Q2 2025 Sequans Communications SA Earnings Call
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Please note. This conference is being recorded I will now turn the call over to Dave a hangover Investor Relations David you may begin.
Thank you operator.
To everyone participating in today's call joining.
Joining me on the call from sequence communications on George Carrara, CEO, and chairman and Deborah Choate CFO.
Before turning the call over to George.
I would like to remind all participants of the following important information on behalf of sequence.
First the Quants issued an earnings press release, this morning, and you'll find a copy of the release on the company's website at Www Dot <unk> dot com under the newsroom section.
Second this conference call contains projections and other forward looking statements regarding future events or future or.
For our future financial performance and potential financing 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 a new strategic agreements expectations for sales our ability to convert our pipeline to revenue and our objective objectives for future operations are forward looking statements within the meaning.
Of the private Securities Litigation Reform Act of 1995 section 27, eight and the Securities Act of 1933 as amended and section 20 <unk> of the Securities Exchange Act of 1934 as 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 risks and uncertainties and subject to change at any time.
We operate in a very competitive and rapidly changing environment, new risks emerge from time to time, given these risks and uncertainties you should not rely on where place undue reliance on <unk>.
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 turn.
And the call over to George Corona.
Please go ahead George.
Thank you David.
Good morning to everyone.
Im pleased to hold our first earnings conference call since our decision to adult bitcoin as a lot of private it's actually reserve.
We view with Glenn as a long term store of value asset and we intend to strategically accumulated overtime.
Our approach involves actively acquiring and holding bitcoin using net proceeds from equity and debt issuances.
Executing from time to time based on market conditions.
As cash generated from operations and intellectual property monetization.
We are committed to this strategy and believe it will unlock significant long term value for our shareholders.
We will look to continue to accumulate this going for our treasury and do not intend to set.
At the end of last week.
<unk> successfully completed the deployment of all net proceeds.
From the $384 million offering closed on July seven 2025.
So lunch hour bitcoin treasuries strategy.
As of July 2015.
The company holds 3072 bitcoins.
Acquired using the full net proceeds from the offering.
At a total cost of approximately $358 $5 million.
This reflects an average purchase price including fees.
<unk> hundred $16690 per a bitcoin.
According to bitcoin treasuries dot net disposition sequence among the top 25 largest public bitcoin treasury companies globally.
Also we are uniquely positioned as the European.
With current treasury comp in the U S, which may attract a broader international shareholder rights.
With the price of Bitcoin today on 118000, this represents a bit kenaf of around $363 million.
Yeah.
We are focused on delivering best in class disclosure and transparency practices for our shareholders.
We have added a metrics dashboard dollar website spin.
Specifically dedicated to the bitcoin treasuries.
These metrics will continue to be enhanced.
As we work to integrate additional industry standard Bitcoin Treasury Kpis installer dashboard.
Following our initial deployment our short term strategy for the second half of 2025.
As to continue the momentum we've built and further expand our <unk> reserves.
We intend to pursue this through three primary channels.
First deploying a portion of the available cash on our balance sheet.
Second utilizing net proceeds expected from the exercise of common warrants issued in the offering successfully closed on July seven.
And third.
Allocating additional capital anticipated from the public equity market.
Collectively these initiatives are designed to establish a strong foundation for the continued evolution of our trailers such.
Beyond this year, we are developing a plan to expand this strategy we.
We expect this to include the issuance of equity debt and fixed income instruments.
Along with other highly accurate they've options such as the monetization of our operational business and intellectual property.
Our goal is to continue increasing dividend per share and to generate <unk> dollar shareholders.
To ensure flawless execution, we have partnered with Swann bitcoin.
The premier platform for <unk> wealth management and institutional services.
Through strategic Bitcoin Treasury management agreement Swan will support us with this world class team and deep expertise.
This partnership positions us strongly.
To lead in this era of Bitcoin Treasury strategy and to drive long term value for our shareholders.
Now turning to our Iot business. This business continues to improve and move in the right direction.
We strongly believe that we are well positioned to leverage the operating business to help accelerate our <unk> session.
Our second quarter, Iot revenue was $8 $14 million in.
In line with our guidance with the product revenue of $3 $85 million up 10% quarter over quarter and 59% year over year.
Product revenue growth was mainly driven by monarch to shipment.
We continue to expect product revenue to ramp in the second half of 2025 and in 2026.
Driven mainly by the move of design win projects from the development phase domestic production and shipments.
Business momentum continued to be focused around our <unk> product offering with.
