Sequans communications announces first quarter 2021 financial results
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 first quarter ended march 31, 2021. first quarter 2021 summary results table: (in us$ millions, except share and per share data) q1 2021 q4 2020 q1 2020 revenue $12.3 $15.8 $8.8 gross profit 6.2 7.1 4.5 gross margin (%) 50.1 % 45.1 % 51.3 % operating loss (5.8 ) (5.4 ) (7.8 ) net loss (11.4 ) (11.3 ) (15.3 ) diluted earnings per ads ($0.33 ) ($0.36 ) ($0.64 ) non-ifrs diluted earnings per ads (1) ($0.15 ) ($0.28 ) ($0.36 ) weighted average number of diluted ads 34,664,779 31,044,769 23,904,935 (1) see use of non-ifrs/non-gaap financial measures disclosure on page 3 "first quarter revenue grew by 40% year-over-year driven by significant gains in massive iot. sequans continued to see strong momentum in our product revenue pipeline and design wins, particularly from solid demand in massive iot," said georges karam, ceo of sequans. "on a sequential basis, our seasonally slower first quarter revenue was also impacted by supply chain constraints that delayed approximately $2 million of shipments, and the anticipated decline in demand for the modem we supply for the verizon jetpack. we continue to execute our long-term growth strategy on three fronts – continued growth in massive iot and cbrs iot, expansion of our go-to-market channels, and ongoing development of our 5g product line. we remain committed to delivering our first 5g nr solution in 2022 and entering the next growth phase for our company." q2 2021 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. despite the continued supply chain constraints for materials, and factoring in the risk related to the portable router business, management is targeting a 10% sequential increase in revenue. first quarter 2021 financial and operational results summary revenue for the first quarter was $12.3 million, a decrease of 22.0% compared to the fourth quarter of 2020 and an increase of 40.5% compared to the first quarter of 2020. the decrease from the prior fourth quarter was primarily due to the seasonally slower first quarter combined with delayed shipments related to supply chain constraints, while the increase in revenue year-over-year was primarily due to product shipments in the massive iot market. gross profit for the first quarter of 2021 was $6.2 million, a decrease from the prior quarter gross profit of $7.1 million and an increase from the prior year first quarter of $4.5 million. gross margin for the first quarter of 2021 was 50.1% compared to 45.1% in the fourth quarter of 2020 and 51.3% in the first quarter of 2020. the sequential improvement in gross margin was primarily due to the increase in the product revenue mix from chip sales. operating loss was $5.8 million compared to $5.4 million in the fourth quarter of 2020 and $7.8 million in the first quarter of 2020. the year-over-year decline in operating loss was primarily due to the increase in revenue and a slight reduction in operating expenses. net loss was $11.4 million, or ($0.33) per diluted ads, compared to $11.3 million, or ($0.36) per ads, in the fourth quarter of 2020 and $15.3 million, or ($0.64) per ads, in the first quarter of 2020. net loss in the first quarter of 2021 includes a non-cash charge resulting from the change in the remaining embedded derivative fair value associated with the company’s convertible notes, which includes the change in value of the tranches of convertible notes converted through their conversion dates, partially offset by a foreign exchange gain related to the revaluation of euro liabilities in the quarter. 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 $5.1 million, or ($0.15) per ads, compared to $8.5 million, or ($0.28) per ads in the fourth quarter of 2020, and $8.7 million, or ($0.36) per ads, in the first quarter of 2020. the non-ifrs net loss includes foreign exchange gain of $1.4 million, or $0.04 per ads, in the first quarter of 2021, versus a foreign exchange loss of $1.9 million, or ($0.06) per ads, in the fourth quarter of 2020 and a foreign exchange gain of $0.7 million, or $0.03 per ads, in the first quarter of 2020. cash: cash, cash equivalents and short-term deposits at march 31, 2021 totaled $13.5 million compared to $18.5 million at december 31, 2020. the balance at march 31, 2021 excludes the $50 million of proceeds from the hybrid equity and convertible debt financing closed on april 9, 2021 and the $1.7 million in proceeds from a government grant received april 1, 2021, as well as the repayment of $18.8 million in convertible notes and other debt on april 14, 2021 and april 15, 2021. conference call and webcast sequans plans to conduct a teleconference and live webcast to discuss the financial results for the first quarter of 2021 today, april 27, 2021 at 8:00 a.m. et /14:00 cet. to participate in the live call, analysts and investors should dial 877-407-0792 or +1 201-689-8263 if outside the u.s. when prompted, provide the