Sequans munications S.A.(SQNS) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $16.5 million, representing a 39% increase year-over-year and a 16.2% increase sequentially [42] - Gross margin improved to 77.6%, up from 49.2% in Q3 2021 and 60.7% in Q2 2022, driven by higher licensing revenue [44] - Non-IFRS net income for Q3 was $424,000, or $0.01 per diluted ADS, compared to a non-IFRS net loss of $1.2 million in Q2 2022 and a net loss of $5.3 million in Q3 2021 [49] Business Line Data and Key Metrics Changes - Massive IoT product sales accounted for nearly all total product revenue in Q3, while broadband IoT revenue increased due to the new strategic 5G licensing deal [42][43] - Cat-M product family grew 62% year-to-date despite delays, while Cat 1 revenue was down due to shipment timing but expected to return to normal in Q4 [20][21] - The pipeline for design wins and advanced design ins is close to $700 million, with almost half being secured design wins [23] Market Data and Key Metrics Changes - Metering remains the strongest segment for design wins, followed by asset tracking, smart home, and ehealth applications [26] - The addressable market for Cat 1, excluding China, is projected to exceed $400 million by 2025, with expectations of capturing significant market share [22] Company Strategy and Development Direction - The company is focused on expanding its Massive IoT business and leveraging its technology leadership in Cat M and Cat 1 categories [27][35] - The new 5G strategic deal is expected to fund ongoing development and generate future royalty revenue, with potential for additional partnerships [34][75] - The company aims to increase market share in metering from around 10% today to close to 50% in the next three years [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future growth potential, citing a strong pipeline and the successful reception of new products like Calliope 2 [38][39] - The company anticipates that supply chain issues will improve, allowing for better product availability in 2023 [64][86] - Management expects to achieve operating cash flow breakeven in 2023, supported by the new 5G deal [93] Other Important Information - Cash and short-term deposits totaled $5.8 million at the end of Q3, down from $16.8 million at the end of Q2 [52] - The company received $13.5 million net of withholding taxes from its strategic partner in October as the first payment under a three-year agreement [52] Q&A Session Summary Question: Supply chain normalization outlook - Management indicated that while supply chain issues are improving, they are not fully normalized yet, and the company is building inventory to meet future demand [62][63] Question: Updates on the design win pipeline - The design win pipeline is currently at $700 million, with $350 million in secured design wins and the rest in advanced projects with high conversion potential [66][67] Question: Future revenue dynamics and growth expectations - Management reiterated expectations for 50% year-on-year growth from 2023 to 2025, with a focus on moving projects from design to production [91][92]