Sequans munications S.A.(SQNS) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's revenue for Q1 2023 was $11.9 million, a decrease of 14.3% year-over-year from $13.9 million in Q1 2022 and down from $15.9 million in Q4 2022 [32] - Gross margin reached a historic high of 78.5%, up from 68.1% in Q1 2022 and 75.3% in Q4 2022, primarily due to a higher proportion of licensing revenue [37] - The operating loss for Q1 2023 was $4 million, compared to a loss of $1 million in Q4 2022 and a loss of $2 million in Q1 2022 [33] - The net loss for Q1 2023 was $5 million or $0.10 per diluted ADS, consistent with the loss in Q4 2022, but down from a net income of $2 million in Q1 2022 [33] Business Line Data and Key Metrics Changes - Revenue from the Massive IoT segment accounted for approximately 28% of total revenue, with a sequential decline attributed to lower Cat 1 revenue due to inventory rationalization [16] - Broadband IoT revenue represented 72% of total revenue, driven by increased licensing and services revenue from 5G licensing deals, although it declined sequentially as expected [16] - The total pipeline increased to over $750 million in potential revenue, with 85% of Design Wins focused on Massive IoT projects [7][16] Market Data and Key Metrics Changes - The company is experiencing a rebound in customer projects, with three customers confirmed to resume production in 2023, contributing to a positive outlook for the second half of the year [27] - The company anticipates significant growth in the broadband segment, particularly with the Taurus 5G platform, which is expected to expand the addressable market by an additional $2 billion by 2025 [29] Company Strategy and Development Direction - The company is focused on expanding its 5G strategic partnerships and is optimistic about reaching new licensing agreements by the end of the year [6] - The strategy includes enhancing the product pipeline with new launches, particularly in smart metering applications, and leveraging partnerships to strengthen market presence [11][30] - The company aims to return to revenue growth in the second half of 2023, with plans to achieve profitability in the future [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing discussions regarding 5G IP licensing and the potential for new strategic partnerships [6][46] - The company acknowledged the challenges posed by inventory rationalization and project delays but remains optimistic about the recovery trajectory in the second half of 2023 [10][26] - Management highlighted the importance of the Taurus 5G platform as a key driver for future growth, with expectations for significant revenue contributions starting in 2025 [29][70] Other Important Information - The company secured a $20 million private placement to strengthen its balance sheet, which will support ongoing strategic discussions [22] - Cash and short-term deposits totaled $5.3 million at the end of Q1 2023, reflecting cash used primarily for capital expenditures and debt service costs [58] - The company is exploring non-dilutive funding options from European and French government sources, which could provide up to $50 million [38][50] Q&A Session Summary Question: Clarification on 5G product development timeline and strategic partnerships - Management confirmed that scheduled payments from a key customer were received and that discussions with several serious customers are ongoing, with expectations to close deals this year [42][45] Question: Expected revenue ramp in the second half of 2023 - Management indicated that product revenue is expected to grow in the second half of 2023, driven by design wins and initial shipments of new products [47][49] Question: Update on European and French government grants - Management stated that the European financing process is longer, with expectations to know results by Q3 or early Q4, while the French project is currently under evaluation [50][69] Question: Potential impact of macroeconomic conditions on project delays - Management acknowledged the risk of project delays due to macroeconomic factors but emphasized strong demand in the market and ongoing customer engagement [92][94]