Sequans Communications S.A. Q1 FY2026 earnings call

Capital Allocation Strategy - Focused on executing IoT strategy, scaling product business, advancing 5G roadmap. Negotiated early redemption of $94.5 million convertible debt by June 1st 2026, funded by selling Bitcoin collateral. By June 1st, expect near debt-free balance sheet with at least 600 Bitcoin as encumbered asset. Intend to monetize Bitcoin holdings in disciplined manner. ### Operational Side - IoT semiconductor business has solid momentum. Product pipeline driven by 4G CAT-M, CAT-1 BIS, RF transceiver, and early 5G eRadCap engagements. CAT-M scaling with asset tracking and smart metering. Cat1biz positioned for breakout year with multiple customer ramps. RF transceiver has stable demand from existing customers and new prospective customers in defense and drone. Advancing 5G eRETCAP program, received first engineering test chips, target customer sampling in second half of 2027. Services and licensing have ongoing discussions for revenue. Supply chain facing memory pricing increases, working on addressing cost pressures and securing supply. Cost reduction plan implemented, expecting expense targets met in second half. ### Financial Results - Q1 2026 total revenue $6.1 million, compared to $6.9 million in Q4. Gross margin 37.7% vs 41.4% in Q4. Operating expenses $11.8 million vs $12.3 million in Q4. Non-cash charges related to Bitcoin holdings $29.3 million vs $56.3 million in Q4. Realized losses on sale of Bitcoin $11.7 million vs $6.1 million in Q4. IFRS net loss $54.3 million vs $76.4 million in Q4. Non-IFRS net loss $20.7 million. Cash burn normalized ~$10 million in Q1. Redeemed $28.3 million of debt, held 1,514 Bitcoin at end of Q1, expected to hold at least 600 Bitcoin after full debt redemption.

IoT semiconductor business generated $6.1 million revenue in Q1. Product revenue shows continuous strength despite supply challenges, with order backlog at ~$22 million product-related for the year and early indications of orders into next year's Q1. 44% of over $300 million potential three-year product revenue from design wind projects were in production in Q1, with three additional design wind projects transitioning to production and expecting more in Q2. More than half of current design wind pipeline expected in production by end of June, representing ~$150 million potential three-year revenue. Services and licensing business is an important source of high margin revenue with ongoing discussions for 2026, including large global partners, licensing, and collaboration opportunities.

Second Quarter Outlook - Expect revenue in range of $6.8 million to $7.4 million, predominantly product revenue with potential upside from new licensing deals. ### Full Year - Continue to evaluate strategic alternatives to accelerate profitability. Expect revenue to build sequentially throughout the year. Aim to reach cash flow break-even by end of the year as revenue scales. ### 5G IoT - Believe 5G IoT represents significant long-term growth opportunity with improved pricing dynamics relative to 4G.

Market and Business Risks - Forward-looking statements subject to risks and uncertainties. Competitive and rapidly changing environment with new risks emerging. Supply chain challenges including memory pricing increases. Timing variability in revenue recognition for services and licensing. Potential delay in converting design wind projects to production, especially for Cat1biz projects. ### Balance Sheet and Bitcoin Risks - Digital asset strategy subject to market conditions. Fluctuations in Bitcoin prices could impact balance sheet and capital allocation. Uncertainty in monetizing Bitcoin holdings in disciplined manner while maintaining liquidity for operations.

Q: Luke Horton from Northland asked about 5G roadmap and pipeline, specifically eRedCap's opportunity relative to existing CatM, Cat1 business, confidence in $300 million pipeline and sequential growth, and digital asset strategy after June 1st redemption.

A: George Karam responded that eRedCap will replace CatM, Cat1, etc., with larger opportunity and higher ASP. Confidence comes from backlog and design win ramp. After June 1st, will monetize Bitcoin in disciplined manner without sacrificing IoT.

Q: Scott Searle from Roth Capital Partners asked about RF business momentum, revenue, backlog, licensing opportunities, second half product ramp confidence, Cat1Biz competitive landscape, and OpEx in second half.

A: George Karam said RF business has ~$5 million revenue secured for year with potential growth in defense and drone markets. Confidence in product ramp from production projects. Cat1Biz has some design wins but needs second half ramp. OpEx expected to keep coming down with target cash operating expenses below 10 million.

Q: Jacob Stephen from Lake Street Capital Markets asked about balance sheet post-June 1, supply chain confidence, and preferred use of proceeds from Bitcoin sale.

A: George Karam explained balance sheet post-June 1 will be near debt-free. Confidence in supply chain but may face margin impact for upside. Proceeds from Bitcoin sale could be used for share buybacks opportunistically.

Q: Fedor Shebelin from B. Reilly asked about preferred use of proceeds from remaining Bitcoin sale and details on operating expense savings.

A: George Karam said proceeds could be used for share buybacks. Operating expense savings come from R&D focus on 5G, headcount reductions, and G&A expense reductions across the board.