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PRESS RELEASE from provider: Business Wire
This content is a press release from our partner Business Wire. The AP newsroom and editorial departments were not involved in its creation.

Sequans Communications Announces Preliminary Fourth Quarter 2018 and Full Year 2018 Financial Results

February 19, 2019

PARIS--(BUSINESS WIRE)--Feb 19, 2019--4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced preliminary financial results for the fourth quarter ended December 31, 2018.

Fourth Quarter and Fiscal Year 2018 Highlights:

Revenue: Revenue was $6.1 million, a decrease of 41.0% compared to the third quarter of 2018, and a decrease of 46.3% compared to the fourth quarter of 2017, reflecting the need to work down channel inventory resulting from a weaker-than-expected broadband business and customer project delays. Revenue from IoT grew 70% in 2018, including CAT 1 chipset revenues which nearly tripled compared to 2017. The growth in IoT was not sufficient to offset the decline in the broadband business, and full-year revenue decreased 16.6% to $40.3 million in 2018 from $48.3 million in 2017.

Gross margin: Gross margin was 46.9% compared to 35.0% in the third quarter of 2018 and compared to 41.7% in the fourth quarter of 2017, primarily due to a shift in product mix toward a higher proportion of chipset sales versus modules. Full-year gross margin decreased from 43.8% in 2017 to 40.0% in 2018.

Operating loss: Operating loss was $8.9 million compared to an operating loss of $7.9 million in the third quarter of 2018 and an operating loss of $5.6 million in the fourth quarter of 2017. Full year operating loss for 2018 was $31.0 million compared to an operating loss of $19.5 million for 2017.

Net loss: Preliminary net loss was $10.2 million, or ($0.11) per diluted share/ADS, compared to a net loss of $9.9 million, or ($0.10) per diluted share/ADS, in the third quarter of 2018 and a net loss of $7.6 million, or ($0.10) per diluted share/ADS, in the fourth quarter of 2017. Preliminary full year net loss for 2018 was $36.9 million, or ($0.39) per diluted share/ADS, compared to a net loss of $26.2 million, or ($0.34) per diluted share/ADS, for 2017.

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 $9.4 million, or ($0.10) per diluted share/ADS, compared to a non-IFRS net loss of $8.0 million, or ($0.08) per diluted share/ADS in the third quarter of 2018, and a non-IFRS net loss of $5.9 million, or ($0.07) per diluted share/ADS, in the fourth quarter of 2017. Full year non-IFRS net loss for 2018 was $31.8 million, or ($0.34) per diluted share/ADS, compared to a full year non-IFRS net loss of $21.4 million, or ($0.28) per diluted share/ADS in 2017.

Cash: Cash, cash equivalents and short-term deposits at December 31, 2018 totaled $12.1 million compared to $5.2 million at September 30, 2018, reflecting the issuance in the fourth quarter of $4.5 million of additional convertible debt due in April 2021 and a €12 million ($13.6 million) financing facility, partially offset by the early extinguishment of $1 million principal convertible notes due in April 2020.

Strategic investment: On February 18, a new strategic investor (“Investor”) agreed to invest approximately $8.4 million in support of accelerating Sequans’ existing 5G product roadmap. Upon the closing of this transaction, the Company will issue to the Investor a total of 9,392,986 warrants. The warrants are exercisable upon 61 days’ notice to Sequans at an exercise price of €0.02 per share/ADS into 9,392,986 of our ordinary shares/ADS. The warrants expire 15 years from the issuance date. The Company has agreed to grant the new strategic investor customary registration rights upon exercise of the warrants. The net proceeds from the transaction, which will be reflected in Sequans’ first quarter financial statements, will strengthen Sequans’ balance sheet and will be used to fund development of Sequans’ first 5G chipset.

“We are proud that this company has chosen Sequans in which to invest for 5G technology development,” said Georges Karam, Sequans CEO. “The investment will support the availability of solutions for important 5G use cases and accelerate the development of the market, and allow us to forge an important strategic relationship.”

“IoT revenue showed good growth in 2018, increasing 70% from the prior year, driven by our success in CAT 1,” continued Dr. Karam. “Meanwhile, lower revenue from the broadband business, mainly from emerging markets, combined with the ongoing effects of IoT customer project delays, caused our 2018 results to be below expectations, particularly in the fourth quarter. We already see signs of improvement, and we expect a significant rebound in the first quarter, followed by accelerating growth throughout the remainder of 2019, driven mainly by LTE-M revenue.”

Preliminary financial results: In the context of the preparation of its 2018 consolidated financial statements, the Company determined that certain deferred tax assets and deferred tax liabilities related to the application of IFRS to deferred taxes on debt instruments with equity components issued since 2015 had not been recorded. The expected accounting changes do not affect the cash position or the operating results for the current or prior periods. The Company has not yet finalized its review, but the corrections are expected to lead to a decrease in the 2018 consolidated IFRS net loss and could also lead to a decrease of the 2016 and 2017 consolidated IFRS net losses. No change to announced non-IFRS results is expected.

Q1 2019 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 results to improve significantly in the first quarter from the low level of the fourth quarter, with the extent of the improvement tempered somewhat by typical seasonality. Management has decided not to provide detailed quarterly guidance until visibility on the LTE-M market improves, but continues to expect quarterly results to improve sequentially throughout 2019, driven by increasing LTE-M revenue as more Sequans-powered devices go into mass production.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the preliminary financial results for the fourth quarter of 2018 today, February 19, 2019 at 8:00 a.m. EST /14:00 CET. To participate in the live call, analysts and investors should dial 800-230-1059 (or 612-234-9960 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 March 19, 2019 by dialing toll free 800-475-6701 or 320-365-3844 from outside the U.S., using the following access code: 461871.

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 and broadband sales, 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, (xii) the impact of accounting changes relating to deferred tax assets and deferred tax liabilities related to the application of IFRS to deferred taxes on debt instruments with equity components issued since 2015, and (xiii) 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.

As discussed above, the Company’s financial results are preliminary and do not reflect expected changes related to a change in how the Company has accounted for deferred tax assets and deferred tax liabilities related to the application of IFRS to deferred taxes on debt instruments with equity components issued since 2015 or changes that may result prior to filings its Annual Report on Form 20-F.

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.comwww.facebook.com/sequanswww.twitter.com/sequans

View source version on businesswire.com:https://www.businesswire.com/news/home/20190219005418/en/

CONTACT: Media Relations: Kimberly Tassin, +1.425.736.0569,Kimberly@sequans.com

Investor Relations: Claudia Gatlin, +1 212.830.9080,Claudia@sequans.com

KEYWORD: EUROPE FRANCE

INDUSTRY KEYWORD: TECHNOLOGY HARDWARE INTERNET NETWORKS SOFTWARE TELECOMMUNICATIONS SEMICONDUCTOR MOBILE/WIRELESS

SOURCE: Sequans Communications S.A.

Copyright Business Wire 2019.

PUB: 02/19/2019 06:00 AM/DISC: 02/19/2019 06:01 AM

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