Sequans Communications S.A.

Welcome to the second quarter 2026 CEQAN's earnings conference call. My name is Jonathan and I will be your operator for today's call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. Please note that this conference is being recorded. I would now like to turn the call over to 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 Sequon Communications are Georges Karam, CEO and Chairman, and Norman Brodt, CFO. Before turning the call over to Georges, I would like to remind our participants of the following important information on behalf of Sequon. Siquans issued an earnings press release this morning, and you'll find a copy of the release on the company's website at www.siquans.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 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 is amended, and Section 21E of the Securities and Exchange Act of 1934 is 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 uncertainty 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 Securities and Exchange Commission. And now I'd like to hand the call over to Georges Karam. Please go ahead, Georges.

Thank you, David, and good morning, everyone. Before discussing our core business, I'd like to begin with an update on our capital structure, as we have now substantially concluded our Bitcoin treasury strategy. As we have announced on May 28, we completed the full redemption of our remaining convertible debt funded through the sale of a portion of our Bitcoin holdings. Since then, we have continued to systematically reduce our Bitcoin position in a disciplined and opportunistic manner. The Bitcoin market has been volatile over the past several months. and throughout that period, we have remained patient, strategic and deliberate in managing our digital assets. During June, despite a challenging price environment, we made the decision to sell a portion of our holdings to further strengthen our cash position. As a result, we ended the second quarter with approximately $21 million in cash and 314 Bitcoin remaining on our balance sheet. At current market prices, those remaining Bitcoin represent approximately $20 million of additional value. With our IOT business continuing to perform well and our balance sheet in a strong position, we have the flexibility to monetize these remaining holdings opportunistically and when it's the best interest of the company to do so. Our priority going forward is squarely on executing our IUT semiconductor strategy, scaling our product business, expanding our presence in the defense and drone markets, and advancing our 5G eRedCap roadmap to create long-term shareholder value. As we enter the second half of 2026, we do so with a strong debt-free balance sheet and the required financial flexibility to support our operations and invest in future growth. Now turning to our IOT semiconductor business. We continued to build momentum in the second quarter. Revenue for the quarter was approximately $7.5 million, exceeding the guidance we provided last quarter and representing a 23% increase from the first quarter. The vast majority of that revenue came from product sales, which increased by more than 80% year over year, demonstrating the continued acceleration of our core business. We also saw strong order momentum across our customer base, with several key accounts scaling meaningfully into the second half of the year and beyond. We have more than 40 DesignWin projects that have reached mass production, several of which we expect will each generate more than $4 million in annualized revenue beginning in 2027. These programs are contributing to a strong and growing backlog that now extends into 2027, providing us with increasing visibility and confidence and our product growth trajectory for both this year and next. More importantly, this reflects the continued conversion of our design wind pipeline into projects in production with committed orders to come. Our design wind pipeline, measured by potential three-year product revenue, also continues to expand beyond the more than $300 million reported at the end of 2027. We'll provide an update figure at year end, but today 55% of that figure is in mass production and generating revenue, representing approximately $165 million of design wins in production at quarter's end, a more than 3x increase year over year. We expect that percentage to continue increasing as additional customer programs move into production. Across our product portfolio, we continue to see encouraging momentum across each of our key technology families. CAT-M remains a core growth driver for the business, led by asset tracking and smart metering applications. Multiple design win projects are now in production and continue to perform ahead of plan, supporting the strong product revenue growth we delivered during the quarter. Cat1Biz is also gaining traction with customer ramps across telematic, security, and industrial applications expected to continue building through the second half of the year. We remain encouraged by the level of customer engagement and the new IOT opportunities we see as existing design wind projects move toward production. During the second quarter, we secured 10 new project winds leveraging our CAT-M and CAT-1 BIS technologies while transitioning a similar number of projects into mass production. Design activity across our pipeline remains healthy and we expect to add additional winds throughout the remainder of the year. Our RF transceiver business is also gaining momentum. We continue to see strong demand from existing customers, while interest from new prospects in the defense and drone markets continue to grow. During the quarter, we began shipping our SQN 9506 development kit platform to several prospective customers evaluating our RF technology for these applications. I'm also pleased to report that we secured our first drone program with product shipments expected to begin early next year. While still at an early stage, we believe this represents an important milestone as we continue to expand into this new market. Development of our 5G eRadCap solution. also remains on track. Our test ship is now in-house, and we continue to target customer sampling during the second half of 2027. As the IoT market transitions from 4G to 5G, we continue to believe eRedCap will become a key industry standard and an important pillar of our long-term strategy. Beyond the product opportunity itself, We believe our investment in eRedCap further strengthens our technology leadership, enhances the value of our intellectual property portfolio, and creates additional opportunities for future licensing and services