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TMCNet:  Sequans Communications Announces Second Quarter 2014 Financial Results

[July 24, 2014]

Sequans Communications Announces Second Quarter 2014 Financial Results

PARIS --(Business Wire)--

4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Highlights:

Revenue: Revenue of $5.1 million increased 13% compared to the first quarter of 2014, due to higher sales of chipsets and higher other revenue. Revenue increased 116% compared to the second quarter of 2013 due to higher sales of products for the LTE markets.

Gross margin: Gross margin was 41.3% compared to gross margin of 39.5% in the first quarter of 2014, and 41.1% in the second quarter of 2013, due to a more favorable revenue mix including more other revenue.

Operating loss: Operating loss was $8.7 million compared to an operating loss of $8.3 million in the first quarter of 2014 and an operating loss of $9.2 million in the second quarter of 2013, due to higher operating expenses primarily related to product development costs.

Net loss: Net loss was $8.7 million, or ($0.15) per diluted share/ADS, compared to a net loss of $8.3 million, or ($0.14) per diluted share/ADS in the first quarter of 2014 and a net loss of $9.1 million, or ($0.20) per diluted share/ADS in the second quarter of 2013.

Non-IFRS Net loss: Excluding stock-based compensation, non-IFRS net loss was $8.4 million, or ($0.14) per diluted share/ADS, compared to a non-IFRS net loss of $7.9 million, or ($0.13) per diluted share/ADS in the first quarter of 2014, and a non-IFRS net loss of $8.6 million, or ($0.19) per diluted share/ADS, in the second quarter of 2013.



In millions of US$ except percentages, shares and per share amounts Key Metrics
Q2 2014 %* Q1 2014 %* Q2 2013 %*
Revenue $5.1 $4.5 $2.3
Gross profit 2.1 41.3% 1.8 39.5% 1.0 41.1%
Operating loss (8.7) (171.2%) (8.3) (183.6%) (9.2) (392.7%)
Net loss (8.7) (171.4%) (8.3) (183.3%) (9.1) (387.3%)
Diluted EPS ($0.15) ($0.14) ($0.20)
Weighted average number of diluted shares/ADS 59,144,398 59,136,031 44,683,839
Cash flow used in operations (3.3) (8.4) (8.1)
Cash, cash equivalents and short-term investments at quarter-end 22.1 27.9 24.9
Additional information:
Stock-based compensation included in operating result
0.3 0.4 0.5
Non-IFRS diluted EPS (excludes stock-based compensation) ($0.14) ($0.13) ($0.19)
* Percentage of revenue

"We have begun shipping for the build of a mobile computing design win targeting a Q4 launch in the U.S. and our home/portable router business is providing a growing base of revenues," said Georges Karam, Sequans CEO. "During Q2,�we�added several new design wins for routers and M2M applications, and we are in advanced discussions on a number of others, including several mobile computing opportunities. The new Colibri platform introduced in June has been gaining a lot of traction, especially among module manufacturers. Looking ahead, we see a growing pipeline of follow-on design wins and new carrier opportunities in the U.S., APAC, and the rest of the world," concluded Dr. Karam.

Third Quarter 2014 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 2014 to be in the range of $6.5 to $7.5 million, with non-IFRS gross margin of above 35%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.12) and ($0.14) for the third quarter of 2014, based on approximately 59.1 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 2014 today, July 24, 2014, at 8:00 a.m. EDT /14:00 CEST. To participate in the live call, analysts and investors should dial 877-260-8898 (or +1 612-332-0802 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 24, 2014, 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: 330549.

