Sequans Communications S.A. (NYSE: SQNS), a leading developer
and provider of 5G/4G chips and modules, today announced financial
results for the first quarter ended March 31, 2021.
First Quarter 2021 Summary Results Table:
(in US$ millions, except share and per
share data)
Q1 2021
Q4 2020
Q1 2020
Revenue
$12.3
$15.8
$8.8
Gross profit
6.2
7.1
4.5
Gross margin (%)
50.1
%
45.1
%
51.3
%
Operating loss
(5.8
)
(5.4
)
(7.8
)
Net loss
(11.4
)
(11.3
)
(15.3
)
Diluted earnings per ADS
($0.33
)
($0.36
)
($0.64
)
Non-IFRS diluted earnings per ADS (1)
($0.15
)
($0.28
)
($0.36
)
Weighted average number of diluted ADS
34,664,779
31,044,769
23,904,935
(1) See Use of Non-IFRS/non-GAAP Financial
Measures disclosure on page 3
"First quarter revenue grew by 40% year-over-year driven by
significant gains in Massive IoT. Sequans continued to see strong
momentum in our product revenue pipeline and design wins,
particularly from solid demand in Massive IoT," said Georges Karam,
CEO of Sequans. "On a sequential basis, our seasonally slower first
quarter revenue was also impacted by supply chain constraints that
delayed approximately $2 million of shipments, and the anticipated
decline in demand for the modem we supply for the Verizon Jetpack.
We continue to execute our long-term growth strategy on three
fronts – continued growth in Massive IoT and CBRS IoT, expansion of
our go-to-market channels, and ongoing development of our 5G
product line. We remain committed to delivering our first 5G NR
solution in 2022 and entering the next growth phase for our
company."
Q2 2021 Outlook
The following statement is based on management’s current
assumptions and expectations and assumes no increase in the
severity or duration of the COVID-19 pandemic. This statement is
forward-looking and actual results may differ materially.
Despite the continued supply chain constraints for materials,
and factoring in the risk related to the portable router business,
management is targeting a 10% sequential increase in revenue.
First Quarter 2021 Financial and Operational Results
Summary
Revenue for the first quarter was $12.3 million, a decrease of
22.0% compared to the fourth quarter of 2020 and an increase of
40.5% compared to the first quarter of 2020. The decrease from the
prior fourth quarter was primarily due to the seasonally slower
first quarter combined with delayed shipments related to supply
chain constraints, while the increase in revenue year-over-year was
primarily due to product shipments in the Massive IoT market.
Gross profit for the first quarter of 2021 was $6.2 million, a
decrease from the prior quarter gross profit of $7.1 million and an
increase from the prior year first quarter of $4.5 million. Gross
margin for the first quarter of 2021 was 50.1% compared to 45.1% in
the fourth quarter of 2020 and 51.3% in the first quarter of 2020.
The sequential improvement in gross margin was primarily due to the
increase in the product revenue mix from chip sales.
Operating loss was $5.8 million compared to $5.4 million in the
fourth quarter of 2020 and $7.8 million in the first quarter of
2020. The year-over-year decline in operating loss was primarily
due to the increase in revenue and a slight reduction in operating
expenses.
Net loss was $11.4 million, or ($0.33) per diluted ADS, compared
to $11.3 million, or ($0.36) per ADS, in the fourth quarter of 2020
and $15.3 million, or ($0.64) per ADS, in the first quarter of
2020. Net loss in the first quarter of 2021 includes a non-cash
charge resulting from the change in the remaining embedded
derivative fair value associated with the Company’s convertible
notes, which includes the change in value of the tranches of
convertible notes converted through their conversion dates,
partially offset by a foreign exchange gain related to the
revaluation of euro liabilities in the quarter.
Non-IFRS Net loss and diluted loss per ADS: Excluding the
non-cash stock-based compensation, the non-cash impact of the
fair-value and effective interest adjustments related to the
convertible debt with embedded derivatives and other financings,
the non-cash impact of convertible debt amendments, and deferred
tax benefit or expense related to the convertible debt and other
financings, non-IFRS net loss was $5.1 million, or ($0.15) per ADS,
compared to $8.5 million, or ($0.28) per ADS in the fourth quarter
of 2020, and $8.7 million, or ($0.36) per ADS, in the first quarter
of 2020. The non-IFRS net loss includes foreign exchange gain of
$1.4 million, or $0.04 per ADS, in the first quarter of 2021,
versus a foreign exchange loss of $1.9 million, or ($0.06) per ADS,
in the fourth quarter of 2020 and a foreign exchange gain of $0.7
million, or $0.03 per ADS, in the first quarter of 2020.
Cash: Cash, cash equivalents and short-term deposits at
March 31, 2021 totaled $13.5 million compared to $18.5 million at
December 31, 2020. The balance at March 31, 2021 excludes the $50
million of proceeds from the hybrid equity and convertible debt
financing closed on April 9, 2021 and the $1.7 million in proceeds
from a government grant received April 1, 2021, as well as the
repayment of $18.8 million in convertible notes and other debt on
April 14, 2021 and April 15, 2021.
Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to
discuss the financial results for the first quarter of 2021 today,
April 27, 2021 at 8:00 a.m. ET /14:00 CET. To participate in the
live call, analysts and investors should dial 877-407-0792 or +1
201-689-8263 if outside the U.S. When prompted, provide the event
title or access code: 13718024. A live and archived webcast of the
call will be available from the Investors section of the Sequans
website at www.sequans.com/investors/. An audio replay of the
conference call will be available until May 11, 2021 by dialing
toll free 844-512-2921 or +1 412-317-6671 from outside the U.S.,
using the following access code:13718024.
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
future results of operations and financial positions, business
strategy and plans, expectations for Massive IoT and Broadband and
Critical IoT sales, the impact of the coronavirus on our
manufacturing operations, supply chain, and on customer demand, the
impact of component shortages and manufacturing capacity, and our
objectives for future operations, 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,
2020, 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) 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 coronavirus on the ability to operate our business
and research, production of our products or demand for our products
by customers whose supply chain is impacted or whose operations
have been impacted by government shelter-in-place or similar
orders, (xiii) our ability to raise debt and equity financing, and
(xv) 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, effective interest adjustments related to the
convertible debt with embedded derivatives and other financings,
and 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 provider of 5G and 4G chips and modules for IoT devices. 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 and critical IoT
applications, Sequans offers a product portfolio based on its
Cassiopeia 4G Cat 4/Cat 6 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, South Korea, and
China.
Visit Sequans online at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans
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, 2021
December 31, 2020
March 31, 2020
Revenue :
Product revenue
$
8,548
$
12,064
$
5,501
Other revenue
3,773
3,727
3,271
Total revenue
12,321
15,791
8,772
Cost of revenue
Cost of product revenue
5,691
8,183
3,897
Cost of other revenue
452
494
373
Total cost of revenue
6,143
8,677
4,270
Gross profit
6,178
7,114
4,502
Operating expenses :
Research and development
7,254
7,938
7,421
Sales and marketing
2,294
2,003
2,264
General and administrative
2,460
2,606
2,605
Total operating expenses
12,008
12,547
12,290
Operating loss
(5,830
)
(5,433
)
(7,788
)
Financial income (expense):
Interest income (expense), net
(2,711
)
(3,643
)
(3,491
)
Change in fair value of convertible debt
derivative
(4,090
)
111
(5,621
)
Foreign exchange gain (loss)
1,358
(1,936
)
675
Loss before income taxes
(11,273
)
(10,901
)
(14,826
)
Income tax expense (benefit)
147
361
443
Loss
$
(11,420
)
$
(11,262
)
$
(15,269
)
Attributable to :
Shareholders of the parent
(11,420
)
(11,262
)
(15,269
)
Minority interests
—
—
—
Basic loss per ADS
($
0.33
)
($
0.36
)
($
0.64
)
Diluted loss per ADS
($
0.33
)
($
0.36
)
($
0.64
)
Weighted average number of ADS used for
computing:
— Basic
34,664,779
31,044,769
23,904,935
— Diluted
34,664,779
31,044,769
23,904,935
SEQUANS COMMUNICATIONS
S.A.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At March 31,
At Dec 31,
(in thousands of US$)
2021
2020
ASSETS
Non-current assets
Property, plant and equipment
$
9,086
$
9,187
Intangible assets
27,771
25,312
Deposits and other receivables
3,303
588
Other non-current financial assets
369
386
Total non-current assets
40,529
35,473
Current assets
Inventories
4,621
6,225
Trade receivables
7,078
17,277
Contract assets
496
371
Prepaid expenses
1,190
962
Other receivables
7,728
3,264
Research tax credit receivable
5,224
5,110
Short-term deposits
—
10,900
Cash and cash equivalents
13,486
7,574
Total current assets
39,823
51,683
Total assets
$
80,352
$
87,156
EQUITY AND LIABILITIES
Equity
Issued capital, euro 0.02 nominal value,
141,774,810 shares authorized, issued and outstanding at March 31,
2021 (133,934,090 shares at December 31, 2020)
$
3,459
$
3,269
Share premium
288,714
276,560
Other capital reserves
53,223
46,677
Accumulated deficit
(374,629
)
(363,209
)
Other components of equity
(466
)
(423
)
Total equity
(29,699
)
(37,126
)
Non-current liabilities
Government grant advances, loans and other
liabilities
14,548
11,203
Venture debt
638
2,172
Convertible debt
16,102
26,074
Convertible debt embedded derivative
9,951
12,395
Lease liabilities
4,092
4,762
Trade payables
646
851
Provisions
2,017
1,874
Deferred tax liabilities
20
19
Contract liabilities
599
2,397
Total non-current liabilities
48,613
61,747