revenue. Although product revenue from our eRedCap platform is expected to begin in 2028, we believe meaningful services and licensing revenue can be generated well in advance of commercial product launches. That brings me to our broader licensing and services business. Our licensing and services business continues to represent an important source of high margin revenue, although the timing of individual engagements can vary from quarter to quarter. While it represented a modest contribution to revenue in the second quarter, We expect a meaningful increase in the second half of the year as one or more of the significant license opportunities currently under discussion converts into signed agreements. Today, we have several active licensing and strategic engagements under discussion with global customers and partners across a range of end markets and geographies. The potential revenue contribution from these opportunities ranges from several hundred thousands dollars to well over $10 million, underscoring the significance of this part of our business. Beyond their potential financial contribution, these engagements continue to expand our strategic reach into new markets and application, while providing meaningful upside to revenue and supporting our path toward break-even. Because many of these discussions involve confidential commercial relationships and sensitive end markets, we are not in a position to provide customer-specific details at this time. However, we remain encouraged by the level of activity across our licensing pipeline and will provide updates as we reach definitive agreements. As our product business continues to scale, maintaining a reliable supply chain remains equally important. We continue to operate in a challenging supply environment. While memory remains the primary constraint, we are increasingly seeing pressure across the broader semiconductor supply chain, including silicon and packaging. Based on what we are seeing today, We expect these supply constraints to persist beyond 2026. To address these challenges, we have continued to strengthen our supply chain strategy. Apart from wafer fabrication at TSMC, we are implementing multiple sourcing options across key components and manufacturing materials. This reduces our dependence on individual suppliers, improves supply security, and better positions us to support our expected growth in the years ahead. We also remain focused on managing cost pressures. Where appropriate we continue to pass through higher component costs to our customers while working closely with our supplier to adapt to changing market conditions. This remains particularly important with memory chips where pricing continues to be volatile and can change significantly even from month to month. Based on our current planning assumptions, we believe supply is secured for our baseline demand through the remainder of 2026. Our focus is now shifting towards securing the capacity we will need to support continued growth in 2027. As our financial priority remains focused on disciplined cost management and reducing cash burn with the continued objective of moving toward a break-even operating run rate as revenue continues to scale. We made some progress this quarter and expect to make more in the second half of the year. Overall, the second quarter reflected continued progress across the business. We strengthened our balance sheet, continued to grow our semiconductor business advanced our product roadmap and further simplified our capital structure positioning sequence for continued growth. Regarding our outlook for the third quarter, we currently expect revenue to be in the range of $8.5 million to $10 million, reflecting continued momentum in our core product business. With the upper end of the range, further supported by the potential contribution from closing one of the significant licensing opportunities currently under discussion. Based on our growing backlog, continued production ramps, and the strength of our design wind pipeline, we continue to expect the business to build through the second half of the year. While the timing of licensing revenue can vary from quarter to quarter, We remain encouraged by the level of activity across our sales pipeline and continue to believe we are well positioned to deliver sequential growth as we execute our strategy. Looking ahead, we believe the fundamental building blocks of the business continue to strengthen. We have a simplified, near debt-free balance sheet with meaningful liquidity and the financial flexibility to support our long-term strategy. Our IoT semiconductor business continues to demonstrate strong underlying momentum, supported by a growing backlog and a design wind pipeline that continues to grow and convert into production revenue. Finally, our differentiated portfolio of 5G and RF technologies remains one of Sequence's most important long-term strategic assets. creating opportunities across both products and licensing revenue. Our priorities remain clear. We'll continue scaling our IoT semiconductor business, advancing our 5G eRadCap roadmap, expanding our licensing opportunities, and executing against the initiatives we believe will unlock the full long-term value of Sequence. Before handing the call over to Norman, I'd like to take a moment to recognize an important leadership transition that took place at the end of June. After 19 years with Sequence, Deborah Choate retired as our Chief Financial Officer. Deborah has been part of Sequence through many of the company's most important milestones. She played a significant role in strengthening our financial foundation and supporting the strategic initiatives that have positioned the company for where it is today. On behalf of our Board of Directors and everyone at Sequence, I would like to sincerely thank Deborah for her many contributions over the years and wish her all the best in her retirement. I'm also pleased to welcome Norman Brodt as our new Chief Financial Officer. Norman joined Sequence as Vice President of Finance in January 2025 and has been deeply involved in our financial planning, capital allocation strategy, and operational initiatives over the past year and a half. Many of the decisions and initiatives we have discussed on today's call have benefited from his leadership and involvement, making this a natural transition for the company. I'm confident that Norman's experience, financial discipline and knowledge of our business will serve Sequence well as we continue executing our strategy. With that, I will now turn the call over to Norman to review our second quarter financial results in greater detail. Norman.

