SQNS

• Capital Structure Update: Management substantially concluded the company's Bitcoin treasury strategy, fully redeeming all outstanding convertible debt via opportunistic Bitcoin sales. The company ended Q2 2026 with $21 million in cash and 314 Bitcoin remaining (valued at ~$20 million at current market prices), and now holds a completely debt-free, unencumbered balance sheet with full financial flexibility. Remaining Bitcoin will be monetized opportunistically. There was a leadership transition, with Norman Brodt succeeding the retired Deborah Choate as CFO.
• Core IoT Semiconductor Momentum: Q2 product revenue exceeded prior quarter guidance, with 23% sequential revenue growth and strong order momentum. More than 40 DesignWin projects are now in mass production, with a growing backlog that extends into 2027. Of the >$300 million 3-year potential design win pipeline (reported at end-2025), 55% ($165 million) is now in mass production, representing a 3x year-over-year increase. The company secured 10 new design wins in Q2 2026, with a similar number transitioning to mass production.
• Product Segment Developments: CAT-M remains the core growth driver, led by asset tracking and smart metering applications, with production performance ahead of plan. Cat1Biz is gaining traction across telematics, security, and industrial applications, with ramps expected to continue through H2 2026. The RF transceiver business saw growing interest from defense and drone markets; the company began shipping its SQN 9506 development kit to prospects and secured its first drone program, with shipments starting in early 2027. 5G eRedCap development remains on track, with in-house test chips complete and customer sampling targeted for H2 2027; commercial product revenue is expected to start in 2028, with meaningful licensing and services revenue expected ahead of product launch.
• Licensing and Services: The high-margin licensing and services business has multiple active advanced discussions with global partners, with potential individual deal values ranging from hundreds of thousands of dollars to over $10 million. Management expects a meaningful revenue increase from this segment in H2 2026 once deals close.
• Supply Chain and Cost Management: Broad semiconductor supply chain constraints (including for memory, silicon, and packaging) are expected to persist beyond 2026. The company has secured supply for baseline 2026 demand, and is now securing 2027 capacity, with a multi-sourcing strategy to reduce supplier dependence. Management remains focused on disciplined cost reduction to lower operating expenses and reduce cash burn, targeting break-even operating run rate as product revenue scales.

• Third quarter 2026 revenue guidance is set at $8.5 million to $10 million, with continued core product growth driving the lower end of the range, and the upper end contingent on closing a significant licensing deal in the quarter.
• Management confirms the long-term target of reaching operating break-even by the first half of 2027, and expects to be very close to or at break-even on a full-year 2027 basis, supported by sequential product growth, ongoing cost control, and expected H2 2026 licensing revenue.
• Operating expense is targeted to fall to a recurring $10 million per quarter in H2 2026, down from $11.9 million in Q2 2026.
• For the RF transceiver business, management expects revenue to approach at least $5 million in 2027, with the opportunity to scale to $10-$20 million annually in subsequent years with 90%+ margins.
• Management expects 10 percentage points of additional design win pipeline conversion to mass production by the end of 2026, following the 11 percentage point conversion seen in the first half of 2026.

Total company revenue for Q2 2026 was $7.5 million, a 23.2% sequential increase from Q1 2026. Product sales (the core IoT semiconductor business) contributed ~90% of total Q2 revenue, with product sales up 39% sequentially and almost 100% year over year. Product sales were the overwhelming majority of revenue, and have increased more than 80% year over year overall. The licensing and services segment contributed a modest share of Q2 2026 revenue; this segment carries high margins (near 90% for RF technology licensing), and has meaningful high-margin upside from pending opportunities. The RF transceiver sub-segment within the product business is an early-stage growth area that currently generates ~$3 million annually in predictable revenue, with high 90%+ margins.

• Persistent broad semiconductor supply chain constraints, including volatility in memory chip pricing that can change significantly month-to-month, and pressure on silicon and packaging capacity, which are expected to continue beyond 2026.
• Timing of licensing revenue is unpredictable; large licensing deals require extended negotiation, and revenue recognition depends on deal close timing within the quarter, creating revenue variability.
• Bitcoin price volatility creates uncertainty for the value of remaining holdings, and the company missed an earlier window for full liquidation when Bitcoin prices declined after convertible debt redemption.
• IoT design win conversion takes extended time (customers require long lead times to move from design to mass production and shipping), creating uncertainty around near-term revenue growth timing.
• Suppliers do not count Bitcoin holdings the same as cash on the balance sheet, which can create challenges for securing long-term supply commitments.

Q: Is the original target of operating breakeven in H1 2027 still on track, given the 3x year-over-year increase in production design wins? / A: Management confirms the target remains on track. Growing production projects have created much more predictable revenue visibility into 2027, with expected continued sequential product growth. The company remains committed to cost control, and expected H2 2026 licensing and government grant revenue will help support reaching the breakeven target. Most organic growth is driven by new production projects rather than price increases, with this growth expected to continue through 2027 at similar rates.

Q: What is the end-goal for the remaining Bitcoin holdings, and is there any urgency to liquidate to fund core operations? / A: The company's official strategy is full liquidation as soon as reasonably possible to eliminate balance sheet volatility and convert assets to cash that suppliers recognize for capacity commitments. There is no near-term urgency to liquidate at current depressed prices, as the company already has sufficient cash for 2026 operations and expects incoming revenue from licensing and government grants. Liquidation will happen opportunistically when prices improve, but the company will not hold Bitcoin long-term.

Q: What is the size of the RF drone/defense market opportunity and 2026/2027 revenue expectations? / A: The current RF business already generates $3 million in annual predictable revenue with 90%+ margins. There are currently over 20 active prospective opportunities, with the first drone design win already secured and shipments starting in early 2027. Management expects RF revenue to reach at least $5 million in 2027, with long-term scaling potential to $10-$20 million annually.

Q: What is the expected cadence for converting the remaining 45% of the $300 million 3-year design pipeline to production, and are new drone opportunities included in the pipeline? / A: The pipeline converted 11 percentage points (from 44% to 55%) in H1 2026, and management targets another 10 percentage points of conversion by end-2026. Conversion speed varies by customer and product, with CAT-M converting much faster than Cat1Bis. New drone and defense RF opportunities are already included in the existing pipeline total.