4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the third quarter ended Sept. 30,
2018 and the closing of $18 million in additional debt financing
subsequent to the end of the third quarter.
Third Quarter 2018 Highlights:
Revenue: Revenue was $10.3 million, a decrease of 18.7%
compared to the second quarter of 2018, primarily due to a 24%
sequential decline in product revenue, as a result of a delay in
the ramp of LTE-M revenues, and a decrease of 9.0% compared to the
third quarter of 2017, reflecting significantly higher IoT product
revenue and other revenue, more than offset by lower broadband
product.
Gross margin: Gross margin was 35.0% compared to 39.4% in
the second quarter of 2018 and compared to 44.3% in the third
quarter of 2017, primarily due to a shift in product mix toward a
higher proportion of modules.
Operating loss: Operating loss was $7.9 million compared
to an operating loss of $7.0 million in the second quarter of 2018
and an operating loss of $5.6 million in the third quarter of
2017.
Net loss: Net loss was $9.9 million, or ($0.10) per
diluted share/ADS, compared to a net loss of $8.1 million, or
($0.09) per diluted share/ADS, in the second quarter of 2018 and a
net loss of $6.9 million, or ($0.09) per diluted share/ADS, in the
third quarter of 2017. Net loss for the quarter ended September 30,
2018 included an estimated $0.7 million charge related to
amendments of the convertible debt made at the end of the
quarter.
Non-IFRS Net loss: Excluding the non-cash items of
stock-based compensation, the non-cash impact of convertible debt
amendments and effective interest adjustments related to the
convertible debt and other financings, non-IFRS net loss was $8.0
million, or ($0.08) per diluted share/ADS, compared to a non-IFRS
net loss of $6.8 million, or ($0.07) per diluted share/ADS in the
second quarter of 2018, and a non-IFRS net loss of $5.9 million, or
($0.07) per diluted share/ADS, in the third quarter of 2017.
Cash: Cash, cash equivalents and short-term deposit at
September 30, 2018 totaled $5.2 million compared to $7.0 million at
June 30, 2018. Subsequent to the balance sheet date, the Company
received $18 million in proceeds from the issuance of $4.5 million
of additional convertible debt due in April 2021 and a €12 million
($13.7 million) financing facility to be repaid over three and a
half years. The new debt was part of an overall debt restructuring,
which included an amendment of the terms of the $12 million
principal convertible notes due in April 2019 to extend the term to
April 2021 and the early repayment of $1 million principal
convertible notes due in April 2020.
In millions of US$ except percentages, shares and per share amounts
Key Metrics Q3 2018 %* Q2 2018
%* Q3 2017 %* Revenue
$10.3
$12.7 $11.3 Gross profit
3.6
35.0 % 5.0 39.4 % 5.0 44.3 % Operating loss
(7.9 ) (77.1 )% (7.0 ) (55.0 )% (5.6 ) (49.2 )% Net
loss
(9.9 ) (96.4 )% (8.1 ) (63.9 )% (6.9 ) (61.2 )%
Diluted EPS
($0.10 ) ($0.09 ) ($0.09 ) Weighted
average number of diluted shares/ADS
94,533,229 94,459,289
79,774,103 Cash flow from (used in) operations
(1.3 )
(8.0 ) (5.3 ) Cash, cash equivalents and short-term deposit at
quarter-end
5.2 7.0 13.3 Additional information on non-cash
items: - Stock-based compensation included in operating result
0.4 0.5 0.3 - Non-cash interest on convertible debt and
other financing
0.8 0.7 0.8 - Non-cash impact of convertible
debt amendment
0.7 — — Non-IFRS diluted EPS (excludes
stock-based compensation, impact of convertible debt amendments and
effective interest adjustments related to the convertible and other
debt and embedded derivative, and the non-cash impact of
revaluation of interest-free government loan)
($0.08
) ($0.07 ) ($0.07
)
* Percentage of revenue
“Although some customers’ project delays are causing the
acceleration of the ramp in LTE-M revenues to be pushed out until
early 2019, we are confident this is only a timing issue. We see
the ramp building as we are working on more than 130 projects in
different phases with over 25 of them either in production or
scheduled to launch by mid-2019,” said Georges Karam, Sequans’ CEO.
