Q4 2021 Sequans Communications SA Earnings Call
Greetings and welcome to sequence communications fourth quarter and year end 2021 financial results.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to hand over the call.
To your host Ms. Kim Rogers Hayden IR. Please go ahead.
Yeah.
Yeah.
Thank you to everyone participating in today's call joining me on the call today from <unk> Communications are issuers, Karam, Chairman and Chief Executive Officer, and Deborah <unk>, Chief Financial Officer before turning the call over to George I'd like to remind all participants.
<unk> of the following important information on behalf of sequence.
Quick ones issued the earnings press release, this morning, which was posted to the company's website at www sequence dot com under the newsroom section.
Before we start I would like to remind everyone that this conference call contains projections and other forward looking statements regarding future events or <unk>.
Future financial performance and potential financing sources.
All statements other than present and historical facts and conditions contained in this call, including any statements regarding future results of operations and financial positions business strategy and plans, including financing alternatives for our <unk> business.
Expectations for massive Iot and portable router sales the impact of COVID-19 on our supply chain and on customer demand the impact of component shortages and manufacturing capacity.
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 27, a of the Securities Act of 1933 as amended and section 21.
<unk> of the Securities Exchange Act of $19 34 as amended these statements are only project predictions and reflect our 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 ought.
Operating in a very competitive and rapidly changing environment.
Risks emerge from time to time, given these risks and uncertainties you should not rely on our 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 George Karam. Please go ahead George.
Thank you Kim.
Good morning, ladies and gentlemen.
Welcome to our fourth quarter and full year 2021 financial results conference call.
<unk> exited 2021 with growing momentum and our massive Iot and broadband and <unk> businesses.
Setting us up for a strong 2022.
More design wins move toward mass production.
The fourth quarter revenue grew by 16, 1% sequentially.
And when adjusted to exclude last year's jet back contribution increased 61, 4% year over year.
Revenue for 2021 was $50 9 million.
On a par with last year.
But when adjusted by $22 million for the loss of the legacy jet back contribution.
2021 revenue grew by over 79%.
Versus 2012.
This growth was achieved this.
<unk> global supply chain disruptions, which limited our shipment abilities and has slowed some of our customers.
In early January we announced our expanded partnership with Renaissance.
The expansion of our existing 45 licensing agreements.
Our go to market opportunities.
Supports two crucial factors shaping our growth objectives.
Reducing our manufacturing costs.
And gaining access to a potential increase in supply capacity.
But NFS equity stake in both seat nominee further reinforce the strength of our country.
We are working closely with all our MCU partners as they are key element of our go to market strategy.
For example, <unk>.
Speed demonstrated an energy harvesting system.
Following an LTM NB Iot connection using our monarch platform at the last CES. This January .
Similarly, we expect our collaboration with Microchip to result in a new platform launch this year.
Our go to market strategy, leveraging our MCU partnerships.
Has scaled our sales capabilities and contributed to our pipeline growth with the new design wins and attractive opportunities.
We began 2022 with a record backlog of noncancelable orders.
Our business pipeline exceeds $650 million of product revenue.
Representing the three year lifetime.
Rich $310 million.
Design wins.
At this time.
80% of the design wins are for massive Iot applications.
Highlighting the success of our LTM NB Iot monarch two platform.
And the enthusiastic response to our Calliope two launch.
We are currently engaged on over 100 products.
Many with high profile tier one customers.
The majority of the design win projects.
Still in the development phase and have not yet contributed significantly to our revenue.
We expect many of them to go into production in 2022 with three major ones, having an annual run rate potential of over 1 million units.
Let's dive into the massive Iot business.
In 2021 massive Iot total revenue grew 79% year over year.
And related product revenues grew by nearly 100%.
It presented more than 50% of our total revenue.
This growth has been driven by bus they kept one an LTM NB Iot categories.
Our largest module partners.
<unk> bus product categories to customers in the U S and Japan.
And given our great visibility with this partner, we expect to ship large quantities to them in 'twenty to 'twenty two as well.
Also sequence direct module business accelerated on bus modem categories.
Due to the carriers three G switch off plan.
Our new projects moving to mass production.
Thanks to its low power capability and it's advanced features our second generation monarch, two platform experienced tremendous global success driving pipeline growth.
But our NFS launch of LTM, NB Iot module product line.
Using the monarch platforms also contributed to pipeline growth.
And the last quarter we.
We announced the addition of a GSS software feature on the monarch two platform.
<unk> low cost and low power GSS for tracking devices, which is being used in a number of design wins.
Also we announced the Gsm's common criteria certification.
Our integrated Sim, we refer to this as ice M <unk>.
Making monarch two.
The first LTM NB Iot chips to pass covenant criteria testing for.
For the highest level.
A L five plus security certification.
This item feature has been tested with 10 carriers around the globe and many customers are engaging with us to use it with their products.
