Q2 2026 Sequans Communications SA Earnings Call

August 4, 2026

Speaker #1: 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 11 on your telephone.

Speaker #1: If your question has been answered and you'd like to remove yourself from the queue, simply press star one-one again. Please note that this conference is being recorded.

Operator: 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.

Speaker #1: I would now like to turn the call over to David Hanover, investor relations. David, you may begin.

Speaker #2: Thank you, operator. And thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are Georges Karam, CEO and Chairman, and Norman Brot, CFO.

Speaker #2: Before turning the call over to Georges, I would like to remind our participants of the following important information on behalf of Sequans. First, Sequans issued an earnings press release this morning, and you'll find a copy of the release on the company's website at www.sequans.com under the newsroom section.

Speaker #2: 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

David Hanover: Second, this conference call contains projections and other forward-looking statements regarding future events or our future financial performance and potential financing sources.

David Hanover: Second, this conference call contains projections and other forward-looking statements regarding future events or our future financial performance and potential financing sources. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time.

Speaker #2: 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.

Speaker #2: 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.

David Hanover: We operate in a very competitive and rapidly changing environment. New risks emerge from time to time.

David Hanover: 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 of 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. Now I'd like to hand the call over to Georges Karam. Please go ahead, Georges.

Speaker #2: 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 is included in our public filings with the Securities and Exchange Commission.

Speaker #2: And now, I'd like to hand the call over to Georges Karam. Please go ahead, Georges.

Speaker #3: 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.

Georges Karam: Thank you, David, 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 28 May, 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. 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.

Speaker #3: As we 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Georges Karam: As a result, we ended Q2 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 IoT 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 H2 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.

Speaker #3: With our IUT 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 in the best interest of the company to do so.

Speaker #3: Our priority going forward is squarely on executing our IUT semiconductor strategy, scaling our product presence in the defense and drone market, and advancing our 5G ERETCAP roadmap to create long-term shareholder value.

Speaker #3: 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.

Speaker #3: Now turning to our IUT 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 percent increase from the first quarter.

Georges Karam: We continued to build momentum in Q2. Revenue for the quarter was approximately EUR 7.5 million, exceeding the guidance we provided last quarter and representing a 23% increase from Q1. 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 H2 and beyond. Today, we have more than 40 design win projects that have reached mass production, several of which we expect will each generate more than EUR 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 in our product growth trajectory for both this year and next.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Today, we have more than $40 design win projects that have reached mass production. Several of which we expect will each generate more than $4 million in annualized revenue beginning in 2027.

Speaker #3: These programs are contributing to a strong and growing backlog that now extends into 2027, providing us with increasing visibility and confidence in our product growth trajectory for both this year and next.

Speaker #3: More importantly, this reflects the continued conversion of our design win pipeline into projects in production with committed orders to come. Our design win pipeline measured by potential three-year product revenue also continues to expand beyond the more than $300 million reported at the end of 2027.

Georges Karam: More importantly, this reflects the continued conversion of our design win pipeline into projects in production with committed orders to come. Our design win pipeline, measured by potential 3-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.

Speaker #3: We'll provide an updated figure at year-end, but as of today, 55% of that figure is in mass production and generating revenue, representing approximately $165 million of design wins in production at the quarter's end.

Speaker #3: That's 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. CATM remains a core growth driver for the business.

Speaker #3: 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.

Georges Karam: 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. Cat 1 bis is also gaining traction with customer ramps across telematics, security, and industrial applications expected to continue building through the H2 of the year. We remain encouraged by the level of customer engagement and the new IoT opportunities we see as existing design win projects move toward production. During the Q2, we secured 10 new project wins, 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 wins throughout the remainder of the year. Our RF transceiver business is also gaining momentum.

Speaker #3: CAT1 BIS is also gaining traction, with customer ramps across telematics, security, and industrial applications expected to continue building through the second half of the year.