Thank you, Georges, and good morning, everyone. Before reviewing our financial results, I'd like to say a few words. I assumed the role of Chief Financial Officer at the beginning of July following Deborah's retirement after 19 years with Sequence. I want to thank Deborah for the strong foundation she built and for ensuring a smooth I'm pleased to have the opportunity to speak with you today for the first time as CFO. Now, let me turn to our second quarter financial results. Total revenue for the second quarter was $7.5 million, an increase of 23.2% compared to the first quarter of 2026. Compared to the second quarter of 2025, Revenue declined 8.4%, primarily because the prior year quarter included a significant contribution from license and services revenue associated with the 2024 Qualcomm transaction. Excluding this impact, our revenue grew 84.2% year over year. Revenue in the quarter was primarily product related, with product sales up 39% sequentially and almost doubling year over year. reflecting the continued growth of our IoT business. That reflects sustained conversion of our design wind pipeline into production revenue and with more than 40 projects now in mass production and the backlog extending far into 2027, we have strong visibility into continued growth. Growth margin was 32.9% compared to 37.7% in the first quarter and 64.4% in the second quarter of 2025. The sequential and year-over-year decline primarily reflects the higher mix of product revenue relative to license and services revenue which naturally carries a different margin profile. As a reminder, the second quarter of last year includes meaningful license and services revenue associated with the Qualcomm transaction making the year-over-year comparison less meaningful. Operating expenses consisting of research and development, selling, general and administrative expenses were approximately $11.9 million compared with $11.8 million in the first quarter. We continue to execute on our cost reduction initiatives and remain on track to achieve lower operating expense levels in the second half of the year. During the quarter, we recorded a non-cash impairment on our Bitcoin holdings of $3 million, now down significantly from $29.3 million in the first quarter, along with a realized net gain of $5.3 million on Bitcoin sales compared to a realized net loss of $11.7 million in the prior quarter. Operating loss was $7.2 million. compared to losses of $50.5 million in the first quarter of 2026 and $8.5 million in the second quarter of 2025. Net loss for the quarter was $9.6 million or $0.65 per diluted ADS compared to net losses of $76.2 million or $5.23 per diluted ADS in the first quarter. and $9 million or $3.53 per diluted ADS in the second quarter of 2025. Please note that we adjusted Q1 2026 financial income and expenses to the re-evaluation of the convertible debt upon the amendment in February to permit the full redemption of the debt, which resulted in an increase of the financial expenses of $21.9 million. During the past quarter, debt-related net interest expense was $2.4 million, down from $4.9 million in the first quarter, reflecting the wind-down of our convertible debt. On a non-IFRS basis, excluding non-cash impairments, stock-based compensation, and non-cash items associated with the converted debt and its embedded derivative, Non-IFRS net loss was $4 million or $0.27 per diluted ADS. This compares to a non-IFRS net loss of $20.6 million or $1.41 per diluted ADS in the first quarter and a non-IFRS net loss of $8 million or $3.14 per diluted ADS in the second quarter of 2025. Turning to the balance sheet, cash and cash equivalents at June 30th Total $21 million, up from $10.6 million at March 31st. For the first six months of the year, cash used in operating activities was $23 million. Investing activities provided $127.7 million, driven primarily by proceeds from Bitcoin sales. while financing activities used $97 million, reflecting the full repayment of the converted debt associated with our Bitcoin treasury stretch. As of June 30th, we held 314 Bitcoin, valued at approximately $18.4 million, all of which is unrestricted and available for sale. This compares to 1,514 Bitcoin at March 31st, valued at $103.2 million at the end of March, of which 1,217 Bitcoin was pledged as a collateral for the convertible debt. With the redemption of our convertible debt completed and the repayment of our COVID-related loan during the quarter, Sequence now has a clean, unencumbered balance sheet. Together with our $21 million cash position, and 314 unrestricted Bitcoin, we believe the company is well positioned to support its operating and strategic priorities going forward. Before I hand the call back to George, I want to briefly echo his comments on our licensing pipeline. We have several discussions that are well advanced and we believe a number of these have the potential to contribute meaningfully to revenue in the second half of the year. As George noted, the timing of licensing revenue recognition can be difficult to predict, and that variability is reflected in our Q3 guidance range. With that, I'll turn the call back to George.

