4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the first quarter ended March 31,
2017.
First Quarter 2017 Highlights:
Revenue: Revenue of $12.4 million decreased 10.9%
compared to the fourth quarter of 2016 primarily as a result of the
typical pattern of seasonality. Revenue increased 33.9% compared to
the first quarter of 2016, due to higher product sales partly
offset by lower license and service revenues.
Gross margin: Gross margin was 47.1% compared to gross
margin of 38.2% in the fourth quarter of 2016 due to a more
favorable product mix, and compared to 47.5% in the first quarter
of 2016, due to a less favorable revenue mix in the first quarter
of 2017 as a result of lower license and service revenues.
Operating loss: Operating loss was $4.2 million compared
to an operating loss of $4.9 million in the fourth quarter of 2016
and an operating loss of $5.2 million in the first quarter of
2016.
Net loss: Net loss was $5.6 million, or ($0.07) per
diluted share/ADS, compared to a net loss $5.4 million, or ($0.07)
per diluted share/ADS, in the fourth quarter of 2016 and a net loss
of $9.2 million, or ($0.16) per diluted share/ADS, in the first
quarter of 2016.
Non-IFRS Net loss: Excluding the non-cash items of
stock-based compensation and the fair-value (in 2016) and effective
interest adjustments related to the convertible debt and other
financings, non-IFRS net loss was $4.7 million, or ($0.06) per
diluted share/ADS, compared to a non-IFRS net loss of $4.2 million,
or ($0.06) per diluted share/ADS in the fourth quarter of 2016, and
a non-IFRS net loss of $5.5 million, or ($0.09) per diluted
share/ADS, in the first quarter of 2016.
Cash: Cash, cash equivalents and short-term deposit at
March 31, 2017 totaled $14.5 million compared to $20.5 million at
December 31, 2016.
In millions of US$ except percentages, shares and per share amounts
Key Metrics Q1 2017
%* Q4 2016 %* Q1 2016 %* Revenue
$12.4 $14.0 $9.3 Gross
profit
5.9 47.1% 5.3 38.2% 4.4 47.5% Operating loss
(4.2) (34.2%) (4.9) (34.9%) (5.2) (56.0%) Net loss
(5.6) (45.1%) (5.4) (38.5%) (9.2) (99.4%) Diluted EPS
($0.07) ($0.07) ($0.16) Weighted average number of diluted
shares/ADS
75,043,865 74,501,387 59,196,482 Cash flow from
(used in) operations
(9.9) (5.7) 3.9 Cash, cash equivalents
and short-term deposit at quarter-end
14.5 20.5 6.5
Additional information on non-cash items: - Stock-based
compensation included in operating result
0.3 0.5 0.3 -
Change in the fair value of convertible debt embedded derivative
- - 3.1 - Non-cash interest on convertible debt and other
financing
0.6 0.7 0.4 Non-IFRS diluted EPS (excludes
stock-based compensation, fair value and effective interest
adjustments related to the convertible and other debt and embedded
derivative)
($0.06) ($0.06) ($0.09)
* Percentage of revenue
“We are off to a good start in 2017, with key metrics
meeting or exceeding expectations,” said Georges Karam, Sequans’
CEO. “Demand for our broadband solutions continues to increase; we
have a backlog of IoT-related orders supporting the ramp of Cat 1
devices during the year, and we remain on track to grow at least
40% in 2017. Meanwhile, our design win momentum across our entire
product line, with particularly strong interest in our Monarch Cat
M1/NB1 platform for IoT, continues to position us to achieve even
higher growth next year.”
Q2 2017 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 2017 to be in
the range of $13.5 to $15.5 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
($0.05) and ($0.07) for the second quarter of 2017, based on
approximately 75.1 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.
Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to
discuss the financial results for the first quarter of 2017 today,
May 2, 2017 at 8:00 a.m. EDT /14:00 CEST. To participate in the
live call, analysts and investors should dial 800-230-1074 (or +1
651-291-5254 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 2, 2017 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: 421729.
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 and the non-cash
financial expense related to the convertible debt and its embedded
derivative issued in April 2015 and April 2016. 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 a
non-GAAP reconciliation for 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 adjustments could be significant to
our actual IFRS results.
