Sequans Communications SA Q4 FY2022 earnings call

• Secured a multi-year strategic 5G licensing partnership for the Taurus 5G platform valued over $50 million, adding licensing revenue over three years with royalty potential up to 10 years.
• Product sales pipeline grew to over $700 million of three-year-life revenue, with $350 million in design wins driven by LTM and B-IoT Monarch 2 platform, expected to convert to $100 million annualized peak revenue at full ramp.
• Innovation in product line: Calliope 2 Cat 1 platform had strong market reception, Monarch 2 platform added GNSS and iSIM features, and Taurus 5G platform is on track for sampling in 2023.
• IP licensing as a new growth lever, with plans to close at least one more licensing deal by the end of Q2 2023.

Full-year 2022 revenue increased 19% to $60.6 million from $50.9 million in 2021. Gross margin improved to 70.8% from 53.4% in 2021, driven by licensing revenue in the revenue mix. Product revenue saw Massive IoT as a key contributor. Fourth quarter revenue was $15.9 million, up 15% year-over-year, with licensing revenue from the 5G deal contributing significantly.

• Q1 2023 revenue target around $12 million, reflecting excess inventory and customer launch delays, with targeting gross margin of about 70%.
• Non-IFRS operating expenses expected to average ~$12 million per quarter in 2023, assuming stable Euro-dollar exchange rate.
• IFRS interest expense in Q1 2023 is approximately $2.5 million, comprising contractual interest and IFRS adjustment.

• Supply chain disruptions and component shortages impacting product launches and customer project timelines.
• Uncertainties in converting pipeline to revenue, including delays in customer project launches.
• Impact of foreign exchange rate fluctuations and revaluation of embedded derivatives affecting financial results.

Q: Scott Searle from ROTH asked about pipeline composition, ramp up visibility, and strategic options.

A: Georges Karam discussed pipeline breakdown, with 80% of the pipeline in Massive IoT, ramp up expectations with 45% of design win projects expected in production by end of 2023, and mentioned a strategic committee with three Board members exploring options.

Q: Craig Ellis from B. Riley asked about supply chain, strategic committee timeframe, and end market mix of incremental pipeline.

A: Georges Karam addressed supply chain easing, strategic committee details being confidential, and end market diversification with metering, telematic, and security segments.

Q: Nick Doyle from Needham & Company asked about Calliope 2 market share and metering qualification.

A: Georges Karam talked about Calliope 2's competitive advantage in the Cat 1 market and metering qualification taking longer due to utility deployment requirements and 10-year commitment periods.