Sequans munications S.A.(SQNS) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's total revenue for the full year 2019 was $30.9 million, with massive IoT revenue decreasing compared to 2018, primarily due to delays in the ramp of Cat M and inventory issues with the Cat 1 module partner [52][54] - Gross margin increased to 40.1% in 2019 from 39.5% in 2018, while operating expenses decreased by about 15% to $40.3 million [54] - In Q4 2019, revenue was $9.2 million, a sequential increase of 25.2% from Q3, and a 50.9% increase compared to Q4 2018 [56][58] Business Line Data and Key Metrics Changes - Massive IoT accounted for approximately 42% of total revenue in 2019, down from about 50% in 2018, with expectations for growth in both Cat 1 and Cat M in 2020 [52][54] - The broadband and critical IoT category, along with revenue from vertical markets, experienced slight declines in 2019 but are expected to rebound in 2020 due to new customers and higher services revenue [54] Market Data and Key Metrics Changes - The company is seeing strong traction with Tier 1 metering companies and has established a strong distribution channel with global distributors Avnet and RFPD [22][29] - The CBRS market in the U.S. is expected to provide growth opportunities, with the company launching low-cost Cat 4 and Cat 6 modules optimized for this market [39][42] Company Strategy and Development Direction - The company is focusing on expanding its portfolio for massive IoT and broadband IoT, with ongoing development of new chips for 5G applications [7][45] - A strategic shift towards partnerships with microcontroller vendors is being pursued to address the mass market, aiming to simplify the go-to-market strategy [27][84] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about overcoming previous market ramp delays and is looking forward to capitalizing on growth in the IoT market [8][50] - The company is actively monitoring the potential impact of the coronavirus on its supply chain and customer demand, but remains positive about its operational outlook [64][65] Other Important Information - The company closed two strategic deals in Q4 2019, expected to generate over $40 million in revenue over three years [9][48] - Cash flow from operations in Q4 was $16.9 million, with cash at year-end totaling $14.1 million, reflecting an upfront payment from a strategic deal [62] Q&A Session Summary Question: Can you provide color on the change in go-to-market strategy and microcontroller partnerships? - The company is focusing on Tier 1 customers and simplifying the go-to-market strategy through partnerships with distributors like Avnet, which are integrating Sequans technology into end-to-end solutions [77][80] Question: How should we think about product revenue into Q1? - The company expects to see a recovery in Cat 1 shipments and some broadband revenue, with a positive outlook for sequential growth in product revenue [92][93] Question: Can you discuss the timing of Cat M opportunities and the MCU front? - Training with distributors is ongoing, and while some products may ramp quickly, new customer acquisition through distributors may take longer [99][101] Question: How does CBRS factor into the numbers and the competitive landscape? - The company is investing in low-cost CBRS modules and has a significant market share among CBRS players, with expectations for module revenue growth [104][106] Question: Can you clarify the focus on 5G and upcoming announcements? - The company remains focused on fixed residential and industrial applications for 5G, with plans for announcements at Mobile World Congress [114][116] Question: Can you discuss gross margin expectations? - The company aims for a gross margin of about 45% over the course of 2020, with potential for improvement as the business shifts to a more chip-based model [120]