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
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, Dec 31, March 31,
2017 2016 2016
Revenue : Product revenue $ 9,640 $ 11,947 $ 5,412
Other revenue 2,790 2,006 3,873
Total
revenue 12,430 13,953
9,285 Cost of revenue Cost of product revenue 5,989
7,879 4,128 Cost of other revenue 589 740 747
Total cost of revenue 6,578
8,619 4,875 Gross profit
5,852 5,334 4,410 Operating
expenses : Research and development 6,194 6,327 6,727 Sales and
marketing 2,496 2,204 1,501 General and administrative 1,411 1,669
1,378
Total
operating expenses 10,101 10,200
9,606 Operating loss (4,249)
(4,866) (5,196) Financial income
(expense): Interest income (expense), net (1,038) (1,080) (628)
Change in the fair value of convertible debt embedded derivative -
- (3,127) Foreign exchange gain (loss) (246) 670
(212)
Loss before income taxes (5,533)
(5,276) (9,163) Income tax expense
(benefit) 71 95 66
Loss $
(5,604) (5,371) $ (9,229) Attributable to
: Shareholders of the parent (5,604) (5,371) (9,229) Minority
interests - - - Basic loss per share
($0.07) ($0.07) ($0.16) Diluted loss per share
($0.07) ($0.07) ($0.16) Weighted average number of
shares used for computing: — Basic 75,043,865 74,501,387 59,196,482
— Diluted 75,043,865 74,501,387 59,196,482
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION At March 31,
At December 31, (in thousands of US$)
2017 2016
ASSETS Non-current assets Property, plant and
equipment $ 6,302 $ 6,659 Intangible assets 7,450 7,707 Deposits
and other receivables 338 332 Available for sale assets
315 310
Total non-current
assets 14,405 15,008
Current assets Inventories 8,184 8,693 Trade receivables
17,189 15,285 Prepaid expenses and other receivables 2,923 3,172
Recoverable value added tax 434 470 Research tax credit receivable
2,980 1,902 Short term deposit 345 345 Cash and cash equivalents
14,162 20,202
Total
current assets 46,217 50,069
Total assets $ 60,622 $
65,077 EQUITY AND LIABILITIES Equity
Issued capital, euro 0.02 nominal value, 75,122,137 shares
authorized, issued and outstanding at March 31, 2017 (75,030,078 at
December 31, 2016) $ 1,925 $ 1,923 Share premium 189,233 189,029
Other capital reserves 28,598 28,257 Accumulated deficit (215,157 )
(209,553 ) Other components of equity (602 )
(796 )
Total equity (deficit) 3,997
8,860
Non-current liabilities
Government grant advances, loans and other liabilities 5,001 5,144
Convertible debt and accrued interest 17,199 16,338 Provisions
1,332 1,306 Other Liabilities 22 22 Deferred revenue
1,940 1,940
Total non-current
liabilities 25,494 24,750
Current liabilities Trade payables 12,585 18,358
Interest-bearing receivables financing 11,882 7,712 Government
grant advances 560 601 Other current liabilities 5,633 4,415
Deferred revenue 424 335 Provisions 47
46
Total current liabilities
31,131 31,467
Total equity and
liabilities $ 60,622 $ 65,077
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, (in thousands of
US$) 2017 2016
Operating activities Loss before income taxes
$ (5,533 ) $ (9,163 )
Non-cash adjustment to reconcile income before tax to net cash from
(used in) operating activities Depreciation and impairment of
property, plant and equipment 691 796 Amortization and impairment
of intangible assets 569 489 Share-based payment expense 341 253
Increase in provisions 16 75 Financial expense (income) 1,061 631
Change in the fair value of convertible debt embedded derivative -
3,127 Foreign exchange loss (gain) 69 243 Working capital
adjustments Decrease (Increase) in trade receivables and other
receivables (1,671 ) 7,041 Decrease (Increase) in inventories 509
482 Decrease (Increase) in research tax credit receivable (1,078 )
(787 ) Increase (Decrease) in trade payables and other liabilities
(4,726 ) 1,367 Increase (Decrease) in deferred revenue 89 (267 )
Increase (Decrease) in government grant advances (250 ) (382 )
Income tax paid 2 (41 )
Net cash flow from (used in) operating
activities (9,911 ) 3,864
Investing activities Purchase of intangible assets and
property, plant and equipment (419 ) (1,234 ) Sale (purchase) of
financial assets (11 ) (31 ) Sale of short-term deposit - (3 )
Interest received 23 3
Net cash flow used in investments
activities (407 ) (1,265 )
Financing activities Proceeds from issue of warrants,
exercise of stock options/warrants 206 129 Proceeds from
Interest-bearing receivables financing 4,170 (4,916 ) Repayment of
borrowings and finance lease liabilities - (12 ) Interest paid (101
) (30 )
Net cash flows from (used in) financing activities
4,275 (4,829 ) Net increase (decrease)
in cash and cash equivalents (6,043 ) (2,230 ) Net foreign exchange
difference 3 1 Cash and cash equivalent at January 1 20,202 8,288
Cash and cash equivalents at end of the period $
14,162 $ 6,059 SEQUANS
COMMUNICATIONS S.A. UNAUDITED
RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
Three months ended (in
thousands of US$, except share and per share amounts) March
31, Dec 31, March 31, 2017
2016 2016 Net IFRS loss as
reported $ (5,604) $ (5,371) $ (9,229)
Add back Stock-based compensation expense according to IFRS
2 (1) 341 459 254 Change in the fair value of convertible debt
embedded derivative - - 3,127 Non-cash interest on Convertible debt
and other financing (2) 610 671 365
Non-IFRS loss adjusted
$ (4,653) $ (4,241) $
(5,483) IFRS basic loss per share as reported ($0.07)
($0.07) ($0.16) Add back Stock-based compensation expense
according to IFRS 2 (1) $0.00 ($0.00) $0.01 Change in the fair
value of convertible debt embedded derivative $0.00 $0.00 $0.05
Non-cash interest on Convertible debt and other financing (2)
$0.01 $0.01 $0.01 Non-IFRS basic loss per
share ($0.06) ($0.06) ($0.09) IFRS diluted
loss per share ($0.07) ($0.07) ($0.16) Add back Stock-based
compensation expense according to IFRS 2 (1) $0.00 ($0.00) $0.01
Change in the fair value of convertible debt embedded derivative
$0.00 $0.00 $0.05 Non-cash interest on Convertible debt and other
financing (2) $0.01 $0.01 $0.01 Non-IFRS
diluted loss per share ($0.06) ($0.06) ($0.09)
(1) Included in the IFRS loss as follows: Cost of product
revenue $ 3 $ - $ 4 Research and development 109 192 108 Sales and
marketing 79 131 39 General and administrative 150 136 103
(2) Related to the difference between contractual and effective
interests
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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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