“We have mitigated the financial impact of this delay by securing
an additional $18 million of debt financing. We have also
implemented operating efficiencies, without affecting our
technology leadership, and believe our current financial resources
are adequate to reach cash flow breakeven. The overall momentum in
the IoT market remains strong and our pipeline of opportunities
continues to grow.”
Q4 2018 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 non-IFRS results for the fourth quarter of 2018
to be similar to the third quarter. With customers’ project delays
creating some uncertainty about the timing of the IoT revenue ramp,
management has decided not to give detailed quarterly guidance
until visibility on device launch timing improves.
Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to
discuss the financial results for the third quarter of 2018 today,
October 30, 2018 at 8:00 a.m. EDT /14:00 CET. To participate
in the live call, analysts and investors should dial 800-230-1059
(or +1 612-234-9959 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 November 30, 2018 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: 455392.
Forward Looking Statements
This press release contains projections and other
forward-looking statements regarding future events or our future
financial performance and potential financing sources. 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 and plans, expectations for IoT sales, sufficiency of
funding 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, (xi) the finalization of the
amount of the charge related to the amendment of the convertible
debt made at the end of the quarter, and (xii) 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 income and 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)
Sept 30,2018 June 30,2018
Sept 30,2017 Revenue :
Product revenue $ 7,526 $ 9,921 $ 8,869 Other revenue 2,759
2,737 2,430
Total revenue
10,285 12,658
11,299 Cost of revenue Cost of product revenue
6,026 7,127 5,678 Cost of other revenue 664 549
615
Total cost of revenue 6,690
7,676 6,293
Gross profit 3,595 4,982
5,006 Operating expenses : Research and
development 6,750 7,152 6,769 Sales and marketing 2,229 2,518 2,014
General and administrative 2,545 2,276 1,786
Total operating expenses 11,524
11,946 10,569
Operating loss (7,929 ) (6,964 )
(5,563 ) Financial income (expense): Interest
income (expense), net (1,278 ) (1,240 ) (1,202 ) Convertible debt
amendment (685 ) — — Foreign exchange gain (loss) 58
188 (90 )
Loss before income taxes
(9,834 ) (8,016 )
(6,855 ) Income tax expense (benefit) 78
74 65
Loss $
(9,912 ) $ (8,090 ) $
(6,920 ) Attributable to : Shareholders of the
parent (9,912 ) (8,090 ) (6,920 ) Minority interests —
— — Basic loss per share ($0.10 )
($0.09 ) ($0.09 ) Diluted loss per share ($0.10 )
($0.09 ) ($0.09 ) Weighted average number of shares
used for computing: — Basic 94,533,229 94,459,289 79,774,103 —
Diluted 94,533,229 94,459,289
79,774,103
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended Sept 30, (in thousands of
US$, except share and per share amounts) 2018
2017 Revenue : Product revenue $ 25,082
$ 28,668 Other revenue 9,095 8,278
Total revenue 34,177
36,946 Cost of revenue Cost of product revenue
19,014 18,731 Cost of other revenue 1,902
1,795
Total cost of revenue 20,916
20,526 Gross profit
13,261 16,420 Operating
expenses : Research and development 21,421 19,217 Sales and
marketing 7,232 6,582 General and administrative 6,792 4,520
Total operating expenses
35,445 30,319 Operating
loss (22,184 ) (13,899
) Financial income (expense): Interest income