event title or access code: 13718024. a live and archived webcast of the call will be available from the investors section of the sequans website at www.sequans.com/investors/. an audio replay of the conference call will be available until may 11, 2021 by dialing toll free 844-512-2921 or +1 412-317-6671 from outside the u.s., using the following access code:13718024. forward-looking statements this press release contains projections and other forward-looking statements regarding future events or our future financial performance and potential financing sources. all statements other than present and historical facts and conditions contained in this release, including any statements regarding future results of operations and financial positions, business strategy and plans, expectations for massive iot and broadband and critical iot sales, the impact of the coronavirus on our manufacturing operations, supply chain, and on customer demand, the impact of component shortages and manufacturing capacity, 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 undertake no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release. 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 rely on or 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. in addition to the risk factors contained in our form 20-f for the fiscal year ended december 31, 2020, 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, (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, (ix) our inability to enter into and execute on strategic alliances, (x) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain, (xii) the impact of the coronavirus on the ability to operate our business and research, production of our products or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders, (xiii) our ability to raise debt and equity financing, and (xv) other factors detailed in documents we file from time to time with the securities and exchange commission. 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 the non-cash stock-based compensation and the non-cash impacts of convertible debt amendments, effective interest adjustments related to the convertible debt with embedded derivatives and other financings, and deferred tax benefit or expense related to the convertible debt and other financings. 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 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, finland, taiwan, south korea, and china. visit sequans online at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans sequans communications s.a. unaudited condensed consolidated statements of operations three months ended (in thousands of us$, except share and per share amounts) march 31, 2021 december 31, 2020 march 31, 2020 revenue : product revenue $ 8,548 $ 12,064 $ 5,501 other revenue 3,773 3,727 3,271 total revenue 12,321 15,791 8,772 cost of revenue cost of product revenue 5,691 8,183 3,897 cost of other revenue 452 494 373 total cost of revenue 6,143 8,677 4,270 gross profit 6,178 7,114 4,502 operating expenses : research and development 7,254 7,938 7,421 sales and marketing 2,294 2,003 2,264 general and administrative 2,460 2,606 2,605 total operating expenses 12,008 12,547 12,290 operating loss (5,830 ) (5,433 ) (7,788 ) financial income (expense): interest income (expense), net (2,711 ) (3,643 ) (3,491 ) change in fair value of convertible debt derivative (4,090 ) 111 (5,621 ) foreign exchange gain (loss) 1,358 (1,936 ) 675 loss before income taxes (11,273 ) (10,901 ) (14,826 ) income tax expense (benefit) 147 361 443 loss $ (11,420 ) $ (11,262 ) $ (15,269 ) attributable to : shareholders of the parent (11,420 ) (11,262 ) (15,269 ) minority interests — — — basic loss per ads ($ 0.33 ) ($ 0.36 ) ($ 0.64 ) diluted loss per ads ($ 0.33 ) ($ 0.36 ) ($ 0.64 ) weighted average number of ads used for computing: — basic 34,664,779 31,044,769 23,904,935 — diluted 34,664,779 31,044,769 23,904,935 sequans communications s.a. unaudited condensed consolidated statements of financial position at march 31, at dec 31, (in thousands of us$) 2021 2020 assets non-current assets property, plant and equipment $ 9,086 $ 9,187 intangible assets 27,771 25,312 deposits and other receivables 3,303 588 other non-current financial assets 369 386 total non-current assets 40,529 35,473 current assets inventories 4,621 6,225 trade receivables 7,078 17,277 contract assets 496 371 prepaid expenses 1,190 962 other receivables 7,728 3,264 research tax credit receivable 5,224 5,110 short-term deposits — 10,900 cash and cash equivalents 13,486 7,574 total current assets 39,823 51,683 total assets $ 80,352 $ 87,156 equity and liabilities equity issued capital, euro 0.02 nominal value, 141,774,810 shares authorized, issued and outstanding at march 31, 2021 (133,934,090 shares at december 31, 2020) $ 3,459 $ 3,269 share premium 288,714 276,560 other capital reserves 53,223 46,677 accumulated deficit (374,629 ) (363,209 ) other components of equity (466 ) (423 ) total equity (29,699 ) (37,126 ) non-current liabilities government grant advances, loans and other liabilities 14,548 11,203 venture debt 638 2,172 convertible debt 16,102 26,074 convertible debt embedded derivative 9,951 12,395 lease liabilities 4,092 4,762 trade payables 646 851 provisions 2,017 1,874 deferred tax liabilities 20 19 contract liabilities 599 2,397 total non-current liabilities 48,613 61,747 current liabilities trade payables 14,716 15,701 interest-bearing receivables financing 11,026 14,228 venture debt 5,964 6,104 lease liabilities 1,202 1,014 government grant advances and loans 6,134 3,867 contract liabilities 12,894 13,145 other current liabilities and provisions 9,502 8,476 total current liabilities 61,438 62,535 total equity and liabilities $ 80,352 $ 87,156 sequans communications s.a. unaudited condensed consolidated statements of cash flow three months ended march 31, (in thousands of us$) 2021 2020 operating activities loss before income taxes $ (11,273 ) $ (14,826 ) non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities depreciation and impairment of property, plant and equipment 875 1,015 amortization and impairment of intangible assets 1,895 1,180 share-based payment expense 1,160 667 increase in provisions 41 52 interest expense, net 2,734 3,491 change in the fair value of convertible debt embedded derivative 4,090 5,621 convertible debt amendment — (1,399 ) foreign exchange loss (gain) (1,115 ) (545 ) bad debt expense — 18 working capital adjustments decrease (increase) in trade receivables and other receivables 10,141 (1,669 ) decrease in inventories 1,604 518 decrease (increase) in research tax credit receivable 380 (490 ) increase in trade payables and other liabilities 208 1,402 decrease in contract liabilities (2,812 ) (2,574 ) increase (decrease) in government grant advances 1,390 (110 ) income tax paid (120 ) (76 ) net cash flow provided by (used in) operating activities 9,198 (7,725 ) investing activities purchase of intangible assets and property, plant and equipment (3,610 ) (943 ) capitalized development expenditures (2,279 ) (1,431 ) purchase of financial assets (2,698 ) (28 ) decrease of short-term deposit 10,900 — interest received 23 19 net cash flow used in investments activities 2,336 (2,383 ) financing activities proceeds from issue of warrants, exercise of stock options/warrants 87 27 proceeds (repayment of) from interest-bearing receivables financing (2,976 ) 2,504 proceeds from interest-bearing research project financing — 405 payment of lease liabilities (448 ) (439 ) repayment of government loans (121 ) — repayment of venture debt (1,460 ) (811 ) repayment of interest-bearing research project financing (181 ) — interest paid (533 ) (537 ) net cash flows from financing activities (5,632 ) 1,149 net increase (decrease) in cash and cash equivalents 5,902 (8,959 ) net foreign exchange difference 10 (2 ) cash and cash equivalents at january 1 7,574 14,098 cash and cash equivalents at end of the period 13,486 5,137 sequans communications s.a. unaudited reconciliation of non-ifrs financial results (in thousands of us$, except share and per share amounts) three months ended march 31, 2021 december 31, 2020 march 31, 2020 net ifrs loss as reported $ (11,420 ) $ (11,262 ) $ (15,269 ) add back non-cash stock-based compensation expense according to ifrs 2 (1) 1,160 1,172 667 non-cash change in the fair value of convertible debt embedded derivative 4,090 (111 ) 5,621 non-cash interest on convertible debt and other financing (2) 1,085 1,663 1,294 non-cash impact of deferred tax income (loss) — — 398 non-cash impact of convertible debt amendment — — (1,399 ) $ (5,085 ) $ (8,538 ) $ (8,688 ) ifrs basic loss per ads as reported ($ 0.33 ) ($ 0.36 ) ($ 0.64 ) add back non-cash stock-based compensation expense according to ifrs 2 (1) $ 0.03 $ 0.04 $ 0.03 non-cash change in the fair value of convertible debt embedded derivative $ 0.12 $ 0.00 $ 0.24 non-cash interest on convertible debt and other financing (2) $ 0.03 $ 0.04 $ 0.05 non-cash impact of deferred tax income (loss) $ 0.00 $ 0.00 $ 0.02 non-cash impact of convertible debt amendment $ 0.00 $ 0.00 ($ 0.06 ) non-ifrs basic loss per ads ($ 0.15 ) ($ 0.28 ) ($ 0.36 ) ifrs diluted loss per ads ($ 0.33 ) ($ 0.36 ) ($ 0.64 ) add back non-cash stock-based compensation expense according to ifrs 2 (1) $ 0.03 $ 0.04 $ 0.03 non-cash change in the fair value of convertible debt embedded derivative $ 0.12 $ 0.00 $ 0.24 non-cash interest on convertible debt and other financing (2) $ 0.03 $ 0.04 $ 0.05 non-cash impact of deferred tax income (loss) $ 0.00 $ 0.00 $ 0.02 non-cash impact of convertible debt amendment $ 0.00 $ 0.00 ($ 0.06 ) non-ifrs diluted loss per ads ($ 0.15 ) ($ 0.28 ) ($ 0.36 ) (1) included in the ifrs loss as follows: cost of product revenue $ 15 $ 28 $ 5 research and development 554 647 272 sales and marketing 217 190 124 general and administrative 374 307 266 (2) related to the difference between contractual and effective interest rates
