Sequans Communications (SQNS) Q3 2024 earnings summary

Executive summary

• Achieved $10.1 million in Q3 2024 revenue, up 29.5% year-over-year and 4.2% sequentially, driven by strong licensing and product growth, notably from the Qualcomm transaction.

• Net profit reached $72.3 million (IFRS) and $80.5 million (Non-IFRS), primarily due to a $152.7 million gain from the Qualcomm asset sale.

• Cash and cash equivalents surged to $173.6 million at quarter-end, with $85 million in debt repaid after the quarter closed, resulting in a nearly debt-free balance sheet.

• Retained perpetual licensing rights to 4G IoT technology, supporting Monarch 2 and Calliope 2 platforms, and maintained almost 100% of existing design win projects, representing a $250 million three-year revenue pipeline.

• Focused R&D on next-generation 5G RedCap and e-RedCap solutions to drive future growth.

Financial highlights

• Q3 2024 revenue was $10.1 million, with product revenue at $2.4 million (up 144.5% year-over-year) and licensing revenue at $7.7 million (up 9.8% year-over-year), mainly from the Qualcomm Taurus 5G license.

• Gross margin was 82.5%, reflecting a high mix of licensing revenue; product gross margin was 36.9%.

• IFRS operating profit reached $87 million, driven by a $152.7 million net gain from the Qualcomm asset sale and offset by a $56.6 million impairment loss on 5G Taurus assets.

• Non-IFRS net profit for Q3 was $80.5 million, or $2.91 per diluted ADS.

• Cash flow from operations was $8.5 million for the nine months ended September 30, 2024.

Outlook and guidance

• Management expects approximately 10% sequential revenue growth in Q4 2024, with product revenue projected to double from Q3 levels.

• Licensing and service revenues to remain significant, with $13 million in Qualcomm-related licensing revenue to be recognized between Q4 and 2025.

• Targeting cash operating expenses below $10 million per quarter in 2025.

• Confident in achieving break-even by 2026, supported by anticipated revenue growth and cost efficiencies.