SEQUANS INVESTOR BRIEFING: 5G AND IOT - CAPITALIZING ON IMPORTANT TRENDS OF THE DECADE JANUARY 2021
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Sequans Investor Briefing: 5G and IoT Capitalizing on Important Trends of the Decade January 2021 Dr. Georges Karam, CEO
Interactive Q&A
Dial-in numbers:
1 (800) 263 0877 1 (720) 543 0197
©2021 Sequans Communications 2
Safe Harbor
This presentation contains projections and other forward-looking statements regarding future events or our future financial performance and potential financing sources. All statements other
than present and historical facts and conditions contained in this presentation, including any statements regarding our expected revenue for the fourth quarter of 2020, future revenue
potential, results of operations and financial positions, business strategy and plans, expectations for Massive IoT and Broadband and Critical IoT sales, the ability to continue to operate remotely
(as required) at high levels of productivity, increasing backlog of orders, the impact of the coronavirus on our manufacturing operations, and on customer demand, and our objectives for future
operations, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended). These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on
assumptions and subject to risk and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time.
Given these risks and uncertainties, you should not rely on or place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in
the projections or forward-looking statements. Except as required by law, we assume no obligation to update any forward-looking statements publicly, whether as a result of new information,
future events or otherwise. In addition to the risk factors contained in our Form 20-F for the fiscal year ended December 31, 2019, some of the factors that could cause actual results to differ
materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are
sold, (ii) unexpected increases in our expenses, including manufacturing expenses, (iii) our inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or
cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject due
to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers,
(viii) our inability to achieve new design wins or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, (ix) our inability to enter into and
execute on strategic alliances, (x) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain,
(xii) our ability to remediate material weaknesses in our internal controls relating to the impact of accounting changes relating to deferred tax assets and deferred tax liabilities related to the
application of IFRS to deferred taxes on debt instruments with equity components, (xiii) the impact of the coronavirus on the ability to operate our business and research, production of our
products, or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders, and (xiv) other
factors detailed in documents we file from time to time with the Securities and Exchange Commission. This presentation also contains estimates and other statistical data obtained from
independent third parties related to market size and growth. You are cautioned not to give undue weight to such estimates and data.
©2021 Sequans Communications 3
Welcome & Agenda
Market & Strategy – Georges Karam
Financial Model – Deborah Choate
Questions & Answers
©2021 Sequans Communications 4
We are Capitalizing on Two Major Technology Trends
©2021 Sequans Communications 5
We are Capitalizing on Two Major Technology Trends
~$8 Billion
Opportunity
2021-2025
©2021 Sequans Communications 6
Enabling IoT with
Cellular Connectivity
Cloud/Edge Wireless
Computing & AI Connectivity
• Internet of Things is key to “Digital
Transformation” mega-trend.
• IoT is connecting all things in the world in
real time to leverage AI for better
decisions.
• Goal is improving efficiency and
productivity, and enabling key
environmental/social responsibility
objectives.
Industry 4.0 Sustainable Optimized
• To realize these objectives, cloud/edge Productivity Development Energy
computing and AI must also have global,
reliable and secure wireless (cellular)
connectivity.
©2021 Sequans Communications 7
What Makes Sequans Different?