The monarch, two chip with ICM and Genesis features.
He has a higher ASP.
And helps revenue growth.
These new innovations are advancing our technological leadership versus our competition.
And boosting our design wins further supporting our growth objectives for this product line.
We are excited about the recent sampling of our cat one calliope two platform.
The second generation of Cat, one category bring significant cost improvement.
Power reduction advantages.
With this global coverage the cat one market is an important segment of massive Iot.
Lamenting the LTM NB Iot category.
As many applications, where required higher speed and some will need voice.
Given the current level of prospective customer engagements on Calliope, two we anticipate securing numerous design wins that could contribute to revenue in early 2023.
In the fourth quarter, we achieved more than it doesn't new design wins with must in the fourth segment and therefore massive iuds segments. We.
We have talked about in the past.
Art metering smart home tracking and medical devices.
These are large markets that are expected to grow on average by three fold in the next few years and will be important growth levers for sequels.
Building on our strong position in each of these segments.
And the current pipeline of design wins, we expect to increase our share to achieve 30% of our addressable market on average in each of these segments as they expand.
Smart city and metering is the largest of these segments.
Lead in power consumption and portfolio completeness offering bus LTM, NB Iot and kept one categories.
The number of design wins, we have secured with tier one metering customers.
It gives us confidence that we can significantly grow our share of this market segment.
Asset and characterize King is the next biggest market segment.
The new <unk> technology integrated on our monarch, two platform and our cost advantage are key differentiators.
<unk> currently makes up most of our sales in this space.
The new wins are moving to LTE M technology, using our monarch two solution.
Numerous projects are progressing towards mass production with significant volume order in our backlog.
Yeah.
Smart home and security is another massive Iot market, that's expected to triple in size by 2020 for what we believe we can take market share with with our cat, one and LTM NB Iot platforms.
Our second generation Cat one calliope two is a key differentiator as many applications will require cat one speeds for Canada and voice support.
The recent collapse to lunch has driven numerous designs in this space.
And we see an opportunity for future engagements with big brand names.
Medical and fitness and the other segment people power to smaller markets.
We have gained market share.
Medical and fitness, we have a half a dozen.
Design wind projects on the monarch two platform.
You did to ship this year in addition to the ones we have in mass production.
The people segment covers wearable and handheld devices.
And trackers for gift for kids personal assets and pets.
We are shipping several tracker devices on the monarch two platform.
With others in development to launch over the course of the.
Calliope two advantages in this market, particularly for wearable and handheld devices, requiring a neutral low power cat one solution should help us adding further growth.
Switching now to our broadband Iot business.
Broadband Iot business historically covered our cassiopeia cat four cat six products.
Beginning with the fourth quarter of 2021.
Our consolidated this segment with the services and licensing revenue that are related to our <unk> strategic deals with a fortune global 500 partner and.
And with other <unk> licensing deals related to tourists.
Going forward, we will report only two category massive Iot and broadband and Iot and we'll distribute the vertical revenues between the two segments based on the product category used in the vertical these.
Note that in 2021, all vertical deals, we're using cassiopeia platform and we attributed this to broadband.
Yeah.
In 2021, the broadband Iot business grew 78% year over year, excluding the jetpack headwinds impact.
The main growth drivers were the services and licensing revenue generated from our <unk> strategic partnership deal.
The <unk> licenses.
And the new vertical projects, along with Cvs product revenue growing from almost zero to about $3 million year over year.
Although flat our cat four cat six emerging market business remains productive.
While our differentiated <unk> offering.
US re establish our broadband Iot business.
We have shipped our seabed as modules to customers building modern.
Tours, a ruggedized tablet.
Headsets and tracker devices for private LTE networks syndrome.
The CVR, Steve address market remains fragmented, but given our pipeline of design wind projects.
We anticipate that this category could double this year and continue growing nicely in the future.
Note that Cvs is also an option for utilities complementing our product offering for smart metering applications that we currently address with our massive Iot product line.
Our value added services business related to non terrestrial <unk> networks like satellite remains lumpy and overall is not expected to be a source of growth in 2022.
That said, we have design wins in hand, and our work on new projects that we believe.
Could land in the next 12 months, mainly for high margin services and licensing business that would add to our five year strategic and Taurus licensing deals.
Now 45, she told US update as I stated on our last earning call. We believe the long term value of our <unk> strategy is not reflected in our current valuation.
As a result, we have been engaged in ongoing constructive dialogues with potential strategic partners to finance, our <unk> investment and are encouraged by the level of interest.
<unk> has a proven track record of closing strategic deals, which reinforces our confidence that we will reach a mutually beneficial agreement with the new flagship Park.
We continue to move forward with the <unk> platform development.
I'm excited to share that we have taped out our <unk> RF transceiver chip and we should be sampling soon.
