Sequans Communications (NYSE: SQNS) reported Q1 EPS of ($0.36), $0.01 better than the analyst estimate of ($0.37). Revenue for the quarter came in at $8.8 million versus the consensus estimate of $8.76 million.

First Quarter 2020 Highlights:

• Revenue: Revenue was $8.8 million, a decrease of 4.3% compared to the fourth quarter of 2019 and an increase of 35.6% compared to the first quarter of 2019.
• Gross margin: Gross margin was 51.3% compared to 47.0% in the fourth quarter of 2019, and compared to 35.9% in the first quarter of 2019.
• Operating loss: Operating loss was $7.8 million compared to $5.6 million in the fourth quarter of 2019 and $8.0 million in the first quarter of 2019.
• Net loss: Net loss was $10.6 million, or ($0.44) per diluted ADS, compared to $9.2 million, or ($0.38) per ADS, in the fourth quarter of 2019 and $9.6 million, or ($0.41) per ADS, in the first quarter of 2019.
• Non-IFRS Net loss: Excluding the non-cash stock-based compensation, the non-cash impact of convertible debt amendments, effective interest adjustments related to the convertible debt and other financings, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $8.7 million, or ($0.36) per ADS, compared to $7.9 million, or ($0.33) per ADS in the fourth quarter of 2019, and $8.3 million, or ($0.35) per ADS, in the first quarter of 2019.
• Cash: Cash and cash equivalents at March 31, 2020 totaled $5.1 million compared to $14.1 million at December 31, 2019. The cash balance at the end of March 2020 excludes $2.2 million in proceeds from a new loan from BPI France, the French government investment bank, as well as $2.8 million expected in May from the payment of the 2019 French research credit and €5 million of proceeds from new French government debt financing expected to be finalized in the second quarter as part of the French COVID-19 economic support plan.

”On balance, the impact thus far on the demand for our products from COVID-19-related developments is more positive than negative,’ said Georges Karam, CEO of Sequans. ‘We are seeing a continuation of the surge in demand for modules from the U.S. for use in portable routers. This augments the ongoing improvement expected in our Broadband IoT business driven by new customers serving emerging markets and our strong position in the Citizens Broadband Radio Service (CBRS) market. In our Massive IoT business, demand associated with devices that are in mass production is good, and we are seeing more interest in solutions for devices and applications serving a reduced-contact economy, from industrial monitoring to remote healthcare. The real promise of 5G has never been more apparent than ever in this environment where existing networks are straining to meet current needs.

“On the operations side, our contract manufacturers in China have returned to normal operations after restrictions prompted by COVID-19 caused some capacity constraints for modules during Q1. Most of our own people are still operating under stay-at-home restrictions, with a high degree of productivity given the inherent challenges.

‘With a large backlog of orders, we expect significant revenue growth in the second quarter despite certain supply and delivery risks. We are taking measures to deal with extended lead times on some components, and we are also adding more module capacity, since we see the module demand in Broadband IoT remaining at a relatively high level even after stay-at-home orders are lifted. Meanwhile, we continue to keep a close watch on Massive IoT projects scheduled to launch later this year, which could be subject to delays or changes in priorities due to this unprecedented situation.

“While technology can’t begin to compensate for the human and economic hardship caused by this global pandemic, we are gratified to be able to contribute by supplying connectivity to a variety of devices that help people and businesses carry on and make the transition to the next phase. More significant than the specific level of business in a particular accounting period is the likelihood that this crisis will reinforce and perhaps accelerate established trends that we expect to fuel our growth over the coming years.”

GUIDANCE:

Sequans Communications sees Q2 2020 revenue of $12 million, versus the consensus of $11.14 million.

Sequans expects revenue of at least $12 million for the second quarter of 2020, which represents more than 35% sequential growth and approximately 50% growth year over year. The backlog of orders and indications regarding customer demand support upside to this expectation, but the company also sees risks, including potential supply chain issues, caused by the impact of the coronavirus.

For earnings history and earnings-related data on Sequans Communications (SQNS) click here.