Sequans Communications Announces Second Quarter 2013 Financial Results

Sequans Communications Announces Second Quarter 2013 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 second quarter ended June 30, 2013.

Second Quarter 2013 Highlights:


Revenue: Revenue of $2.3 million was flat compared to the first quarter of 2013, reflecting an increase in product revenues, offset by decreased license and other revenues. Revenue decreased 67% compared to the second quarter of 2012, 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 41.1% compared to gross margin of 31.3% in the first quarter of 2013 and 54.2% in the second quarter of 2012.

Operating loss: Operating loss was $9.2 million compared to an operating loss of $9.3 million in the first quarter of 2013 and an operating loss of $8.0 million in the second quarter of 2012.

Net loss: Net loss was $9.1 million, or ($0.20) per diluted share/ADS, compared to a net loss of $9.4 million, or ($0.24) per diluted share/ADS in the first quarter of 2013 and a net loss of $8.3 million, or ($0.24)per diluted share/ADS in the second quarter of 2012.

Non-IFRS Net loss: Excluding stock-based compensation, non-IFRS net loss was $8.6 million, or ($0.19) per diluted share/ADS, compared to a non-IFRS net loss of $8.8 million, or ($0.23) per diluted share/ADS in the first quarter of 2013, and a non-IFRS net loss of $7.4 million, or ($0.21) per diluted share/ADS, in the second quarter of 2012.

In millions of US$ except percentages,

Key Metrics

shares and per share amounts

Q2 2013

%*

Q1 2013

%*

Q2 2012

%*

Revenue

$2.3

$2.3

$7.0

Gross profit

1.0

41.1%

0.7

31.3%

3.8

54.2%

Operating loss

(9.2)

(392.7%)

(9.3)

(402.0%)

(8.0)

(113.1%)

Net loss

(9.1)

(387.3%)

(9.4)

(408.5%)

(8.3)

(118.0%)

Diluted EPS

($0.20)

($0.24)

($0.24)

Weighted average number of diluted shares/ADS

44,683,839

39,079,443

34,678,812

Cash flow used in operations

(8.1)

(6.4)

(6.4)

Cash and cash equivalents at quarter-end

24.9

34.0

40.7

Additional information:

Stock-based compensation included in operating result

0.5

0.6

0.9

Non-IFRS diluted EPS (excludes stock-based compensation)

($0.19)

($0.23)

($0.21)

* Percentage of revenue

"Our LTE business is gaining traction and we have more visibility on the revenue ramp in the second half of 2013," said Georges Karam, Sequans CEO. "Based on early design wins, we are beginning to receive orders related to emerging carriers.

"In addition to increasing revenue from solutions for emerging carriers, we expect growth to accelerate as a result of recent design wins for carriers in the United States, Japan and Korea later this year and into 2014. We remain encouraged by the amount of operator interest in LTE-only solutions, and we are actively involved throughout the ecosystem in order to translate this interest into additional design wins and revenue growth," 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 third quarter of 2013 to be in the range of $3.5 to $4.5 million, with non-IFRS gross margin of at least 30%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.18) and ($0.20) for the third quarter of 2013, based on approximately 44.7 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 second quarter of 2013 today, July 25, 2013 at 8:00 a.m. EDT /14:00 CEST. To participate in the live call, analysts and investors should dial 800-230-1093 (or +1 612-288-0340 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 August 25, 2013, 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: 296521.

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 or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, 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 relating to stock-based compensation. 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

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,

March 31,

June 30,

2013

2013

2012

Revenue :

Product revenue

1,799

1,096

5,990

Other revenue

548

1,206

1,045

Total revenue

2,347

2,302

7,035

Cost of revenue

Cost of product revenue

1,332

1,262

3,177

Cost of other revenue

51

320

44

Total cost of revenue

1,383

1,582

3,221

Gross profit

964

720

3,814

Operating expenses :

Research and development

7,248

6,514

7,657

Sales and marketing

1,135

1,139

2,009

General and administrative

1,798

2,321

2,108

Total operating expenses

10,181

9,974

11,774

Operating loss

(9,217)

(9,254)

(7,960)

Financial income (expense):

Interest income, net

10

19

46

Foreign exchange gain (loss)

167

(132)

(354)

Loss before income taxes

(9,040)

(9,367)

(8,268)

Income tax expense

51

37

36

Loss

(9,091)

(9,404)

(8,304)

Attributable to :

Shareholders of the parent

(9,091)

(9,404)

(8,304)

Minority interests

-

-

-

Basic loss per share

($0.20)

($0.24)

($0.24)

Diluted loss per share

($0.20)

($0.24)

($0.24)

Weighted average number of shares used for computing:

— Basic

44,683,839

39,079,443

34,678,812

— Diluted

44,683,839

39,079,443

34,678,812

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)

2013

2012

Revenue :

Product revenue

2,895

9,304

Other revenue

1,754

1,838

Total revenue

4,649

11,142

Cost of revenue

Cost of product revenue

2,594

4,884

Cost of other revenue

371

88

Total cost of revenue

2,965

4,972

Gross profit

1,684

6,170

Operating expenses :

Research and development

13,762

14,682

Sales and marketing

2,274

4,239

General and administrative

4,119

4,220

Total operating expenses

20,155

23,141

Operating loss

(18,471)

(16,971)

Financial income (expense):

Interest income, net

29

77

Foreign exchange gain (loss)

35

(362)

Loss before income taxes

(18,407)

(17,256)

Income tax expense (benefit)

88

91

Loss

(18,495)

(17,347)

Attributable to :

Shareholders of the parent

(18,495)

(17,347)

Minority interests

-

-

Basic loss per share

($0.44)

($0.50)

Diluted loss per share

($0.44)

($0.50)

Weighted average number of shares used for computing:

— Basic

41,810,911

34,674,648

— Diluted

41,810,911

34,674,648

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At June 30,

At December 31,

(in thousands of US$)

2013

2012

ASSETS

Non-current assets

Property, plant and equipment

8,609

9,187

Intangible assets

4,671

4,184

Loan and other receivables

451

458

Available for sale assets

1,041

931

Research tax credit receivable

4,067

4,103

Total non-current assets

18,839

18,863

Current assets

Inventories

7,898

7,443

Trade receivables

4,431

5,529

Prepaid expenses and other receivables

2,790

3,074

Recoverable value added tax

476

415

Research tax credit receivable

5,940

4,327

Cash and cash equivalents

24,906

28,751

Total current assets

46,441

49,539

Total assets

65,280

68,402

EQUITY AND LIABILITIES

Equity

Issued capital, euro 0.02 nominal value, 44,683,839 shares authorized, issued and outstanding at June 30, 2013 (34,683,839 at December 31, 2012)

1,176

912

Share premium

142,593

129,309

Other capital reserves

13,606

12,556

Accumulated deficit

(106,210)

(87,715)

Other components of equity

(49)

409

Total equity

51,116

55,471

Non-current liabilities

Government grant advances and interest-free loans

93

287

Finance lease obligations

352

236

Provisions

424

369

Deferred tax liabilities

80

85

Total non-current liabilities

949

977

Current liabilities

Trade payables

7,319

6,038

Government grant advances and interest-free loans

267

515

Finance lease obligations

242

129

Other current financial liabilities

4,093

4,133

Deferred revenue

890

609

Provisions

404

530

Total current liabilities

13,215

11,954

Total equity and liabilities

65,280

68,402

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended June 30,

(in thousands of US$)

2013

2012

Operating activities

Loss before income taxes