4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the second quarter ended
June 30, 2017.
Second Quarter 2017 Highlights:
Revenue: Revenue was $13.2 million, after a reduction of
$740,000 related to a product return from an early 2016
tablet-related sale. Excluding the impact of the return, revenue
would have been $14.0 million. Revenue for the second quarter of
2017 increased 6.3% compared to the first quarter of 2017 (12.3%
without the impact of the return) and increased 33.7% compared to
the second quarter of 2016 (41.2% without the impact of the
return), reflecting increases in both product and other
revenue.
Gross margin: Gross margin was 42.1% compared to 47.1% in
the first quarter of 2017 and compared to 44.6% in the second
quarter of 2016, reflecting an increase in the proportion of module
sales in the product mix in the second quarter of 2017.
Operating loss: Operating loss was $4.1 million compared
to an operating loss of $4.2 million in the first quarter of 2017
and an operating loss of $5.7 million in the second quarter of
2016.
Net loss: Net loss was $6.0 million, or ($0.08) per
diluted share/ADS, compared to a net loss $5.6 million, or ($0.07)
per diluted share/ADS, in the first quarter of 2017 and a net loss
of $5.1 million, or ($0.09) per diluted share/ADS, in the second
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 $4.9 million, or ($0.06) per
diluted share/ADS, compared to a non-IFRS net loss of $4.7 million,
or ($0.06) per diluted share/ADS in the first quarter of 2017, and
a non-IFRS net loss of $5.8 million, or ($0.10) per diluted
share/ADS, in the second quarter of 2016.
Cash: Cash, cash equivalents and short-term deposit at
June 30, 2017 totaled $19.5 million compared to $14.5 million
at March 31, 2017, and does not reflect the net proceeds of
approximately $3 million from government grants and research tax
credit expected to be received in the third quarter of 2017.
In millions of US$ except percentages, shares and per share amounts
Key Metrics Q2 2017 %* Q1
2017 %* Q2 2016 %* Revenue
$13.2 $12.4
$9.9 Gross profit
5.6 42.1
%
5.9 47.1
%
4.4 44.6
%
Operating loss
(4.1 ) (30.9 )% (4.2 ) (34.2 )% (5.7 )
(58.0 )% Net loss
(6.0 ) (45.3 )% (5.6 ) (45.1 )%
(5.1 ) (51.2 )% Diluted EPS
($0.08 ) ($0.07 ) ($0.09
) Weighted average number of diluted shares/ADS
75,896,815 75,043,865 59,280,702 Cash flow from (used in)
operations
(4.4 ) (9.9 ) (4.2 ) Cash, cash
equivalents and short-term deposit at quarter-end
19.5 14.5
7.5 Additional information on non-cash items: - Stock-based
compensation included in operating result
0.3 0.3 0.2 -
Change in the fair value of convertible debt embedded derivative
— — (1.5 ) - Non-cash interest on convertible debt and other
financing
0.8 0.6 0.6 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 )
($0.10 )
* Percentage of revenue
"We continue to make excellent progress," said Georges Karam,
Sequans' CEO. "Business during Q2 was in line with our expectations
and it's unfortunate that the optics were affected by an adjustment
related to a sale made over a year ago in the discontinued tablet
business. Our Cat 1 business is ramping nicely and our visibility
continues to improve. Our Cat M1 customers, including an extensive
list of module partners, are moving aggressively to complete their
certification on Verizon and AT&T, and we are performing Cat M1
and Cat NB1 trials with multiple operators world-wide, setting the
stage for accelerating growth next year. In the broadband business,
we are a little cautious about some temporary softness in the
emerging markets, but we also see a number of very exciting
opportunities to augment the growth we expect from popular devices
such as Verizon's JetPack and SmartHub.
"Our strategy of working closely with partners to combine their
leading technology with ours in an optimized solution is being
well-received by customers. We also continue to be approached by a
growing number of potential partners to discuss various forms of
cooperation, which further validates our leadership and positions
us the LTE connectivity partner of choice."
Q3 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 third quarter of 2017 to be in
the range of $15 to $17 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 third quarter of 2017, based on
approximately 79.8 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 second quarter of 2017 today,
August 1, 2017 at 8:00 a.m. EDT /14:00 CEST. To participate in
the live call, analysts and investors should dial 800-230-1059 (or
+1 612-288-0337if 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 September 1, 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: 426480.