Speaker #3: We remain encouraged by the level of customer engagement and the new IUT opportunities we see as existing design win projects move toward production. During the second quarter, we secured 10 new project twins leveraging our CATM and CAT1 BIS technologies.

Speaker #3: While transitioning a similar number of projects, into mass production. Design activity across our pipeline remains healthy and we expect to add additional wins throughout the remainder of the year.

Speaker #3: 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 continues to grow.

Georges Karam: 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 SQN9506 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 eRedCap solution also remains on track. Our test ship is now in-house, and we continue to target customer sampling during the H2 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.

Speaker #3: During the quarter, we began shipping our SQN9506 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 this year.

Speaker #3: 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 eRET-CAP solution also remains on track.

Speaker #3: Our test ship is now in-house, and we continue to target customer sampling during the second half of 2027. As the IUT market transitions from 4G to 5G, we continue to believe ERETCAP will become a key industry standard and an important pillar of our long-term strategy.

Speaker #3: Beyond the product opportunity itself, we believe our investment in ERETCAP further strengthens our technology leadership, enhances the value of our intellectual property portfolio, and creates additional opportunities for future licensing and services revenues.

Georges Karam: 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 Q2, we expect a meaningful increase in the H2 of the year as one or more of the significant license opportunities currently under discussion converts into signed agreements.

Speaker #3: Although product revenue from our ERETCAP platform is expected to begin in 2028, we believe meaningful services and licensing revenue can be generated well in advance of commercial product launches.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 thousand dollars to well over $10 million.

Georges Karam: 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 thousand 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 towards breakeven. 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.

Speaker #3: 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 applications, while providing meaningful upside to revenue and supporting our path toward breakeven.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Georges Karam: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Georges Karam: 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 the break-even operating run rate as revenue continues to scale. We made some progress this quarter and expect to make more in the H2 of the year. Overall, the Q2 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 Sequans for continued growth.

Speaker #3: 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 breakeven 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.

Speaker #3: 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.

Speaker #3: 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.

Georges Karam: Regarding our outlook for the Q3, 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 win pipeline, we continue to expect the business to build through the H2 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.

Speaker #3: 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 win pipeline, we continue to expect the business to build through the second half of the year.

Speaker #3: 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.

Speaker #3: Looking ahead, we believe the fundamental building blocks of the business continue to strengthen. We have simplified near debt-free balance sheet with meaningful liquidity and the financial flexibility to support our long-term strategy.

Georges Karam: 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 win pipeline that continues to grow and convert into production revenues. Finally, our differentiated portfolio of 5G and RF technologies remains one of Sequans' most important long-term strategic assets, creating opportunities across both products and licensing revenue. Our priorities remain clear. We continue scaling our IoT semiconductor business, advancing our 5G eRedCap roadmap, expanding our licensing opportunities, and executing against the initiatives we believe will unlock the full long-term value of Sequans. 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 Sequans, Deborah Choate retired as our chief financial officer.

Speaker #3: Our IoT semiconductor business continues to demonstrate strong underlying momentum supported by a growing backlog and a design win pipeline that continues to grow and convert into production revenue.

Speaker #3: Finally, our differentiated portfolio of 5G and RF technologies remains one of Sequans' most important long-term strategic assets, creating opportunities across both products and licensing revenue.

Speaker #3: Our priorities remain clear, we'll continue scaling our IoT semiconductor business, advancing our 5G EREDCAP roadmap, expanding our licensing opportunities, and executing against the initiatives we believe will unlock the full long-term value of SEQUANS.

Speaker #3: 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.

Speaker #3: After 19 years with SEQUANS, Deborah Choate retired as our chief financial officer. Deborah has been part of SEQUANS through many of the company's most important milestones.

Georges Karam: Deborah has been part of Sequans 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 director and everyone at Sequans, 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 Sequans 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.

Speaker #3: She played a significant role in strengthening our financial foundation and supporting the strategic initiatives that have positioned the company where it is today.

Speaker #3: On behalf of our board of director and everyone at SEQUANS, I would like to sincerely thank Deborah for her many contributions over the years and wish her all the best in her retirement.