With the main two modern categories LTM in Cat, one business supported by our monarch and Calliope families respectively.
We are adding new opportunities every week, specifically with cat one calliope two platform, which is needed to address security and fleet management applications.
Our total three years revenue pipeline now exceeds $485 million.
With $250 million already added design win stage.
All design wind projects are progressing well and we remain confident that by the end of 2025 approximately half of them will have reached mass production and shipment.
In the second quarter three additional design wind projects advance to this stage and are expected to contribute to our future revenue growth.
In terms of new design wins, we secured five new Iot projects in the second quarter.
I am pleased to announce that we have secured a major design win with Iris.
Our new family of RF Transceivers product that we have just launched to market addressing many radio applications outside the usual Iot market like defense drones, and Vito axon automotive.
These six design wins represent in total close to $30 million of three years of that.
We will move them to the design win stage as soon as the customers have reached a sampling phase of their products integrating our technology.
Finally regarding our <unk> roadmap strategy.
<unk> of the <unk> platform is progressing well we are on track to deliver best in class technology building on the success of our <unk> solutions.
Customer interest remains strong driven by our unique value proposition that enables a seamless transition from <unk> to <unk> <unk>, while ensuring long long term application viability.
Turning to licensing and services, we have a strong track record of successfully monetizing our intellectual property.
Through strategic licensing agreement.
Notable examples include our $60 million <unk> told us license with a Chinese partner.
And the $200 million sale of our <unk> VIP to Qualcomm, which included in backlog.
Yes.
Looking ahead, we believe our red Kap and RF technologies will further strengthen this trajectory.
Additionally, our Chinese tourist licensing partner is progressing towards production.
With royalty revenues expected to begin in 2026.
In summary.
We are reaffirming our outlook that given the current business momentum our AUC operations are on track to become cash flow positive in the second half of 2026.
Our objective is to leverage the value generated by this business to support further investments in our bitcoin treasury.
This will complement the capital already raised for that purpose with the goal of increasing our bitcoin holdings and enhancing long term shareholder value.
I will now turn the call over to David <unk> to review the second quarter of 2025 financial results in greater detail.
Deborah.
Thank you George and good morning, everyone I'll cover our second quarter financial results and then seek more ethylene holdings.
Total revenues in Q2, 2025, or $8 1 million up one 1% compared to the first quarter of 2025.
Margin remained strong at 64, 4%.
Comparisons to the first quarter of 2024.
The second quarter of 2024 are included in the press release, but I will not comment on them here as they are not very relevant the company was in a very different position prior to the Qualcomm transaction that took place in the second half of 2024.
Operating expenses in Q2, 2025 were $14 million versus $12 million in Q1 of 2025, reflecting a number of nonrecurring expenses in the quarter and the second quarter related to some restructuring and various advisory fees related to our strategic transactions.
We continue to target to reduce cash operating expense.
<unk> expenses, excluding depreciation expense to be around $10 million per quarter by the end of 2025.
The loss from operations was $8 7 million compared to a loss from operations of $6 8 million in the prior quarter.
And the second quarter of 2025, our net loss was $9 1 million or <unk> 46 cents per diluted ads.
<unk> had a net loss of $7 3 million or 29 cents per diluted EPS in the first quarter.
Our non <unk> loss in Q2, 2025 was $8 1 million compared to a non <unk> net loss of $6 1 million in Q1 2025.
Cash cash equivalents and short term deposits at June 30th were $41 6 million compared.
Compared to $45 9 million at the end of March representing a significant reduction in cash burn compared with the first quarter of 2025.
In part due to receiving some government R&D funding earlier than expected.
We continue to have strong support and EU, French and Swiss governments with various R&D funding programs.
And we expect to collect the remaining $10 million from Qualcomm held in escrow on September 30th 2025.
On the Bitcoin casualty strategy front as announced earlier. This month, we completed the sale of $139 4 million American depositary shares and pre funded warrants for total gross proceeds of $195 million.
And the issuance of $189 million in principal amount of secured convertible debentures.
July seven 2028 at original issued discount of 4%.
Common warrants to purchase up to $41 2 million Aes is exercisable within 90 days of the closing of the offering were also issued.
Total proceeds for painting deal fees were approximately $368 5 million.
The secured kinetic.
Variable debentures are convertible at a conversion price of $2 10 per <unk>.
The common warrants have an exercise price of $1 40 per ads.
We have used the net proceeds from these sales to purchase 3072 that claims as announced earlier this week.
Now we are beginning to execute the next phase of the Treasury implementation as mentioned by George earlier.