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)
June 30, 2017 March 31,2017
June 30, 2016
Revenue : Product revenue $ 10,159 $ 9,640 $ 7,699 Other
revenue 3,058 2,790 2,185
Total revenue 13,217
12,430 9,884 Cost of
revenue Cost of product revenue 7,064 5,989 4,667 Cost of other
revenue 591 589 804
Total cost of revenue 7,655
6,578 5,471 Gross profit
5,562 5,852
4,413 Operating expenses : Research and
development 6,254 6,194 6,889 Sales and marketing 2,072 2,496 1,495
General and administrative 1,323 1,411 1,761
Total operating expenses
9,649 10,101
10,145 Operating loss (4,087 )
(4,249 ) (5,732 ) Financial income
(expense): Interest income (expense), net (1,194 ) (1,038 )
(916 ) Other financial expense — — (83 ) Change in the fair value
of convertible debt embedded derivative — — 1,544 Foreign exchange
gain (loss) (626 ) (246 ) 196
Loss
before income taxes (5,907 )
(5,533 ) (4,991 ) Income tax
expense (benefit) 83 71 70
Loss $ (5,990 ) $
(5,604 ) $ (5,061 )
Attributable to : Shareholders of the parent (5,990 ) (5,604
) (5,061 ) Minority interests — —
— Basic loss per share ($0.08 ) ($0.07
) ($0.09 ) Diluted loss per share ($0.08 )
($0.07 ) ($0.09 ) Weighted average number of shares used for
computing: — Basic 75,896,815 75,043,865 59,280,702 — Diluted
75,896,815 75,043,865 59,280,702
SEQUANS COMMUNICATIONS S.A. UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30 (in thousands of US$, except
share and per share amounts) 2017
2016 Revenue : Product revenue $ 19,799 $
13,111 Other revenue 5,848 6,058
Total revenue 25,647
19,169 Cost of revenue Cost of product revenue
13,053 8,795 Cost of other revenue 1,180 1,551
Total cost of revenue 14,233
10,346 Gross profit
11,414 8,823 Operating
expenses : Research and development 12,448 13,616 Sales and
marketing 4,568 2,996 General and administrative 2,734 3,139
Total operating expenses
19,750 19,751 Operating
loss (8,336 ) (10,928
) Financial income (expense): Interest income
(expense), net (2,232 ) (1,544 ) Other financial expense — (83 )
Change in the fair value of convertible debt embedded derivative —
(1,583 ) Foreign exchange gain (loss) (872 ) (16 )
Loss before income taxes (11,440 )
(14,154 ) Income tax expense (benefit)
154 136
Loss $
(11,594 ) $ (14,290 )
Attributable to : Shareholders of the parent (11,594 )
(14,290 ) Minority interests — — Basic
loss per share ($0.15 ) ($0.24 ) Diluted loss per
share ($0.15 ) ($0.24 ) Weighted average number of
shares used for computing: — Basic 75,472,863 59,239,524 — Diluted
75,472,863 59,239,524
SEQUANS
COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
At June 30,
At December 31, (in thousands of US$)
2017
2016 ASSETS Non-current assets
Property, plant and equipment $ 6,337 $ 6,659 Intangible assets
8,527 7,707 Deposits and other receivables 370 332 Available for
sale assets 336 310
Total
non-current assets 15,570 15,008
Current assets Inventories 8,528 8,693 Trade receivables
17,223 15,285 Prepaid expenses and other receivables 3,895 3,172
Recoverable value added tax 807 470 Research tax credit receivable
3,709 1,902 Short term deposit 345 345 Cash and cash equivalents
19,126 20,202
Total current
assets 53,633 50,069
Total
assets $ 69,203 $ 65,077
EQUITY AND LIABILITIES Equity
Issued capital, euro 0.02 nominal value,
79,762,386 shares authorized, issued and outstanding at June 30,
2017 (75,030,078 at December 31, 2016)
$ 2,028 $ 1,923 Share premium 204,750 189,029 Other capital
reserves 28,905 28,257 Accumulated deficit (221,147 ) (209,553 )
Other components of equity (521 ) (796 )
Total
equity 14,015 8,860
Non-current
liabilities Government grant advances, loans and other
liabilities 5,242 5,144 Convertible debt and accrued interest 5,620
16,338 Provisions 1,574 1,306 Other Liabilities 22 22 Deferred
revenue 1,455 1,940
Total
non-current liabilities 13,914 24,750
Current liabilities Trade payables 14,385 18,358
Interest-bearing receivables financing 7,370 7,712 Government grant
advances 698 601 Convertible debt and accrued interest 12,437 —
Other current liabilities 5,468 4,415 Deferred revenue 900 335
Provisions 16 46
Total current
liabilities 41,274 31,467
Total
equity and liabilities $ 69,203 $
65,077 SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Six months ended June 30 (in thousands of
US$) 2017 2016 Operating
activities Loss before income taxes
$ (11,440
) $ (14,154 ) Non-cash adjustment to
reconcile income before tax to net cash from (used in) operating
