Sequans Communications S.A.

Good morning, ladies and gentlemen, and welcome to the Sequence Communications fourth quarter and year-end 2024 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 11, 2025. I would now like to turn the conference over to Kim Rogers, Investor Relations at Sequence. Please go ahead.

Thank you, Operator, and thank you to everyone participating in today's call. Joining me on the call today from Sequence Communications is George Karam, Chairman and CEO, and Deborah Choate, CFO. Before turning the call over to George, I would like to remind our participants of the following important information on behalf of Sequans. First, Sequans issued an earnings press release this morning. You can find a copy of the release on the company's website at www.sequans.com under the newsroom section. Second, this conference call contains projections and other forward-looking statements regarding future events, or our future financial performance and potential financing sources. All statements other than present and historical facts and conditions contained in this release, including any statements regarding our business strategy, cost optimization plans, strategic options, the ability to enter into new strategic agreements, expectations for massive IoT sales, our ability to convert our pipeline to revenue, 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 and 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 rely on or 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. More information on factors that could affect our business and financial results are included in our public filings made with the Security and Exchange Commission. And now I'd like to hand the call over to George Karam. Please go ahead, George.

Thank you, Kim. Good morning, everyone. I would like to thank you all for joining us today. I'm excited to review our remarkable transformation in 2024, a year that demonstrated our resilience showcased the strength of our cellular IoT intellectual property and product portfolio, and positioned us for sustained growth. The key milestone was the successful completion of the $200 million Qualcomm deal. This transaction ensures the future of our 4G IoT business, an advancement of our 5G REDCap and eREDCAP solutions, while also significantly improving our financial position. Energized by the momentous event, we doubled product revenue in the fourth quarter compared to the previous quarter. We delivered $11 million in total revenue, representing a 9% sequential increase in line with our guidance. Notably, product revenue in the fourth quarter increased to $4.7 million from $2.4 million in the prior quarter and $4 million in the fourth quarter of 2020. Also, we are highly encouraged by the positive response from our customers and partners following the Qualcomm D. The strengthening of our financial position has been a catalyst in securing our design wind pipeline, new customer acquisition, and new project twins. The deal also validates our technology leadership and reinforces the superiority of our products, which are fully optimized for IOT application, where power efficiency, radio performance, and cost are critical factors. I'm gratified to conclude 2024 with the strong fundamentals that position Sequence on a robust trajectory toward growth and sustainable long-term success. Switching gears to discuss the factors we believe will drive product revenue growth over the next two years, let me walk you through the two main drivers. The first is our design win pipeline and how the corresponding project wins. will move into mass production in 2025 and 2026, converting into Monarch 2 and Calliope 2 product revenues. The second is the development of our design-in pipeline with the new opportunities and new customers that we are working on to secure and add to our design-in pipeline. Despite the challenging years, we have maintained most of our existing DesignWin projects and customers. Counting three years of future revenue for each, once they begin shipment, our DesignWin pipeline represents around $250 million. While some of these projects are currently in shipment mode, the majority are still in the design phase and are expected to launch within the next two years. Our design wins spans various IT segments, including smart metering, telematics, security, e-health, and industrial applications. Smart metering, a very successful market segment for us, accounts for over 50% of our current pipeline. The time to revenue for most of these projects was delayed by the inventory overhang. the industry has faced in the last two years, where customers have favored the shipment of legacy products over the launch of new ones. Additionally, the transformation of the design wind pipeline to revenue was impacted by our large percentage in metering, where product qualification requirements are complex, prolonging the time to production. We are confident that our customers remain committed to sequence, and that the launch of more projects in the second half of 25 and 26 will support our revenue growth over the next two years. Cat1Biz Cali P2 is scheduled to start shipping this year and will be a key driver of growth later this calendar year, contributing to the increasing revenue from LTM1R2, our primary product currently shipping. Note that the long-term nature of these IoT projects with life cycles spanning up to eight years ensures sustained revenue once they enter production and will continue driving our