Under International accounting standards, our bitcoin assets on the balance sheet will be re measured at fair value at each balance sheet date.
Any loss in historical cost and any gain keeping the value back to historical cost will be recognized in net income.
However, ISS does not allow us to recognize unrealized gains above historical cost in the income statement, but rather directly in an equity reserve account.
While this mark to market may introduced volatility into our reported results it does not impact our cash.
We also launched a bitcoin dashboard strategy.
Excuse me a bit quaint dashboard today at on our website <unk> Dot com slash bitcoin cash treasury, where investors will be able to find a bitcoin related statistics in one location.
We encourage investors to check that as often as it will track additional declines as we announce them and provide a real time snapshot of our market and bitcoin metrics.
And beginning with our Q3 2025 results announcement, we will highlight that claim related statistics in our press release.
And now I'll turn the call back to George before we begin Q&A.
Thank you Debra so to conclude this call. We're very excited about the different treasury strategy, We've just launched <unk>.
Following the successful deployment of the initial fees.
Establishes short term execution plan.
And we are actively preparing for further expansion beyond this year.
In summary, we are fully committed to flawless execution aiming to become a best in class with contractually and deliver long term value of our shareholders.
With that let's begin the Q&A session operator.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone. We also ask that you. Please wait for your name and company to be announced before proceeding with your question one moment for the first question.
And our first question will be coming from the line of Scott Searle of careful Roth Marc Your line is open.
Hey, George AJ Bridgette good morning, good afternoon, thanks for taking the questions.
Hey, Julien.
Just to dive in on the Bitcoin Treasury initiatives.
I know, it's early days and you just launched the dashboard. So we will see more details on that going forward, but I'm wondering.
If there is a bitcoin yield number or target that.
That youre looking for I think in the early going here I know, it's been three weeks in but it looks like your annualized yield.
This is well over 15% I'm wondering if you have any early thoughts on that and kind of what the capital structure or target as you look forward over the next 18 to 24 months I know, it's premature but I'm wondering if you have some high level thoughts on that front and Deborah just I was wondering if you could detail the nonrecurring expenses in the quarter just the magnitude of it and then I had a couple of fall.
So ups on the Iot front.
Thank you Scott.
On the obviously in terms of.
We have a targeted I mean, depending on the tools I would say for 10 25 as I mentioned about three steps that we are doing.
One which is really.
Uh huh.
A piece of the available cash on our balance sheet, because you know we have still strong balance sheet.
We have another $10 million coming from Viacom at the end of the quarter.
We are reserving for the operation some piece, but there is some of it can be used for <unk> and this will be executed and obviously there is the ones where it depends on the exercise.
I'm, giving a high level of product I believe this would exercise much.
To reiterate two months to see them exercising all of this obviously will give us a level.
All of US and then from there.
Our ability LLC to go back to market at least some equity as well in the fourth quarter that we put in the plan depending on those three of the three are executed I believe there is a target maybe fourth quarter will exceed 10% yield.
Today, though I don't know, which the reference because there is a program of the year to give it to us to take the reference if I take the reference which is last week.
That transaction.
From there I believe we can we can be above 10% and if we're lucky maybe we can be at 15% at orsa entity.
Now in terms you know about.
The structure for next year, I mean again.
We are working as you can imagine on this strategy since nonstop since three months in and obviously the first phase was more about executing and I believe we executed well by closing the deal and deploy your C. D and <unk> planned at reached the level, where we are today and number of <unk> that we hold.
Immediately we put in place and concluded with I'll say the next step, but just to keep the momentum in the coming four months and this is in place and from there on working really on bigger plan.
To go beyond the 106 smartphones, it's about six months, even beyond where it essentially.
Using.
The equity debt and preferred whatever fixed income tools, all smarter idea that in.
<unk> not on the table and we are discussing them to work on them and be able to raise capital and continue the momentum buying bitcoin and cleaning of the EU, but obviously also there has been this is really what I consider important in sequence in different sequence. I mean, there is a valuable piece of business that we have in hand that can be monetized in one way.
And another and this can be.
Z <unk>.
It can deliver nice yield from the shareholder mainly considering the value added that we have today right. I mean, if you could put an app versus <unk>.
The sequence business today, we still have significant.
<unk>.
It all cash to extract from this business and obviously you outlook on all the plans he has to do.
So this is really at the high level the Gulf would be yes.
The nonrecurring expenses, we had about.
About 600000 sign in R&D expense it was related to some restructuring costs following the acquisition of <unk>.
