4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the fourth quarter and full year
ended December 31, 2016.
Fourth Quarter and Full Year 2016 Highlights:
Revenue: Revenue of $14.0 million increased 12.0%
compared to the third quarter of 2016, and increased 28.4% compared
to the fourth quarter of 2015. In both cases, this was due to
higher product sales partly offset by lower license and service
revenues. Full-year revenue increased 40.1% to $45.6 million in
2016 from $32.5 million in 2015.
Gross margin: Gross margin was 38.2% compared to gross
margin of 46.8% in the third quarter of 2016, and compared to 42.5%
in the fourth quarter of 2015, due to a less favorable revenue mix
in the fourth quarter of 2016, primarily lower license and service
revenues. Full-year gross margin increased to 43.8% in 2016 from
40.2% in 2015.
Operating loss: Operating loss was $4.9 million compared
to an operating loss of $4.0 million in the third quarter of 2016
and an operating loss of $5.2 million in the fourth quarter of
2015, reflecting higher revenues offset by lower gross profit and
higher operating expenses. Full year operating loss for 2016 was
$19.7 million compared to an operating loss of $23.6 million for
2015.
Net loss: Net loss was $5.4 million, or ($0.07) per
diluted share/ADS, compared to a net loss of $5.1 million, or
($0.08) per diluted share/ADS, in the third quarter of 2016 and a
net loss of $9.9 million, or ($0.17) per diluted share/ADS, in the
fourth quarter of 2015. Full year net loss for 2016 was $24.8
million, or ($0.39) per diluted share/ADS, compared to a net loss
of $27.4 million, or ($0.46) per diluted share/ADS, for 2015.
Non-IFRS Net loss: Excluding the non-cash items of
stock-based compensation, the fair-value (in 2015) and effective
interest adjustments related to the convertible debt and other
financings, and the provision for WiMAX inventory (in 2015),
non-IFRS net loss was $4.2 million, or ($0.06) per diluted
share/ADS, compared to a non-IFRS net loss of $4.3 million, or
($0.07) per diluted share/ADS in the third quarter of 2016, and a
non-IFRS net loss of $4.5 million, or ($0.08) per diluted
share/ADS, in the fourth quarter of 2015. Full year non-IFRS net
loss for 2016 was $19.9 million, or ($0.31) per diluted share/ADS,
compared to a full year non-IFRS net loss of $23.3 million, or
($0.39) per diluted share/ADS in 2015.
Cash: Cash, cash equivalents and short-term deposit at
December 31, 2016 totaled $20.5 million compared to $8.7 million at
December 31, 2015.
In millions of US$ except percentages,
shares and per share amounts
Key Metrics
Q4 2016 %* Q3 2016
%* Q4 2015 %*
Full year 2016 %*
Full year 2015 %* Revenue
$14.0
$12.5 $10.9
$45.6 $32.5
Gross profit
5.3 38.2% 5.8 46.8% 4.6 42.5%
20.0 43.8% 13.1 40.2% Operating loss
(4.9)
(34.9%) (4.0) (31.7%) (5.2) (47.7%)
(19.7) -43.3%
(23.6) (72.7%) Net loss
(5.4) (38.5%) (5.1) (41.1%) (9.9)
(90.7%)
(24.8) -54.4% (27.4) (84.2%) Diluted EPS
($0.07) ($0.08) ($0.17)
($0.39) ($0.46) Weighted
average number of diluted shares/ADS
74,501,387 61,642,549
59,145,393
63,805,442 59,144,905 Cash flow from (used in)
operations
(5.7) (9.5) (2.2)
(15.6) (16.4) Cash, cash
equivalents and short-term deposit at quarter-end
20.5 24.7
8.7
20.5 8.7 Additional information on non-cash
items: - Stock-based compensation included in operating result
0.5 0.2 0.2
1.1 0.9 - Change in the fair value of
convertible debt embedded derivative
- - 4.2
1.6 2.0
- Non-cash interest on convertible debt and other financing
0.7 0.6 0.3
2.2 0.8 - Impact of revaluation of
interest-free government loan
- - (0.1)
(0.1) (0.3) -
WiMAX inventory provision
- - 0.8
- 0.8 Non-IFRS
diluted EPS (excludes stock-based compensation, fair value and
effective interest adjustments related to the convertible debt and
its embedded derivative, and the non-cash impact of revaluation of
interest-free government loan)
($0.06) ($0.07) ($0.08)
($0.31)
($0.39)
* Percentage of revenue
“We are pleased to report revenue growth of 40% in 2016, a year
in which we became the technology leader in LTE for IoT,” said
Georges Karam, Sequans CEO. “During 2016, we grew and also
diversified our customer base, expanded our relationships with
operators all over the world, and engaged in several new technology
partnerships.