Thank you, Norman. So as we close, our priorities remain clear. We are focused on executing and scaling our IoT semiconductor business while expanding our presence in software-defined radio applications including drones and defense. We continue to see encouraging momentum across the business supported by a growing backlog, a growing design wind pipeline, an increasing number of design wind projects transitioning into production, and a maturing pipeline of licensing and services opportunities. Together with continued strength across our CAT-AM, CAT-1bis and RF product families, and the progress we are making with 5GE RedCap, we believe Sequence is well positioned to deliver continued growth while moving steadily toward cash flow recovery. At the same time, we have taken important steps to strengthen our financial foundation. With the redemption of our convertible debt and the successful transition away from our Bitcoin Treasures strategy, we have significantly improved our financial flexibility and Sharpen our focus on our core semiconductor business. Going forward, we'll continue to manage our remaining Bitcoin holdings in a disciplined and opportunistic manner while maintaining the liquidity needed to support operations, invest in innovation, and execute our long-term growth strategy. Overall, we believe Sequence is entering an important new chapter. We have a stronger balance sheet, improving visibility into future Product Revenue, a Differentiated Technology Portfolio, and Multiple Avenues for Growth. We remain focused on discipline, execution, and believe we are well-positioned to create long-term value for our shareholders. Thank you for listening, and we can now open the call for questions.

Certainly. And our first question for today comes from the line of Scott Thoreau from Roth. Your question, please.

Hey, good morning, good afternoon, thanks for taking the questions. George, congrats on the product momentum kind of going in the right direction, and Norm, congrats on the new role. Maybe to start, George, in terms of 55% of the design wind pipeline now ramping into production, and it continues to grow beyond that 300 million mark implies, you know, 13, 14 million plus at full production. I think you've been targeting the first half of next year is when you'd be getting to operating breakeven. Is that still the plan? And given how things are rolling into production, are you on track for that, Mark?

Yeah. Hi, Scott. Indeed, you know your remarks. I mean, honestly, when you compare to last year, as we said, we have like 3x improvement in projects in the production. So they are solid, and we have visibility, as we mentioned many times, even towards the first half of next year, 2027, from all those projects and productions. So this is really becoming much more, I would say, predictable, if you want, like when the projects are moving and ordering so we can predict much easier. So we expect definitely sequential growth, the growth to continue on our product, and to support our breakeven, you know it's essentially the it takes two other elements obviously continue controlling our cost structure which is something definitely we are committed to and and we will continue doing this as we move forward in the second half but also obviously there is a second component which can a little bit play on the very on the on the margin which is the services revenue so yes with these three points that sets the target to be next year in a position very close to break-even if not break-even on a yearly basis globally.