Given our unique position with our Taurus platform, we remain committed dollar strategy and optimistic about our prospects in <unk>. The next major growth lever for sequels.
Let me provide further clarification on our supply chain.
On our last earning call we confirm that our wafer allocation through Q1, 2022 aligned with our shipment forecast and that we were still working to secure adequate supply for the rest of 2022.
Specifically, we needed to resolve issues, we had towards the end of Q2 and during Q3 to achieve our revenue goals.
We are increasingly optimistic that we will have adequate allocation to meet our customer demand for all of 2020.
While supply chain constraints remain a potential disruptor.
We now have improved visibility for sufficient supply capacity this year as most of the anticipated shortfall with TSMC has been resolved.
That said distribution continues to be fluid.
And we remain pragmatic about the potential for unforeseen developments.
Looking ahead in 2022.
In summary, we ended the year in a strong position with a sizable platform for growth.
We are successfully delivering on our growth levers.
Launching new products and feature set that will allow us to increase our market share.
Expanding our distribution footprint by.
By leveraging our go to market channels, and furthering our relationships with MCU partners.
And advancing the development of our <unk> platform.
We are engaged with numerous high quality tier one customers on design wins and have several large customers with potential run rate of over 1 million units per year.
This pipeline continues to expand with many new exciting opportunity and Bath massive and broadband Iot strengthened by project with our MCU and channel partners.
With the improved visibility on our wafer supply from TSMC.
Any unforeseen developments, we are on track to deliver revenue growth in 2022, and the 30% to 40% range.
Sequence solid competitive advantages and a broad portfolio of differentiated products.
Fourth our leadership position in <unk> market and our confidence that we can deliver sustained long term growth.
The team and I are committed to expanding our market share.
Growing our revenue and improving shareholder value. We appreciate your commitment to sequence and thank you for your continued confidence and trust.
I'll now turn the call over to them.
Thank you George and good morning, everyone.
Revenue for the fourth quarter was $13 $8 million.
A decrease of <unk>, 5% versus Q4 of 2020, and an increase of 16, 1% sequentially.
The quarter includes an increase in services revenue driven by the recent deal with Renaissance and.
Product revenue accounted for 50% of total revenue.
An 8% decrease versus Q3, reflecting primarily lower shipments at Catlin modulus to one of our customers.
Mr. Their inventory level in previous quarters to anticipate potential supply chain issues.
Revenue for massive Iot in Q4, 2021 accounted for approximately 45% of our total revenue.
As George stated earlier as of this quarter, we will only report two categories.
If Iot and broadband Iot going forward, we will consolidate the services and licensing revenue that are related to our strategic deals enter the broadband Iot segment.
Revenues in broadband Iot increased from Q3 2021 as growth in <unk> private networks is starting to pick up.
Service and licensing revenue generated by our scientists strategic deals increased in Q4 compared to Q3 2021, primarily related to additional revenues generated by the extended by necessity greatly.
As expected compared to Q4 2020 revenue from this portion of our business declined due to the absence of jetpack counts.
For the quarter, we had three customers in one channel partner that each represented 10% or more of our revenue.
As massive Iot design wins move into production, we expect to diversify the number of end customers served.
Okay.
Gross margin in Q4, 2021 was 57, 1% absence 45, 1% in Q4 2020 and up from 49, 2% in the third quarter at 2021.
The improvements were due to the increase in the mix of chipset revenue versus module revenue and the increase in services and licensing compared to prior periods.
Our full year gross margin for 2021 with about 50%.
53, 5% despite quarter to quarter fluctuations, resulting from shifts in our revenue mix.
<unk> operating expenses were $11 9 million.
9% and $10 9 million in Q3 2021.
<unk>.
$800000 and higher noncash stock compensation expense and.
And the reduction in net R&D capitalization of over $700000.
Year over year, Isos operating expenses decreased $600000 compared to $12 5 million in Q4 of 2020.
Non <unk> operating expenses, which excludes stock based compensation expense were $10 $1 million in Q4 2021.
Let me slightly up from $9 9 million in Q3.
Our fourth quarter operating loss was $4 million, an improvement compared to an operating loss of $5 $1 million in the third quarter of 2021 and.
And a $5 five $5 4 million loss in the fourth quarter of 2020.
Our net loss in Q4 was $7 7 million or 21 cents per diluted ABS and.
And included noncash charges of $2 $4 million.
Noncash interest expense.
The loss on the revaluation of the embedded derivatives related to our convertible debt.
This compares to a net profit of $200000 or less than one cent per diluted ABS in Q3, which included non cash gains from the revaluation of the embedded derivative at $7 7 million as well as noncash interest expense of $1 $2 million.
The net loss in the fourth quarter of last year was $11 3 million or 36 cents per eds, which.
