PARIS--(BUSINESS WIRE)--Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G chips and modules, today announced financial results for the second quarter ended June 30, 2020.
Second Quarter 2020 Highlights:
Revenue: Revenue was $12.2 million, an increase of 39.4% compared to the first quarter of 2020 and an increase of 54.6% compared to the second quarter of 2019.
Gross margin: Gross margin was 48.3% compared to 51.3% in the first quarter of 2020, and compared to 37.7% in the second quarter of 2019.
Operating loss: Operating loss was $5.6 million compared to $7.8 million in the first quarter of 2020 and $6.9 million in the second quarter of 2019.
Net loss: Net loss was $19.0 million, or ($0.70) per diluted ADS, compared to $15.3 million, or ($0.64) per ADS, in the first quarter of 2020 and $9.2 million, or ($0.39) per ADS, in the second quarter of 2019. Net loss in the second quarter of 2020 includes $9.1 million loss on revaluation of the embedded derivative arising from the amendments to the convertible debt made in March 2020. The loss on the revaluation was $5.6 million in the first quarter of 2020.
Note: Net loss and net loss per diluted ADS for the first and second quarters of 2020 include the non-cash impact of the March 20, 2020 amendments to the Company's five issues of convertible debt. As the amendments give the Company the option to change certain terms of the convertible debt rendering the equity conversion variable, IFRS accounting requires that the conversion option be considered as an embedded derivative, which must be marked to market each quarter with the change in value reflected as a non-cash financial gain or loss. Previously, the estimated value of the conversion option was recorded through equity. The results for the first quarter of 2020 have been updated from the preliminary figures announced on April 23, 2020 to reflect this accounting, following completion of the valuation analyses subsequent to publication of the first quarter results.
Non-IFRS Net loss and diluted loss per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, the non-cash impact of convertible debt amendments, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $7.5 million, or ($0.28) per ADS, compared to $8.7 million, or ($0.36) per ADS in the first quarter of 2020, and $7.9 million, or ($0.33) per ADS, in the second quarter of 2019.
"The second quarter was a pivotal one for us," said Georges Karam, CEO of Sequans. "We achieved excellent sequential growth in both our Broadband IoT and Massive IoT businesses, significantly reduced our operating loss, strengthened our balance sheet, secured several key design wins, continued building a channel pipeline, and met several important milestones related to our strategic partnership for 5G.
"Broadband IoT revenue was particularly strong in Q2 because we were able to mitigate COVID-19 related supply issues and satisfy a significant portion of the extra demand for portable routers generated by the measures taken to deal with the pandemic. We will continue to fulfill this backlog in Q3, and we believe ongoing Broadband IoT demand will normalize at a higher level than we experienced pre-coronavirus. Our Massive IoT business continues to experience strong demand, in particular related to equipment for health monitoring, augmenting the overall ramp of this business segment.
"We expect continued sequential growth in both Massive IoT and Broadband IoT during the remaining quarters of this year, with the positive impact on demand from the coronavirus likely to continue to offset any negative impact. Recent design wins, our strong position in CBRS, a growing channel pipeline and additional platform wins that could close during the second half of 2020 together support continued strong growth next year. The excellent progress we are making on 5G technology continues to attract very strong interest from both prospective new customers and potential strategic partners, serving to further increase our confidence in our long-term success."
Q3 2020 Outlook
The following statement is based on management’s current assumptions and expectations and assumes no increase in the severity or duration of the COVID-19 pandemic. This statement is forward-looking and actual results may differ materially. Sequans undertakes no obligation to update this statement.
Sequans is targeting a sequential increase in revenue of at least 10% for the third quarter of 2020, which would cause revenue in the first nine months of 2020 to be greater than the revenue for all of 2019. The backlog of orders and indications regarding customer demand support this goal, but the company also sees ongoing risks related to COVID-19.
About Sequans Communications
Sequans Communications S.A. (NYSE: SQNS) is a leading developer and provider of 5G and 4G chips and modules for IoT devices. For 5G/4G massive IoT applications, Sequans provides a comprehensive product portfolio based on its flagship Monarch LTE-M/NB-IoT and Calliope Cat 1 chip platforms, featuring industry-leading low power consumption, a large set of integrated functionalities, and global deployment capability. For 5G/4G broadband and critical IoT applications, Sequans offers a product portfolio based on its Cassiopeia 4G Cat 4/Cat 6 and high-end Taurus 5G chip platforms, optimized for low-cost residential, enterprise, and industrial applications. Founded in 2003, 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