Speaker #3: I'm also pleased to welcome Norman Broad as our new Chief Financial Officer. Norman joined Sequans 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.

Georges Karam: I'm also pleased to welcome Norman Brodt as our new Chief Financial Officer. Norman joined Sequans 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 Sequans well as we continue executing our strategy. With that, I will now turn the call over to Norman to review our Q2 financial results in greater detail. Norman?

Speaker #3: 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.

Speaker #3: I'm confident that Norman's experience financial discipline and knowledge of our business will serve SEQUANS 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 and a greater detail.

Georges Karam: I'm confident that Norman's experience, financial discipline, and knowledge of our business will serve Sequans well as we continue executing our strategy. With that, I will now turn the call over to Norman to review our Q2 financial results in greater detail. Norman?

Speaker #3: Norman?

Speaker #2: Thank you, Georges. And good morning, everyone.

Norman Brodt: 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 Sequans. I want to thank Deborah for the strong foundation she built and for ensuring a smooth transition. I'm pleased to have the opportunity to speak with you today for the first time as CFO. Now, let me turn to our Q2 financial results. Total revenue for Q2 was EUR 7.5 million, an increase of 23.2% compared to Q1 2026. Compared to Q2 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.

Speaker #3: Before we review our financial results, I'd like to say a few words. I assume the role of chief financial officer at the beginning of July following Deborah's retirement of the 19 years with SEQUANS.

Speaker #3: I want to thank Deborah for the strong foundation she built and for ensuring a smooth transition. I'm pleased to have the opportunity to speak with you today for the first time as CFO.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Norman Brodt: 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 win pipeline into production revenue, and with more than 40 projects now in mass production, and a backlog extending far into 2027, we have strong visibility into continued growth. Gross margin was 32.9%, compared to 37.7% in the Q1 and 64.4% in the Q2 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 Q2 of last year includes meaningful license and services revenue associated with the Qualcomm transaction, making the year-over-year comparison less meaningful.

Speaker #3: Reflecting the continued growth of our IoT business. That reflects sustained conversion of our design win pipeline into production revenue and with more than 40 projects now in mass production and a backlog extending far into 2027, we have strong visibility into continued growth.

Speaker #3: Gross 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 mix of the higher mix of product revenue relative to license and services revenue, which naturally carries a different margin profile.

Speaker #3: As a reminder, the second quarter of last year included meaningful license and services revenue associated with the Qualcomm transaction, making the year over year comparison less meaningful.

Speaker #3: 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.

Norman Brodt: Operating expenses consisting of research and development, selling, general and administrative expenses were approximately $11.9 million, compared with $11.8 million in the Q1. We continue to execute on our cost reduction initiatives and remain on track to achieve lower operating expense levels in the H2 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 Q1. Along with the 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 Q1 2026 and $8.5 million in the Q2 2025.

Speaker #3: During the quarter, we recorded a non-cash impairment on our Bitcoin holdings of $3 million, down significantly from $29.3 million in the first quarter.

Speaker #3: Along with a realized net gain of $5.3 million on Bitcoin sales, compared to realized net loss of $11.7 million, in the prior quarter. Operating loss was $7.2 million.

Speaker #3: 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 65 cents per diluted ADS, compared to net losses of $76.2 million or $5.23 per diluted ADS.

Norman Brodt: 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 Q1, and $9 million or $3.53 per diluted ADS in the Q2 2025. Please note that we adjusted the Q1 2026 financial income and expenses to the reevaluation 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 Q1, reflecting the wind down of our convertible debt. On a non-IFRS basis, excluding non-cash impairments, stock-based compensation, and the non-cash items associated with the convertible debt and its embedded derivative, non-IFRS net loss was $4 million, or $0.27 per diluted ADS.

Speaker #3: 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 reevaluation 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.

Speaker #3: 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.