“We expect continued strong momentum in design wins and a
growing pipeline of new opportunities to result in higher annual
revenue growth in 2017, accelerating more in 2018, as the broadband
access business continues to grow and the pace of the IoT ramp
continues to gain momentum.”
Q1 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 first quarter of 2017 to be in
the range of $11.5 to $13.5 million, reflecting typical
seasonality, 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 ($0.07) and ($0.09) for
the first quarter of 2017, based on approximately 75.0 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 fourth quarter of 2016 today,
February 14, 2017 at 8:00 a.m. EST / 14:00 CET. To participate in
the live call, analysts and investors should dial 800-230-1059 (or
+1 612-234-9960 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 March 14, 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: 414366.
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 April 2016 and the impact of
revaluation of an interest-free government loan issued in October
2015. 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 adjustment
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) Dec 31,
Sept 30, Dec 31,
2016 2016 2015
Revenue : Product revenue $ 11,947 $ 9,523 $ 6,551
Other revenue 2,006
2,934 4,319
Total
revenue 13,953
12,457 10,870
Cost of revenue Cost of product revenue 7,879 5,900
5,628 Cost of other revenue 740
731 621
Total
cost of revenue 8,619
6,631 6,249
Gross profit 5,334
5,826
4,621 Operating expenses : Research and
development 6,327 6,391 6,752 Sales and marketing 2,204 1,926 1,509
General and administrative 1,669
1,459 1,540
Total operating expenses 10,200
9,776
9,801 Operating loss
(4,866 ) (3,950
) (5,180 ) Financial
income (expense): Interest income (expense), net (1,080 )
(1,062 ) (545 ) Change in the fair value of convertible debt
embedded derivative - - (4,249 ) Foreign exchange gain (loss)
670 (61 )
234
Loss before income taxes
(5,276 )
(5,073 ) (9,740 )
Income tax expense (benefit) 95
53 117
Loss $ (5,371 ) $ (5,126
) (9,857 ) Attributable to :
Shareholders of the parent (5,371 ) (5,126 ) (9,857 ) Minority
interests - -
- Basic loss per share
($0.07 ) ($0.08 )
($0.17 ) Diluted loss per share ($0.07
) ($0.08 ) ($0.17 )
Weighted average number of shares used for computing: — Basic
74,501,387
61,642,549
59,145,393 — Diluted 74,501,387
61,642,549 59,145,393
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, (in thousands of US$, except
share and per share amounts) 2016
2015 Revenue : Product revenue $
34,581 $ 24,669 Other revenue 10,998
7,863
Total revenue
45,579
32,532 Cost of revenue Cost of product revenue
22,574 17,970 Cost of other revenue 3,022
1,481
Total cost of
revenue 25,596
19,451 Gross profit
19,983 13,081
Operating expenses : Research and development 26,334
25,305 Sales and marketing 7,126 5,985 General and administrative
6,267 5,428
Total operating expenses 39,727
36,718 Operating
loss (19,744 )
(23,637 ) Financial income (expense):
Interest income (expense), net (3,686 ) (1,516 ) Other financial
expense (83 ) (145 ) Change in the fair value of convertible debt
embedded derivative (1,583 ) (2,036 ) Foreign exchange gain
593 249
Loss
before income taxes (24,503
) (27,085 ) Income tax
expense (benefit) 284 317
Loss (24,787 )
(27,402 ) Attributable to : Shareholders of
the parent (24,787 ) (27,402 ) Minority interests
- - Basic loss per share
($0.39 ) ($0.46 ) Diluted
loss per share ($0.39 )
($0.46 ) Weighted average number of shares used for computing: —
Basic 63,805,442 59,144,905 — Diluted
63,805,442 59,144,905
SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At December
31, (in thousands of US$) 2016
2015 * ASSETS
Non-current assets Property, plant and equipment $ 6,659 $
7,116 Intangible assets 7,707 5,255 Deposits and other receivables
