Sequans Communications Announces First Quarter 2019 Financial Results

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4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today
announced financial results for the first quarter ended March 31, 2019.

First Quarter Highlights:

Revenue: Revenue was $7.0 million, an increase of 15.9% compared
to the fourth quarter of 2018, primarily due to higher revenue in
broadband and IoT, while the postponement of a project caused revenue
from the vertical business to be lower than the Q1 target for that
business. Q1 revenue represented a decrease of 37.4% compared to the
first quarter of 2018, reflecting primarily a decline in broadband
revenue and the impact of Cat M customer project delays in IoT.

Gross margin: Gross margin was 41.0% compared to 43.3% in the
fourth quarter of 2018, due to an increase in module sales, and compared
to 41.7% in the first quarter of 2018, primarily due to a decrease in
non-product revenue.

Operating loss: Operating loss was $7.4 million compared to an
operating loss of $9.3 million in the fourth quarter of 2018 and an
operating loss of $7.3 million in the first quarter of 2018.

Net loss: Net loss was $9.0 million, or ($0.10) per diluted
share/ADS, compared to a net loss of $9.5 million, or ($0.10) per
diluted share/ADS, in the fourth quarter of 2018 and a net loss of $8.7
million, or ($0.10) per diluted share/ADS, in the first quarter of 2018.

Non-IFRS Net loss: Excluding the non-cash stock-based
compensation and the non-cash impacts of convertible debt amendments,
effective interest adjustments related to the convertible debt and other
financings, and deferred tax benefit or expense related to the
convertible debt and other financings, non-IFRS net loss was $7.6
million, or ($0.08) per diluted share/ADS, compared to a non-IFRS net
loss of $9.4 million, or ($0.10) per diluted share/ADS in the fourth
quarter of 2018, and a non-IFRS net loss of $7.5 million, or ($0.08) per
diluted share/ADS, in the first quarter of 2018.

Cash: Cash and cash equivalents at March 31, 2019 totaled $7.6
million compared to $12.1 million at December 31, 2018 and exclude the
$3 million of proceeds from the issuance of new convertible in May 2019.


In millions of US$ except percentages, shares and per share amounts	Key Metrics
	Q1 2019		%*		Q4 2018 ⁽¹⁾		%*		Q1 2018		%*
Revenue	$7.0				$6.1				$11.2
Gross profit	2.9		41.0	%	2.6		43.3	%	4.7		41.7	%
Operating loss	(7.4	)	(105.2	)%	(9.3	)	(153.7	)%	(7.3	)	(64.9	)%
Net loss	(9.0	)	(128.4	)%	(9.5	)	(156.0	)%	(8.7	)	(77.9	)%
Diluted EPS	($0.10	)			($0.10	)			($0.10	)
Weighted average number of diluted shares/ADS	94,788,726				94,599,554				91,465,178
Cash flow from (used in) operations	(4.6	)			(7.5	)			(6.0	)
Cash, cash equivalents and short-term deposit at quarter-end	7.6				12.1				15.0
Additional information on non-cash items:
– Stock-based compensation included in operating result	0.5				0.3				0.5
– Non-cash interest on convertible debt and other financing	0.9				0.8				0.7
– Non-cash impact of convertible debt amendment	—				(0.4	)			—
– Non-cash impact of deferred tax income (loss)	0.1				(0.7	)			—
Non-IFRS diluted EPS (excludes non-cash stock-based compensation, impact of convertible debt amendments, effective interest adjustments related to the convertible and other debt and embedded derivative, impact of revaluation of interest-free government loan) and related deferred tax benefit (expense)	($0.08	)			($0.10	)			($0.08	)

*Percentage of revenue
(1)	Updated from the 2018 earnings release provided on February 19, 2019. See Sequans’ Form 20-F filed on May 1, 2019

“We are pleased to see the broadband business improving, the Cat 1
business growing nicely, and momentum continuing to build in the Cat
M/NB business as expected during the first quarter,” said Georges Karam,
Sequans CEO. “We have already begun to receive orders related to Cat
M/NB devices that are scheduled to go into mass production around
mid-year, and we expect growth in this business to accelerate in the
second half of the year. Even though we are still at the beginning of
the market ramp for 4G LTE for IoT, we are fully engaged in 5G, having
already conducted five years of research activity. With near-term growth
driven by helping customers get the most from 4G technology, enabling
them to make a seamless transition to 5G can continue our growth well
into the next decade.”

Q2 2019 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 second quarter of 2019 to continue the
trend seen in Q1 and be better than the first quarter – with continued
sequential improvement through the balance of the year, driven by
increasing LTE-M revenue as more Sequans-powered devices go into mass
production.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss
the preliminary financial results for the first quarter of 2019 today,
May 9, 2019 at 8:00 a.m. EDT /14:00 CET. To participate in the live
call, analysts and investors should dial 800-230-1092 (or 612-288-0340
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 June 9, 2019 by
dialing toll free 800-475-6701 or 320-365-3844 from outside the U.S.,
using the following access code: 465836.