Speaker #3: On a non-IFRS basis, excluding non-cash impairments, stock-based compensation, and the non-cash items associated with the convertible debt and its embedded derivative, non-IFRS net loss was $4 million, or $0.27 per diluted ADS.

Speaker #3: 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.

Norman Brodt: This compares to a non-IFRS net loss of $20.6 million or $1.41 per diluted ADS in the Q1, and a non-IFRS net loss of $8 million or $3.14 per diluted ADS in the Q2 2025. Turning to the balance sheet, cash and cash equivalents at 30 June totaled $21 million, up from $10.6 million at 31 March. For the H1 of the year, cash used in operating activities was $23 million. Investing activities provided $127.7 million, driven primarily by the proceeds from Bitcoin sales, while financing activities used $97 million, reflecting the full repayment of the convertible debt associated with our Bitcoin treasury strategy. As of 30 June, we held 314 Bitcoin, valued at approximately $18.4 million, all of which is unrestricted and available for sale.

Speaker #3: Turning to the balance sheet, cash and cash equivalents at June 30th totaled $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 convertible debt associated with our Bitcoin treasury strategy.

Speaker #3: 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.

Norman Brodt: This compares to 1,514 Bitcoin at 31 March, 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, Sequans 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 Georges, 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 H2.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Before I hand the call back to George, I want to briefly echo his comments on our licensing pipeline. We have several discussion 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.

Norman Brodt: Before I hand the call back to Georges, 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 H2. As Georges 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 Georges.

Norman Brodt: As Georges 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 Georges.

Speaker #3: 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.

Speaker #2: Thank you, Norman. So as we close our priorities remain clear. We are focused on executing and scaling our IUT semiconductor business while expanding our presence in softer defined radio applications including drones and defense.

Georges Karam: Thank you, Norbert. 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 win pipeline, an increasing number of design win projects transitioning into production, and a maturing pipeline of licensing and services opportunities. Together, with continued strength across our Cat M, Cat 1 bis, and RF product families, and the progress we are making with 5G eRedCap, we believe Sequans is well-positioned to deliver continued growth while moving steadily toward cash flow breakeven. At the same time, we have taken important steps to strengthen our financial foundation.

Speaker #2: We continue to see encouraging momentum across the business, supported by a growing backlog, a growing design win pipeline, an increasing number of design win projects transitioning into production, and a maturing pipeline of licensing and services opportunities.

Speaker #2: Together, with continued strength across our CAT1 bids and RF product families, and the progress we are making with 5GE Red Cap, we believe sequence is well positioned to deliver continued growth while moving steadily toward cash flow breakeven.

Speaker #2: 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 treasury strategy, we have significantly improved our financial flexibility and sharpened our focus on our core semiconductor business.

Georges Karam: With the redemption of our convertible debt and the successful transition away from our Bitcoin treasury strategy, we have significantly improved our financial flexibility and sharpened 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 Sequans 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 disciplined execution and believe we are well-positioned to create long-term value for our shareholders. Thank you for listening, we can now open the call for questions. Operator?

Speaker #2: 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.

Speaker #2: Overall, we believe Sequans 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.

Speaker #2: We remain focused on discipline and execution and believe we are well positioned to create long-term value for our shareholders. Thank you for listening. We can now open the call for questions. Operator?

Operator: Certainly. Our first question for today comes from the line of Scott Searle from Roth. Your question, please.

Speaker #1: Certainly. Our first question today comes from the line of Scott Thoreau from Roth. Your question, please.

Speaker #4: Hey, good morning, good afternoon. Thanks for taking the questions. Georges, congrats on the product momentum—it's kind of going in the right direction. And Norm, congrats on the new role.

Scott Searle: Hey, good morning. Good afternoon. Thanks for taking the questions. Georges, congrats on the product momentum going in the right direction. Norm, congrats in the new role. Maybe to start, Georges, in terms of 55% of the design win pipeline now ramping into production, it continues to grow beyond that EUR 300 million mark implies, EUR 13 million, EUR 14 million plus at full production. I think you've been targeting the H1 of next year is when you'd be getting to operating breakeven. Is that still the plan? Given how things are rolling into production, are you on track for that mark?

