Sequans Investor Presentation - CEO May 2019 Dr. Georges Karam - Seeking Alpha
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Sequans Investor Presentation
May 2019
Dr. Georges Karam
CEO
©2018 Sequans Communications
MKT-FM-015-R05
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 release, including any statements regarding our future results of operations and financial positions, business strategy and plans, expectations for IoT and Broadband sales, 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 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. 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) the impact of natural disasters on our sourcing operations and supply chain, (xi) 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, and (xii) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. 2 ©2018 Sequans Communications
Sequans Overview Acknowledged leadership in LTE chips
optimized for IoT
LTE for IoT business grew 70% in 2018;
LTE for IoT Expected to Shift Revenue Mix
IoT growth expected to accelerate this
and Accelerate Growth *
year fueled primarily by the growth in
LTE-M/NB-IoT chip sales
Broadband and verticals continue to
offer moderate LT growth prospects,
after broadband’s trough quarter in
Q4:18
2016 2017 2018 2019
NYSE-listed (SQNS) – HQ: Paris; IoT Broadband/Verticals
273 headcount; 2018 revenue $40.3M;
global presence in 10 countries * Intended to portray anticipated order-of-magnitude shift in business model; does not
represent guidance since IoT ramp is highly dependent on timing factors beyond
Sequans’ control
3 ©2018 Sequans Communications
Expertise in carrier-grade cellular
Sequans’ Strengths
4G & 5G technology
Technology leadership
Optimized for higher data rate, features and Optimized for lower data rate, lower power
performance (Cat 4, Cat 6, 5G/Cat 19) consumption cost (Cat 1, Cat M1/NB1/NB2)
Optimized Cat M1/NB1 solutions shipping 12-18 months ahead of competition
Time-to-market advantage Certified by leading carriers
Benchmark for carriers’ certification process
Key strategic relationships Cellular carriers and other service providers worldwide
Technology partners
Strategic partners
4 ©2018 Sequans Communications
Optimized Family of Solutions for Multitude of Applications
Cassiopeia Colibri Calliope Monarch Monarch SX Monarch SiP Monarch N Monarch 2
Further optimized chips 5G/Cat 19 Cat 6 Cat 4 Cat 1 Cat M1/NB1/NB2 Further optimized/new chips
Higher data rates; higher performance Lower data rates, lower power
Broadband devices IoT devices
Mobile hotspot/ Set Top Box
router Industrial
Security Wearables Smart Energy Telematics and Smart Home
Router
Indoor/Outdoor CPE Vertical Asset Tracking
Gateway
Applications
5 ©2018 Sequans Communications
Technology Leadership Attracting Many Strategic Partners
Strong, established ecosystem
Global carriers, customers and technology partners
Validates technology
Augments go-to-market capabilities
Enables more integrated solutions A Foxconn Company
Representative high-value strategic relationships
Expanding Verizon, AT&T, T-Mobile, Sprint, DoCoMo,
DTAG relationships; engaged with Tier 1 carriers WW
Joint development project with Foxconn/Socle, PoLTE
Collaboration efforts with Skyworks and STMicro
Strategic project with TCL for 5G IPR
Funding from strategic investor to support 5G roadmap
Long-standing, supportive relationship with TSMC
6 ©2018 Sequans Communications
Evolution from M2M to IoT
Millions of Things Billions of Things
Short range: BLE, WiFi
2G Wireless
Long range: Cat 1, Cat M1/NB1, LoRa
LTE-M and NB-IoT designed for IoT
Networks ready
Special data plans
7 ©2018 Sequans Communications
Ecosystem developing rapidlyIOT Market
Estimated market size over 2018-2021 is IoT LTE CAT1 SM / M / NB-IOT TAM
458M units (CAT1 single-mode, M1, NB1) 250,000,000
CAGR 2017-2022 = 84% 200,000,000
Shipments (units)
Primary applications: 150,000,000
100,000,000
M2M driven by 2G/3G network
shut down and organic growth 50,000,000
Track & Trace 0
2018 2019 2020 2021
8 ©2018 Sequans Communications Source: ABI, TSR, Sequans judgmentRelationships with Carriers Worldwide
Telia Megafon
Bell Rogers BT/ EE Telenet/liberty Global
Telus KPN DT TMobile
Orange
Altice/SFR Vodafone China Mobile
T-Mobile Turkcell China Telecom KT
Verizon Telefonica TIM SKT DoCoMo
SwissComm China Unicom
DISH
Sprint SoftBank
AT&T Etisalat LGU+
KDDI
AIS
Singtel M1 Chunghwa
Cat-M1
Telstra
Cat-NB1 Telefonica
MTN Vodafone
Optus
Cat-M1 + Cat-NB1 Spark
