Sequans Communications S.A.

Good day, ladies and gentlemen, and welcome to the first quarter of 2026 Sequin's earnings conference call. My name is Howard, and I will be your operator for today's call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1-1 on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Mr. David Hanover, Investor Relations. David, you may begin.

Thank you, operator, and thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are George Karam, CEO and Chairman, and Deborah Cho, 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, and you'll 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 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 sales, Our ability to convert our pipeline of 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 Exchange Act of 1934 as amended. These statements are only predictions and reflect current beliefs and expectations with respect to future events and are based on assumptions and subject to risks 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 results may differ materially from those contained in 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 Securities and Exchange Commission. And now I'd like to hand the call over to George Caron. Please go ahead, George.

Thank you, David, and good morning, everyone. I'd like to begin with a brief update on our capital allocation strategy, including how we are approaching the management of our digital asset holdings alongside the continued execution of our IoT semiconductor business. Our priority remains clear. We are focused first and foremost on executing our IoT strategy, scaling our product business, and advancing our 5G roadmap in a disciplined way to create long-term shareholder value. In parallel, we have continued to manage our Bitcoin holdings with a pragmatic and opportunistic approach. In light of current market conditions, we made the decision earlier this year to eliminate all debt-related risk by negotiating an early redemption agreement with our debt holders. This allows us to fully redeem the $94.5 million of convertible debt by June 1st, 2026, funded through the sale of Bitcoin that had been held as collateral. As of today, we have already redeemed approximately 62% of this debt, and the remaining balance will be redeemed in the coming weeks. By June 1st, we expect to have a near debt-free balance sheet with at least 600 Bitcoin held as an encumbered asset. Looking ahead, we do not intend to further push our treasury strategy. Instead, our objective will be to monetize these holdings over time in a disciplined manner. balancing market conditions with our broader capital needs. Importantly, we remain focused on maintaining a strong cash position to support operations, invest in our 5G IoT roadmap, and provide stability as we scale the business. Turning now to the operational side of the business. Our IoT semiconductor business continues to demonstrate solid underlying momentum. For the first quarter, we generated $6.1 million revenue. This performance is broadly in line with our expectations and reflects continuous strength in product revenue, despite supply challenges, partially offset by variability in the timing of services revenue. Looking ahead, we continue to benefit from a strong backlog, which provides good near-term visibility. Sorry, guys. So looking ahead, we continue to benefit from a strong backlog, which provides good near-term visibility. Our order backlog continues to build with approximately $22 million in revenue, primarily product-related, already secured for the year. along with early indications of orders extending into the first quarter of next year. This provides us with increasing confidence in the trajectory of the business as we move through 2026 and confirms the healthy nature of our design wind pipeline and related KPI we track. Our full year outlook continues to be supported by an increasing number of design wind projects transitioning to production. We entered the year with more than $300 million in potential three-year product revenue from design wind projects. Of these, 44% had already reached the production phase and are generating revenue. During the first quarter, three additional design wind projects transitioned into production and we expect additional projects to follow in the second quarter. As a result, we continue to anticipate that more than half of our current design wind pipeline will be in production by the end of June, representing approximately $150 million in potential three years' revenue. We are also seeing strong momentum with the new customer engagements. In the first quarter, We engage more than a dozen new customer projects, with six already confirmed as design wins. These programs are expected to contribute to growth beginning in 2027 and beyond. Our product pipeline remains primarily driven by our 4G CAT-M and CAT-1 BIS technologies. It also includes our RF transceiver product, which supports a wide range of software-defined radio applications including defense and drone use cases. In addition, we have initiated early engagements around 5G eRadCap, which will be the future successor to 4G and cellular IoT deployments. Smart metering, telematics, and asset tracking continue to represent our strongest verticals, followed by security, eHealth and medical, and other industrial applications. Turning now to product ramps and key drivers. CAT-M continues to be a meaningful growth driver in 2026, led primarily by asset tracking and smart metering deployments. This business is scaling in line with expectation, supported by strong visibility and steady ordering patterns, as many CAT-M design wind projects are now in production with key customers deployment underway. Cat1biz is positioned for a breakout year supported by multiple customer ramps across telematics, security, and some metering use cases. We are already seeing revenue contribution from several design wins with additional projects expected to enter production in the second half of the year. We're also seeing incremental opportunities driven by current market dynamics which are creating opening for sequence to gain share. In our RF transceiver business, we continue to see stable demand from existing customers, supported by committed backlog, and we expect additional contribution in the second half of the year. At the same time, we are engaging with a number of new prospective customers, particularly in defense and drone applications, and we expect to begin securing some of these opportunities in the near term. We are also advancing