Sequans Communications Announces Fourth Quarter and Full Year 2011 Financial Results

Sequans Communications S.A. (NYSE: SQNS), a 4G chipmaker supplying LTE and WiMAX chips to equipment manufacturers for mobile operators worldwide, today announced financial results for the fourth quarter and the year ended December 31, 2011.

Fourth Quarter 2011 Highlights:

Revenues, gross margin and non-IFRS loss per share are in line with guidance.

Revenue: Revenue of $11.5 million decreased 56% sequentially from the third quarter of 2011 and decreased 50% compared to the fourth quarter of 2010. The primary reason for the decrease was the decline in sales to the Company’s largest customer, following changes in the WiMAX market in the United States.

Gross margin: Gross margin was 52.0% compared to 53.6% in the third quarter of 2011 and 50.4% in the fourth quarter of 2010.

Operating income (loss): Operating loss was $5.0 million compared to an operating profit of $1.9 million in the third quarter of 2011 and an operating profit of $0.6 million in the fourth quarter of 2010.

Net Profit (Loss): Net loss was $5.6 million, or ($0.16) per diluted share/ADS, compared to a net profit of $3.2 million, or $0.09 per diluted share/ADS in the third quarter of 2011 and a net loss of $2.8 million, or ($0.10) per diluted share/ADS in the fourth quarter of 2010.

Non-IFRS Net Profit (Loss): Excluding stock-based compensation and the change in the fair value of the option component of convertible notes, non-IFRS net loss was $4.3 million, or ($0.12) per diluted share/ADS, compared to a non-IFRS net profit of $2.8 million, or $0.08 per diluted share/ADS in the third quarter of 2011, and a non-IFRS net loss of $0.2 million, or ($0.01) per diluted share/ADS, in the fourth quarter of 2010.

Full Year 2011 Highlights:

Revenue of $93.7 million in 2011 increased 37% over 2010 revenue, while gross margin remained stable at 50.5% in 2011 compared to 51.0% in 2010.

2011 included an operating profit of $1.1 million compared to an operating loss of $0.5 million in 2010, while the net loss decreased to $0.4 million ($0.01 loss per diluted share/ADS) in 2011, from a net loss of $2.7 million ($0.11 loss per diluted share/ADS) in 2010. Excluding stock-based compensation and the change in the fair value of the option component of convertible notes, non-IFRS net profit was $3.7 million, or $0.11 per diluted share/ADS in 2011, compared to a non-IFRS net profit of $0.5 million, or $0.02 per diluted share/ADS in 2010.

"Owing to a very strong first half, overall 2011 was a very good year for Sequans, with revenues up 37% and operating leverage leading to a nearly seven-fold increase in non-IFRS profit,” said Georges Karam, Sequans CEO. "Our Q4 results and Q1 guidance reflect the fact that our largest customer for WiMAX chips is continuing to focus on reducing inventory after an abrupt shift in strategy by Sprint in the U.S. Although new WiMAX devices were recently introduced by operators in Japan and Korea and we expect orders from our largest customer to resume in 2012, the market for WiMAX chips is expected to be smaller in 2012 than originally expected. Given our strong product offering, we anticipate continuing to have a major share of the available market.

"Our long term future is based on the growth of chips for LTE devices and this has been our development focus for some time. We are very pleased with our early traction in LTE. Although our second generation chips have only been sampling for a short time, we have already achieved design wins with nine device vendors. These customers are working closely with operators in the largest LTE markets -- the U.S., China and India, as well as in some smaller markets in Southeast Asia, Japan, the Middle East, Australia and Brazil.

"We are positioned to be a strong participant in the LTE market based on the advantages of our solution, which include an ultra-efficient modem design enabling superior performance with 150Mb/s Category 4 throughput, very low power consumption and an extremely small footprint. In addition, we are planning to introduce a number of additional advanced features that are eagerly anticipated by wireless carriers. In addition, we believe we are the only vendor offering a dual 4G chip for devices supporting both WiMAX and LTE, which will benefit operators planning a gradual transition to LTE.

"Our LTE plan is on track and we are pleased with our progress in gaining initial design wins in all major LTE markets around the world. We continue to expect LTE revenue from data devices to begin ramping during the second half of this year,” concluded Mr. Karam.

Outlook

The following statements are based on management’s current assumptions and expectations. These statements are forward-looking and actual results may differ materially. Sequans undertakes no obligation to update these statements.

Sequans expects revenue for the first quarter of 2012 to be in the range of $4 to $5 million, with gross margin around 50%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.27) and ($0.29) for the first quarter of 2012, with approximately 34.7 million weighted average number of diluted shares/ADSs. Non-IFRS EPS guidance excludes the impact of stock based compensation.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the fourth quarter and full year of 2011 today, February 9, 2012 at 8:00 a.m. EST /14:00 CET. To participate in the live call, analysts and investors should dial 800-230-1059 (or +1 612-234-9959 if outside the U.S.). A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/. A replay of the conference call will be available until March 9, 2012, by dialing toll free 800-475-6701 in the U.S., or +1 320-365-3844 from outside the U.S., using the following access code: 231147.

Forward Looking Statements

This press release may contain projections or other forward-looking statements regarding future events or our future financial performance. All statements other than present and historical facts and conditions contained in this release, including any statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risk and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are sold, including WiMAX and LTE markets, (ii) unexpected increases in our expenses, including manufacturing expenses, (iii) inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject due to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers, (viii) our inability to achieve new design wins, and (ix) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

Use of Non-IFRS/non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements prepared in accordance with IFRS, we disclose certain non-IFRS, or non-GAAP, financial measures. These measures exclude non-cash charges. We believe that these measures can be useful to facilitate comparisons among different companies. These non-GAAP measures have limitations in that the non-GAAP measures we use may not be directly comparable to those reported by other companies. We seek to compensate for this limitation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable IFRS measures in the table attached to this press release.

About Sequans Communications

Sequans Communications is a 4G chipmaker, supplying LTE and WiMAX chips to equipment manufacturers for mobile operators worldwide. Founded in 2003 to address the WiMAX market, the company expanded in early 2009 to address the LTE market. Sequans chips are inside 4G networks around the world. Sequans is based in Paris, France with additional offices throughout the world, including United States, United Kingdom, Israel, Hong Kong, Singapore, Taiwan, South Korea and China. www.sequans.com