Sequans Communications S.A. (SQNS) Renesas Tender Offer Transaction Conference Call (Transcript)

Sequans Communications S.A. Conference Call Summary Company Overview - Company: Sequans Communications S.A. (NYSE: SQNS) - Event: Renesas Tender Offer Transaction Conference Call - Date: August 07, 2023 Key Points Proposed Acquisition by Renesas - Renesas intends to commence a tender offer to acquire all outstanding ordinary shares of Sequans for $3.03 per American Depositary Share (ADS), valuing Sequans at approximately $249 million, including net debt [7][13] - The transaction is expected to close by the first quarter of 2024, pending regulatory approvals and customary closing conditions [8][13] - The acquisition is seen as a significant development, allowing Sequans to leverage Renesas' global sales and support organization to enhance design wins in the massive IoT and broadband IoT markets [9][10] Strategic Benefits of the Acquisition - The combination with Renesas will expand Sequans' addressable market and revenue potential, particularly in cellular IoT [9] - Integration with Renesas' operations is expected to lead to lower costs, improved operational margins, and foster innovation [10] - Sequans is experiencing strong momentum in design wins and diversifying its product offerings, positioning itself for long-term growth [10] Financial Aspects - The acquisition value considers the repayment of approximately $60 million of Sequans' debt, representing more than a 4x multiple of trailing 12-month sales [13] - Completion of the tender will require tenders of 90% of the outstanding share capital of Sequans on a fully diluted basis [14] Regulatory Approvals - Regulatory approvals are required from France, the UK, Japan, Taiwan, and the US, but not from China [19] Current Business Environment - Sequans has gained four new projects in the metering segment, including two major ones, indicating strong momentum [10] - The company is projecting significant shipments of its Cat 1 Calliope 2 platform next year, with many design win projects expected to ramp up in early 2024 [11] - The 5G Taurus chip is on track for sampling in Q4, with considerable engagement from prominent OEMs and ODMs [11] Challenges and Inventory Management - The timeline to move design wins into production has been longer than initially forecasted due to existing customer inventory issues [12][23] - Customers are waiting to consume their existing inventory before transitioning to Sequans' new products [30] Future Outlook - The strategic licensing partnership for 5G technology is expected to generate a royalty stream of up to $10 million annually [12] - The company remains optimistic about exiting the year with improved inventory situations and strong project pipelines [30] Additional Insights - There is no breakup fee associated with the MoU with Renesas, and the French government has delayed decisions on pending grants to the end of September [27] - The integration with Renesas is expected to create more positive synergies than negative ones, allowing for a broader offering to customers [35][37] Conclusion - The decision to enter into an agreement with Renesas is viewed as a strategic move to unlock Sequans' full potential and is considered beneficial for all stakeholders involved [16]