Sequans Communications (NYSE: SQNS) reported Q4 EPS of ($0.28), $0.03 worse than the analyst estimate of ($0.25). Revenue for the quarter came in at $15.8 million versus the consensus estimate of $15.54 million.

Fourth Quarter and Fully Year 2020 Highlights:

• Revenue: Revenue was $15.8 million, an increase of 11.8% compared to the third quarter of 2020 and an increase of 58.4% compared to the fourth quarter of 2019. Full-year revenue for 2020 was $50.9 million, an increase of 65.0% compared to $30.9 million for 2019.
• Gross margin: Gross margin was 45.1% compared to 42.0% in the third quarter of 2020, and compared to 51.2% in the fourth quarter of 2019. Full-year gross margin increased from 40.1% in 2019 to 46.1% in 2020.
• Operating loss: Operating loss was $5.4 million compared to $5.9 million in the third quarter of 2020 and $4.6 million in the fourth quarter of 2019. Full year operating loss for 2020 was $24.7 million compared to $28.0 million for 2019.
• Net loss: Net loss was $11.3 million, or ($0.36) per diluted ADS, compared to $9.0 million, or ($0.30) per ADS, in the third quarter of 2020 and $8.1 million, or ($0.34) per ADS, in the fourth quarter of 2019. Net loss in the fourth quarter of 2020 includes a $0.1 million gain on revaluation of the embedded derivative arising from the amendments to the convertible debt made in March 2020. The revaluation was a $1.5 million gain in the third quarter of 2020. Full year net loss for 2020 was $54.5 million, or ($1.94) per ADS, compared to $36.7 million, or ($1.54) per ADS, for 2019. Net loss for the full year includes a $13.1 million loss on the revaluation of the embedded derivative and a $1.4 million non-cash gain recorded as a result of the amendments to the convertible debt agreements.
• Non-IFRS Net loss and diluted loss per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, the non-cash impact of convertible debt amendments, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $8.5 million, or ($0.28) per ADS, compared to $8.4 million, or ($0.28) per ADS in the third quarter of 2020, and $6.8 million, or ($0.29) per ADS, in the fourth quarter of 2019. The non-IFRS net loss includes foreign exchange losses of $1.9 million, or ($0.06) per ADS, in the fourth quarter of 2020 and $0.9 million, or ($0.03) per ADS, in the third quarter of 2020 and a foreign exchange loss of $0.8 million, or ($0.03) per ADS, in the fourth quarter of 2019. Full year non-IFRS net loss for 2020 was $33.0 million, or ($1.17) per ADS, compared to $31.6 million, or ($1.33) per ADS in 2019. Full year non-IFRS net loss for 2020 includes foreign exchange losses of $2.6 million, or ($0.09) per ADS, compared with a foreign exchange gain of $0.1 million, or ($0.00) per ADS, in 2019.
• Cash: Cash, cash equivalents and short-term deposits at December 31, 2020 totaled $18.5 million compared to $25.3 million at September 30, 2020.

"We had a strong finish in 2020 and we are off to an excellent start for 2021," said Georges Karam, CEO of Sequans. "Our fourth quarter revenue growth exceeded our target, even as demand related to portable routers began to return to pre-COVID levels, leading to year-over-year growth of almost 65%. Some of our most important accomplishments in 2020 included the strengthening of our go-to-market capabilities via relationships with new distributors and MCU partners, extending our technology leadership by introducing the second generation of our Monarch platform, and reaching important milestones in our 5G development, which is expected to create another major growth engine for the company. Several of these initiatives are already making a positive contribution and all will help sustain our momentum as time goes on, and support our goal of an average of 50% annual growth for the five-year period beginning in 2020.

"We are entering 2021 with the highest-ever level of backlog, driven by strong demand in the Massive IoT business. Since the end of 2020, we have secured several key Massive IoT design wins within our strong pipeline of developing business which will help offset lower revenue related to portable routers in 2021 and support our long-term growth objectives.”

Q1 2021 Outlook

The following statement is based on management’s current assumptions and expectations and assumes no increase in the severity or duration of the COVID-19 pandemic. This statement is forward-looking and actual results may differ materially.

Overall demand, driven mainly by Massive IoT, continues to be strong and supports the company’s short and long-term growth targets despite the already-anticipated reduction in the portable router business. Management expects Q1 2021 revenue to follow the company’s typical seasonal pattern of a decline compared to Q4; management has decided not to give specific quarterly guidance in view of the potential impact of industry-wide supply chain bottlenecks, which could delay some shipments.

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