Sequans Communications SA Q3 FY2022 earnings call

• Strong Q3 revenue and profitability despite product revenue headwinds.
• New 5G strategic deal progress with first payment received and revenue recognition from IP delivered.
• Pipeline growth, particularly strong reception to Calliope 2.
• MCU partnerships, especially with Renesas, aiding market access.
• Confidence in future growth with a robust pipeline of design wins and expected market share expansion in Massive IoT segments.

Third quarter revenue was $16.5 million, up 39% year-over-year and 16.2% sequentially. Massive IoT product sales in Q3 accounted for nearly all product revenue. Broadband IoT revenue increased due to the new 5G licensing deal. Cat-M grew 62% year-to-date despite delays. Cat 1 revenue was down this quarter but expected to return to normal in Q4 and grow in 2023 with Calliope 2. The pipeline of design wins and advanced design ins is close to $700 million, almost half of it being secured design wins.

• Q4 revenue expected to be flat to slightly down compared to Q3, with gross margin above 65%.
• Non-IFRS operating expenses expected to be at least $500,000 higher in Q4 assuming stable exchange rate, close to breakeven at operating level.
• IFRS interest expense in Q4 2022 expected to be ~$2.8 million, non-IFRS interest expense ~$1.3 million.
• 5G deal expected to contribute $3-4 million per quarter for the remainder of the agreement's term after initial quarters.

• Supply chain issues including China lockdowns and component shortages impacting product shipments and revenue recognition.
• Potential impact of U.S. export control rules on 5G partnership revenue stream.
• Delays in moving design wins to mass production and generating revenue due to complexity in IoT project timelines.

Q: Scott Searle asked about supply chain normalization, pipeline details, and 5G strategic front.

A: Georges Karam discussed supply chain relief, pipeline breakdown including 10 key customers' potential revenue, and positive outlook on 5G partnerships.

Q: Craig Ellis inquired about Q4 revenue specifics, Renesas contribution, and cash self-funding.

A: Deborah Choate provided Q4 revenue color, Georges Karam spoke about Renesas partnership progress and revenue growth targets, and Deborah Choate mentioned 5G deal funding 5G development for cash flow breakeven in 2023.

Q: Nicholas Doyle asked about 5G technology in China and product revenue declines.

A: Georges Karam explained 5G technology's compliance and safeguards, and discussed product revenue delays being due to project timing issues rather than cancellations