Q2 2024 Earnings Summary
- Sequans expects an acceleration in design wins and pipeline growth due to improved financial standing, as customers who were previously hesitant because of financial issues are now likely to proceed, leading to increased revenue growth.
- Sequans is poised to capitalize on the upcoming expansion in the 5G IoT market, planning to accelerate the development of their 5G RedCap and eRedCap technologies, positioning themselves well as these markets mature in the next 2-3 years.
- The transaction with Qualcomm strengthens Sequans' competitive position, improving their financial stability without negatively affecting their operations, enabling them to continue serving customers and enhancing competition in the market.
- Uncertainty over regulatory approvals for the Qualcomm transaction may delay its completion, impacting Sequans' financial stability. The CEO acknowledged uncertainty about whether Hart-Scott-Rodino filings are required: "Honestly, Debray is not with me. I need to check this. But the most important one is the FDI regulatory in French."
- Delays in converting design wins to revenue due to past financial challenges may continue to impact future growth. The CEO mentioned that "the conversion rate from design win was not great... many of them literally... said, it's great, we will select you, provided you fix your problem."
- Limited immediate financial benefit from the Qualcomm deal, as any OEM chip sales to Qualcomm are expected to be non-material. When asked if Qualcomm would OEM chips from Sequans before producing their own, the CEO responded: "I believe the market should not plan on this... we take from Qualcomm is really stabilization of the technology and definitely the cash and fixing the financial problems of the company."
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Qualcomm Deal and Regulatory Approvals
Q: Thoughts on Qualcomm deal antitrust and approvals?
A: Management believes the deal raises no antitrust issues and will benefit the market by making technology available to two companies, creating more options for customers. Only the French FDI regulatory approval is required; there are no other jurisdictions needed. -
4G Pipeline and Customer Activity
Q: Update on 4G pipeline and impact from financial issues?
A: Despite financial challenges, the 4G design win pipeline remains strong. Existing customers continued buying and progressing toward production. Some customers delayed decisions, awaiting resolution of financial issues, but management expects to regain momentum now that these problems are being fixed. -
Qualcomm OEM Chips from Sequans
Q: Will Qualcomm OEM chips from Sequans before making their own?
A: Management does not expect this to be material. Qualcomm has the capability to produce their own chips, and both companies will follow their respective paths. Sequans benefits from technology stabilization and financial improvements from the deal. -
5G RedCap Development Timeline
Q: Status of 5G RedCap development and timeline?
A: The company is preparing for the evolution to 5G, focusing on RedCap development aligned with market readiness. Mass market adoption is estimated in 2–3 years, and development will accelerate now that financial issues are resolved.
Research analysts covering SEQUANS COMMUNICATIONS.