(expense), net (3,745 ) (3,434 ) Convertible debt amendment (685 )
— Foreign exchange gain (loss) 34 (962 )
Loss before income taxes (26,580 )
(18,295 ) Income tax expense (benefit)
171 219
Loss $
(26,751 ) $ (18,514 )
Attributable to : Shareholders of the parent (26,751 )
(18,514 ) Minority interests — — Basic
loss per share ($0.29 ) ($0.24 ) Diluted loss per
share ($0.29 ) ($0.24 ) Weighted average number of
shares used for computing: — Basic 93,486,416 76,918,723 — Diluted
93,486,416 76,918,723
SEQUANS
COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION At Sept
30, At December 31, (in thousands of US$)
2018 2017 ASSETS
Non-current assets Property, plant and equipment $ 6,652 $
6,993 Intangible assets 11,573 9,561 Deposits and other receivables
390 402 Available for sale assets 340 353
Total non-current assets 18,955
17,309
Current assets Inventories 7,287 7,376 Trade
receivables 20,803 20,826 Prepaid expenses and other receivables
3,357 4,214 Recoverable value added tax 508 688 Research tax credit
receivable 2,841 3,248 Short term deposit — 347 Cash and cash
equivalents 5,179 2,948
Total
current assets 39,975 39,647
Total assets $ 58,930 $ 56,956
EQUITY AND LIABILITIES Equity Issued capital,
euro 0.02 nominal value, 94,586,764 shares authorized, issued and
outstanding at September 30, 2018 (80,024,707 shares at December
31, 2017) $ 2,384 $ 2,031 Share premium 225,470 204,952 Other
capital reserves 39,035 33,313 Accumulated deficit (262,564 )
(235,813 ) Other components of equity (486 ) (435 )
Total equity 3,839 4,048
Non-current liabilities Government grant advances, loans and
other liabilities 5,969 5,030 Convertible debt and accrued interest
16,708 17,063 Provisions and other liabilities 1,703 1,584 Deferred
revenue 930 1,293
Total non-current
liabilities 25,310 24,970
Current liabilities Trade payables 13,591 13,023
Interest-bearing receivables financing 9,549 7,413 Government grant
advances 832 1,592 Provisions and other current liabilities 4,612
5,170 Deferred revenue 1,197 740
Total current liabilities 29,781 27,938
Total equity and liabilities $ 58,930
$ 56,956 SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Nine months ended Sept 30, (in thousands of
US$) 2018 2017 Operating
activities Loss before income taxes
$ (26,580
) $ (18,295 ) Non-cash adjustment to
reconcile income before tax to net cash from (used in) operating
activities Depreciation and impairment of property, plant and
equipment 2,372 2,025 Amortization and impairment of intangible
assets 2,334 1,758 Share-based payment expense 1,505 958 Increase
(decrease) in provisions 66 675 Financial expense (income) 3,745
3,434 Convertible debt amendment 685 — Foreign exchange loss (gain)
(174 ) 567 Working capital adjustments Decrease (Increase) in trade
receivables and other receivables 847 (2,057 ) Decrease (Increase)
in inventories 89 (155 ) Decrease (Increase) in research tax credit
receivable 407 (484 ) Decrease in trade payables and other
liabilities 114 (7,299 ) Increase (decrease) in deferred revenue 94
(112 ) Decrease in government grant advances (744 ) (403 ) Income
tax paid (80 ) (206 )
Net cash flow used in
operating activities (15,320 )
(19,594 ) Investing activities Purchase
of intangible assets and property, plant and equipment (4,456 )
(4,096 ) Capitalized development expenditures (2,224 ) — Sale
(purchase) of financial assets 25 (101 ) Sale of short-term deposit
347 — Interest received 71 47
Net
cash flow used in investments activities (6,237
) (4,150 ) Financing
activities Proceeds from issue of warrants, exercise of stock
