Sequans Communications S.A. (SQNS) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call provides mixed signals: strong guidance for future revenue growth and strategic partnerships, but current financials show increased losses and cash burn. Positive aspects include potential high-margin IP licensing and a disciplined Bitcoin strategy. However, uncertainties in supply chain and lack of specific guidance details weigh on sentiment. The stock buyback plan and cost reduction efforts are positive, but the overall impact is neutral due to immediate financial challenges and market uncertainties.
Key Financial Performance
Q4 2025 Revenue $7 million, predominantly product-based with 94% from product sales and 6% from services. This reflects strong incremental growth in product shipments.
Full Year 2025 Revenue $27.2 million, including nonrecurring Qualcomm-related revenue. Adjusted underlying business revenue was closer to $20 million, showing a ramp throughout the year.
Q4 2025 Revenue Growth 72.6% sequential increase, driven primarily by growth in product revenue.
Gross Margin Q4 2025 37.7%, impacted by provisions for slow-moving inventory. Excluding these provisions, gross margin would have been approximately 43%, compared to 42.4% in the prior quarter.
R&D and SG&A Expenses Q4 2025 $11.5 million, down from $13.6 million in Q3, reflecting cost reduction efforts.
Bitcoin Holdings End of Q4 2025 2,139 Bitcoin with a market value of $187.1 million. 1,617 Bitcoin valued at $141.5 million were pledged as collateral for convertible debt, and 522 Bitcoin valued at $45.6 million were unencumbered.
Net Cash Equivalent Position End of Q4 2025 Exceeds $68 million after adding cash balance and netting out convertible debt.
Non-IFRS Net Loss Q4 2025 $18.5 million or $1.19 per ADS, compared to $11.3 million or $0.81 per ADS in Q3. Excluding the $8.4 million realized loss on Bitcoin sale, the loss would have been just over $10 million.
Normalized Operating Cash Burn Q4 2025 Approximately $7.7 million, including primary working capital movements.
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Operating Highlights
5G eRedCap chip: Continued investment in the 5G eRedCap chip R&D program, with first test chips expected this quarter and customer sampling beginning in mid-2027.
IoT semiconductor business: Generated $7 million in Q4 revenue, predominantly from product sales. Full-year 2025 revenue was $27.2 million, with an adjusted underlying business revenue of $20 million. Targeting $40-$45 million in 2026 revenue.
Cat-M and Cat 1bis technologies: Cat-M is driving growth in asset tracking and smart metering, while Cat 1bis is expected to see significant growth in telematics and security in 2026.
RF transceivers: Committed backlog in place with additional demand expected in the second half of 2026.
Design win pipeline: Exiting 2025 with a revenue funnel exceeding $550 million in potential 3-year product revenue, including $300 million from design win projects. 44% of design wins are in production, generating revenue.
5G eRedCap adoption: Mobile network operators in the U.S. are accelerating the transition from 4G to 5G, with IoT applications being a key focus.
Global revenue outlook: Targeting $40-$45 million in total global revenue for 2026, supported by a significant order backlog and increasing production of design win projects.
Capital management: Repurchased 9.7% of outstanding ADSs in Q4 and approved a new buyback program for up to an additional 10%. Focused on rightsizing operating expenses and reducing cash burn to achieve breakeven by Q4 2026.
Supply chain management: Addressing substrate constraints by adding suppliers and managing memory pricing pressures to minimize impact on business.
Bitcoin digital asset treasury: Managing Bitcoin holdings valued at $150 million, with actions like repurchasing ADSs to create per share value. Sold Bitcoin to fund debt redemption and share buybacks.
Strategic alternatives: Evaluating options to accelerate profitability and unlock additional value across IoT business and treasury strategy.
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Risk or Challenges
Supply Chain Constraints: The company is addressing substrate constraints by adding suppliers to reduce single-source exposure and improve resiliency. Memory pricing and capacity pressures are also affecting both the company's products and customers' devices, potentially influencing shipment timing and costs.
Revenue Timing Risks: Approximately $1 million of revenue could shift from Q1 to Q2 2026 due to manufacturing and shipment timing planned for the end of Q1.
Bitcoin Valuation and Financial Impact: The company recorded a $56.9 million noncash impairment charge related to the mark-to-market value of Bitcoin holdings and an $8.4 million net realized loss on Bitcoin sales in Q4 2025. These factors significantly impacted financial results.