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, 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 S.A. (NYSE: SQNS) is a 4G chipmaker and leading provider of single-mode LTE chipset solutions to wireless device manufacturers worldwide. Founded in 2003, Sequans has developed and delivered six generations of 4G technology and its chips are certified and shipping in 4G networks, both LTE and WiMAX, around the world. Today, Sequans offers two LTE product lines: StreamrichLTE™, optimized for feature-rich mobile computing and home/portable router devices, and StreamliteLTE™, optimized for M2M devices and other connected devices for the Internet of Things. Sequans is based in Paris, France with additional offices in the United States, United Kingdom, 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) June 30, March 31, June 30, � � � � 201420142013

Revenue :

Product revenue 4,404 4,100 1,799 � Other revenue � 664 � 404 � 548 Total revenue5,0684,5042,347 Cost of revenue Cost of product revenue 2,932 2,643 1,332 � Cost of other revenue � 44 � 82 � 51 Total cost of revenue2,9762,7251,383 Gross profit2,0921,779964 Operating expenses : Research and development 7,518 6,918 7,248 Sales and marketing 1,454 1,179 1,135 General and administrative 1,796 1,953 1,798 � � � � � � � � � Total operating expenses10,76810,05010,181 Operating loss(8,676)(8,271)(9,217) Financial income (expense): Interest income (expense), net (1) 11 10 � Foreign exchange gain � 30 � 44 � 167 Loss before income taxes(8,647)(8,216)(9,040) Income tax expense � 41 � 42 � 51 Loss (8,688) (8,258) (9,091) Attributable to : Shareholders of the parent (8,688) (8,258) (9,091) � Minority interests � - � - � - Basic loss per share � ($0.15) � ($0.14) � ($0.20) Diluted loss per share � ($0.15) � ($0.14) � ($0.20) Weighted average number of shares used for computing: - Basic 59,144,398 59,136,031 44,683,839 - Diluted � 59,144,398 � 59,136,031 � 44,683,839 �

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) 20142013Revenue : Product revenue 8,504 2,895 � Other revenue � 1,068 � 1,754 Total revenue9,5724,649 Cost of revenue Cost of product revenue 5,575 2,594 � Cost of other revenue � 126 � 371 Total cost of revenue5,7012,965 Gross profit3,8711,684 Operating expenses : Research and development 14,436 13,762 Sales and marketing 2,633 2,274 General and administrative 3,749 4,119 � � � � � � � Total operating expenses20,81820,155 Operating loss(16,947)(18,471) Financial income (expense): Interest income, net 10 29 � Foreign exchange gain � 74 � 35 Loss before income taxes(16,863)(18,407) Income tax expense (benefit) 83 88 Loss (16,946) (18,495) Attributable to : Shareholders of the parent (16,946) (18,495) � Minority interests � - � - Basic loss per share � ($0.29) � ($0.44) Diluted loss per share � ($0.29) � ($0.44)

Weighted average number of shares used for computing:

- Basic 59,138,642 41,810,911 - Diluted � 59,138,642 � 41,810,911 �

SEQUANS COMMUNICATIONS S.A. � � � UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION � � � � � � At June 30, At December 31, (in thousands of US$)20142013ASSETS Non-current assets Property, plant and equipment 8,734 6,622 Intangible assets 3,859 4,679 Deposits and other receivables 349 471 Available for sale assets � 269 � 1,098 Total non-current assets � 13,211 � 12,870 Current assets Inventories 5,947 6,582 Trade receivables 6,425 5,486 Prepaid expenses and other receivables 2,655 2,832 Recoverable value added tax 734 508 Research tax credit receivable 5,618 8,006 Cash and cash equivalents � 22,114 � 37,244 Total current assets � 43,493 � 60,658 Total assets 56,704 73,528EQUITY AND LIABILITIES Equity Issued capital, euro 0.02 nominal value, 59,144,741 shares authorized, issued and outstanding at June 30, 2014 ( 59,129,639 at December 31, 2013) 1,568 1,567 Share premium 165,510 165,785 Other capital reserves 15,447 14,721 Accumulated deficit (140,185) (123,239) Other components of equity � 114 � 95 Total equity � 42,454 � 58,929 Non-current liabilities Government grant advances and interest-free loans 478 604 Finance lease obligations 104 240 Provisions 608 460 Deferred tax liabilities � 38 � 37 Total non-current liabilities � 1,228 � 1,341 Current liabilities Trade payables 7,774 7,252 Government grant advances and interest-free loans 372 435 Finance lease obligations 264 261 Other current liabilities 4,178 4,384 Deferred revenue 388 343 Provisions � 46 � 583 Total current liabilities � 13,022 � 13,258 Total equity and liabilities 56,704 73,528