options/warrants 30 906 Public equity offering proceeds, net of
transaction costs paid 20,840 14,942 Proceeds (repayment of) from
interest-bearing receivables financing 2,136 (131 ) Proceeds from
interest-bearing research project financing 1,574 1,126 Repayment
of government loans (352 ) (56 ) Interest paid (438 )
(272 )
Net cash flows from financing activities
23,790 16,515 Net
increase (decrease) in cash and cash equivalents 2,233 (7,229 ) Net
foreign exchange difference (2 ) 9 Cash and cash equivalent at
January 1 2,948 20,202
Cash and cash
equivalents at end of the period $ 5,179
$ 12,982 SEQUANS
COMMUNICATIONS S.A. UNAUDITED RECONCILIATION OF NON-IFRS
FINANCIAL RESULTS (in thousands of US$, except share
and per share amounts) Three months ended
Sept 30,2018 June 30,2018
Sept 30,2017 Net IFRS loss as reported
$ (9,912 ) $ (8,090
) $ (6,920 ) Add back
Stock-based compensation expense according to IFRS 2 (1) 446 526
310 Non-cash interest on convertible debt and other financing (2)
761 745 759 Non-cash impact of convertible cebt amendment 685 — —
$ (8,020 ) $
(6,819 ) $ (5,854 ) IFRS
basic loss per share as reported ($0.10 ) ($0.09 ) ($0.09 ) Add
back Stock-based compensation expense according to IFRS 2 (1) $0.00
$0.01 $0.01 Non-cash interest on convertible debt and other
financing (2) $0.01 $0.01 $0.01 Non-cash impact of convertible debt
amendment $0.01 $0.00 $0.00
Non-IFRS basic loss per share ($0.08 )
($0.07 ) ($0.07 ) IFRS diluted loss per share ($0.10 )
($0.09 ) ($0.09 ) Add back Stock-based compensation expense
according to IFRS 2 (1) $0.00 $0.01 $0.01 Non-cash interest on
convertible debt and other financing (2) $0.01 $0.01 $0.01 Non-cash
impact of convertible debt amendment $0.01 $0.00 $0.00
Non-IFRS diluted loss per
share ($0.08 ) ($0.07 ) ($0.07 ) (1)
Included in the IFRS loss as follows: Cost of product revenue $ 2 $
3 $ 2 Research and development 116 127 87 Sales and marketing 66 73
55 General and administrative 262 323 166 (2) Related to the
difference between contractual and effective interests
SEQUANS COMMUNICATIONS S.A. UNAUDITED RECONCILIATION OF
NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and per share amounts)
Nine months ended Sept 30, 2018
2017 Net IFRS loss as reported $
(26,751 ) $ (18,514 ) Add
back Stock-based compensation expense according to IFRS 2 (1)
1,504 958 Non-cash interest on convertible debt and other financing
(2) 2,177 2,119 Non-cash impact of convertible debt amendment 685 —
$ (22,385 ) $
(15,437 ) IFRS basic loss per share as reported
($0.29 ) ($0.24 ) Add back Stock-based compensation expense
according to IFRS 2 (1) $0.02 $0.01 Non-cash interest on
convertible debt and other financing (2) $0.02 $0.03 Non-cash
impact of convertible debt amendment $0.01
$0.00 Non-IFRS basic loss per share ($0.24 )
($0.20 ) IFRS diluted loss per share ($0.29 ) ($0.24 ) Add back
Stock-based compensation expense according to IFRS 2 (1) $0.02
$0.01 Non-cash interest on convertible debt and other financing (2)
$0.02 $0.03 Non-cash impact of convertible debt amendment
$0.01 $0.00 Non-IFRS diluted loss per share
($0.24 ) ($0.20 ) (1) Included in the IFRS
loss as follows: Cost of product revenue $ 8 $ 7 Research and
development 382 293 Sales and marketing 219 199 General and
administrative 895 459 (2) Related to the difference between
contractual and effective interests
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version on businesswire.com: https://www.businesswire.com/news/home/20181030005418/en/
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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