Very helpful. And if I could follow up then, George, on the licensing front, it sounds like there are more opportunities or irons in the fire at this point in time. I think previously we've been talking about two or three. It sounds like it may have expanded beyond that. Wide range of opportunities. Is that the correct interpretation? And I think you've You've hinted at it in the past as well. Given where the balance sheet is today, that some of these licensing opportunities, given how they tend to be front-end, cash-loaded, that that would finance operations until the anticipated break-even. Is that still the expectation?

Yeah, absolutely. I mean, again, you know, the opportunity we have in hand, they are maturing. Definitely, they are closer, I would say, to be... I mean, as predicted, you know, we already... from the beginning of the year, we estimated that this will happen in the second half. So we are on track on this. Now, obviously, what's important is really signing the deal. Revenue itself, depending on the timing, you could take some revenue in a quarter or the other based on the revenue recognition rules. But we definitely have a handful of projects very, very advanced in discussion. And hopefully we can conclude one or more in the second half to meet our target. This is really the only point we see it for the year, if you want, and will be completely on our plan that we set at the beginning of the year. In addition to this, we should mention as well, when we are talking about breakeven as well, it's like, you know, there is always the cash from the government, you know, which is the grant from the government, which is, you know, it's a little bit, we have technically around, you know, 4 million plus on a yearly basis. but this amount doesn't, you know, it's not smooth every quarter and we have a chunk of 3 million plus that should happen in the second half as well when you compute the cash.

Very helpful. And lastly, if I could just on the RF front, very exciting opportunity now that's starting to ramp up. I'm wondering if you could frame the size of the opportunity maybe in terms of revenue expectations in 26 and 27. And a quick one for you, Norm. just in terms of the OPEX running over 11 million this quarter. I'm wondering if you could remind us where the target is. I think it was below 10 million, but just, you know, are you comfortable to get into that bogey in the second half of this year? Thanks.

Yeah, I mean, on the RF, definitely, you know, we have very solid RF portfolio, you know, and, you know, this is somehow related to the acquisition we did boosted, I will say, the position of the company. We always had this technology in the company. The acquisition of ACP that we did a year ago boosted us and put us in a very strong position where we have a couple of customers with whom we do a couple of million dollars, three million dollars in a predicted way, I will say, every year. But we took this product really to address larger space of software-defined and more focused on drone and defense. Today, the pipeline of this we're talking about more than 20 opportunities that we are dealing with you know I mean not to give exact number but really we have a large number and many people interested in our technology all the feedback we are getting is extremely positive and we already signed one deal and to whom we will start shipping beginning of next year I believe their product is quite advanced we have many others in evaluation process to whom we start shipping to them the Development Kit, you know, the technology that they need for them to conclude their design win and move on. So I'm expecting in the second half of the year to get more and more from those designs secured. Now, the potential of this, honestly, it's big if we are able to reach to all those customers. And we're still in our early phase to really estimate exactly where we can go there. But, you know, thinking like this is a business that can scale to 10, 20 million dollars per year. with a margin closer to 90% plus. We're talking about very high margin sales. So this is really very important for us, and we are focusing on it every day, and we have the full team committed to this. Now, where we will be next year? Definitely, hopefully, maybe we should be approaching on the RF more than $5 million for sure, and scale this to 10 and plus the following year. That's what I hope, at minimum.

Yeah. Hi, Scott. So on the OPEX, as you certainly have seen, we've made some progress on the OPEX already. We have a last year at the same time about 13 million, but more than that, we are down to 11.9 this quarter. So there is progress on the reduction of that. Now, we are still targeting on a 10 million per quarter OPEX on a recurrent level. So we're having plans on our page and working on that towards that target. Yes, so I confirm that idea.

Great, thanks so much. I'll get back in the queue. Thanks, Colt.

Thank you. And our next question comes from the line of Owen Rickert from Northland Capital Markets. Your question, please.

Hey guys, thanks for taking my question here. Just quickly on the Bitcoin holdings, what's the intended end state for that? Is this full liquidation the goal? And how are you thinking about timing given the current market conditions?

