
2016 2016
2015
Revenue:
Product revenue $ 7,699 $ 5,412 $ 6,243 Other revenue
2,185 3,873 1,253
Total revenue 9,884
9,285 7,496
Cost of revenue Cost of product revenue 4,667 4,128 4,427
Cost of other revenue 804 747
345
Total cost of revenue
5,471 4,875
4,772 Gross profit
4,413 4,410
2,724
Operating expenses:
Research and development 6,889 6,727 6,135 Sales and marketing
1,495 1,501 1,348 General and administrative 1,761 1,378 1,286
Total operating
expenses 10,145
9,606 8,769 Operating
loss (5,732 )
(5,196 ) (6,045 )
Financial income (expense): Interest income (expense), net
(916 ) (631 ) (432 ) Other financial expense (83 ) - (141 ) Change
in the fair value of convertible debt embedded derivative 1,544
(3,127 ) (275 ) Foreign exchange gain (loss) 196
(209 ) (120 )
Loss before
income taxes (4,991 )
(9,163 ) (7,013 )
Income tax expense (benefit) 70
66 55
Loss $
(5,061 ) $ (9,229 )
(7,068 )
Attributable to:
Shareholders of the parent (5,061 ) (9,229 ) (7,068 ) Minority
interests - -
- Basic loss per share ($0.09 )
($0.16 ) ($0.12 ) Diluted loss per share
($0.09 ) ($0.16 ) ($0.12
) Weighted average number of shares used for computing: — Basic
59,280,702 59,196,482 59,144,741 — Diluted 59,280,702
59,196,482 59,144,741
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS Six months
ended June 30, (in thousands of US$, except share and per
share amounts) 2016 2015
Revenue:
Product revenue 13,111 10,231 Other revenue 6,058
2,073
Total revenue 19,169
12,304 Cost of revenue Cost of
product revenue 8,795 7,189 Cost of other revenue 1,551
469
Total cost of revenue
10,346 7,658 Gross profit
8,823 4,646
Operating expenses:
Research and development 13,616 13,028 Sales and marketing 2,996
3,070 General and administrative 3,139 2,769
Total operating expenses 19,751
18,867 Operating loss
(10,928 ) (14,221 ) Financial
income (expense): Interest income (expense), net (1,544 ) (466
) Other financial expense (83 ) (141 ) Change in the fair value of
convertible debt embedded derivative (1,583 ) (275 ) Foreign
exchange gain (16 ) 106
Loss before income
taxes (14,154 ) (14,997
) Income tax expense (benefit) 136 119
Loss
(14,290 ) (15,116 )
Attributable to:
Shareholders of the parent (14,290 ) (15,116 ) Minority interests
- - Basic loss per share ($0.24
) ($0.26 ) Diluted loss per share ($0.24 )
($0.26 )
Weighted average number of shares used for
computing:
— Basic 59,239,524 59,144,741 — Diluted 59,239,524
59,144,741
SEQUANS
COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
At June 30, At December 31, (in thousands
of US$) 2016 2015 *
ASSETS Non-current assets Property, plant and
equipment $ 7,442 $ 7,116 Intangible assets 6,560 5,255 Deposits
and other receivables 352 345 Available for sale assets
327 321
Total non-current
assets 14,681 13,037
Current assets Inventories 3,829 4,065 Trade receivables
11,002 16,497 Prepaid expenses and other receivables 4,871 3,170
Recoverable value added tax 504 541 Research tax credit receivable
3,943 2,865 Deposit maturing in less than 90 days 343 393 Cash and
cash equivalents 7,122 8,288
Total current assets 31,614
35,819
Total assets $
46,295 $ 48,856 EQUITY AND
LIABILITIES Equity
Issued capital, euro 0.02 nominal value,
59,331,870 sharesauthorized, issued and outstanding at June 30,
2016(59,166,741 at December 31, 2015)
$ 1,572 $ 1,568 Share premium 165,778 165,536 Other capital
reserves 27,615 16,864 Accumulated deficit (199,056 ) (184,766 )
Other components of equity (479 ) (450
)
Total equity (deficit) (4,570 )
(1,248 )
Non-current liabilities Government grant
advances, loans and other liabilities 5,208 5,385 Finance lease
obligations - - Convertible debt and accrued interest 14,616 8,984
Provisions 1,498 1,396 Other Liabilities 3,026
3,267
Total non-current liabilities
24,348 19,032
Current
liabilities Trade payables 14,518 9,498 Interest-bearing
receivables financing 2,130 6,472 Government grant advances 1,334
916 Convertible debt embedded derivative - 6,091 Finance lease
obligations - 12 Other current liabilities 5,123 4,604 Deferred
revenue 3,163 3,162 Provisions 249
317
Total current liabilities
26,517 31,072
Total equity and
liabilities $ 46,295 $ 48,856
* Prior to the issuance of the audited 2015 financial statements,
the estimate of costs to complete one service contract was revised
based on the best information available at that time, resulting in
a remeasurement of the percentage of completion as of December 31,
2015. This remeasurement resulted in a shift of $177,000 in revenue
from the fourth quarter of 2015 to the first quarter of 2016, and a
corresponding increase in net loss in the fourth quarter of 2015.