revenue growth well beyond 2026. While working on turning DesignWin into revenue, our next focus is on new business opportunities and adding new customers to grow our DesignWin pipeline. This will add another driver of revenue growth in 2026 and beyond. We have strengthened our sales team and focused our sales strategy on increasing market share in high-velocity IoT market segments, where new project wins can generate revenue within two years, typically faster than metering wins. Following our highly productive meetings at CES 2025, we have seen significant acceleration in new customer engagements. This marks a major shift from last year, when our financial troubles limited our ability to win new customers and projects. I'm pleased to say that our design in pipeline, which includes advanced customer engagements, we are working to secure and move to design wins now exceeds $200 million in a projected three years revenue, starting from the launch date of each project. Notably, one-third of this pipeline is spending award decisions expected in the first quarter. With this strong start of today year, we have increased conviction that our $250 million design win pipeline will also grow this year. turning to sequence competitive advantages in the IOT market. Our position as a European semiconductor company is a key differentiator. With increasing restriction on Chinese manufacturers, the number of chips and module competitors outside China is shrinking. We expect this trend to intensify, positioning sequence as a key beneficiary in the evolving market landscape. Additionally, OEM module makers are facing increasing pressure to consolidate or exit the market, such as the recent announcement from uBlocks, validating our business model with sales of both chip and modules. This enables Sequence to offer differentiated customer support in addition to an innovative product portfolio, now well-recognized as best-in-class. SIGWAT has a comprehensive product portfolio that spans the full range of IoT applications, from high-speed Cat4 for real-time video to mid-range Cat1BIS CalIP2 for security and telematics, and down to ultra-efficient LTM Monarch2 for tracking, metering, and other industrial applications. This robust portfolio ensures we can fully support customer demand on existing 4G networks. Looking ahead as the industry transitions to 5G, our customers will seek REDCap and eREDCAP, two emerging 5G IoT modem categories, set to replace 4G Cat4, Cat1BIS, and LTM, positioning sequence at the forefront of this evolution. Our 5G IP expertise, combined with the addition of an expanded wireless IP portfolio and top engineering talent through our recent acquisition of ACP in Zurich, positions us strongly to execute on our REDCap and eREDCAP product roadmap for 2026. This strategic advantage enables us to maintain our technology leadership and competitive edge as we introduce new generation of chips with enhanced 5G IoT support, extended feature sets, and significant advancements in power efficiency, radio performance, and cost optimization. In addition to advancing our cellular IoT business, we are actively pursuing a strategic expansion into new vertical markets. Our extensive IP and product portfolio enables us to offer advanced radio solutions for satellite communication, public safety, and defense. We have already established business leads in these sectors and are focused on further developing these opportunities to drive broader product adoption and value-added services . Similarly, we expect to expand our addressable market through licensing agreements following the successful model we implemented in China. We are confident in our ability to deliver tangible results from these new initiatives over the next 12 to 18 months. Our financial strategy remains focused on achieving non-FRS operating income break-even by 2026, driven largely by the acceleration of Monarch 2 and Kalaipi 2 shipments, which will fuel product revenue growth in 2025. While not all design wind projects are currently in production, our $250 million design wind pipeline represents more than four years of product revenue, equating to an annual average of approximately $60 million from 2025 to 2028. As these projects transition into production in 2025 and 2026, we expect annual revenue contributions will progressively rise, surpassing this average in the later half of that period. Additionally, in 2026, we expect to see revenue contributions from new design wins Secured this year, sourced from our current $200 million pipeline of design-in projects. Last, in addition to product revenue, we anticipate revenue generation from licensing and services through partnerships and strategic initiatives we are conducting. These factors, combined with financial discipline, will ensure we remain on track to achieve our financial goals in 2026. In summary, Sequence is built on a solid foundation for sustained growth with a clear path to future profitability driven by a robust design wind pipeline and a new customer engagement. Our advanced product roadmap reinforces our technology leaderships and our strategic initiatives to develop vertical markets and expand our licensing business position us well for the future. As we continue to innovate and expand, we remain committed to delivering long-term value to our stakeholders while shaping the future of IUD. I'll turn the call over to Debra to review the fourth quarter and annual 2024 preliminary financial results and details.