Sequans munications S.A.(SQNS) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's revenue for Q2 2021 was $12.9 million, representing a 5.1% increase year-over-year and a 4.4% sequential increase, falling short of the previously announced 10% growth target due to supply chain constraints [47] - Gross margin improved to 56.6% in Q2 2021 from 48.3% in Q2 2020 and 50.1% in Q1 2021, driven by a shift in revenue mix towards higher service revenue [50] - The operational loss narrowed to $3.4 million in Q2 2021 from $5.8 million in Q1 2021 and $5.6 million in Q2 2020 [52] Business Line Data and Key Metrics Changes - Massive IoT revenue increased by approximately 14% from Q1 2021 and 120% year-over-year, accounting for over half of total revenue [48] - Broadband IoT revenues decreased due to lower revenue from Jetpack portable routers, but excluding Jetpack, Broadband IoT grew 7% quarter-over-quarter and over 400% year-over-year [49] - The vertical category, including service revenue from a major 5G strategic deal, increased in Q2 2021 compared to both Q1 and Q2 2020 [49] Market Data and Key Metrics Changes - The company reported a strong demand for Massive IoT solutions, with a sales product pipeline exceeding $600 million and design wins increasing by 18% to $280 million [41] - The top 10 Massive IoT customers could generate annual revenue close to $50 million next year, with expectations of 50% growth per year over the next two years [40] Company Strategy and Development Direction - The company is focusing on expanding its Massive IoT and Broadband IoT segments, with a strategic emphasis on partnerships to enhance market reach [34][28] - The long-term growth of Broadband IoT will be driven by the 5G Taurus platform, with product revenue expected to begin in 2023 [25] - The company aims to evolve from a carrier-centric business model to a more diversified customer base, focusing on enterprise and industrial applications [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged supply chain challenges impacting the semiconductor industry, which are obscuring the company's performance and limiting growth potential [35] - Despite supply chain headwinds, the company remains confident in its long-term growth trajectory and investment thesis, anticipating achieving medium- and long-term growth objectives [40] - The company expects to approach $100 million in revenue in 2022, with a growth rate of 50% per year for the following years, contingent on supply chain improvements [45] Other Important Information - The company had over $30 million in cash at the end of Q2 2021, reflecting a strong balance sheet [43] - Cash flow generated by operations for the first six months of 2021 was $6.5 million, compared to $9.2 million used in operations in the same period of 2020 [56] Q&A Session Summary Question: Future of Jetpack business and broadband revenue outlook - Management indicated uncertainty regarding the Jetpack business and assumed no recovery in the second half of the year, while CBRS business is performing well [66][67] Question: Impact of supply chain on product gross margins - Management expects some temporary lower gross margins in Q3 due to revenue mix but maintains a positive outlook for the year [70] Question: Supply constraints and growth ramp in Massive IoT - Management confirmed strong demand and backlog but noted that supply chain challenges are the limiting factor for growth [71] Question: Clarification on revenue projections for 2022 - Management projected approaching $100 million in sales for 2022, with a solid growth trajectory expected [76] Question: Strategic partnerships and MCU collaborations - Management highlighted ongoing partnerships with MCU vendors, which are crucial for expanding market reach and driving growth [88]