Sequans Communications Announces Fourth Quarter and Full Year 2022 Financial Results

PARIS, Feb. 14, 2023 /PRNewswire/ -- Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G solutions for IoT devices, today announced financial results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 and Full Year Summary Results Table:

"Notable accomplishments in 2022 set the stage for sustainable long-term growth and market share gains in the largest IoT markets," said Georges Karam, CEO of Sequans. "In particular, we executed a multi-year, strategic 5G licensing deal for our Taurus 5G platform valued at more than $50 million; successfully launched Calliope 2, our second-generation Cat 1 chip; grew our product pipeline to over $700 million and delivered 19% annual revenue growth. We closed the year with fourth quarter revenue of $15.9 million, in line with our expectations, and annual revenue of $60.6 million. Higher contribution from licensing revenue lifted our gross margin to over 75% in the fourth quarter and over 70% for the year, which drove a marked improvement in our operating results. Our annual operating loss improved significantly from $18.3 million in 2021 to $3.8 million in 2022, resulting in a non-IFRS operating profit of $1.6 million in 2022."

"We expect product shipments to accelerate and revenue growth to resume in the second half of 2023 with the scheduled launch of key design wins into production," continued Mr. Karam. "Demand remains robust, and we are confident that our pipeline of specific customer projects offers a long runway of future revenue, despite short-term cyclical challenges in the industry. Approximately half of our $700 million 3-year-life revenue pipeline is backed by design wins representing above $100 million annualized revenue at peak production. Furthermore, given the strong reception to Calliope 2 and the continuous success of Monarch 2, we anticipate incremental design wins will continue to grow our pipeline for the remainder of 2023."

Mr. Karam concluded, "We are actively marketing our 5G IP licensing platform and are engaged in discussions for multiple IP licensing revenue opportunities, which could offset any timing delays of product revenue. Discussions are advancing, and we are optimistic about closing a new licensing agreement in the first half of 2023. We believe the scarcity factor of a 5G cellular option optimized for IoT makes Sequans attractive to many potential partners. We have numerous avenues open to us, and the Board has formed a special committee to explore strategic options as well.  We will evaluate every tool in our toolbox to unlock shareholder value."

Q1 2023 Outlook

The following statement is based on management's current assumptions and expectations. This statement is forward-looking and actual results may differ materially.

Taking into consideration the impact of excess inventory primarily at one key customer, the delay of design win project launches, and the historically seasonally lower activity in the first quarter, management is targeting revenues of around $12 million with 70% gross margin for the quarter ending March 31, 2023.

Fourth Quarter 2022 Highlights:

Revenue: Revenue was $15.9 million, a decrease of 3.7% compared to the third quarter of 2022 and an increase of 15.2% compared to the fourth quarter of 2021.The sequential decline for the fourth quarter was expected and was primarily due to decreased license revenue, partially offset by an increase in product revenue. The annual growth is primarily due to the increase in license revenue, which was partially offset by the decline in product revenue.

Gross margin: Gross margin was 75.3% compared to 77.6% in the third quarter of 2022 and compared to 57.1% in the fourth quarter of 2021 due to the higher proportion of licensing revenue versus product sales in the revenue mix in 2022.

Operating profit / loss: Operating loss was $1.0 million compared to operating profit of $1.2 million in the third quarter of 2022 and operating loss of $4.0 million in the fourth quarter of 2021. The improvement in operating loss in 2022 was primarily due to the improvement in gross margin.

Net profit / loss: Net loss was $5.0 million, or ($0.10) per diluted ADS, compared to a net losses of $2.9 million, or ($0.06) per ADS, in the third quarter of 2022 and $7.7 million, or ($0.21) per ADS, in the fourth quarter of 2021. Net loss in the fourth quarter of 2022 includes a $1.1 million gain on the change in fair value of the convertible debt derivative compared to a $1.2 million loss in both the third quarter of 2022 and in the fourth quarter of 2021.

Non-IFRS Net profit / loss and diluted profit / loss per ADS:  Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value, the amendment and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, non-IFRS net loss was $2.8 million, or ($0.06) per diluted ADS, compared to non-IFRS net gain of $0.4 million, or $0.01 per diluted ADS in the third quarter of 2022, and a non-IFRS net loss of $3.5 million, or ($0.09) per diluted ADS, in the fourth quarter of 2021. The non-IFRS net gain / loss includes foreign exchange loss of $1.5 million, or ($0.03) per diluted ADS, in the fourth quarter of 2022, compared with foreign exchange gains of $1.0 million, or $0.02 per diluted ADS, in the third quarter of 2022 and $0.1 million, or $0.00 per diluted ADS, in the fourth quarter of 2021.

Cash: Cash and cash equivalents and short-term deposits at December 31, 2022 totaled $10.7 million compared to $5.8 million at September 30, 2022.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the fourth quarter of 2022 today, February 14, 2023 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: 13735066.  A live and archived webcast of the call will be available from the Investors section of the Sequans website at https://www.sequans.com/company/investor-relations/webcasts-and-presentations/. An audio replay of the conference call will be available until February 22, 2023 by dialing toll free 844-512-2921 or 412-317-6671 from outside the U.S., using the following access code: 13735066.

Forward Looking Statements

This press release contains projections and other forward-looking statements regarding future events  and our future financial performance. 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 future product sales, potential for future strategic licensing deals or other strategic transactions, the impact of the Covid-19 on our supply chain and on customer demand, the impact of component shortages and manufacturing capacity, our ability to convert our pipeline to revenue 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, 2021, 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 resulting from inflationary pressures, and rising interest rates, including manufacturing and operating expenses and interest expense, (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 Ukraine-Russia conflict on our independent contractors located in Ukraine, (xiii) the impact of Covid-19 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 or Covid-19 workforce shortages, (xiv) 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, conversions and repayments, 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 planned 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

Media Relations:  Kimberly Tassin, +1.425.736.0569, [email protected]
Investor Relations: Kimberly Rogers, +1 385.831-7337, [email protected]

Condensed financial tables follow

SOURCE Sequans Communications