Sequans Releases Financial Results for Second Quarter 2017

Sequans Communications has announced its financial results for the second quarter ended June 30, 2017.

According to the Second Quarter 2017 Highlights:

  • Revenue: The Company recorded net revenue of $13.2 million, after a reduction of $740,000 related to a product return from an early 2016 tablet-related sale. Excluding the impact of the return, revenue would have been $14.0 million. The revenue for the second quarter of 2017 increased 6.3% compared to the first quarter of 2017 (12.3% without the impact of the return) and increased 33.7% compared to the second quarter of 2016 (41.2% without the impact of the return), reflecting increases in both product and other revenue.
  • Gross margin: Gross margin was 42.1% compared to 47.1% in the first quarter of 2017 and compared to 44.6% in the second quarter of 2016, reflecting an increase in the proportion of module sales in the product mix in the second quarter of 2017.
  • Operating loss: Operating loss was $4.1 million compared to an operating loss of $4.2 million in the first quarter of 2017 and an operating loss of $5.7 million in the second quarter of 2016.
  • Net loss: Net loss was $6.0 million, or ($0.08) per diluted share/ADS, compared to a net loss $5.6 million, or ($0.07) per diluted share/ADS, in the first quarter of 2017 and a net loss of $5.1 million, or ($0.09) per diluted share/ADS, in the second quarter of 2016.
  • Non-IFRS Net loss: Excluding the non-cash items of stock-based compensation and the fair-value (in 2016) and effective interest adjustments related to the convertible debt and other financings, non-IFRS net loss was $4.9 million, or ($0.06) per diluted share/ADS, compared to a non-IFRS net loss of $4.7 million, or ($0.06) per diluted share/ADS in the first quarter of 2017, and a non-IFRS net loss of $5.8 million, or ($0.10) per diluted share/ADS, in the second quarter of 2016.
  • Cash: Cash, cash equivalents and short-term deposit at June 30, 2017 totaled $19.5 million compared to $14.5 million at March 31, 2017, and does not reflect the net proceeds of approximately $3 million from government grants and research tax credit expected to be received in the third quarter of 2017.

According to Sequans, business during Q2 was in line with its expectations and it's unfortunate that the optics were affected by an adjustment related to a sale made over a year ago in the discontinued tablet business. The Sequans Cat 1 business is ramping nicely and visibility continues to improve. The Cat M1 customers, including an extensive list of module partners, are moving aggressively to complete their certification on Verizon and AT&T, and are performing Cat M1 and Cat NB1 trials with multiple operators world-wide, setting the stage for accelerating growth next year. In the broadband business, the company is a little cautious about some temporary softness in the emerging markets, but also sees a number of very exciting opportunities to augment the growth it expects from popular devices such as Verizon's JetPack and SmartHub.

Q3 2017 Outlook

Sequans expects revenue for the third quarter of 2017 to be in the range of $15 to $17 million with non-IFRS gross margin above 40%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.05) and ($0.07) for the third quarter of 2017, based on approximately 79.8 million weighted average number of diluted shares/ADSs. Non-IFRS EPS guidance excludes the impact of stock based compensation, the non-cash fair-value and effective interest adjustments related to the convertible debt and other financings, and any other relevant non-cash or non-recurring expenses.