4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the first quarter ended March 31, 2017.
First Quarter 2017 Highlights:
Revenue: Revenue of $12.4 million decreased 10.9% compared to the fourth quarter of 2016 primarily as a result of the typical pattern of seasonality. Revenue increased 33.9% compared to the first quarter of 2016, due to higher product sales partly offset by lower license and service revenues.
Gross margin: Gross margin was 47.1% compared to gross margin of 38.2% in the fourth quarter of 2016 due to a more favorable product mix, and compared to 47.5% in the first quarter of 2016, due to a less favorable revenue mix in the first quarter of 2017 as a result of lower license and service revenues.
Operating loss: Operating loss was $4.2 million compared to an operating loss of $4.9 million in the fourth quarter of 2016 and an operating loss of $5.2 million in the first quarter of 2016.
Net loss: Net loss was $5.6 million, or ($0.07) per diluted share/ADS, compared to a net loss $5.4 million, or ($0.07) per diluted share/ADS, in the fourth quarter of 2016 and a net loss of $9.2 million, or ($0.16) per diluted share/ADS, in the first 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 $4.7 million, or ($0.06) per diluted share/ADS, compared to a non-IFRS net loss of $4.2 million, or ($0.06) per diluted share/ADS in the fourth quarter of 2016, and a non-IFRS net loss of $5.5 million, or ($0.09) per diluted share/ADS, in the first quarter of 2016.
Cash: Cash, cash equivalents and short-term deposit at March 31, 2017 totaled $14.5 million compared to $20.5 million at December 31, 2016.
| In millions of US$ except percentages, shares and per share amounts | Key Metrics | |||||||||||
| Q1 2017 | %* | Q4 2016 | %* | Q1 2016 | %* | |||||||
| Revenue | $12.4 | $14.0 | $9.3 | |||||||||
| Gross profit | 5.9 | 47.1% | 5.3 | 38.2% | 4.4 | 47.5% | ||||||
| Operating loss | (4.2) | (34.2%) | (4.9) | (34.9%) | (5.2) | (56.0%) | ||||||
| Net loss | (5.6) | (45.1%) | (5.4) | (38.5%) | (9.2) | (99.4%) | ||||||
| Diluted EPS | ($0.07) | ($0.07) | ($0.16) | |||||||||
| Weighted average number of diluted shares/ADS | 75,043,865 | 74,501,387 | 59,196,482 | |||||||||
| Cash flow from (used in) operations | (9.9) | (5.7) | 3.9 | |||||||||
| Cash, cash equivalents and short-term deposit at quarter-end | 14.5 | 20.5 | 6.5 | |||||||||
| Additional information on non-cash items: | ||||||||||||
| - Stock-based compensation included in operating result | 0.3 | 0.5 | 0.3 | |||||||||
| - Change in the fair value of convertible debt embedded derivative | - | - | 3.1 | |||||||||
| - Non-cash interest on convertible debt and other financing | 0.6 | 0.7 | 0.4 | |||||||||
| 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) | ($0.09) | |||||||||
| * Percentage of revenue | ||||||||||||
“We are off to a good start in 2017, with key metrics meeting or exceeding expectations,” said Georges Karam, Sequans’ CEO. “Demand for our broadband solutions continues to increase; we have a backlog of IoT-related orders supporting the ramp of Cat 1 devices during the year, and we remain on track to grow at least 40% in 2017. Meanwhile, our design win momentum across our entire product line, with particularly strong interest in our Monarch Cat M1/NB1 platform for IoT, continues to position us to achieve even higher growth next year.”
Q2 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 second quarter of 2017 to be in the range of $13.5 to $15.5 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 second quarter of 2017, based on approximately 75.1 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 first quarter of 2017 today, May 2, 2017 at 8:00 a.m. EDT /14:00 CEST. To participate in the live call, analysts and investors should dial 800-230-1074 (or +1 651-291-5254 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 June 2, 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: 421729.