activities Depreciation and impairment of property, plant and
equipment 1,367 1,582 Amortization and impairment of intangible
assets 1,181 1,001 Share-based payment expense 648 480 Increase in
provisions 323 3 Financial expense (income) 2,269 1,552 Change in
the fair value of convertible debt embedded derivative — 1,583
Other financial expense — 83 Foreign exchange loss (gain) 414 135
Working capital adjustments Decrease (Increase) in trade
receivables and other receivables (2,614 ) 4,624 Decrease in
inventories 165 236 Increase in research tax credit receivable
(1,807 ) (1,078 ) Increase (Decrease) in trade payables and other
liabilities (4,125 ) 3,587 Increase in deferred revenue 80 1
Increase (Decrease) in government grant advances (693 ) 79 Income
tax paid (81 ) (130 )
Net cash flow from (used in)
operating activities (14,313 )
(416 ) Investing activities Purchase of
intangible assets and property, plant and equipment (2,289 ) (2,738
) Sale (purchase) of financial assets (64 ) (13 ) Sale of
short-term deposit — 50 Interest received 37 8
Net cash flow used in investments activities
(2,316 ) (2,693 )
Financing activities Proceeds from issue of warrants,
exercise of stock options/warrants 760 246 Public equity offering
proceeds, net of transaction costs paid 15,313 — Proceeds from
Interest-bearing receivables financing (342 ) (5,138 ) Proceeds
from convertible debt, net of transaction cost — 6,932 Repayment of
borrowings and finance lease liabilities — (12 ) Interest paid
(187 ) (84 )
Net cash flows from (used in)
financing activities 15,544
1,944 Net increase (decrease) in cash and cash
equivalents (1,085 ) (1,165 ) Net foreign exchange difference 9 (1
) Cash and cash equivalent at January 1 20,202
8,288
Cash and cash equivalents at end of the period
$ 19,126 $ 7,122
SEQUANS COMMUNICATIONS S.A. UNAUDITED
RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and
per share amounts)
Three months ended June 30, 2017
March 31,2017 June 30,
2016 Net IFRS loss as reported $ (5,990
) $ (5,604 ) $
(5,061 ) Add back Stock-based compensation
expense according to IFRS 2 (1) 307 341 226 Change in the fair
value of convertible debt embedded derivative — — (1,544 ) Non-cash
interest on Convertible debt and other financing (2) 759 610 556
Non-IFRS loss adjusted $ (4,924
) $ (4,653 ) $
(5,823 ) IFRS basic loss per share as reported ($0.08
) ($0.07 ) ($0.09 ) Add back Stock-based compensation expense
according to IFRS 2 (1) $0.01 $0.00 $0.01 Change in the fair value
of convertible debt embedded derivative $0.00 $0.00 ($0.03 )
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 )
($0.10 ) IFRS diluted loss per share ($0.08 ) ($0.07 )
($0.09 ) Add back Stock-based compensation expense according to
IFRS 2 (1) $0.01 $0.00 $0.01 Change in the fair value of
convertible debt embedded derivative $0.00 $0.00 ($0.03 ) 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 ) ($0.10 )
(1) Included in the IFRS loss as follows: Cost of product
revenue $ 2 $ 3 $ 4 Research and development 97 109 96 Sales and
marketing 65 79 35 General and administrative 143 150 91 (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)
Six months ended June 30 2017 2016
Net IFRS loss as reported $ (11,594 )
$ (14,290 ) Add back Stock-based
compensation expense according to IFRS 2 (1) 648 480 Change in the
fair value of convertible debt embedded derivative — 1,583 Non-cash
interest on Convertible debt and other financing (2) 1,370 921
Non-IFRS loss adjusted $ (9,576
) $ (11,306 ) IFRS basic loss
per share as reported ($0.15 ) ($0.24 ) Add back Stock-based
compensation expense according to IFRS 2 (1) $0.01 $0.01 Change in
the fair value of convertible debt embedded derivative $0.00 $0.03
Non-cash interest on Convertible debt and other financing (2)
$0.01 $0.01 Non-IFRS basic loss per
share ($0.13 ) ($0.19 ) IFRS diluted loss per share
($0.24 ) ($0.24 ) Add back Stock-based compensation expense
according to IFRS 2 (1) $0.01 $0.01 Change in the fair value of
convertible debt embedded derivative $0.00 $0.03 Non-cash interest
on Convertible debt and other financing (2) $0.01
$0.01 Non-IFRS diluted loss per share ($0.13 )
($0.19 ) (1) Included in the IFRS loss as follows:
Cost of product revenue $ 5 $ 8 Research and development 206 204
Sales and marketing 144 74 General and administrative 293 194
(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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