Sequans Communications SA Q4 FY2023 earnings call

• Business comments: Q4 2023 revenue was $4.8M; expect Q1 2024 revenue over $7M with sequential growth in 2024 driven by product revenue ramp from Massive IoT (LTE-M/NB-IoT Monarch 2 and Cat 1 Calliope 2 platforms) in asset tracking, smart metering, fleet management; design win pipeline represents over $400M of potential 3-year life revenue. Broadband IoT 5G platform expected to have product revenue start in late 2025 with ramp in 2026.
• Strategic discussions: Renesas terminated MOU due to unfavorable tax ruling in Japan, but relationship with Renesas remains strong; Board actively engaged with potential partners on strategic alternatives; in discussions with lenders to extend debt terms and government financing alternatives; received French government approval for EUR 11M in new funding, with nearly EUR 7.5M as grant and rest as low-interest loan repayable on product sales.

Fourth quarter 2023 revenue was $4.8 million, with approximately $4 million being product revenue, a significant increase from the prior quarter. Full year 2023 revenue decreased 44.5% from $60.6 million in 2022 to $33.6 million in 2023. Product revenue rebounded in the fourth quarter as channel and customer inventory issues began to clear, driving increased product shipments. In the fourth quarter, Massive IoT product sales accounted for nearly all product revenue. Licensing revenue was low in Q4 2023 due to the revenue recognition profile of the primary 5G licensing deal but is expected to rebound in Q1 2024, targeting over $3 million in licensing and service revenue. For the fourth quarter, 1 customer and 1 channel partner each represented 10% or more of revenue.

• Expect Q1 2024 revenue over $7M, with sequential revenue growth in remaining quarters of 2024. Target licensing and service revenue over $3M in Q1 2024. Aim for 60% gross margin in Q1 2024. Identified potential cost optimization actions. Intend to reactivate discussions with European Investment Bank.

• Renesas terminated MOU due to unfavorable tax ruling in Japan, though relationship with Renesas remains strong. Sensitivity of ongoing strategic discussions regarding potential partners. Challenges in discussions with lenders to extend debt terms and with government financing alternatives.

Q: Will there be a Q&A session today?

A: Due to the sensitivity of the ongoing discussions, we are unable to provide further details on the strategic process at this time. Therefore, we trust you understand that we will not be conducting a Q&A session today.