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 our future results of operations and financial
positions, business strategy and plans, expectations for IoT and
Broadband sales, 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, (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) the impact of natural disasters on
our sourcing operations and supply chain, (xi) our ability to remediate
material weaknesses in our internal controls relating to the impact of
accounting changes relating to deferred tax assets and deferred tax
liabilities related to the application of IFRS to deferred taxes on debt
instruments with equity components, and (xii) 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 the non-cash stock-based
compensation and the non-cash impacts of convertible debt amendments,
effective interest adjustments related to the convertible debt 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 provider of
single-mode 4G LTE wireless semiconductor solutions for Internet of
Things (IoT) and a wide range of broadband data devices. Founded in
2003, Sequans has developed and delivered seven generations of 4G
technology and its chips are certified and shipping in 4G networks
around the world. Today, Sequans offers two LTE product lines:
StreamliteLTE™, optimized for IoT and M2M devices and StreamrichLTE™,
optimized for feature-rich mobile computing and home and portable router
devices. The company is based in Paris, France with additional offices
in the United States, United Kingdom, Sweden, 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)		March 31, 2019 ⁽²⁾			Dec 31, 2018 ⁽¹⁾			March 31, 2018


Revenue :
	Product revenue	$	4,681		$	3,856		$	7,635
	Other revenue	2,357			2,217			3,599
Total revenue		7,038			6,073			11,234
Cost of revenue
	Cost of product revenue	3,575			2,943			5,861
	Cost of other revenue	574			503			689
Total cost of revenue		4,149			3,446			6,550
Gross profit		2,889			2,627			4,684
Operating expenses :
	Research and development	6,157			6,488			7,519
	Sales and marketing	2,221			2,179			2,485
	General and administrative	1,913			3,294			1,971

Total operating expenses		10,291			11,961			11,975
Operating loss		(7,402		)	(9,334		)	(7,291		)
Financial income (expense):
	Interest income (expense), net	(1,976		)	(1,631		)	(1,227		)
	Other financial expenses	—			(400		)	—
	Convertible debt amendment	—			420			—
	Foreign exchange gain (loss)	322			332			(212		)
Loss before income taxes		(9,056		)	(10,613		)	(8,730		)
Income tax expense (benefit)		(17		)	(1,139		)	19
Loss		$	(9,039	)	$	(9,474	)	$	(8,749	)
Attributable to :
	Shareholders of the parent	(9,039		)	(9,474		)	(8,749		)
	Minority interests	—						—
Basic loss per share		($0.10		)	($0.10		)	($0.10		)
Diluted loss per share		($0.10		)	($0.10		)	($0.10		)
Weighted average number of shares used for computing:
— Basic		94,788,726			94,599,554			91,465,178
— Diluted		94,788,726			94,599,554			91,465,178

(1)		Updated from the 2018 earnings release provided on February 19, 2019. See Sequans’ Form 20-F filed on May 1, 2019
(2)		In 2019, the Company adopted IFRS 16 using the modified retrospective application approach. Accordingly, prior period amounts have not been restated.


	SEQUANS COMMUNICATIONS S.A.
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

		At March 31,			At Dec 31,
(in thousands of US$)		2019 ⁽²⁾			2018 ⁽¹⁾

ASSETS
	Non-current assets
	Property, plant and equipment	$	9,679		$	6,271
	Intangible assets	15,183			12,409
	Deposits and other receivables	388			394
	Other non-current financial assets	331			337
	Total non-current assets	25,581			19,411
	Current assets
	Inventories	7,639			8,243
	Trade receivables	8,309			13,177
	Contract assets	3,270			2,707
	Prepaid expenses and other receivables	4,441			3,237
	Recoverable value added tax	683			565
	Research tax credit receivable	3,878			3,148
	Cash and cash equivalents	7,555			12,086
	Total current assets	35,775			43,163
Total assets		$	61,356		$	62,574

EQUITY AND LIABILITIES
	Equity
	Issued capital, euro 0.02 nominal value, 94,788,726 shares authorized, issued and outstanding at March 31, 2019 (94,732,539 shares at December 31, 2018)	$	2,384		$	2,384
	Share premium	233,820			225,470
	Other capital reserves	40,256			39,768
	Accumulated deficit	(281,076		)	(272,036		)
	Other components of equity	(625		)	(605		)
	Total equity	(5,241		)	(5,019		)
	Non-current liabilities
	Government grant advances and loans	6,567			5,674
	Venture Debt	10,495			11,811
	Convertible debt and accrued interest	20,889			19,723
	Lease liabilities	4,591			—
	Provisions	1,734			1,689
	Deferred tax liabilities	616			691
	Deferred revenue	687			808
	Total non-current liabilities	45,579			40,396
	Current liabilities
	Trade payables	7,497			9,412
	Interest-bearing receivables financing	3,661			10,295
	Venture Debt	2,042			823
	Lease liabilities	2,126			—
	Government grant advances and loans	738			688
	Other current liabilities	3,881			4,654
	Deferred revenue	777			973
	Provisions	296			352
	Total current liabilities	21,018			27,197
Total equity and liabilities		$	61,356		$	62,574

(1)		Updated from the 2018 earnings release provided on February 19, 2019. See Sequans’ Form 20-F filed on May 1, 2019
(2)		In 2019, the Company adopted IFRS 16 using the modified retrospective application approach. Accordingly, prior period amounts have not been restated.