332 345 Available for sale assets 310
321
Total non-current assets
15,008 13,037
Current assets Inventories 8,693 4,065 Trade
receivables 15,285 16,497 Prepaid expenses and other receivables
3,172 3,170 Recoverable value added tax 470 541 Research tax credit
receivable 1,902 2,865 Short term deposit 345 393 Cash and cash
equivalents 20,202
8,288
Total current assets
50,069 35,819
Total
assets $ 65,077 $ 48,856
EQUITY AND LIABILITIES Equity
Issued capital, euro 0.02 nominal value,
75,030,078 shares authorized, issued and outstanding at December
31, 2016 (59,166,741 at December 31, 2015)
$ 1,923 $ 1,568 Share premium 189,029 165,536 Other capital
reserves 28,257 16,864 Accumulated deficit (209,553 ) (184,766 )
Other components of equity (796 )
(450 )
Total equity (deficit)
8,860 (1,248 )
Non-current
liabilities Government grant advances, loans and other
liabilities 5,355 5,385 Convertible debt and accrued interest
16,338 8,984 Provisions 1,306 1,396 Other Liabilities
22 3,267
Total
non-current liabilities 23,021
19,032
Current liabilities Trade
payables 18,358 9,498 Interest-bearing receivables financing 7,712
6,472 Government grant advances 390 916 Convertible debt embedded
derivative - 6,091 Finance lease obligations - 12 Other current
liabilities 4,415 4,604 Deferred revenue 2,275 3,162 Provisions
46 317
Total current liabilities 33,196
31,072
Total equity and
liabilities $ 65,077 $ 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 $177,000 in revenue
from the fourth quarter of 2015 to the first quarter of 2016, and a
corresponding increase in net loss in the fourth quarter of 2015.
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, (in
thousands of US$) 2016
2015 Operating activities Loss before
income taxes
$ (24,503 ) $
(27,085 ) Non-cash adjustment to reconcile income
before tax to net cash from (used in) operating activities
Depreciation and impairment of property, plant and equipment 3,080
3,408 Amortization and impairment of intangible assets 2,215 1,867
Share-based payment expense 1,122 867 Increase (decrease) in
provisions (240 ) 152 Financial expense (income) 3,686 1,516 Change
in the fair value of convertible debt embedded derivative 1,583
2,036 Other financial expenses 83 145 Foreign exchange loss (gain)
(18 ) (340 ) Loss (Gain) on disposal of property, plant and
equipment 2 5 Working capital adjustments Decrease (Increase) in
trade receivables and other receivables 705 (9,091 ) Decrease
(Increase) in inventories (4,628 ) 5,134 Decrease (Increase) in
research tax credit receivable 963 578 Increase (Decrease) in trade
payables and other liabilities 2,354 2,041 Increase (Decrease) in
deferred revenue (737 ) 2,848 Increase (Decrease) in government
grant advances (1,030 ) (170 )
Income tax paid
(226 ) (312 )
Net cash flow used in operating activities
(15,589 ) (16,401 ) Investing
activities Purchase of intangible assets and property, plant
and equipment (5,390 ) (5,483 ) Sale (purchase) of financial assets
24 345 Sale of short-term deposit 48 (233 ) Interest received 48 26
Net cash flow used in investments activities (5,270
) (5,345 ) Financing activities
Public equity offering proceeds, net of transaction costs paid
23,569 - Proceeds from issue of warrants, exercise of stock
options/warrants 279 29 Proceeds from Interest-bearing receivables
financing 1,240 4,339 Proceeds from interest-bearing research
project financing 1,021 - Proceeds from government loans, net of
transaction cost - 2,134 Proceeds from convertible debt, net of
transaction cost 6,932 11,572 Repayment of borrowings and finance
lease liabilities (12 ) (183 ) Interest paid (251 ) (181 )
Net
cash flows used in financing activities 32,778
17,710 Net increase (decrease) in cash and cash
equivalents 11,919 (4,036 ) Net foreign exchange difference (5 ) (5
) Cash and cash equivalent at January 1 8,288 12,329