Which included a noncash gain on revaluation embedded derivatives of $111000 and noncash interest expense of $1 7 million.
On a non isos basis, our net loss for Q4 was $3 5 million or <unk> <unk> per diluted avs.
Again, an improvement compared to a non <unk> net loss of $5 3 million or <unk>.
<unk> per day for ABS in the third quarter and a non <unk> net loss of $8 5 million or 28 speculated ABS in the fourth quarter of 2020.
In Q4, we had a gain on foreign exchange of adding $22000 primarily related to the revaluation of euro denominated net liabilities on the balance sheet.
This compares to a foreign exchange gain of 409000 in Q3, and a loss of $1 9 million in Q4 2020.
Investors should be aware that the company's results are subject to certain market risks and as a result, our net profit and loss may fluctuate quarter to quarter specifically.
Specifically in the financial income expense category on the income statement, which is below our operating results.
Foreign exchange gains or losses, again, primarily related to engagement of euro based balance sheet items.
And the marketing to market and the embedded derivatives related to the convertible debt and can cause significant differences in net income or loss from quarter to quarter.
These fluctuations may be more exchange during periods of increased market volatility in foreign exchange rates or in the company's share price.
Lastly in the value of the embedded derivatives are excluded from our non <unk> presentation, foreign exchange gains and losses, whether realized or unrealized or not.
And please remember that our isos net loss includes significant noncash interest expense related to our convertible debt that is excluded in the nine non <unk> presentation.
Cash and short term deposits totaled $4 $8 million at the end of Q4 compared to $15 2 million at the end of Q3 and $18 5 million at the end of 2020.
The 2021 closing amount excludes nearly $17 million related to the new NFS commercial deal an investment which was received in Q1 2022.
Cash used by operations for the fourth quarter of 2021 with $4 7 million.
An improvement in over the $10 5 million used by operations in the third quarter.
Short term debt from financing receivables remain nearly flat at $9 5 million versus $9 4 million at the end of Q3.
As George mentioned, we are actively engaged in dialogues with potential strategic partners to finance, our <unk> investment can analyze its cash burden and reinforce our balance sheet.
Turning to the outlook for Q1, we are targeting revenue to be essentially flat to the first quarter of 2022 compared to Q4 2021.
We expect the services and licensing revenue to be strong helping to drive gross margin about 55%.
Our guidance takes into account that our first quarter has historically been a seasonally down quarter and factors in our supply capacity.
Our current backlog gives us confidence in this outlook.
We continue to expect that non <unk> operating expenses, which excludes stock compensation expense and assuming a stable euro dollar exchange rate will average slightly above $11 million per quarter in the coming few quarters.
We expect <unk> interest expense in Q1 2022 to be around $2 $3 million.
<unk> interest expense to be about $1 1 million, meaning that we expect our non <unk> net loss to have lower interest expense by $1 2 million.
We are not providing guidance on any impact of revaluing the embedded derivatives are.
Possible foreign exchange gains or losses, given this is largely determined by market conditions.
Finally for modeling purposes, the number of ads outstanding today is $39 9 million.
At the conclusion of this call we will post a written version of our formal remarks in the Investor Relations section of our website on the webcast and presentations page the same location, where you will find the audio replay.
Now I'll turn the call back to George.
Thanks, Deborah operator, we are now ready to open the call for Q&A. Please.
Thank you.
At this time, we will be conducting a question and answer session.
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You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset.
Before pressing the star keys.
One moment, please while we poll for questions.
Thank you. The first question comes from Scott CLA with Roth Capital. Please go ahead.
Good morning. Good afternoon. Thanks for taking my questions nice job guys in terms of securing supply for the 2022 outlook.
Thank you.
Just real quickly in terms of the sequential outlook you indicated that services licensing NRG would remain strong in the first quarter I'm wondering like products, how do we expect that to move sequentially as we go into the first quarter in store things out and then George in terms of that.
$650 million backlog pipeline.
I think in the past that it excluded five G. Given that you're just taped out the <unk> product is there any <unk> contribution factored into how that pipeline currently looks.
Now obviously the.
Really focusing first on the pipeline Scott is really focusing on product revenue. So this excludes all the services.
And this strategic deal that we could have there.
We.
What I would like to say we didn't include yet bigger I mean, there is a little bit a little bit of.
From one of the deals that we have the debits miner to consider in terms of product revenue related to the fund me. So this will come later on once we will be progressing forward I'll say in terms of readiness to go to market.
Okay, great and it sounds like you've got the wafer issues, you've got visibility on that front with TSMC going back.
Into 2021 to where other issues related to subgroups substrates and other.
Components within the module and product supply lines, how does the rest of that look right now you feel pretty comfortable on that front as well.
We feel we're managing this value.
I believe on this angle it was more of a question when we had a problem last year. It was more a question of lead time, because the dynamic has changed overnight.
Yeah.