discussions around licensing and collaboration opportunities which could further expand the reach of our RF portfolio. More broadly, our product pipeline continues to mature with several design wind programs progressing toward production. We are also seeing new generation product opportunities with existing customers, which provide incremental upside with our installed base. At the same time, we are actively preparing for the next major transition in IoT connectivity, which is the migration from 4G to 5G. Market demand for our 5G eRedCap solution continues to strengthen, particularly as mobile network operators look to reform 4G spectrum and accelerate broader 5G deployment. Importantly, IoT applications represent the final phase of this 4G to 5G transition, and these applications require long device lifecycle, often 10 years or more, making a seamless and future-proof migration path essential. Unlike the 4G era, where the market became fragmented across multiple cellular technology categories. We expect the 5G IoT landscape to be more streamlined, centered around eRETCAP as the primary standard. This creates a more efficient and scalable ecosystem for both customers and suppliers. Sequence is well positioned in this transition. We already have an established customer base across our 4G portfolio, and we expect to leverage these relationships as we introduce our 5G solutions. In many cases, customers will be able to transition using solutions designed to be compatible with existing deployments, enabling a smoother upgrade path. We continue to make strong progress on our 5G eRETCAP program. During the quarter, we received our first engineering test chips, which are now in-house and under evaluation. This represents an important milestone as we advance toward customer sampling, which we continue to target for the second half of 2027. Looking ahead, we believe 5G IoT will represent a significant long-term growth opportunity, both in terms of market size and value per device, supporting improved pricing dynamics relative to 4G. Now turning to services and licensing. Our services and licensing business continues to represent an important source of high margin revenue, although timing of revenue recognition can vary from quarter to quarter. On this front, we have several ongoing discussions that could contribute to revenue over the course of 2026. These include engagements with large global partners, licensing and collaboration opportunities, leveraging our RF and 5G IP portfolio, as well as a range of smaller service agreements. These opportunities provide potential upside to our product-driven revenue base, while also expanding our reach into new markets and applications. We remain focused on converting these discussions into revenue while managing expectation around time. On the supply chain side, we continue to operate in a dynamic cost and supply environment. We are seeing significant increases in memory pricing, which are impacting the cost of both our chips and modules. We are actively working to address these cost pressures while ensuring we can meet customer demand. At the same time, we have taken proactive steps to secure supply, including multi-sourcing across key components, such as memory and packaging. Based on our current plan, we believe supply for our 2027 baseline demand is secure, although we continue to monitor potential upside scenarios. Overall, while cost pressures and supply challenges are real that are manageable and consistent with the broader industry trends. As we move through 2026, we remain focused on disciplined cost management and reducing cash burden. Our objective continues to be reaching a break-even run rate by the end of the year as revenue scales. We implemented the cost reduction plan at the end of last year. And while the full benefits will not be realized until mid-year, we are confident in achieving our expense targets in the second half. Working capital dynamics will continue to evolve alongside growth, particularly as we support production ramps and manage supply chain requirements. These dynamics may create short-term variability, but they are aligned with long-term revenue growth. Overall, our performance underscores the progress we are making in strengthening our core IOT business, improving financial discipline, and maintaining flexibility in our capital stretch. Regarding our outlook for the second quarter, we currently expect revenue to be in the range of $6.8 million to $7.4 million, driven predominantly by product revenue, with potential upside if new licensing deals are closed. Based on our backlog and continued momentum across our design wind pipeline, we expect revenue to build sequentially throughout the remainder of the year. We also remain focused on reducing cash burn and continue to believe we can approach cash flow break even by the end of the year as the business skips. Looking ahead, we continue to evaluate strategic alternatives that could accelerate profitability and unlock additional value for shareholders. What's clear to us is that we are operating from a position of strength. We have a solid balance sheet, a growing and increasingly productive IoT business, and a differentiated 5G and RFIP portfolio that we believe will be a key driver of long-term value. As we discussed earlier, the transition from 4G to 5G in IoT represents a fundamental shift in the market, with eRadCap expected to become the primary standard, we believe this will create a larger, more unified, and more scalable market than what we saw in the 4G cycle. Sequence is uniquely positioned to benefit from this evolution. We expect to leverage our existing 4G customer base as a natural entry point into 5G, enabling a more efficient transition for customers while accelerating our own time to market. Combined with the expected premium pricing and expanded market opportunity, we believe this positions us to drive meaningful long-term growth and improve profitability. In parallel, we will complete the redemption of our debt by June 1st and continue to manage our capital allocation with discipline and maintaining a strong CASP position while preserving flexibility to act opportunistically as conditions evolve. Overall, we remain focused on scaling our IoT business, advancing our 5G roadmap, developing our new RF transceiver business, and executing against the key drivers that we believe will unlock the full value of sequence over time. With that, I will now turn the call over to Deborah to review our financial results in greater detail. Deborah.