Yeah, I mean, thanks for the question. Honestly, you know as you know obviously we are out of the strategy so the intention of the company is not really i would say to build any strategy around this so it's an asset in hand uh the most logical way is to turn this to cash as soon as possible uh on the same time we don't need really the cash immediately and and we were talking about licensing that you could have as well more money. We have money from the government coming in. So we don't really feel the pressure where we are today to go and liquidate at the price we are today. Now, obviously, you can say where this is going to go and is it going to go lower or higher. I mean, we remain opportunistic there and definitely, you know, you will hear at some time that the idea is really to clean it and get the balance sheet where you don't have dependence on Bitcoin. so timing for this nothing definitive if you want we are more opportunistic looking to the best we can do for the interest of the company.

Got it got it super helpful thanks and then secondly for me can you just give us a quick sense of how much of the organic growth was volume driven versus pricing driven and how sustainable that growth rate is into the second half of the year?

Yeah I mean it's It's a good question, because obviously there is an impact of cost, which means we have some price increase. To be honest, our price increase was not too big in Q2, because the impact for us was a little bit more complicated to implement this rapidly, I would say, overnight, I would say, with all those memory issues. So we had a little bit to deal with every customer to impact this in the second half. So we see it more in the second half, but still, you know, we didn't have an increase similar to what you see in memory where the people are doubling and tripling. So we're talking about, you know, I believe without giving, we don't have an exact number, but it's really below 5%. That's so far what we impacted our product pricing.

But there is more maybe to come in the near future because it continues to increase.

It's very painful because you cannot, cannot set the policy once forever with your customer. You need to deal with this almost on a quarterly basis. But the majority of the growth is really coming from new projects turning to production. And obviously, this is where it's coming. And the growth, we are positioned to continue growing. Back to the simple rule, I know that many, many shareholders in the past, when we were talking about our pipeline, me and all the shareholders were extremely nervous and we would like I would say we wanted to be not too much patient I would say to convert those design wins to revenue and unfortunately in the IOT business it takes time because customers take a lot of time to move from design win to get their product ready certified and shipping but what's good about it is once it's there it's there and it's sticky and it stays for many years and many others. If you put this into perspective where we are in product revenue and next year, so the growth trend should continue next year at least at similar level.

Great. Thank you.

Thank you. And our next question comes from the line of Fedor Shabalen from BeReilly. Your question, please.

Thank you very much. Thank you very much, operator. And good morning, everyone. And Norman, congratulations on the appointment. My questions kind of follow up questions for previous ones. Georges, you cited many design wind projects now in mass production and have a question about this 55% of 300 million three-year product pipeline. What would be expected cadence for the remaining 45% to convert and does the pipeline figure get revised upward with the new Drone Defense Wayne, or was it already embedded in this guidance? Thank you.

Yeah, I mean, you know, just if I take it like at the beginning of the year, we were like at 44% of 300 million. and in six months we turn the 44 it becomes 55 so I did like 10 points. Honestly it's not a rule what I'm giving here if you want but just to give you you know I don't know if the future will be like the past because all depends on the project right I mean we have some customers surprisingly they move fast some others could be slow and take longer time. I should say today our CAT-M technology in general people are moving very very fast on the CAT-M. CAT-1 which is really ramping Still more room there to convert to design. So, but, you know, technically, I don't know if I should say towards the end of the year, we should add another 10 point. This will be my own target, if you want, like, if I look to the past, but obviously we're pushing to convert much more than this.

Thank you, Howard Kohler. And my follow up is about Bitcoin remaining holdings. I know you want to monetize it opportunistically but if you can confirm the year end target for this and also what are the immediate needs for financing your core internal semiconductor business and is it kind of urgent or not urgent so just trying to figure out when Are you dependent on monetizing with Bitcoin holdings near term or not? Thank you.