Ladies and gentlemen, it seems like all we have lost the management line. So kindly stay connected while while we reconnect the management line. Thank you.
Okay.
We are back in the call and.
Can I go ahead and.
Continue you can proceed thank you.
Okay.
And that we cannot hear the management team.
Hello.
Yes, it seems like we have lost the connection with the management team.
Uh huh.
You stay connected while we try to connect with the management team because I don't have the numbers African okay, I'm going to I'm trying them to call in.
Thank you.
Okay.
Okay.
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Okay.
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Okay.
Hello.
We have yes, we have the management.
Back into Cogs.
Please go ahead.
Sorry, guys I mean, we got dropped Congress trying hard to all the numbers to cognex practical happy to come back sorry for this can be <unk> fine.
So we have.
This is Scott.
Surely are you there you're able to hear US, Yes, Hey, George maybe just two.
To continue along on a couple of different fronts.
Just the five strategic could you just clarify it sounds like you continue to be actively engaged and.
And things are progressing well.
The color that you could provide timelines associated with it sounds like now any activity that would happen there will fully fund you in terms of 100% <unk> development is that correct.
Yeah, absolutely I mean, we are really quite general what I would say optimistic not to say.
More but we have we have many engagements as I said.
At least we have some of them quite advanced in terms of discussion and negotiation.
It's very hard to give a timeline on this but.
We would hope this one out of the method would be great and lastly, and then I'll hop back in the queue, but talking about the growth this year, the 30% to 40% growth in 'twenty two.
It sounds like you have both a combination of strong visibility to that in terms of your <unk>.
Backlog and pipeline as well as your supply at a wafer level can you flex higher does does renesys help on this front and I'm kind of wondering in that what are you factoring in.
In terms of contribution from the new Cat, one product portfolio and if there are any larger smart city opportunities over there because I think that there were some larger potential opportunities are timelines here, where we're a little bit fluid. So I'm wondering what's kind of factoring into your current thoughts for 2022. Thanks.
We're reflecting essentially the deal we have in hand more than well what could happen or quite been adverse and good.
Return to some revenue this year, you can all be shelved or the new engagement.
Engagement that I have not really on track now to most of our structure and quickly that probability that they would contribute revenue. This year will be very limited maybe towards the end of the year, but geologists on the edge specifically the new platform gets one we're not factoring revenue this year.
I mean, this will be more beginning over the next year, we could have some positive surprise of things differently.
From the Sungard, obviously, we're leveraging the deals that they are.
Quite secured with our partners on the design win was a reference for others. So there will be a contribution of furnaces.
Our revenue this year, we were short a bolted now on top of what they said in terms of guidance.
<unk> dot com to supply chain constraints.
All receive we have.
General more positive demand from customers and so on we could start hurting the supply so when I'm, giving my comment on the supply.
It's really the supply we need to cover all of those kind of numbers.
If at the end, we have much more demand and is accelerating.
Then the limiting factor becomes that game to supply. It doesn't mean, we will not be able to fix it because.
As I mentioned.
<unk> could help from this angle as well.
But for the time being I'm just limiting to what we did is we haven't had in supply to sort of this deal.
Is that number I'm factoring in this is that element I'm taking into account two mentioned this number of 30% to 40% growth.
Great. Thanks, so much nice job.
Thanks Scott.
Thank you <unk>.
Question comes from Mike <unk>.
Walkley with Canaccord Genuity. Please go ahead.
Great. Thanks for taking my question.
Just to just a clarification.
Kind of a one Scott you other questions too.
For the flattish revenue guidance should we assume a similar mix of revenue.
And Conservatives and licensing revenue.
Is it going to remain strong for the year. So that helps overall gross margins the $6 million per quarter run rate kind of a new way to think about it or is it even higher.
Yes.
Hi, Mike.
The for the Q1 guidance, yes. So you can guess theres similar level, we remain a strong on this.
And for the year.
In the second half, we're going to have less than the first half revenue in terms of services that Avenue and I can explain why we have a little bit the boost if you want the total service revenue between Q4, and Q1 and maybe to some extent a little bit in Q2 as well all of this is related obviously to the.
Revenue recognition model that we use for the with the percentage of completion on the <unk>.
<unk> strategic deal it happens.
Depending on our progress when you strip out the chip N saw U two land by John anything a little bit of revenue, but also not to neglect as well the recent deal with it.
With NSS.
Neil has some component.
Again license.
And services that it's.
It's being recognized more R&D.
In Q in the first half of the year and Thats why all this is boosting it little bit in the first half.
Okay, Great. That's helpful and then with the expanded partnership with Vanessa and you've talked about how it can reduce cost.
As the supply improves and product revenue ramps throughout the year, how should we think about mix and gross margin leverage on the product side of the business.
Okay.
Yes, I mean for the time being we are not.