SEQUANS COMMUNICATIONS S.A. � � � � � UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSix months ended June 30, (in thousands of US$)20142013Operating activities Loss before income taxes (16,863) (18,407) Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities Amortization and impairment of property, plant and equipment 1,742 2,055 Amortization and impairment of intangible assets 916 954 Share-based payment expense 726 1,050 Increase (decrease) in provisions (389) (71) Financial income (10) (29) Foreign exchange loss (gain) (20) 60 Loss (Gain) on disposal of property, plant and equipment 27 - Working capital adjustments Decrease (Increase) in trade receivables and other receivables (1,312) 1,059 Decrease (Increase) in inventories 635 (455) Decrease (Increase) in research tax credit receivable 2,388 (1,577) Increase (Decrease) in trade payables and other liabilities 418 900 Increase (Decrease) in deferred revenue 45 281 Increase (Decrease) in government grant advances 135 (180) Income tax paid (165) (210) Net cash flow used in operating activities (11,727) (14,570)Investing activities Purchase of intangible assets and property, plant and equipment (3,962) (2,623) Sale (purchase) of financial assets 951 (103) Interest received 79 82 Net cash flow used in investments activities (2,932) (2,644)Financing activities Initial Public Offer, net of costs (298) 13,548 Proceeds from issue of warrants and exercise of stock options/warrants 22 - Repayment of borrowings and finance lease liabilities (128) (122) Interest paid (69) (54) Net cash flows from (used in) financing activities (473) 13,372 � Net increase (decrease) in cash and cash equivalents (15,132) (3,842) Net foreign exchange difference 2 (3) Cash and cash equivalent at January 1 37,244 28,751 Cash and cash equivalents at end of the period 22,114 24,906

SEQUANS COMMUNICATIONS S.A. � � � � � UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS � � � � � � � � � Three months ended (in thousands of US$, except share and per share amounts) June 30, March 31, June 30, � � � � 201420142013 Net IFRS loss as reported (8,688) (8,258) (9,091) Add back Stock-based compensation expense according to IFRS 2 331 395 488 Non-IFRS loss adjusted(8,357)(7,863)(8,603)IFRS basic loss per share as reported ($0.15) ($0.14) ($0.20) Add back � Stock-based compensation expense according to IFRS 2 � $0.01$0.01$0.01 Non-IFRS basic loss per share($0.14)($0.13)($0.19) IFRS diluted loss per share ($0.15) ($0.14) ($0.20) Add back � Stock-based compensation expense according to IFRS 2 � $0.01$0.01$0.01 Non-IFRS diluted loss per share($0.14)($0.13)($0.19)

SEQUANS COMMUNICATIONS S.A. � � � � UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS � � � � � � � Six months ended (in thousands of US$, except share and per share amounts) June 30, June 30, � � � � 20142013 Net IFRS loss as reported (16,946) (18,495) Add back Stock-based compensation expense according to IFRS 2 727 1,050 Non-IFRS loss adjusted(16,219)(17,445)IFRS basic loss per share as reported ($0.29) ($0.44) Add back � Stock-based compensation expense according to IFRS 2 � $0.02$0.02 Non-IFRS basic loss per share($0.27)($0.42) IFRS diluted loss per share ($0.29) ($0.44) Add back � Stock-based compensation expense according to IFRS 2 � $0.02$0.02 Non-IFRS diluted loss per share($0.27)($0.42)


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