Speaker #4: Hey, maybe to start, Georges, in terms of 55% of the design win pipeline now ramping into production, and it continues to grow beyond that $300 million mark. That implies $13–14 million plus at full production.

Speaker #4: I think you've been targeting the first half of next year is when you'd be getting to operating break even. Is that still the plan?

Speaker #4: And given how things are rolling into production are you on track for that mark?

Speaker #2: 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 into production.

Georges Karam: Yeah. Hi, Scott. Indeed, your remarks, honestly, when you compare it to last year, as we said, we have 3x improvement in projects in production. They are solid, and we have visibility, as we mentioned many times, even towards the H1 of next year, 2027, from all those projects in production. This is really becoming much more, I would say, predictable, if you want. When the projects are moving and ordering, we can predict much easier. We expect definitely sequential growth, the growth continuing on our product. To support our breakeven, it's essentially, it takes two other elements. Obviously, continue controlling our cost structure, which is something definitely we are committed to, and we'll continue doing this as we move forward in the H2.

Speaker #2: 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 in production.

Speaker #2: 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.

Speaker #2: So we expect definitely sequential growth, the growth to continue on our product, and to support our break even—it is essentially that it takes two other elements.

Georges Karam: We expect definitely sequential growth, the growth continuing on our product. To support our breakeven, it's essentially, it takes two other elements. Obviously, continue controlling our cost structure, which is something definitely we are committed to, and we'll continue doing this as we move forward in the H2. Also, obviously, there is a second component which can a little bit play on the margin, which is the services revenue. Yes, with these three points, that sets the target to be next year in a position very close to breakeven, if not breakeven on a yearly basis globally.

Speaker #2: Obviously, continue controlling our cost structure which is something definitely we are committed to and we will continue doing this as we move forward in the second half.

Speaker #2: But also, obviously, there is a second component which can play a little bit on the margin, which is the services revenue. So yes, with these three points, that's just the target: to be next year in a position very close to break-even, if not break-even, on a yearly basis globally.

Georges Karam: Also, obviously, there is a second component which can a little bit play on the margin, which is the services revenue. Yes, with these three points, that sets the target to be next year in a position very close to breakeven, if not breakeven on a yearly basis globally.

Speaker #4: Very helpful. And if I could follow up then, Georges, on the licensing front, it sounds like there are more opportunities, or irons in the fire, at this point in time.

Scott Searle: Very helpful. If I could follow up then, Georges, 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? I think 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 breakeven. Is that still the expectation?

Speaker #4: 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?

Speaker #4: And I think 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.

Speaker #4: Is that still the expectation?

Speaker #2: Yeah, absolutely. I mean, again, the opportunity we have in hand, they are maturing definitely they are closer I would say to be I mean, as predicted, we already from the beginning of the year we estimated that this will happen in the second half.

Georges Karam: Yeah, absolutely. Again, the opportunity we have in hand, they are maturing. Definitely, they are closer, I would say to be. As predicted, we already, from the beginning of the year, we estimated that this will happen in H2, we are on track on this. 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. We definitely have a handful of projects very advanced in discussion, hopefully, we can conclude one or more in H2 to meet our target. This is really the only point we see it for the year, if you want, we'll be completely on our plan that we set at the beginning of the year.

Speaker #2: 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 one quarter or another, based on the revenue recognition rules.

Speaker #2: But we definitely have handful of project very, very advanced in discussion. And hopefully we can conclude one or more in the second half to meet our target.

Georges Karam: This is really the only point we see it for the year, if you want, we'll 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, there is always the cash from the government, which is the grant from the government. We have technically around EUR 4 million plus on a yearly basis, this amount it's not smooth every quarter. We have a chunk of EUR 3 million plus that should happen in H2 as well when you compute the cash.

Speaker #2: This is really the only point we see it for the year, if you want, and we'll be completely on our plan that we set at the beginning of the year.