We are the only chip
company with a complete
range of cellular IoT
solutions fully-optimized for
non-smartphone applications
©2021 Sequans Communications 8
Cellular Technology Evolution
Voice Oriented Technology Adding Data Data Oriented Technology Adding More Data
2G 3G 4G 5G
1990s 2000s 2010s 2020s
Voice SMS www Voice SMS www
Voice SMS Voice SMS www
Highly Low
LPWA Video LPWA Reliable Latency
40-384 kb/s 56 Mb/s 150 Mb/s 5 Gb/s
©2021 Sequans Communications | Proprietary & Confidential 9
Sequans Focus: 4G/5G IoT
Cellular IoT
4G/5G IoT 2G/3G IoT
Connections
(billions)
Sequans’ Focus
Source: Ericsson Mobility Report November 2020
©2021 Sequans Communications 10Sequans Technology Maturity
8 Technology Generations of 4G/5G Leadership
2011
2016 2021
Introduce first
4G LTE-only
(FDD/TDD) chip Introduced Introduced 2nd
world’s first 2019 generation Cat 1
2005-2009 LTE-M/NB-IoT solution for IoT
2015 chip (5G-compliant)
2003 Introduced 3 Introduced 2nd 2022
generations of generation
Introduced first
4G WiMAX LTE-M/NB-IoT
4G LTE Cat 1
chips for platform for IoT
Founders chip optimized Plan to
broadband and (5G-compliant)
began for IoT introduce first
developing 4G mobile apps 5G NR solution
WiMAX chips for Broadband
& Critical IoT
©2021 Sequans Communications 11IoT Vision in the Coming 5G World
Broadband IoT
5G
Critical IoT Massive IoT
©2021 Sequans Communications 12Evolving and Diverging Technical Priorities
Broadband IoT Critical IoT Massive IoT
High Speed/ High
Bandwidth Efficiency Reliability
AR/VR Security
Smart Meters
Enterprise Indoor/Outdoor
Router Cloud Gaming Robotics E-Health
CPE
Low Low Power
Latency Consumption/Cost
©2021 Sequans Communications | Proprietary & Confidential 13Technology Choice Depends on Use Case
Consumer Applications Industrial Applications
Health Gas Pet Cloud Security Indoor/Outdoor Air Quality Advanced Asset Autonomous Fleet
Monitoring Meter Tracking Gaming CPE Sensor Robotics Tracking Vehicle Management
©2021 Sequans Communications 14Technology Choice Depends on Use Case
Consumer Applications Industrial Applications
NB-
Cat 1 LTE-M LTE-M 5G NR Cat 1 5G NR 5G NR LTE-M 5G NR Cat 1
IoT
©2021 Sequans Communications | Proprietary & Confidential 15Key Strength: Fully-Optimized Products
Sequans 5G/4G Product Portfolio Video
©2021 Sequans Communications 16Our Served Market
Served Cellular IoT Market
($ millions)
SAM excludes: 2500
• Smart phones/tablets
• Operators asking for 2G/3G fallback
2000
• China
1500
SAM growth by category:
1000
5-yr CAGR Units 5-yr CAGR $
500
Broadband/Critical IoT 32% 47%
0
Massive IoT 51% 36% 2020 2021 2022 2023 2024 2025
Broadband/Critical IoT Massive IoT
Total 46% 42%
Source: ABI Research, Techno Systems Research and Sequans’ estimates
©2021 Sequans Communications 17Industry Outlook
Dan Shey – Vice President
Enabling Platforms, ABI Research
Dan Shey, Managing Director and Vice President at ABI Research,
manages the M2M/IoT, digital security and wearables research services,
which cover the telecom, industrial, IT and OT ecosystems with a focus
on devices, connectivity, platforms, applications, big data/analytics,
convergence, and strategic analysis of the entire IoT value chain
extending from devices through value-added services. He plays an
essential role in helping clients decipher the complex relationships and
opportunities across the “digital first” and “physical first” domains.
With more than 25 years of industry experience, Dan frequently authors
reports and insights that extend across the IoT, industrial, consumer and
enterprise segments. Dan is frequently quoted in major industry trade
and business media, including The Wall Street Journal, Forbes, CNN,
Wireless Week, PC World, Cellular-News, and Network World.
©2021 Sequans Communications | Proprietary & Confidential 18Competition in 4G/5G IoT Served Market
Massive IoT Broadband IoT
LTE-M/NB-IoT Cat 1 Cat 4/Cat 6 5G NR
Not Optimized
NB-IoT Only
Chinese Vendors not included
©2021 Sequans Communications 19Smart Home and Consumer IoT Video
©2021 Sequans Communications 20Recent Developments
©2021 Sequans Communications | Proprietary & Confidential 21New Markets - Private Networks
Airport
Factory
College Campus
Stadium
Utility
Train Station
©2021 Sequans Communications 22CBRS in the U.S.