Current liabilities
Trade payables
14,716
15,701
Interest-bearing receivables financing
11,026
14,228
Venture debt
5,964
6,104
Lease liabilities
1,202
1,014
Government grant advances and loans
6,134
3,867
Contract liabilities
12,894
13,145
Other current liabilities and
provisions
9,502
8,476
Total current liabilities
61,438
62,535
Total equity and liabilities
$
80,352
$
87,156
SEQUANS COMMUNICATIONS
S.A.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
Three months ended March
31,
(in thousands of US$)
2021
2020
Operating activities
Loss before income taxes
$
(11,273
)
$
(14,826
)
Non-cash adjustment to reconcile income
before tax to net cash from (used in) operating activities
Depreciation and impairment of property,
plant and equipment
875
1,015
Amortization and impairment of intangible
assets
1,895
1,180
Share-based payment expense
1,160
667
Increase in provisions
41
52
Interest expense, net
2,734
3,491
Change in the fair value of convertible
debt embedded derivative
4,090
5,621
Convertible debt amendment
—
(1,399
)
Foreign exchange loss (gain)
(1,115
)
(545
)
Bad debt expense
—
18
Working capital adjustments
Decrease (Increase) in trade receivables
and other receivables
10,141
(1,669
)
Decrease in inventories
1,604
518
Decrease (Increase) in research tax credit
receivable
380
(490
)
Increase in trade payables and other
liabilities
208
1,402
Decrease in contract liabilities
(2,812
)
(2,574
)
Increase (Decrease) in government grant
advances
1,390
(110
)
Income tax paid
(120
)
(76
)
Net cash flow provided by (used in)
operating activities
9,198
(7,725
)
Investing activities
Purchase of intangible assets and
property, plant and equipment
(3,610
)
(943
)
Capitalized development expenditures
(2,279
)
(1,431
)
Purchase of financial assets
(2,698
)
(28
)
Decrease of short-term deposit
10,900
—
Interest received
23
19
Net cash flow used in investments
activities
2,336
(2,383
)
Financing activities
Proceeds from issue of warrants, exercise
of stock options/warrants
87
27
Proceeds (Repayment of) from
interest-bearing receivables financing
(2,976
)
2,504
Proceeds from interest-bearing research
project financing
—
405
Payment of lease liabilities
(448
)
(439
)
Repayment of government loans
(121
)
—
Repayment of venture debt
(1,460
)
(811
)
Repayment of interest-bearing research
project financing
(181
)
—
Interest paid
(533
)
(537
)
Net cash flows from financing
activities
(5,632
)
1,149
Net increase (decrease) in cash and cash
equivalents
5,902
(8,959
)
Net foreign exchange difference
10
(2
)
Cash and cash equivalents at January 1
7,574
14,098
Cash and cash equivalents at end of the
period
13,486
5,137
SEQUANS COMMUNICATIONS
S.A.
UNAUDITED RECONCILIATION OF
NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and
per share amounts)
Three months ended
March 31, 2021
December 31, 2020
March 31, 2020
Net IFRS loss as reported
$
(11,420
)
$
(11,262
)
$
(15,269
)
Add back
Non-cash stock-based compensation expense
according to IFRS 2 (1)
1,160
1,172
667
Non-cash change in the fair value of
convertible debt embedded derivative
4,090
(111
)
5,621
Non-cash interest on convertible debt and
other financing (2)
1,085
1,663
1,294
Non-cash impact of deferred tax income
(loss)
—
—
398
Non-cash impact of convertible debt
amendment
—
—
(1,399
)
$
(5,085
)
$
(8,538
)
$
(8,688
)
IFRS basic loss per ADS as reported
($
0.33
)
($
0.36
)
($
0.64
)
Add back
Non-cash stock-based compensation expense
according to IFRS 2 (1)
$
0.03
$
0.04
$
0.03
Non-cash change in the fair value of
convertible debt embedded derivative
$
0.12
$
0.00
$
0.24
Non-cash interest on convertible debt and
other financing (2)
$
0.03
$
0.04
$
0.05
Non-cash impact of deferred tax income
(loss)
$
0.00
$
0.00
$
0.02
Non-cash impact of convertible debt
amendment
$
0.00
$
0.00
($
0.06
)
Non-IFRS basic loss per ADS
($
0.15
)
($
0.28
)
($
0.36
)
IFRS diluted loss per ADS
($
0.33
)
($
0.36
)
($
0.64
)
Add back
Non-cash stock-based compensation expense
according to IFRS 2 (1)
$
0.03
$
0.04
$
0.03
Non-cash change in the fair value of
convertible debt embedded derivative
$
0.12
$
0.00
$
0.24
Non-cash interest on convertible debt and
other financing (2)
$
0.03
$
0.04
$
0.05
Non-cash impact of deferred tax income
(loss)
$
0.00
$
0.00
$
0.02
Non-cash impact of convertible debt
amendment
$
0.00
$
0.00
($
0.06
)
Non-IFRS diluted loss per ADS
($
0.15
)
($
0.28
)
($
0.36
)
(1) Included in the IFRS loss as
follows:
Cost of product revenue
$
15
$
28
$
5
Research and development
554
647
272
Sales and marketing
217
190
124
General and administrative
374
307
266
(2) Related to the difference between
contractual and effective interest rates
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210427005497/en/
Media Relations: Kimberly Tassin, +1.425.736.0569,
Kimberly@sequans.com Investor Relations: Kimberly Rogers, +1
385.831.7337, krogers@sequans.com
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