Speaker #2: In addition to this, we should mention as well when we are talking about break even as well, it's like the there is always the cash from the government which is the grant from the government which is it's a little bit we have technically around 4 million plus on a yearly basis.

Georges Karam: In addition to this, we should mention as well when we are talking about breakeven as well, there is always the cash from the government, which is the grant from the government. We have technically around EUR 4 million plus on a yearly basis, this amount it's not smooth every quarter. We have a chunk of EUR 3 million plus that should happen in H2 as well when you compute the cash.

Speaker #2: But those this amount doesn't 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.

Speaker #4: Very, 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.

Scott Searle: Very helpful. 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 2026 and 2027. A quick one for you, Norm, just in terms of the OpEx running over EUR 11 million this quarter, I'm wondering if you could remind us where the target is. I think it was below EUR 10 million, just are you comfortable to get into that bogey in H2 of this year? Thanks.

Speaker #4: 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.

Speaker #4: I think it was below $10 million, but just—are you comfortable to get into that bogey in the second half of this year? Thanks.

Speaker #2: Yeah. I mean, on the RF, definitely we have very solid RF portfolio. And this is somehow related to the acquisition we did boosted, I would say, the position of the company.

Georges Karam: Yeah. On the RF, definitely, we have very solid RF portfolio in order. This is somehow related to the acquisition we did, boosted, I would say, the position of the company. We always had this technology in the company, but the acquisition of ACP that we did a year ago boosted us, and put us in a very strong position where we have couple of customer, with whom we do a couple of million dollar, $3 million in a predicted way, I would say, every year. 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. Not to give exact number, really we have a large number, and many people interest in our technology.

Speaker #2: We always had this technology in the company. But 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 customer with whom we do a couple of million dollar, 3 million dollar in a predicted way, I would say, every year.

Speaker #2: 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.

Speaker #2: I mean, not to give an exact number, but really, we have a large number of people interested in our technology. All the feedback we are getting is extremely positive.

Georges Karam: All the feedback we are getting is extremely positive. 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 the evaluation process to whom we start shipping to them the development kit, the technology that they need for them to conclude their design win and move on. I'm expecting in the H2 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 customer and we still in our early phase to really estimate exactly where we can go there. Thinking like this is a business that can scale to $10, $20 million per year with a margin closer to 90% plus. We're talking about very high margin sales.

Speaker #2: 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 the evaluation process, to whom we'll start shipping the development kit and the technology that they need for them to conclude their design win and move on.

Speaker #2: 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 customer and we still in our early phase to really estimate exactly where we can go there.

Speaker #2: But thinking like this, it's a business that can scale to $10–20 million per year, with a margin closer to 90% plus. We're talking about very high-margin sales.

Speaker #2: 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.

Georges Karam: 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'll be next year, definitely, hopefully maybe we should be approaching on the RF more than $5 million for sure. Scale this to 10 and plus the following year. That's what I hope. At minimum. Then Norm?

Speaker #2: Now, where we'll be next year, definitely hopefully maybe we should be approaching on the RF more than 5 million dollar for sure. And scale this to 10 and plus the following year.

Speaker #2: That's what I hope. At minimum. And then Lauren.

Speaker #4: Okay.

Speaker #3: Yeah. Hi, Scott. So on the opex, as you certainly have seen, we've made some progress on the opex already. We had last year at the same time about 13 million but more than that.

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

Speaker #3: 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.

Speaker #3: So we having plans on our page. And working on that towards that target. Yes. So that's the I confirm that idea.

Georges Karam: Okay.

Scott Searle: Okay. Great. Thanks so much. I'll get back in the queue.

Speaker #4: Okay. Great.

Scott Searle: Great. Thanks so much. I'll get back in the queue.

Speaker #2: Thanks, Scott.

Georges Karam: Thanks, Scott.

Speaker #1: Thank you. And our next question comes from the line of Owen Rickert from Northland Capital Markets. Your question, please.