©2021 Sequans Communications 23CBRS Modules
Nick Taluja – EVP Worldwide Sales
©2021 Sequans Communications | Proprietary & Confidential 24New Go-To-Market Initiatives
Scale Sales Capability MCU
Partners
• Reps
• Distributors
Reps
Scale Channel Partners
• MCU Vendors
Distributors
©2021 Sequans Communications 25MCU Partners
Current Relationships Cover 55-60%
of Microcontroller Market
• Almost all IoT devices integrate an MCU
• Partners strengthen our position with
Tier#1 customers
• Partners help us accessing the “dark pipe”
of the IoT funnel
• Various approaches integrating Monarch Platform
• Joint development kits
• Branded module
• More integrated solutions can follow
©2021 Sequans Communications 26Next Generation Products
Monarch 2
©2021 Sequans Communications 27Next Generation Products
Calliope 2
©2021 Sequans Communications 28In Development: Taurus for 5G Broadband & Critical IoT
Private 4G/5G
Deployment
(Vertical Sectors, Harbors,
Airports, Mining, Campus)
Fixed Mobile
Wireless Access Routers
(Home, Business) (MiFi, Mobile Computing)
Critical IoT Industrial
(Automotive, Surveillance (Factories, Robotic, Power
Camera, AR/VR, Drones) Plants, Wireless Machinery)
©2021 Sequans Communications 29Valuable R&D Resources
R&D Headcount
400
Moderate Increase in Headcount 300
200
Relative to Opportunity Being Created
100
0
• Unique team delivering superior solutions 2013 2015 2017 2019 2021 2023 2025
compared with competitors with much
larger teams Served Market Opportunity
($ millions)
2500
• Sustained our R&D investment level to be
2000
aligned with Cellular IoT market potential
1500
and maintain technology leadership
1000
500
• In 2021 shifting substantial resources 0
from 4G to 5G Broadband IoT 2013 2015 2017 2019 2021 2023 2025
Source: ABI, Sequans estimates
©2021 Sequans Communications 30Large Business Pipeline
Engagements and Qualified
~ $500M of Potential Opportunities
Product Revenue
• Represents specific customer projects
where unit demand can be estimated
• Assumes 3 years of revenue from initial Product Design
production – some projects in production Wins
and some will be in 2021-2023
• Revenue from services not included
40% Secured by Design Wins
©2021 Sequans Communications 31Software Services for Vertical Markets
Satellite
Avionics
Public Safety,
Military
* Examples of announced partners and customers
©2021 Sequans Communications 325G Partnerships
Sovereignty
Relationship with Sequans Addresses
Multiple Challenges for Partners
• 2019 – major $35+ million strategic
partnership with Fortune Global 500 company IoT Focus 5G Avoid
Single
Vendor
• 2020 – recently announced a technology
access and license agreement with Renesas
• 2021 – leading a consortium in 5G project Extensive
funded by French government, just awarded Cellular
Expertise
• Ongoing discussions with multiple potential
strategic partners
©2021 Sequans Communications 33Financial Discussion
©2021 Sequans Communications 34Revenue Trends – Reacceleration of Annual Growth Expected in 2020
Annual Revenues ($MM) Quarterly Revenues ($MM)
60 Massive IoT Vertical Broadband IoT $16.0 (unaudited)
>60% y/y growth $15.0
50
$14.0
$40.3
$13.0
40
$12.0
$30.9
30 $11.0
$10.0
20 $9.0
$8.0
10
$7.0
(1)
0 $6.0
(1)
2018 2019 2020 Target Q3:19 Q4:19 Q1:20 Q2:20 Q3:20 Q4:20G
(1) Q4:20 target of 10% sequential revenue growth from Q3
©2021 Sequans Communications 35Key Financial Metrics and Long-term Model (non-IFRS)
% of Revenue 2019 YTD 2020 At Scale
Gross Margin 40% 46% 50%
Research & Development 75.5% 63.1% 15-20%
SG&A 49.4% 33.1% 10-15%
Operating Income (Loss) Margin (84.8%) (49.7%) >20%
Sept 30, 2020, on
At End of Period ($millions) 2019
proforma basis *
Cash & Equivalents, Short-term Deposits $14.1 $25.3
Short-term receivables financing $4.1 $14.4
Government advances & loans $19.9 $23.4
Convertible debt $30.7 $24.6
* Reflects conversion of notes in December 2020, reducing convertible debt from $35M reported at Sept. 30;
no other changes to previously published numbers. ©2021 Sequans Communications 36Highly Scalable Business Model
Revenue & Operating Leverage
($M)
>20% Operating Margin 200
at Scale (non-IFRS)
150
• Fabless semiconductor model
is highly scalable 100
• Required growth in opex is much lower >20%
than target revenue growth rate
50
0
Breakeven At Scale
Gross Profit Opex Operating Income
* Assumes no investment in new technology
©2021 Sequans Communications 37Investment Rationale
• We excel at developing vital, but difficult and complex technology
• Served market expected to show strong growth sustainable for years
• We have the right products and go-to-market strategy
• High barriers to entry for potential competitors
• Strategic partners partially funding 5G development
• Unique collection of very valuable assets – IP, knowhow, platforms, relationships
• The current market valuation does not fully reflect the company’s intrinsic value
©2021 Sequans Communications 38Interactive Q&A
Dial-in numbers:
1 (800) 263 0877 1 (720) 543 0197
©2021 Sequans Communications 39Smart City and Asset Management Video
©2021 Sequans Communications 40You can also read