That really reflecting what I would call discussed improvements.
Because obviously it's work in progress.
And.
They need to implement to move the production. So I don't expect this to be effective really in the first half.
Effective in the.
Second half of the year.
And globally, if you will factor to where we are today in terms of.
Gross margin on the product and have it all that shoe I think overall for the year, we're looking at.
Very high Forty's Simi, just under 50% gross margin.
Yes.
Great that's very helpful.
I guess last question for me as you invest.
This growth with a strong backlog.
Do you feel like you have the adequate resources on the team do you need to add more and how should we think about opex modeling for the year.
No we haven't really.
Because you know we invested the last we added lots of people in the last year and some of them.
When we were taping out for example data chip we have many consultant to reduce them at the beginning of the year. So in Q1 will still maybe.
Staying flat versus Q4.
And I can see there are more flat little bit down over the time I mean, maybe in the model I'll keep it flat.
The fed assumption.
But there is no no no.
There is no extra resources to higher tier plans to add net resources this year.
Great. That's very helpful. I'll pass the line. Thank you.
Thank you. The next question comes from Chris.
Tristan <unk> with Baird. Please go ahead.
Hi, good afternoon.
I know, it's a different business model and also the different technology, but would you expect to benefit that one from the bankruptcy of <unk>.
Would that resulting in some customers converting into.
Hey, Jude or Iot technology, potentially using your chips or is it pretty much a non event based on the data.
Situation and market share.
Hi, Tristan.
I believe you know locally they have some good projects and fast to be to be honest and obviously the defense on the guide.
Taking them over after the bankruptcy what service that will continue that.
They moved out of business to like LTM with Orange.
Obviously, this would give us an option to win more projects because we are very close to those guys and and ecosystem to France. So it can give us some design win but.
Im not expecting really big war mode, or any anything factored for the time being it will not be negative it will be more positive to neutral.
But it's too early because the defense how their business they will move it.
Maintain like sick folks Lora technology, then it's natural for us if those projects some of them start moving to LTE M. We have an option of meeting more views. Some couple of deals I believe they have a couple of projects and fast food that are nice.
Nice to talk to LTM.
Okay, Great and then.
Clearly you have been able to secure more capacity either before the Q2 Q3 timeframe.
Is.
Is the difference between the revenue growth outlook that you provided today versus with the consensus outlook was for this year is that the defense, we should basically use.
To assess how next gen. Cryo supply you have been able to secure or just any way to quantify how much more revenue. You. Now think you can generate this year as a result of the improved supply versus your expectation a quarter ago.
What I mean.
I don't believe we should take the comparison to the consensus for the supply them I'm afraid it will be we can choose whatever came out they say on this kind of confused as to the model I mean, the reality is that you know we.
At the end of the last quarter I I'll still optimistic.
Didn't give up on the support of TSMC, because I saw a positive sign and willingness to help us, but obviously when I was looking to what they have in hand, they had big programming in Q3, and some problem in Q2, and so far we fix them because they help us that we we have a very minor things pending.
And award, but really minor so I feel comfortable today.
With the supply we have factoring in this growth in other words, if I think my my growth number and build it in terms of products and look to the capacity I can service.
Now, obviously, if I have more upside in terms of potential cost side, what I can do let's say 50, or 60% then I'll will start hitting the supply again.
And our need to resolve it by what that of having helped from TSMC, which is still an option obviously, but also the support of <unk>.
Renaissance, which is now well could help us as well in terms of supply.
Great. Thank you very much.
Thanks Crystal.
Thank you. The next question comes from Rajiv Gill with Needham and company. Please go ahead.
Yes, thanks, and good job on the momentum in the business.
George I just wanted to quickly talk about your partnerships with all the MCU suppliers of the major ones benefits <unk> micro chip you talked about the very very crucial and enabling you to scale and add to your.
Sales trajectory I'm wondering if you could elaborate a little bit further on kind of what you see each of those <unk> doing this year in terms of rolling out your technology and folding it into their MCU portfolio, you mentioned NXP Ti for instance.
But wanted to get a little bit more clarity on how those MCU companies are incorporating.
Your failure Iot in their Iot portfolio.
Hi, Rajeev.
I mean for us as I mentioned this is really since two years I mean, we took this past by partnering with MCU partner, knowing that none of them has cellular and obviously, we can be for them what the autumn as for them on the MCU, providing cellular technology and our strategy with them to be honest is really to play fair play with all of them.
And not to have an exclusive relationship preventing us from working with the other guy and offering to everyone of them the full potential from a deal which could be just only partnering on the marketing side to go farther in the tools under development to get and integrate the product biodiesel and even towards it.
Integration.
It makes sense for them.
So this portfolio.
Very transparently offer of options all of them now obviously each one of them has its own agenda is on way of moving on Senator.