Operator: Thank you. Our next question comes from the line of Owen Rickert from Northland Capital Markets. Your question, please.

Owen Rickert: 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?

Speaker #5: Hey, guys. Thanks for taking my question here. Just quickly on the Bitcoin holdings. What's the intended end state for that? Is it full liquidation the goal?

Speaker #5: And how are you thinking about timing, given the current market conditions?

Speaker #2: Yeah. I mean, thanks for the question. Honestly, 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.

Georges Karam: Yeah. Thanks for the question. Honestly, as you know, obviously we are out of the strategy, the intention of the company is not really to build any strategy around this. It's an asset in hand. The most logical way is to turn this to cash as soon as possible. At the same time, we don't need really the cash immediately, and we were talking about licensing deal that we could have as well as more money. We have money from the government coming in. 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?

Speaker #2: So it's an asset in hand. The most logical way is to turn this into cash as soon as possible. At the same time, we don't really need the cash immediately.

Speaker #2: And we are talking about licensing deal that we could have as well with more money. We have money from the government coming in. So we don't really see feel the pressure where we are today to go and liquidate at the price we are today.

Speaker #2: 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.

Georges Karam: Now, obviously, you can say, where this is going to go, and is it going to go lower or higher? We remain opportunistic there and definitely, 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. 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.

Georges Karam: We remain opportunistic there and definitely, 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. 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.

Speaker #2: And definitely, 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.

Speaker #2: 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.

Speaker #5: 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?

Owen Rickert: Got it. Super helpful. Thanks. 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 H2 of the year?

Speaker #5: And how sustainable that growth rate is into the second half of the year?

Speaker #2: Yeah. I mean, it's 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 it's a little bit more complicated to implement this rapidly, I would say, overnight.

Georges Karam: Yeah. 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, it's a little bit more complicated to implement this rapidly overnight with all those memory issue. We have a little bit to deal with every customer to impact this in H2. We'll see it more in H2, but still, we didn't have an increase similar to what you see in memory where the people are doubling and tripling. We're talking about, I believe, without giving a, we don't have an exact number, but it's really below 5%. That's so far what we impacted, our product pricing.

Speaker #2: I would say with all those memory issue. So we have a little bit to deal with every customer to impact this in the second half.

Speaker #2: So we'll see it more in the second half. But still, we didn't have an increase similar to what you see in memory where the people are doubling and tripling.

Speaker #2: So we're talking about, I believe, without giving a we didn't have an exact number, but it's really below 5% that so far what we impacted our product pricing.

Speaker #2: But there is more maybe to come in the near future because it continue to increase it's very painful because you cannot set the policy once forever with your customer.

Georges Karam: There is more maybe to come in the near future because it continue to increase. It's very painful because Cannot set a policy once forever with your customer. You need to deal with this almost on a quarterly basis. The majority of the growth is really coming from new projects turning to production. 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 shareholder in the past when we were talking about our pipeline, me and all the shareholder were extremely nervous and we wanted to be not too much patient, I would say, to convert those design win to revenue. 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.

Speaker #2: 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.

Speaker #2: 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 shareholder in the past when we were talking about our pipeline, me and all the shareholder, we 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 win to revenue.

Speaker #2: 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.

Speaker #2: But what's good about it is once it's there, it's there, and it's sticky and it stays for many years—five, six, seven years. So we have many projects in this situation.

Georges Karam: What's good about it is once it's there, it's there, and it's sticky and stays for many years, five, six, and seven years. We have many projects in this situation, and this is what the 55%, $165 million, and 3 years revenue. On average, we are talking about $55 million as a product revenue on a yearly basis. This will continue to grow because in the H2 of the year, more projects convert, and this 55% will go higher. If you put this into perspective where we are in product revenue and next year, the growth trend should continue next year, at least at similar level.

Speaker #2: And this is what the 55%, 165 million dollar, three years revenue. So in average, we are talking about 55 million dollar in the as a product revenue on a yearly basis.