Yeah, I mean, I honestly, there is no urgency if we take it like this from because we for the all the end of the year, you know, we're not in a rush on this. So it'll be opportunistic. I would like here to highlight one point, you know, obviously, you know, we are a small company. We're dealing with suppliers and suppliers would like to look to us and watch the balance sheet and and unfortunately for many of those suppliers, Bitcoin doesn't count. So to some extent, saying that you have $20 million in Bitcoin, even if the Bitcoin could be at $25, it could be at $100 and you say I have $31 million equivalent, they don't give the same weight in front of your supplier as when you say I have them in cash. So for this reason, we have really a lot of interest of converting this as soon as possible. Other as well, I heard many shareholders, they don't like to have this dependence on volatility on the stock so they get it to cash. For us, the fact that we don't need this money S&P and based on the history of Bitcoin and whatever you could predict, we believe it's not maybe the best timing and better to wait. But we will not keep this on board forever. At some time, When the price will be decent, much better where it is today, we'll convert and take it all to cash. Unfortunately, we missed the window because when we closed, we only redeemed the debt. My idea was to sell all, to be honest, but the Bitcoin were not available because they were in the collateral. So we have to conclude the transaction. And the time to conclude the transaction, Bitcoin went down and we lost immediately like $15,000 per Bitcoin. due to the volatility. Then we waited on this and we didn't convert. So that's a story. But the strategy for the company really take it all to cash as soon as possible, even if we don't need this money now. But factor in a little bit, be patient in a couple of few months to see where we have the best price and sell them.

Thank you, Georges, for your perspective and continue best of luck.

Thank you.

Thank you. Once again, ladies and gentlemen, if you do have a question at this time, please press star 1-1. Our next question comes from the line of Jacob Stephen from Lake Street Capital Markets. Your question, please.

Hey, guys. Appreciate you taking the questions. I'd like to extend the congratulations to Norm as well. Maybe just first, you know, I'm On the margin front, you know, maybe you could kind of quantify for us or give a little bit more color on, you know, product mix versus kind of the memory input cost pressure and kind of what impact they had on margins. And maybe, you know, looking forward, you know, how can we expect the gross margin line to trend?

Hi, Jacob. I mean, you know, a few things I would say. As you know, we have the licensing business. When it's there, this has very high margin. And obviously, depending on this contribution, it pushes sometimes our gross margin to be higher than 50% globally because obviously it helps all the products. If we focus only on the product, the rule for us is like, let's say that what we are trying to achieve is like to be on the chip gross margin and many others. and many more. impacted there. So this is how we should think about it going forward. Now, if we factor into the cost increase, definitely with the supply pressure that we have, sometimes even to get access to the technology, right? I mean, because we didn't anticipate many things at the beginning of the year, and we were trying to catch up. Sometimes we are not able to impact the price of our customer immediately while the supplier impacted immediately. So we could have those variation impacting us from quarter to quarter, but hopefully all this will stabilize over time when we start planning.

Okay, got it. Very helpful. And then maybe just touching on guidance, you know, eight and a half to 10 million, You said the high end is kind of more gated on potential licensing agreements, but maybe if you could, you know, help us think through, you know, like when, I guess, when would the, you know, licensing agreement need to be signed?

You know, in licensing agreements, we have many, as I mentioned. We have several, I will say, they tend to be a few hundred thousand dollars to a couple of million dollars. and we have another four maybe more that they tend to be more than 10 million dollars. Just to give you the spectrum that we have. Obviously the smaller deal are much easier to convert faster because they are less negotiation and you can get them faster. The larger deal take a little bit more time because there is more strategic discussion around it. So this is where we are. Definitely, if we put something in the guidance is that we believe that something could happen this quarter somehow. The challenge about it, like when you sign something, let's say if you sign something end of September, you may sign it and you will not take too much revenue off it. Even if you sign a deal of $20 million license, it will be hard to take any revenue. If you sign it earlier, you can take much more than the guidance that you have, so you can have an upside. Factoring, if you want, the small deal that we have and potentially, you know, larger, medium-sized deal, you know, we could be, that's why we said that the high end assumes some services revenue, not only product. If we do only product, it will be hard to reach the 10 million this quarter. But it's still significant growth of our product revenue quarter to quarter because the low end is almost pure product, if you want.

Okay, understood. I appreciate all the callers.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to George for any further remarks.

Many thanks, operator, for handling this call and many thanks for all of you. Looking forward to meet you in person on another opportunity. Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.