Sequans Communications (SQNS) Q2 2024 earnings summary

Executive summary

• Announced agreement to sell 4G IoT technology to Qualcomm for $200 million in cash, retaining a perpetual license for ongoing use and development, and full ownership of 5G assets.

• Transaction expected to close by end of October 2024, subject to French regulatory approval.

• Q2 2024 revenue reached $9.7 million, up 60.5% sequentially and 5.6% year-over-year.

• License and services revenue comprised 75% of Q2 revenue, driven by a major manufacturing license agreement.

• Net loss narrowed to $0.9 million in Q2 2024 from $11.8 million in Q1 2024 and $9.1 million in Q2 2023.

Financial highlights

• Product revenue was $2.4 million, flat sequentially but up 144.5% year-over-year.

• Service revenue was $7.2 million, largely from a Monarch 2 manufacturing license agreement with Qualcomm.

• Gross margin improved to 84.0% from 63.9% in Q1 2024 and 82.3% in Q2 2023.

• Operating loss reduced to $3.7 million from $8.5 million in Q1 2024 and $5.4 million in Q2 2023.

• After transaction close, company expects to be nearly debt-free with ~$80 million cash and only $3 million low-interest government debt remaining.

Outlook and guidance

• Anticipates modest product revenue increase in Q3 and stronger performance in Q4 2024.

• Expects higher product revenue for full year 2025 compared to 2024, driven by more customer products entering mass production.

• Impact of Qualcomm transaction on licensing/services results for H2 2024 not yet finalized.

• Design win activity expected to accelerate as financial position improves.