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, (in thousands of
US$) 2016 2015
Operating activities Loss before income taxes
$ (14,154 ) $ (14,997 )
Non-cash adjustment to reconcile income
before tax to net cash from(used in) operating activities
Depreciation and impairment of property, plant and equipment 1,582
1,753 Amortization and impairment of intangible assets 1,001 879
Share-based payment expense 480 436 Increase (decrease) in
provisions 3 (260 ) Financial expense (income) 1,552 466 Change in
the fair value of convertible debt embedded derivative 1,583 275
Other financial expenses 83 141 Foreign exchange loss (gain) 135
(275 ) Loss (Gain) on disposal of property, plant and equipment -
(3 ) Working capital adjustments Decrease (Increase) in trade
receivables and other receivables 4,624 2,574 Decrease (Increase)
in inventories 236 1,737 Decrease (Increase) in research tax credit
receivable (1,078 ) (836 ) Increase (Decrease) in trade payables
and other liabilities 3,587 (3,517 ) Increase (Decrease) in
deferred revenue 1 (74 ) Increase (Decrease) in government grant
advances 79 (22 ) Income tax paid (130 ) (68 )
Net cash flow
from (used in) operating activities (416 )
(11,791 ) Investing activities Purchase
of intangible assets and property, plant and equipment (2,738 )
(1,073 ) Sale (purchase) of financial assets (13 ) 278 Sale of
short-term investments 50 (342 ) Interest received 8 18
Net cash
flow used in investments activities (2,693 )
(1,119 ) Financing activities Proceeds
from issue of warrants and exercise of stock options/warrants 246 1
Proceeds from Interest-bearing receivables financing (5,138 ) 1,665
Proceeds from convertible debt, net of transaction cost 6,932
11,582 Repayment of borrowings and finance lease liabilities (12 )
(110 ) Interest paid (84 ) (64 )
Net cash flows used in
financing activities 1,944 13,074 Net
increase (decrease) in cash and cash equivalents (1,165 ) 164 Net
foreign exchange difference (1 ) (5 ) Cash and cash equivalent at
January 1 8,288 12,329
Cash and cash equivalents at end of the
period $ 7,122 $ 12,488
SEQUANS COMMUNICATIONS S.A.
UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
Three months
ended (in thousands of US$, except share and per share
amounts) June 30 March 31 June 30
2016 2016
2015 Net IFRS loss as reported $ (5,061
) $ (9,229 ) $ (7,068
) Add back
Stock-based compensation expense according
to IFRS 2 (1)
226 254 197 Change in the fair value of convertible debt embedded
derivative (1,544 ) 3,127 275 Non-cash interest on Convertible debt
and other financing 556 365 215
Non-IFRS loss adjusted
$ (5,823 ) $
(5,483 ) $ (6,381 )
IFRS basic loss per share as reported ($0.09 ) ($0.16 )
($0.12 ) Add back Stock-based compensation expense according to
IFRS 2 $ 0.01 $ 0.01 $ 0.01 Change in the fair value of convertible
debt embedded derivative ($0.03 ) $ 0.05 - Non-cash interest on
Convertible debt and other financing $ 0.01 $
0.01 - Non-IFRS basic loss per share
($0.10 ) ($0.09 ) ($0.11
) IFRS diluted loss per share ($0.09 ) ($0.16 ) ($0.12 ) Add back
Stock-based compensation expense according to IFRS 2 $ 0.01 $ 0.01
$ 0.01 Change in the fair value of convertible debt embedded
derivative ($0.03 ) $ 0.05 - Non-cash interest on Convertible debt
and other financing $ 0.01 $ 0.01
- Non-IFRS diluted loss per share
($0.10 ) ($0.09 ) ($0.11 )
(1) Included in the IFRS loss as
follows:
Cost of product revenue $ 4 $ 4 $ 4 Research and development 96 108
84 Sales and marketing 35 39 34 General and administrative 91 103
75
SEQUANS COMMUNICATIONS S.A.
UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
Six months ended (in
thousands of US$, except share and per share amounts) June
30, June 30, 2016
2015 Net IFRS loss as reported (14,290
) (15,116 ) Add back Stock-based
compensation expense according to IFRS 2 (1) 480 435 Change in the
fair value of convertible debt embedded derivative 1,583 275
Non-cash interest on Convertible debt and other financing 921 215
Non-IFRS loss adjusted (11,306 )
(14,191 ) IFRS basic loss per
share as reported ($0.24 ) ($0.26 ) Add back Stock-based
compensation expense according to IFRS 2 $ 0.01 $ 0.01 Change in
the fair value of convertible debt embedded derivative $ 0.03 $
0.01 Non-cash interest on Convertible debt and other financing
$ 0.01 $ 0.00 Non-IFRS basic loss per
share ($0.19 ) ($0.24 ) IFRS diluted
loss per share ($0.24 ) ($0.26 ) Add back Stock-based compensation
expense according to IFRS 2 $ 0.01 $ 0.01 Change in the fair value
of convertible debt embedded derivative $ 0.03 $ 0.01 Non-cash
interest on Convertible debt and other financing $ 0.01
$ 0.00 Non-IFRS diluted loss per share
($0.19 ) ($0.24 ) (1) Included in the
IFRS loss as follows: Cost of product revenue 8 10 Research and
development 204 185 Sales and marketing 74 74 General and
administrative 194 166
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Sequans Communications S.A.Media Relations:Kimberly Tassin,
+1-425-736-0569Kimberly@sequans.comorInvestor Relations:Claudia
Gatlin, +1-212-830-9080Claudia@sequans.com
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