Cash and
cash equivalents at end of the period $ 20,202
$ 8,288 SEQUANS COMMUNICATIONS
S.A. UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL
RESULTS
Three months ended (in
thousands of US$, except share and per share amounts) Dec
31, Sept 30, Dec 31,
2016 2016
2015 Net IFRS loss as reported $
(5,371 ) $ (5,126 ) $
(9,857 ) Add back Stock-based compensation
expense according to IFRS 2 (1) 459 183 246 Change in the fair
value of convertible debt embedded derivative - - 4,249 Non-cash
interest on Convertible debt and other financing (2) 671 646 267
Non-cash impact of revaluation of interest-free government loan - -
(148 ) WiMAX inventory provision (3) - - 760
Non-IFRS loss
adjusted $ (4,241 )
$ (4,297 ) $
(4,483 ) IFRS basic loss per share as reported
($0.07 ) ($0.08 ) ($0.17 ) Add back Stock-based compensation
expense according to IFRS 2 (1) ($0.00 ) $ 0.00 $ 0.00 Change in
the fair value of convertible debt embedded derivative $ 0.00 $
0.00 $ 0.07 Non-cash interest on Convertible debt and other
financing (2) $ 0.01 $ 0.01 $ 0.00 WiMAX inventory provision (3)
- -
$ 0.01 Non-IFRS basic loss per share
($0.06 ) ($0.07 )
($0.08 ) IFRS diluted loss per share ($0.07 ) ($0.08 ) ($0.17 ) Add
back Stock-based compensation expense according to IFRS 2 (1)
($0.00 ) $ 0.00 $ 0.00 Change in the fair value of convertible debt
embedded derivative $ 0.00 $ 0.00 $ 0.07 Non-cash interest on
Convertible debt and other financing (2) $ 0.01 $ 0.01 $ 0.00 WiMAX
inventory provision (3) -
- $ 0.01 Non-IFRS diluted loss
per share ($0.06 ) ($0.07
) ($0.08 ) (1) Included in the IFRS
loss as follows: Cost of product revenue $ - $ 4 $ 3 Research and
development 192 79 107 Sales and marketing 131 31 29 General and
administrative 136 69 107 (2) Related to the difference
between contractual and effective interests (3) All included
in cost of goods sold in the IFRS loss
SEQUANS
COMMUNICATIONS S.A. UNAUDITED RECONCILIATION OF
NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and per share
amounts) Year ended December 31,
2016 2015 Net IFRS loss as
reported (24,787 ) (27,402
) Add back Stock-based compensation expense according
to IFRS 2 (1) 1,122 867 Change in the fair value of convertible
debt embedded derivative 1,583 2,036 Non-cash interest on
Convertible debt and other financing (2) 2,238 755 Non-cash impact
of revaluation of interest-free government loan (57 ) (269 ) WiMAX
inventory provision (3) - 760
Non-IFRS loss adjusted
(19,901 )
(23,253 ) IFRS basic loss per share as
reported ($0.39 ) ($0.46 ) Add back Stock-based compensation
expense according to IFRS 2 (1) $ 0.02 $ 0.01 Change in the fair
value of convertible debt embedded derivative $ 0.03 $ 0.04
Non-cash interest on Convertible debt and other financing (2) $
0.04 $ 0.01 Non-cash impact of revaluation of interest-free
government loan - ($0.00 ) WiMAX inventory provision (3)
- $ 0.01 Non-IFRS basic
loss per share ($0.31 )
($0.39 ) IFRS diluted loss per share ($0.39 ) ($0.46 ) Add back
Stock-based compensation expense according to IFRS 2 (1) $ 0.02 $
0.01 Change in the fair value of convertible debt embedded
derivative $ 0.03 $ 0.04 Non-cash interest on Convertible debt and
other financing (2) $ 0.04 $ 0.01 Non-cash impact of revaluation of
interest-free government loan - $ 0.00 WiMAX inventory provision
(3) - $ 0.01
Non-IFRS diluted loss per share ($0.31 )
($0.39 ) (1) Included in the IFRS loss
as follows: Cost of product revenue $ 11 $ 17 Research and
development 475 372 Sales and marketing 236 132 General and
administrative 400 346 (2) Related to the difference between
contractual and effective interests (3) All included in cost
of goods sold in the IFRS loss
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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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