The timeline, how critical lithium Zen I cannot elaborate more because everyone has really is on strategy and everyone has this NDA with me. So I will keep it confidential what they know about each one of them, but in general at all or they could say right now.
Different from Mike today, the way itself, we are approaching with them everyone has is following it track which is different from the other which is to some extent nicely for me because I see how which one is more successful.
The public one we know that today NXP that now platform with us which is not biodiesel. Nonetheless, we are joining customers on offering a platform together.
And they would sell and I will sell.
Renaissance took the decision to integrate.
All of our products in their portfolio. So <unk> is completely engaged they have pipeline, which is controlled by them not by me.
And I have visibility on it but obviously, it's their pipeline and they drive it the way they want.
Microchip has something maybe in the middle today I cannot elaborate board because it's not public. So that's how it is so so I still believe that working with them is very helpful. Because all the Iot devices integrate MCU and all of them need.
When they need to sell it out if they need an MCU and 80% of the cases, so the relationship with <unk> that is crucial.
But the way we think it's a market obviously it remains specific to each one of them all what I can say today, our NSS is going to be direct revenue.
That will be shipping to NFS this year end.
I would not say negligible number, but it's not really it's the beginning of the relation but we have hoped that this would go much bigger next year and maybe it will be two digit next year as soon as we go into next year based on the based on the pipeline I see it today and with others that there is no biodiesel today is remains minimum.
Revenue issue on direct revenue, but obviously, we have design wins together that are integrated in my pipeline I talk about the pipeline.
Very good.
Broadband.
Wondering if you could elaborate the opportunities and CBRE.
There is a kind of a multitude of end markets and use cases exist.
Private networks, where stadiums campuses remote education.
And the catalyst towards that Im wondering how youre thinking about the CVR as you rollout.
Maybe this year and going into 2023. Thank you.
I mean, the CMA would ask.
We are present in all of this we did really phenomenal job last year, because we have many design win many customers.
The challenge about this is that it remains fragmented.
To be honest all of them each deal is a small deal maybe excluding the tablet.
It was sizable.
Quantify it.
And this is really now for example on the tablet for the jail you know just to give you for the prisoner.
Recognize tablet chose by the prisoner and we are shipping in volume for it.
There is a nice market by the way that I'm, sorry for the prisoner, but thats not a bad market for us.
And we it's very hard still to see what it can go in terms of market. All the study all of the analyst day remain very fragmented we can talk all about application when we come to the number the projection really.
And Thats accurate and we remain cautious on this however, we see for our sellers that maybe doubling year over year.
This year, maybe go to close to seven $8 million revenue coming from seabed six seven maybe eight. So this is the target I'm putting for myself. This year based on design wins do we have it in hand on cost a lot of moving to production.
And beyond this obviously the <unk>, what youre talking about the the private the private <unk>.
As you know when you push it further or do you have a lot of private <unk> beyond as well to you about as we have done that ex the utility. So there is a lot of stuff which is.
Could develop in the future, but this is going to take longer to ramp up.
Very good thank you.
Yes.
Thank you.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
Christine Clarke.
The next question comes from Craig Ellis with B Riley.
Please go ahead.
Yes, thanks for taking the question and good afternoon charge and Debra.
George I wanted to start with a follow up to some of the helpful. Color you provided around this year's growth that 30% to 40% I think in the past we had looked at the business as having 50% year on year growth potential on a longer term basis and clearly there are a lot of supply chain dynamics, so that 30% to 40.
Percent is understandable. The question is that looking beyond this year and not asking for specific guidance, but just thinking about the dynamics in the business, especially given the acceleration and the share that seems possible in some of your big end markets. How do you think about the longer term growth potential when we get into.
23% to 25 range for for the business given the traction youre seeing with massive Iot and the scale youre getting and CBS .
Hi, Craig Thanks, Thanks for the question.
We see here this is really focusing on the current year and giving a kind of to.
To give more visibility of what we are seeing in factoring into thinks the supply but also the project ramping I mean, all the projects that have not been.
And full year.
A number.
And obviously you and all of that is more in the pipe that didn't turn yet to design win we remain in a market, which is the growth of the market and average is around 40% year over year between kept them in cat, one and the way we look when our addressable market outside of China, We believe our position.
<unk>.
As like today in the in the teens, maybe maybe market share.
Below 15, I will say 14, and 13 and aggregate.
The.
Percent of the current market in 2021, and we see this market really we see all of our market share for <unk>.
And I mentioned is clearly, we and although we made that analysis, but the mob segment by segment looking to the design win and so on we feel comfortable of claiming that our market share. It obviously depends on the segment. Some will go from.
The team to above 20, and some will go off therapy, but in average we see this going close to 30% and this means our average our growth should be much more than the market is bigger than the 40% market share and iron man.