		SEQUANS COMMUNICATIONS S.A.
		UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

			Three months ended March 31,
(in thousands of US$)			2019			2018
Operating activities
	Loss before income taxes		$	(9,056	)	$	(8,730	)
	Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
		Depreciation and impairment of property, plant and equipment	1,262			769
		Amortization and impairment of intangible assets	1,078			767
		Share-based payment expense	488			531
		Increase (decrease) in provisions	(21		)	22
		Financial expense (income)	1,976			1,227
		Foreign exchange loss (gain)	(425		)	146
		Loss (Gain) on disposal of property, plant and equipment	(32		)	—
	Working capital adjustments
		Decrease (Increase) in trade receivables and other receivables	2,980			3,958
		Decrease (Increase) in inventories	604			8
		Decrease (Increase) in research tax credit receivable	(597		)	(982		)
		Decrease in trade payables and other liabilities	(2,478		)	(3,315		)
		Decrease in deferred revenue	(317		)	(34		)
		Decrease in government grant advances	(99		)	(410		)
	Income tax paid		13			34
Net cash flow used in operating activities			(4,624		)	(6,009		)
Investing activities
	Purchase of intangible assets and property, plant and equipment		(585		)	(329		)
	Capitalized development expenditures		(1,080		)	(463		)
	Sale (purchase) of financial assets		12			(20		)
	Interest received		3			35
Net cash flow used in investments activities			(1,650		)	(777		)
Financing activities
	Proceeds from issue of warrants, exercise of stock options/warrants		—			27
	Public equity offering proceeds, net of transaction costs paid		—			20,890
	Proceeds from issuing of warrants, net of transaction costs paid		8,350			—
	Proceeds (Repayment of) from interest-bearing receivables financing		(6,634		)	(2,095		)
	Proceeds from interest-bearing research project financing		1,126			—
	Payment of lease liabilities		(727		)	—
	Repayment of government loans		—			(118		)
	Interest paid		(373		)	(230		)
Net cash flows from financing activities			1,742			18,474
	Net increase (decrease) in cash and cash equivalents		(4,532		)	11,688
	Net foreign exchange difference		1			2
	Cash and cash equivalent at January 1		12,086			2,948
Cash and cash equivalents at end of the period			$	7,555		$	14,638


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, 2019			Dec 31, 2018 ⁽³⁾			March 31, 2018
Net IFRS loss as reported	$	(9,039	)	$	(9,474	)	$	(8,749	)
Add back
Stock-based compensation expense according to IFRS 2 ⁽¹⁾	488			308			532
Non-cash interest on convertible debt and other financing ⁽²⁾	872			831			671
Non-cash impact of deferred tax income (loss)	76			(656		)	—
Non-cash impact of convertible debt amendment	—			(420		)	—
	$	(7,603	)	$	(9,411	)	$	(7,546	)
IFRS basic loss per share as reported	($0.10		)	($0.10		)	($0.10		)
Add back
Stock-based compensation expense according to IFRS 2 ⁽¹⁾	$0.01			$0.00			$0.01
Non-cash interest on convertible debt and other financing ⁽²⁾	$0.01			$0.01			$0.01
Non-cash impact of deferred tax income (loss)	$0.00			($0.01		)	$0.00
Non-cash impact of convertible debt amendment	$0.00			$0.00			$0.00

Non-IFRS basic loss per share	($0.08		)	($0.10		)	($0.08		)
IFRS diluted loss per share	($0.10		)	($0.10		)	($0.10		)
Add back
Stock-based compensation expense according to IFRS 2 ⁽¹⁾	$0.01			$0.00			$0.01
Non-cash interest on convertible debt and other financing ⁽²⁾	$0.01			$0.01			$0.01
Non-cash impact of deferred tax income (loss)	$0.00			($0.01		)	$0.00
Non-cash impact of convertible debt amendment	$0.00			$0.00			$0.00

Non-IFRS diluted loss per share	($0.08		)	($0.10		)	($0.08		)

(1) Included in the IFRS loss as follows:
Cost of product revenue	$	2		$	—		$	3
Research and development	140			147			139
Sales and marketing	68			6			80
General and administrative	278			155			310
(2) Related to the difference between contractual and effective interest rates
(3) Updated from the 2018 earnings release provided on February 19, 2019. See Sequans’ Form 20-F filed on May 1, 2019

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