Sequans munications S.A.(SQNS) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2021 was $11.9 million, a decrease of 15.8% year-over-year and 7.5% sequentially [42] - Year-to-date revenue increased by 6%, with total revenue growth of 86% and product revenue growth of 123% when excluding the impact of Verizon Jetpack [11][8] - Gross margin in Q3 2021 was 49.2%, up from 42% in Q3 2020 but down from 56.6% in Q2 2021 [46] - Operating loss for Q3 was $5.1 million, compared to a loss of $3.4 million in Q2 2021 and a loss of $5.9 million in Q3 2020 [48] Business Line Data and Key Metrics Changes - Massive IoT revenue increased by 113% year-to-date and 118% year-over-year in Q3 2021 [11][18] - Broadband IoT revenue, driven by CBRS, increased by 135% year-over-year [18] - Vertical software services category grew by 31% year-to-date compared to the same period last year [30] Market Data and Key Metrics Changes - The Cat 1 worldwide market is expected to be approximately 50 million units this year, with growth anticipated to over 100 million units by 2023 [21] - The company is experiencing strong demand in the metering, medical, and smart home segments, contributing to its design wins [83][84] Company Strategy and Development Direction - The company is focusing on 4G and 5G for Internet of Things (IoT) and aims for a 50% compound annual growth rate (CAGR) [15] - Investment in 5G is a strategic priority, with ongoing development of the 5G Taurus platform [28][29] - The company is expanding its distribution channels and partnerships, particularly with MCU partners like Renesas [34][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged external challenges impacting performance, particularly supply chain constraints [9][10] - The backlog of orders is at a record level, providing confidence for future growth [61] - The company anticipates a 15% sequential revenue growth for Q4 2021, despite supply chain challenges [53] Other Important Information - Cash and short-term deposits totaled $15.2 million at the end of Q3, down from $30.3 million at the end of Q2 [52] - The company is actively exploring financing options to support its 5G investments [29][68] Q&A Session Summary Question: Clarification on supply constraints and visibility for 2022 - Management indicated that approximately $1 million in revenue was left on the table due to supply constraints in Q3 [60] - The backlog is at a record level, providing strong visibility for Q1 and Q2 of 2022 [61][62] Question: Insights on TSMC wafer allocation - Management confirmed that TSMC is providing a manageable allocation for Q1 and Q4, with ongoing efforts to secure additional capacity [63][64] Question: Financing opportunities and cash flow outlook - The company expects to be cash flow positive in 2022, excluding the burden of 5G investments [67][68] Question: Market opportunity for Cat 1 - The total addressable market for Cat 1 is projected to grow from 50 million units this year to 100 million units by 2023, with Sequans positioned to capture market share [21][69] Question: Future applications for the 5G Taurus platform - The Taurus platform is expected to address various markets, including fixed wireless applications and industrial IoT [92][94]