Convertible Debt and Financial Risks: The early redemption of half of the convertible debt resulted in a $29.1 million loss, primarily noncash. The remaining convertible debt is collateralized by Bitcoin, exposing the company to further financial risks tied to Bitcoin valuation.
Operating Expense Management: The company is focused on reducing operating expenses to achieve breakeven by Q4 2026. However, working capital dynamics may create short-term cash flow variability.
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Guidance & Outlook
Revenue Expectations for 2026: The company targets approximately $40 million to $45 million of total global revenue for 2026, supported by improving visibility and a significant order backlog.
Revenue Funnel and Design Win Pipeline: The company exits 2025 with a revenue funnel exceeding $550 million in potential 3-year product revenue, including over $300 million from design win projects. Approximately 44% of these design wins are already in production, representing $132 million of potential 3-year revenue.
Production and Design Win Momentum: The company expects to have over 50% of current design win projects in production by the end of June 2026. Nine new customer projects were added to the design win pipeline in Q4 2025, and three existing projects transitioned into production.
Product Family Growth Drivers: Cat-M and Cat 1bis technologies are expected to drive growth in 2026, with Cat-M leading in asset tracking and smart metering deployments and Cat 1bis positioned for a breakout year in telematics and security. RF transceivers have committed backlog, and additional demand is expected in the second half of 2026.
5G eRedCap Development: The company expects to receive its first test chips for 5G eRedCap in Q1 2027, with customer sampling beginning mid-2027. Demand for 5G eRedCap is strengthening as mobile network operators accelerate the transition from 4G to 5G.
IP Licensing and Services Business: The company anticipates high-margin upside in 2026 from IP licensing and services, with individual opportunities ranging from $2 million to $10 million or more.
Supply Chain and Cost Management: The company expects little to no impact on its business in the first half of 2026 and limited impact in the second half due to supply chain constraints. Efforts are underway to reduce single-source exposure and pass through cost increases where appropriate.
Cash Flow and Breakeven Goals: The company aims to reduce cash burn and reach a breakeven run rate by Q4 2026. Operating expenses are being rightsized to support this goal while protecting innovation.
Q1 2026 Revenue Expectations: Revenue for Q1 2026 is expected to be around $6.5 million, with a risk of approximately $1 million shifting into Q2 due to manufacturing and shipment timing.
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Shareholder Return Plan
Repurchase of ADSs in Q4 2025: During the fourth quarter, the company repurchased approximately 9.7% of its outstanding ADSs.
New ADS Repurchase Program: The Board approved a new ADS repurchase program authorizing the buyback of up to an additional 10% of the outstanding ADSs.
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Key Q&A
Q:How is the company thinking about licensing in terms of the $40 million to $45 million guidance figure?
A:The company is taking a conservative approach, assuming an additional $5 million to $6 million in secured licensing for the year, which could bring $2 million to $3 million per quarter after Q1. The guidance assumes 80%-85% product and 15%-20% services for the year.
Q:What is the expected percentage of design wins to be in production by midyear and year-end?
A:The company estimates that at least 50% of the $300 million design win pipeline will be in production by midyear, and potentially 75% by year-end.
Q:What is the breakeven cash flow target and its components?
A:The breakeven cash flow target is $15 million to $16 million, with $3 million from services and the remaining from products. The mix of services and products affects the margin.
Q:What is the outlook for the transceiver business?
A:The transceiver business is expected to generate over $5 million, potentially reaching $7 million this year. Future opportunities could grow to $15 million to $20 million annually if successful with new customers in defense, public safety, and other applications.
Q:What is the impact of memory supply chain issues and competitive landscape for Cat 1bis and eRedCap?
A:Memory supply chain issues are causing price increases and lead time constraints, which the company is managing through multiple sourcing and customer discussions. For Cat 1bis, the market is a duopoly between Qualcomm and Sequans, with most design wins in this category. For eRedCap, the company is in a leading position and expects to sample to customers by mid-2027, with revenue anticipated in mid-2028.
Q:What is the breadth of customers and average order size for design wins in mass production?
A:The 44% of design wins in mass production represent over $130 million in 3-year revenue. Customers range from those ordering 50,000 units per quarter to over 1 million units annually, across more than 30 diversified projects.
Q:What is the progress on reducing OpEx and achieving cash flow breakeven by Q4?
