Sequans Communications Announces Third Quarter 2013 Financial Results

4G chipmaker Sequans Communications S.A. (NYSE:SQNS) today announced financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Highlights:

Revenue: Revenue of $4.1 million increased 73% compared to the second quarter of 2013, reflecting an increase in product revenues, partially offset by decreased license and other revenue. Revenue decreased 49% compared to the third 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 25.1% compared to gross margin of 41.1% in the second quarter of 2013 and 48.0% in the third quarter of 2012, due to revenue mix that includes sales of EZLinkLTE™ modules, used to seed the single-mode LTE device market in its initial phase.

Operating loss: Operating loss was $8.8 million compared to an operating loss of $9.2 million in the second quarter of 2013 and an operating loss of $6.0 million in the third quarter of 2012.

Net loss: Net loss was $8.8 million, or ($0.20) per diluted share/ADS, compared to a net loss of $9.1 million, or ($0.20) per diluted share/ADS in the second quarter of 2013 and a net loss of $5.8 million, or ($0.17) per diluted share/ADS in the third quarter of 2012.

Non-IFRS Net loss: Excluding stock-based compensation, non-IFRS net loss was $8.3 million, or ($0.19) per diluted share/ADS, compared to a non-IFRS net loss of $8.6 million, or ($0.19) per diluted share/ADS in the second quarter of 2013, and a non-IFRS net loss of $5.0 million, or ($0.14) per diluted share/ADS, in the third quarter of 2012.

"The sequential increase in product revenue during Q3 reflected initial sales for North America for single-mode LTE applications,” said Georges Karam, Sequans CEO. "As expected, we also began shipping chips for data devices in the Japanese market, as well as additional chips for carriers migrating to LTE in emerging markets. The breadth of the interest in our LTE-only solutions continues to expand, and new design wins during Q3 further bolster our confidence that shipments will accelerate next year. We are particularly pleased with the progress we are making with our EZLinkLTE module strategy, enabling tablets, notebooks, consumer electronics and machine-to-machine applications. The availability of this comprehensive pre-certified solution is accelerating time to market for a wide range of new devices.”

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 2013 to be in the range of $4.5 to $5.5 million, with non-IFRS gross margin of around 40%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.15) and ($0.17) for the fourth 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. Sequans expects that its cash position at December 31, 2013 will be at a similar level to cash at September 30, 2013, based on this outlook for the fourth quarter and the expected cash-in from receipt of French research tax credits.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the third quarter of 2013 today, October 24, 2013 at 8:00 a.m. EDT/14:00 CEST. To participate in the live call, analysts and investors should dial 800-230-1074 (or +1 612-288-0329 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 24, 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: 304419.

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 S.A. (NYSE:SQNS) is a 4G chipmaker, supplying LTE and WiMAX chips to original equipment manufacturers and original design manufacturers worldwide. Founded in 2003 to address the WiMAX market, the company expanded in early 2009 to address the LTE market. Sequans chips are operating in 4G networks of leading mobile operators around the world. 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.