9 ©2018 Sequans CommunicationsSequans’ Expanding Ecosystem of IoT Partners
Cat M1/NB1
Cat 1
10 ©2018 Sequans CommunicationsGrowing Pipeline of LTE-M and NB-IoT Projects
Cat M/NB design wins/advanced
design-in projects, representing
>$250M in future revenue during
Trackimo
39mm IoT estimated life Polymer Logistics
Tracker * Smart Pallet
Tracker *
Neebo
Connected Holdings Wagz Smart Sercomm “One-click”
Ordering Button * Wristlet for
Arrow M Vehicle Tracker Pet Collar * Babies *
*
11 ©2018 Sequans Communications * Example of announced Sequans-powered deviceAnnouncing Monarch 2 – Next Generation Cat M/NB Platform
Monarch
Low Power – Enables battery life of 1 month for consumer tracker, up to
15 years for smart meter
Low Cost – high level of integration, simple BOM, Single SKU™ RF front
end serving all frequency bands worldwide
Easy Integration – with pre-certified modules; application specific
platforms, and native support of cloud
Monarch 2 (second generation) :
Further improved power consumption
Integrates government-grade secure element
Integrates MCU/location engine to simplify design
Allows customers to re-use existing application software
Monarch N:
Single-chip Cat NB1/NB2 platform
12 ©2018 Sequans Communications Optimized for pure NB-IoT operationExpanding Broadband Product Family and Ecosystem
Millions of CPE, gateways and
mobile routers have been
deployed in tens of networks
all over the world
Indoor and outdoor CPE
Mobile router/hotspot
TDD and FDD bands
from 700 MHz to 5.8 GHz
including US CBRS
LTE and LTE-A
13 ©2018 Sequans CommunicationsExtending Leadership to 5G
Strategic 5G R&D partnership with TCL since 2015
Full engagement with 3GPP 5G standard definition process
5G R&D projects with European partners, financed by EU
Evolution of enhanced mobile broadband with millimeter and CBRS frequency bands
Evolution toward massive IoT and related challenges
New strategic investment to accelerate 5G roadmap
14 ©2018 Sequans CommunicationsHigh-margin Vertical Market Services Leading to New Projects
Leverage 4G/5G expertise to adapt technology to
applications for various vertical markets (e.g. public
safety, avionics, etc.)
Primarily consists of services revenue; products are low
volume, but high margin
15 ©2018 Sequans CommunicationsRevenue Growth
Annual Revenues ($MM) Quarterly Revenues
$60.0 $50.0
$11.3 Q4
$48.3
$50.0 $45.6 $40.0 $11-$13 Q3
$40.3 $14.0
$40.0 Q2
$32.5 $30.0 $11.3
$12.6
Q1
$30.0
$22.6 $20.0 $13.2
$20.0 $9.9
$10.0 $12.4
$10.0 $9.3
$0.0 $0.0
2014 2015 2016 2017 2018 2017 2018 2019
Note: IoT revenue grew 70% in 2018 vs. 2017 Note: IoT revenue grew 22% in Q1:19 vs. Q4:18
16 ©2018 Sequans CommunicationsBeginning in 2019, higher margin chipsets are expected to
become larger percentage of revenues vs. modules; operating
Operating Performance efficiencies implemented in Q4:18 followed by stringent expense
control expected to provide operating leverage as revenue is
expected to increase at a significantly higher rate over time than
expenses
$50.0
Gross margin trend
$40.0 $47.1
$40.9 $39.7 $40.7
$30.0 $36.7
2014 2015 2016 2017 2018 $20.0
$10.0
2014 2015 2016 2017 2018
30%(1) 40% (1) 44% 44% 40% (2)
$0.0
(1) Includes effect of provision for slow-moving WiMAX inventory
(2) Reflects higher proportion of modules in the revenue mix ($10.0)
($20.0)
($19.7) ($19.5)
($30.0) ($23.6)
($31.0)
($40.0) ($34.1)
Operating Loss Opex
17 ©2018 Sequans CommunicationsBalance Sheet
(1) Cash and loans/borrowings exclude
As of approximately $3.0 million in new
US$MM Mar. 31, 2019 convertible debt in May 2019
Total assets 61.4
(2) Loans and borrowings includes $20.9
-Cash and cash equivalents(1) $7.6 million of convertible debt issued in
2015 and 2018 (due in 2021) and 2016
- Total current assets 35.8 (due in 2020), $12.5 million of venture
Total liabilities $66.6 debt issued in 2018 (payable over 3.5
years), $3.7 million of short-term
- Loans & borrowings (1)(2) 44.3 financing of accounts receivable and
$7.2 million in government advances
- Total current liabilities 21.0 and loans.
Total equity ($5.2)
18 ©2018 Sequans CommunicationsSummary
Technology and market leader in single-mode LTE for IoT
Valuable 4G/5G intellectual property and scarce know-how
Worldwide relationships built over many years
Strong design win momentum across diverse applications and geographies
Highly desirable partner for wide variety industry participants
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