A:The company targets reducing OpEx to $10.5 million per quarter in the second half of the year, with $1.5 million in depreciation. Cash flow breakeven is expected with $3 million in services and $13 million in product revenue at a 45% gross margin.
Q:What is the revenue timeline for the eRedCap chip?
A:The eRedCap chip is expected to generate revenue by mid-2028, with testing and customer sampling starting in 2027. The timeline aligns with infrastructure readiness and customer adoption.
Q:What is the expected revenue growth trajectory for 2027 and beyond?
A:The company expects 60%+ growth in 2027, driven by the conversion of the remaining 60% of the design win pipeline and maturing LTE and Cat 1bis programs. The eRedCap chip is expected to add significant growth in 2028.
Q:What is the company's approach to stock buybacks?
A:The company has authorization to repurchase up to 10% of outstanding ADSs and is assessing the pace based on share price and Bitcoin price dynamics. The intention is to reduce outstanding shares and return value to shareholders.
Q:What is the Q1 guidance and potential risks?
A:Q1 guidance is $6.5 million, with some risk of slippage into Q2 due to supply chain timing issues. Orders are in place, but exact timing of shipments may affect quarterly results.
Q:How are customers responding to price increases?
A:Customers are generally receptive to price increases, understanding the supply chain challenges and cost pressures. The company is managing discussions on a case-by-case basis.
Q:What is the strategy for managing convertible debt and Bitcoin treasury?
A:The company is evaluating options for managing convertible debt, including potential redemption, based on Bitcoin price and other factors. The decision will balance liquidity and shareholder value.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on the exact timing of certain revenue contributions, such as the precise quarterly breakdown of design win conversions and the detailed impact of supply chain constraints on Q1 guidance. Additionally, responses about the pace of stock buybacks and the strategy for managing convertible debt lacked concrete details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADSs
IP
Karam
RF
approach
asset tracking
asset treasury
buyback
capital
cash asset
cash burn
cash flow
charge
course
deployment
eRedCap
goal
inventory
loss sale
market condition
market value
noncash
order
production end
program
provision
ramp
redemption debt
repurchase
run rate
security
semiconductor
share value
shareholder value
shipment timing
stage
telematics
transceiver
transition
value holding
SQNS Transcript
Sequans Communications S.A. (SQNS) Q4 2025 Earnings Call Transcript
Unknown2-10
The earnings call provides mixed signals: strong guidance for future revenue growth and strategic partnerships, but current financials show increased losses and cash burn. Positive aspects include potential high-margin IP licensing and a disciplined Bitcoin strategy. However, uncertainties in supply chain and lack of specific guidance details weigh on sentiment. The stock buyback plan and cost reduction efforts are positive, but the overall impact is neutral due to immediate financial challenges and market uncertainties.
Sequans Communications S.A. (SQNS) Q3 2025 Earnings Call Transcript
Unknown11-4
The earnings call reveals significant financial challenges, including a 47.3% revenue decline and a decrease in gross margin. Despite some positive elements, like aggressive stock buybacks and potential IoT growth, the financial health is concerning with increased losses and reduced cash reserves. The Q&A section highlights management's vague responses on strategic initiatives, which may worry investors. Overall, these factors suggest a negative sentiment, likely leading to a stock price decline in the next two weeks.
Sequans Communications S.A. (SQNS) Q3 2024 Earnings Call Transcript
Positive11-5
The earnings call summary presents strong financial performance with a significant revenue increase, high gross margins, and a net profit driven by a strategic asset sale to Qualcomm. The company's financial health is bolstered by debt repayment and substantial cash reserves. Product development shows promise with a robust design win pipeline and new offerings in 5G technology. Despite competitive and supply chain risks, optimistic guidance and strategic partnerships, like with Qualcomm, suggest a positive outlook. The Q&A indicates analyst confidence in future growth, leading to a positive stock price prediction.
Sequans Communications S.A. SPON ADS EA REPR 4 ORD SHS (POST SPLIT) (SQNS) Q4 2023 Earnings Call Transcript
Unknown3-7
Despite a strong gross margin, the company faces significant financial challenges, including increased operating losses and reduced cash reserves. The lack of clear guidance and strategic direction, combined with the termination of the MOU with Renesas, adds uncertainty. Although there is potential for revenue growth in 2024, the immediate financial health and unclear responses from management suggest a negative sentiment. The Q&A highlights concerns about financial stability and strategic clarity, leading to a likely negative stock reaction in the short term.
SQNS Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