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) | March 31, | Dec 31, | March 31, | |||
| 2017 | 2016 | 2016 | ||||
| Revenue : | ||||||
| Product revenue | $ 9,640 | $ 11,947 | $ 5,412 | |||
| Other revenue | 2,790 | 2,006 | 3,873 | |||
| Total revenue | 12,430 | 13,953 | 9,285 | |||
| Cost of revenue | ||||||
| Cost of product revenue | 5,989 | 7,879 | 4,128 | |||
| Cost of other revenue | 589 | 740 | 747 | |||
| Total cost of revenue | 6,578 | 8,619 | 4,875 | |||
| Gross profit | 5,852 | 5,334 | 4,410 | |||
| Operating expenses : | ||||||
| Research and development | 6,194 | 6,327 | 6,727 | |||
| Sales and marketing | 2,496 | 2,204 | 1,501 | |||
| General and administrative | 1,411 | 1,669 | 1,378 | |||
| Total operating expenses | 10,101 | 10,200 | 9,606 | |||
| Operating loss | (4,249) | (4,866) | (5,196) | |||
| Financial income (expense): | ||||||
| Interest income (expense), net | (1,038) | (1,080) | (628) | |||
| Change in the fair value of convertible debt embedded derivative | - | - | (3,127) | |||
| Foreign exchange gain (loss) | (246) | 670 | (212) | |||
| Loss before income taxes | (5,533) | (5,276) | (9,163) | |||
| Income tax expense (benefit) | 71 | 95 | 66 | |||
| Loss | $ (5,604) | (5,371) | $ (9,229) | |||
| Attributable to : | ||||||
| Shareholders of the parent | (5,604) | (5,371) | (9,229) | |||
| Minority interests | - | - | - | |||
| Basic loss per share | ($0.07) | ($0.07) | ($0.16) | |||
| Diluted loss per share | ($0.07) | ($0.07) | ($0.16) | |||
| Weighted average number of shares used for computing: | ||||||
| — Basic | 75,043,865 | 74,501,387 | 59,196,482 | |||
| — Diluted | 75,043,865 | 74,501,387 | 59,196,482 | |||
| SEQUANS COMMUNICATIONS S.A. | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||
| At March 31, | At December 31, | |||||||
| (in thousands of US$) | 2017 | 2016 | ||||||
| ASSETS | ||||||||
| Non-current assets | ||||||||
| Property, plant and equipment | $ | 6,302 | $ | 6,659 | ||||
| Intangible assets | 7,450 | 7,707 | ||||||
| Deposits and other receivables | 338 | 332 | ||||||
| Available for sale assets | 315 | 310 | ||||||
| Total non-current assets | 14,405 | 15,008 | ||||||
| Current assets | ||||||||
| Inventories | 8,184 | 8,693 | ||||||
| Trade receivables | 17,189 | 15,285 | ||||||
| Prepaid expenses and other receivables | 2,923 | 3,172 | ||||||
| Recoverable value added tax | 434 | 470 | ||||||
| Research tax credit receivable | 2,980 | 1,902 | ||||||
| Short term deposit | 345 | 345 | ||||||
| Cash and cash equivalents | 14,162 | 20,202 | ||||||
| Total current assets | 46,217 | 50,069 | ||||||
| Total assets | $ | 60,622 | $ | 65,077 | ||||
| EQUITY AND LIABILITIES | ||||||||
| Equity | ||||||||
| Issued capital, euro 0.02 nominal value, 75,122,137 shares authorized, issued and outstanding at March 31, 2017 (75,030,078 at December 31, 2016) | $ | 1,925 | $ | 1,923 | ||||
| Share premium | 189,233 | 189,029 | ||||||
| Other capital reserves | 28,598 | 28,257 | ||||||
| Accumulated deficit | (215,157 | ) | (209,553 | ) | ||||
| Other components of equity | (602 | ) | (796 | ) | ||||
| Total equity (deficit) | 3,997 | 8,860 | ||||||
| Non-current liabilities | ||||||||
| Government grant advances, loans and other liabilities | 5,001 | 5,144 | ||||||
| Convertible debt and accrued interest | 17,199 | 16,338 | ||||||
| Provisions | 1,332 | 1,306 | ||||||
| Other Liabilities | 22 | 22 | ||||||
| Deferred revenue | 1,940 | 1,940 | ||||||
| Total non-current liabilities | 25,494 | 24,750 | ||||||
| Current liabilities | ||||||||
| Trade payables | 12,585 | 18,358 | ||||||
| Interest-bearing receivables financing | 11,882 | 7,712 | ||||||
| Government grant advances | 560 | 601 | ||||||
| Other current liabilities | 5,633 | 4,415 | ||||||
| Deferred revenue | 424 | 335 | ||||||
| Provisions | 47 | 46 | ||||||
| Total current liabilities | 31,131 | 31,467 | ||||||
| Total equity and liabilities | $ | 60,622 | $ | 65,077 | ||||
| SEQUANS COMMUNICATIONS S.A. | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| Three months ended March 31, | ||||||||
| (in thousands of US$) | 2017 | 2016 | ||||||
| Operating activities | ||||||||
| Loss before income taxes | $ | (5,533 | ) | $ | (9,163 | ) | ||
| Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities | ||||||||
| Depreciation and impairment of property, plant and equipment | 691 | 796 | ||||||
| Amortization and impairment of intangible assets | 569 | 489 | ||||||
| Share-based payment expense | 341 | 253 | ||||||
| Increase in provisions | 16 | 75 | ||||||
| Financial expense (income) | 1,061 | 631 | ||||||
| Change in the fair value of convertible debt embedded derivative | - | 3,127 | ||||||
| Foreign exchange loss (gain) | 69 | 243 | ||||||
| Working capital adjustments | ||||||||
| Decrease (Increase) in trade receivables and other receivables | (1,671 | ) | 7,041 | |||||
| Decrease (Increase) in inventories | 509 | 482 | ||||||
| Decrease (Increase) in research tax credit receivable | (1,078 | ) | (787 | ) | ||||
| Increase (Decrease) in trade payables and other liabilities | (4,726 | ) | 1,367 | |||||
| Increase (Decrease) in deferred revenue | 89 | (267 | ) | |||||
| Increase (Decrease) in government grant advances | (250 | ) | (382 | ) | ||||
| Income tax paid | 2 | (41 | ) | |||||
| Net cash flow from (used in) operating activities | (9,911 | ) | 3,864 | |||||
| Investing activities | ||||||||
| Purchase of intangible assets and property, plant and equipment | (419 | ) | (1,234 | ) | ||||
| Sale (purchase) of financial assets | (11 | ) | (31 | ) | ||||
| Sale of short-term deposit | - | (3 | ) | |||||
| Interest received | 23 | 3 | ||||||
| Net cash flow used in investments activities | (407 | ) | (1,265 | ) | ||||
| Financing activities | ||||||||
| Proceeds from issue of warrants, exercise of stock options/warrants | 206 | 129 | ||||||
| Proceeds from Interest-bearing receivables financing | 4,170 | (4,916 | ) | |||||
| Repayment of borrowings and finance lease liabilities | - | (12 | ) | |||||
| Interest paid | (101 | ) | (30 | ) | ||||
| Net cash flows from (used in) financing activities | 4,275 | (4,829 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | (6,043 | ) | (2,230 | ) | ||||
| Net foreign exchange difference | 3 | 1 | ||||||
| Cash and cash equivalent at January 1 | 20,202 | 8,288 | ||||||
| Cash and cash equivalents at end of the period | $ | 14,162 | $ | 6,059 | ||||
| SEQUANS COMMUNICATIONS S.A. | ||||||
| UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS | ||||||
| Three months ended | ||||||
| (in thousands of US$, except share and per share amounts) | March 31, | Dec 31, | March 31, | |||
| 2017 | 2016 | 2016 | ||||
| Net IFRS loss as reported | $ (5,604) | $ (5,371) | $ (9,229) | |||
| Add back | ||||||
| Stock-based compensation expense according to IFRS 2 (1) | 341 | 459 | 254 | |||
| Change in the fair value of convertible debt embedded derivative | - | - | 3,127 | |||
| Non-cash interest on Convertible debt and other financing (2) | 610 | 671 | 365 | |||
| Non-IFRS loss adjusted | $ (4,653) | $ (4,241) | $ (5,483) | |||
| IFRS basic loss per share as reported | ($0.07) | ($0.07) | ($0.16) | |||
| Add back | ||||||
| Stock-based compensation expense according to IFRS 2 (1) | $0.00 | ($0.00) | $0.01 | |||
| Change in the fair value of convertible debt embedded derivative | $0.00 | $0.00 | $0.05 | |||
| 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) | ($0.09) | |||
| IFRS diluted loss per share | ($0.07) | ($0.07) | ($0.16) | |||
| Add back | ||||||
| Stock-based compensation expense according to IFRS 2 (1) | $0.00 | ($0.00) | $0.01 | |||
| Change in the fair value of convertible debt embedded derivative | $0.00 | $0.00 | $0.05 | |||
| 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) | ($0.09) | |||
| (1) Included in the IFRS loss as follows: | ||||||
| Cost of product revenue | $ 3 | $ - | $ 4 | |||
| Research and development | 109 | 192 | 108 | |||
| Sales and marketing | 79 | 131 | 39 | |||
| General and administrative | 150 | 136 | 103 | |||
| (2) Related to the difference between contractual and effective interests | ||||||
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Contacts:
Media Relations:
Kimberly Tassin,
+1-425-736-0569
Kimberly@sequans.com
or
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Relations:
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Claudia@sequans.com
