Sequans Communications Announces Third Quarter 2012 Financial Results

Sequans Communications Announces Third Quarter 2012 Financial Results

PARIS--(BUSINESS WIRE)-- Sequans Communications S.A. (NYS: SQNS) , a 4G chipmaker supplying LTE and WiMAX chips to equipment manufacturers for mobile operators worldwide, today announced financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights:

Revenues and non-IFRS earnings per share are in line with or better than guidance; gross margin is slightly below guidance.

Revenue: Revenue of $8.0 million increased 13.5% sequentially from the second quarter of 2012 and decreased 69.6% compared to the third quarter of 2011. The sequential increase reflects an increase in shipments of products, partially offset by lower license and maintenance revenues. The decrease compared to the prior year was due to lower sales of WiMAX products, following changes in the WiMAX market in the United States beginning in the second half of 2011.

Gross margin: Gross margin was 48.0% compared to 54.2% in the second quarter of 2012 and 53.6% in the third quarter of 2011.

Operating income (loss): Operating loss was $6.0 million compared to an operating loss of $8.0 million in the second quarter of 2012 and an operating profit of $1.9 million in the third quarter of 2011.

Net profit (loss): Net loss was $5.8 million, or ($0.17) per diluted share/ADS, compared to a net loss of $8.3 million, or ($0.24) per diluted share/ADS in the second quarter of 2012 and a net profit of $3.2 million, or $0.09 per diluted share/ADS in the third quarter of 2011.

Non-IFRS Net profit (loss): Excluding stock-based compensation, non-IFRS net loss was $5.0 million, or ($0.14) per diluted share/ADS, compared to a non-IFRS net loss of $7.4 million, or ($0.21) per diluted share/ADS in the second quarter of 2012, and a non-IFRS net profit of $2.8 million, or $0.08 per diluted share/ADS, in the third quarter of 2011.

"We are reporting revenues in line with guidance," said Georges Karam, Sequans CEO. "By optimizing our organization and maintaining stringent control of our expenses, we have been able to report a smaller loss than indicated in our guidance.

"We are pleased about the traction we are gaining in LTE with both device manufacturers and operators. We achieved additional design wins during Q3 for our second-generation high-performance chips, which we are calling the StreamrichLTE™ product family, based on their industry-leading throughput and advanced features.

"Today, we also introduced the first product in a new family called StreamliteLTE™ tailored to the price/performance requirements of internet-connected consumer electronics such as digital cameras and devices for machine-to-machine applications. Based on our extensive 4G experience and the foresight to include this in our roadmap early on, we have been able to develop and introduce a new chip that will expand our total available market with minimal incremental development expense.

"We expect a reduced contribution from sales of our WiMAX solution in Q4 compared to Q3, but sequentially higher LTE revenues in Q4. Although delays in network service launches are pushing out our LTE revenue acceleration, overall, our confidence is growing as we see the dynamics of the LTE market gradually shifting in our favor. As LTE technology matures and coverage expands, we expect growing demand for single-mode LTE solutions, an area where we are particularly well-positioned," concluded Mr. Karam.

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 fourth quarter of 2012 to be in the range of $4 to $6 million, with non-IFRS gross margin around 48%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.22) and ($0.26) for the fourth quarter of 2012, with approximately 34.7 million weighted average number of diluted shares/ADSs. Non-IFRS EPS guidance excludes primarily the impact of stock based compensation.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the third quarter of 2012 today, October 25, 2012 at 8:00 a.m. EDT / 14:00 CEST. To participate in the live call, analysts and investors should dial 800-288-9626 (or +1 612-332-0932 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 November 25, 2012, 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: 265738.

Forward-Looking Statements

This press release may contain projections or 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, 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, including WiMAX and LTE markets, (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, and (ix) 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. 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 is a 4G chipmaker, supplying LTE and WiMAX chips to equipment manufacturers for mobile operators worldwide. Founded in 2003 to address the WiMAX market, the company expanded in early 2009 to address the LTE market. Sequans chips are inside 4G networks around the world. Sequans is based in Paris, France with additional offices throughout the world, including United States, United Kingdom, Israel, Hong Kong, Singapore, Taiwan, South Korea and China. www.sequans.com