In a position of saying that our growth trajectory in average when you look to 'twenty three 'twenty four 'twenty five and average we should be above 50% the growing year over year.
So that's <unk>.
And more than what I'm projecting this year I will say with the 30% 40% number.
That's really helpful. The next question relates to a point that came up.
Right.
Does the fact that the massive Iot business was breakeven in the calendar third quarter and I know.
At this point in its growth that might be a little bit lumpy quarter to quarter, but can you just talk about the visibility you have two massive Iot being one more consistently breakeven and then to consistently moving into profitability when might that occur in.
What are some of the things that would drive us to sustained profitability in that business from here.
Hello.
The massive Iot.
<unk>.
If we need it because you don't want to talk about the profitability of defense, what you lowered under massive Iot right I mean, so and Jonathan.
Right, we tend to talk about our legacy business.
<unk> include all of what we have and take out the <unk> investment. If you want this is referring to the timeline and <unk> spoken about we remain in this and this.
Yes.
Again, if we take this year and average.
With the growth factor.
Gross targets, we put dollar signs if I think of the <unk> investment definitely it will be profitable as a company I mean on the.
There is no doubt on this and obviously the driver behind it making disagree because you can again imagine that broadband is very limited the services. They are what they are the automotive flat. So the main growth is coming from massive Iot that we said doubled year over year in terms of product revenue and we expect to continue to see the growth on divest of IUD.
As expected.
It's not a doubling in any case to be close to 78%, 70%. This year year over year. So demand growth is coming from from this segment and this is based on the again the four segments I spoke about between smart homes smart cities and the tracking and the health and medical.
Design win in hand, turning domestic production and just what gives us the confidence that we'll achieve this.
That's great and then one product question before I flip blend to that Brian .
I was very interested in the.
Monarch, two chip with ICM and CNS capability and you commented that with.
High ASP product can you provide a little bit more color on where asp's shakes out relative to the rest of the portfolio and how should we think about that product's ability to contribute this year and next year.
Indeed, if you take a G NSS GSS.
We expect to sell our feature and I will say an average, let's say $1 I don't want to give numbers precise number there, but you can add $1.
And this is just only pure software more or less.
Limited. So so if you take a module and the 700 <unk> done that and you add $1. It gives you the value of its module sales. If you are talking about chip sales.
The three to $4 chip sales and you add $1. So significant obviously now that tax rate of the GSS is not 100% so youre talking about maybe.
10% of the deals will be it will be getting GSS.
20% will be taking GSS had not all of them will use software to NSS from us because some of them could be looking for separated Genesis with more features if you want and are willing to pay to that offer this feature to have a separate chip.
Dice in minutes.
Different picture because you could go above $1 50.
All included I would say, obviously, we will have some oriented to payback and all of this is not pure margin, but indeed in the last 50.
Range.
And I assume that that rate could be could be strong because you can go to an attach rate of 100% of the product using the ICM of sequels, because customer will save space would get flexibility, we got power and they will pay less in general the cost of ownership will be less so the only limited limiting factor of the ICM to <unk>.
Penetrate the market as really having this the adoption and acceptance if you want by the carrier to push it to the customers because the carryout of data just a little bit and there is some steps that we need to go through before making this market.
I still I believe the ICM revenue will not impact this year it will be more next year. The GSS, we could have some extra revenue happening this year.
But on the surface wholesale will not.
Change too much the model.
Okay.
Two nice kickers Nonetheless.
Different contribution timing.
Nice to see that.
Deborah just coming back to cash in and nice to see the significant early <unk> boost.
Cash levels close to $22 million. It sounds like can you just comment on any notable items that would either be a benefit or a use of cash beyond just operating means as we go through calendar 'twenty two.
So I think.
The main item is we're expecting about $3 2 million in.
Grant proceeds from the French government grant of <unk>.
This should come in in Q2.
Otherwise no no particular particular items.
We now have the French tax credit is is financed and so that contribute each quarter rather than one big one.
In the third quarter as it used to be.
And the other grant revenues, we have pending grant proceeds.
Much smaller and come in yes scattered over the years. The one big one is the 2.2 million we're expecting.
<unk>.
Got it thanks for all the help Tim.
Thanks, Greg Thanks, Craig.
Thank you.
Ladies and gentlemen, we have reached the end of our question and answer session.
And I would like to turn the call back to George Karam for closing remarks. Thank you.
Thank you again for all of your joining the call today.
We look forward to catching up with you on our first quarter 'twenty to 'twenty two earning calls.
Note that we are participating in the upcoming.
Roth Capital Conference on March 14th and 15th and Dana Point, California.
And the B Riley institutional Investor Conference on May 25th and 26 in Los Angeles.
Look forward to seeing you at one of these upcoming events. Thank you again and thanks operator.
Thank you.
Concludes today's conference you may disconnect your lines at this time, thank you for your participation.
Okay.
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