Sequans Communications: Earnings Call Highlights Growth and Challenges

Sequans Communications S ((SQNS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Sequans Communications recently held its earnings call, showcasing a mixed sentiment among stakeholders. The company reported significant year-over-year revenue growth and advancements in technology and design-win pipeline. However, challenges such as sequential revenue decline, operating losses, and decreased gross margins were also highlighted. Despite these hurdles, strategic advancements and sound financial management suggest potential for future improvement.

Revenue Growth

Sequans Communications reported a 34% increase in revenue for the first quarter of 2025, reaching $8.1 million compared to the same period in 2024. This growth was primarily driven by a 42% increase in product revenue, underscoring the company’s successful market strategies.

Monarch 2 and Calliope 2 Progress

The Monarch 2 platform continues to be a key driver of revenue growth, with new projects entering the pilot rollout phase. Additionally, shipments of Calliope 2 have commenced and are expected to ramp up throughout the second half of 2025, further bolstering the company’s revenue streams.

Design-Win Pipeline

Sequans boasts a robust design-win pipeline, with approximately $480 million in potential revenue. Of this, $250 million is already in the design-win phase, indicating strong future revenue prospects as these projects transition into production.

5G RedCap and eRedCap Roadmap

The acquisition of ACP has accelerated Sequans’ 5G eRedCap roadmap by 18 months. The company anticipates that next-generation chips will begin contributing to revenue by late 2027, marking a significant milestone in its technological advancement.

Cash Management and Financial Position

At the end of Q1, Sequans reported cash and short-term deposits totaling $45.9 million, with no immediate need for an equity raise in 2025 or 2026. This strong financial position allows the company to focus on strategic growth initiatives.

Sequential Revenue Decline

Despite the positive year-over-year growth, Sequans experienced a 27% sequential revenue decline, attributed to a large customer shipment in Q4 that did not recur in Q1. This highlights the challenges of maintaining consistent revenue streams.

Operating Loss

The company reported an IFRS operating loss of $6.8 million for the quarter, compared to a $5.6 million loss in Q4 2024. This increase in operating loss reflects the ongoing challenges in managing operational costs.

Gross Margin Decrease

Gross margins decreased to 64.5% from 67.4% in the previous quarter. This decline was due to a mix of revenues and higher costs associated with the introduction of the Calliope 2 product.

Non-Recurring Cash Burn

Sequans experienced a cash burn of approximately $9 million in the first quarter, driven by several non-operating items. This highlights the importance of managing non-recurring expenses to maintain financial stability.

Forward-Looking Guidance

Looking ahead, Sequans Communications has set ambitious targets. The company expects around 50% of its design-win pipeline to generate revenue by the end of 2025. Plans are in place to launch Monarch 3 and Calliope 3 chips by the end of 2026, which are expected to enhance cost structure and power consumption. Sequans aims to achieve operating income break-even in 2026 and reduce cash burn to below $5 million per quarter by the end of 2025. While new U.S. tariffs pose a potential risk, no direct impact on business is currently anticipated.

In conclusion, Sequans Communications’ earnings call highlighted a mix of growth and challenges. While the company faces issues such as sequential revenue decline and operating losses, its strategic advancements and robust design-win pipeline offer promising prospects for future growth. Investors will be keenly watching how Sequans navigates these challenges and leverages its technological advancements to drive long-term success.