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 profit1.041.1%0.731.3%3.854.2%
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/ADS44,683,83939,079,44334,678,812
Cash flow used in operations(8.1)(6.4)(6.4)
Cash and cash equivalents at quarter-end24.934.040.7
 
Additional information:
Stock-based compensation included in operating result
0.50.60.9
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 revenue1,7991,0965,990
Other revenue 548 1,206 1,045
Total revenue 2,347 2,302 7,035
Cost of revenue
Cost of product revenue1,3321,2623,177
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 development7,2486,5147,657
Sales and marketing1,1351,1392,009
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, net101946
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:

— Basic44,683,83939,079,44334,678,812
— 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 revenue2,8959,304
Other revenue 1,754 1,838
Total revenue 4,649 11,142
Cost of revenue
Cost of product revenue2,5944,884
Cost of other revenue 371 88
Total cost of revenue 2,965 4,972
Gross profit 1,684 6,170
Operating expenses :
Research and development13,76214,682
Sales and marketing2,2744,239
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, net2977
Foreign exchange gain (loss) 35 (362)
Loss before income taxes (18,407) (17,256)
Income tax expense (benefit)8891
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:

— Basic41,810,91134,674,648
— 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 equipment8,6099,187
Intangible assets4,6714,184
Loan and other receivables451458
Available for sale assets1,041931
Research tax credit receivable 4,067 4,103
Total non-current assets 18,839 18,863
Current assets
Inventories7,8987,443
Trade receivables4,4315,529
Prepaid expenses and other receivables2,7903,074
Recoverable value added tax476415
Research tax credit receivable5,9404,327
Cash and cash equivalents 24,906 28,751
Total current assets 46,441 49,539
Total assets65,28068,402
 
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)1,176912
Share premium142,593129,309
Other capital reserves13,60612,556
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 loans93287
Finance lease obligations352236
Provisions424369
Deferred tax liabilities 80 85
Total non-current liabilities 949 977
Current liabilities
Trade payables7,3196,038
Government grant advances and interest-free loans267515
Finance lease obligations242129
Other current financial liabilities4,0934,133
Deferred revenue890609
Provisions 404 530
Total current liabilities 13,215 11,954
Total equity and liabilities65,28068,402
 

 
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
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