And salary adjustment catch up that was booked in the quarter.
Part of the integration process.
And then on the G&A line, we had just a number of fees that were related to the ECP acquisition integration.
Finalization of.
The tax rate related to the Qualcomm <unk>.
Action and the favorable tax treatment.
We were filing for and then a number of things related to preparation for the various bitcoin strategy. So its probably another six to 700000 related to the series six.
Gotcha very helpful. Thank you and George and maybe on the cash flow within the business. It sounds like you will deploy some of that 40 plus million that.
That is all of the balance sheet around the Iot operating business, you're also a $10 million coming in from Qualcomm and it sounds like you would continue to still target cash flow breakeven.
In the second half of 2026 is that is that all correct in terms of.
Additional cash opportunities.
And I guess, you can throw on top of that some incremental licensing opportunities.
So devin whether on the front of licensing or the business itself and obviously you know any strategic angle through all this business opportunity that we are we are exploring.
We'll be.
Cash and racing event for the company that can be used for the bitcoin.
And as I've said the business as you said as I am reiterating business is going very well.
The convergence of design win we have more and more customers turning good product to mass production is predicted this second half of the year and preparing for customer next year. So this reinforced our bullish on the business and the revenue on the other side obviously.
We're extremely disciplined in the in the in our target for <unk>.
Cash spending on <unk> per quarter and would be keep watching this.
To reduce it and the two together.
<unk>.
Still on track for our target next year to be Ricky.
Breakeven is unknown.
Great and George on the licensing front I know in the past I think you've talked about some ongoing potential engagements.
Or discussions could you give us an update on that further <unk> also like your Chinese partner should start to transition into a royalty generating mode in 2020, such as well, which can be redeployed with the big coin strategy absolute and unit one in six months I mean. This is this also could be also a turning point on our February maybe versus.
The best.
We will be more reinforcing the licensing and all of those.
This angle of the business because this is really.
It could be a recruiting business. It grew at a coding revenue was 100% margin with very little therefore behind you those see the Chinese partner, Yeah, It's moving while they are in.
They got that product.
Something ready to go for mass production next year and.
And we believe this will stop being revenue being <unk> and I was working on and I'm still working on a couple of opportunities that progressing well, we should have some kind of decisions.
Into Q4 around them.
That could be also an injection of cash coming from those license.
Great very helpful. And then lastly, if I got a couple of questions on the Iot business and I'll get back in the queue.
But just wanted to clarify it sounds like you continue to expect.
Product revenue ramp up in the second half of this year and exiting the year about 50% of those $250 million worth of design wins should be going into production by the end of this year is that is that correct.
Absolutely absolutely.
Okay.
Lastly, just on ACP. It seems like it's been this self homerun I'm wondering if you could extrapolate a little bit on that opportunity.
Very high gross margin business, a very unique business in terms of Youre going after defense drone UAV and I guess some vehicle to ex markets.
Just how big is that opportunity as we think about.
2026.
That'd be helpful. Thank you.
I mean, it's got to support them and this was really a nice piece of the acquisition on Ralcorp is fewer quarters I'm really for the IP of audits to included in dollar five year roadmap, which we did and it's working very well.
And accelerate our time to market on sale of investments for the company lots of investments. However in the same time, we we discover a portfolio of products that.
Very very advanced study there is no R&D investments. So we're not investing in if any on this just only the product, but we just push it into our marketing machine and sales machine to sell it to market and as I announced we won already big deal really very big deal that should turn to revenue Q1 next year.
So there is upside that the number but I honestly.
I have to put the targets for.
Net for next year, we should be able to do on those maybe.
Maybe six $7 million very easily on the backlog about five in any case.
And depending on some timing and some on how things will go maybe we can reach the $10 million and with very high margin.
Exceeding 70% margin this business and it has as one licensing opportunity related to this as well.
Great Alright. Thank you so much I'll get back in the queue.
Thank you and that does conclude today's Q&A session I would like to turn the call back over to George for closing remarks. Please go ahead.
So thank you all for listening.
And again.
Or.
Continuous stressing that.
We are fully focused on the mid con, making the transition of the company out of thinks levels question I understand it from from many of you and maybe not being patient.
But believe me were working 24, seven and we are committed to this strategy and will make it.
Completely successful stay tuned with us and looking forward I will say to speak with you on the next earning call in a quarter from now and maybe if we have other opportunities.
Thank you very much.
Operator, we can close the call.
Thank you for joining today's conference call you may all now disconnect.