Speaker #2: And this will continue to grow because in the second half of the year, more projects convert. And this 55% will go higher. If you put this into perspective—where we are in product revenue and next year—the growth trend should continue next year at least at a similar level.

Owen Rickert: Great. Thank you.

Speaker #5: Great. Thank you.

Speaker #1: Thank you. And our next question comes from the line of Fedor Chabalen from BeRiley. Your question, please.

Operator: Thank you. Our next question comes from the line of Fedor Shabalin from B. Riley. Your question, please.

Speaker #4: Thank you very much. Thank you very much, operator. And good morning, everyone. And Norman, congratulations on the appointment. My question is kind of follow up questions for previous ones.

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

Speaker #4: Georges, you cited many design win 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 win or was it already embedded in this guidance?

Speaker #4: Thank you.

Speaker #2: Yeah. I mean, just if I take it like in at the beginning of the year, we were like at 44% of 300 million. And in six months, we turned the 44.

Georges Karam: Just if I take it, like at the beginning of the year, we were like at 44% of 300 million. In six months, we turned the 44%, it becomes 55%. Added like 10 point. Obviously, it's not a rule what I'm giving here, if you want. Just to give you, I don't know if the future will be like the past because all depends on the project, right? 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 fast on the Cat M. Cat 1, which is really ramping, still more room there to convert to design win. Technically, I don't know if I should say towards the end of the year, we should add another 10 point.

Speaker #2: It becomes 55, so we added like 10 points. Honestly, it's not a rule what I'm giving here, if you want, but just to give you— I don't know if the future will be like the past, because it all depends on the project, right?

Speaker #2: I mean, we have some customer 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.

Georges Karam: I should say today, our Cat M technology in general, people are moving very fast on the Cat M. Cat 1, which is really ramping, still more room there to convert to design win. 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 look to the past. Obviously, we're pushing to convert much more than this.

Speaker #2: CAT-1, which is really ramping, still more room there to convert to design win. But technically, I don't know if I should say towards the end of the year, we should add another 10 point.

Georges Karam: This will be my own target if you look to the past. Obviously, we're pushing to convert much more than this.

Speaker #2: This will be my own target, if you want, like if I look to the past. But obviously, we're pushing to converge much more than this.

Speaker #4: Thank you for that color. And my follow-up is about Bitcoin remaining holdings. I know you want to monetize this opportunistically, but if you can confirm the year-end target for this, and also, what are the immediate needs for financing your core semiconductor business, and is it kind of urgent or not urgent?

Fedor Shabalin: Thank you for that color. My follow-up is about Bitcoin remaining holdings. I know you want to monetize it opportunistically, if you can confirm the year-end target for this and also what are the immediate needs for financing your core internet semiconductor business? Is it kind of urgent or not urgent? Just trying to figure out when are you dependent on monetizing these Bitcoin holdings near term or not? Thank you.

Speaker #4: So just trying to figure out, when are you dependent on monetizing your Bitcoin holdings—near term or not? Thank you.

Speaker #2: Yeah. I mean, honestly, there is no urgency. If we take it like this from because we for all the end of the year, we're not in a rush on this.

Georges Karam: Yeah. Honestly, there is no urgency if we take it like this, because we, for all the end of the year, we're not in a rush on this, we'll be opportunistic. I would like here to highlight one point. Obviously, we are a small company. We're dealing with suppliers would like to look to us and watch the balance sheet. Unfortunately for many of those suppliers, Bitcoin doesn't count. To some extent, saying that you have EUR 20 million in Bitcoin, even if the Bitcoin could be at EUR 25, it could be at EUR 100, and you say, "I have EUR 31 million equivalent." They don't give the same weight in front of your suppliers as when you say, "I have them in cash." For this reason, we have really a lot of interest of converting this as soon as possible.

Speaker #2: So it'll be opportunistic. I would like here to highlight one point. Obviously, we are small company. We're dealing with suppliers and supplier would like to look to us and watch the balance sheet.

Speaker #2: 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—

Speaker #2: And you say I have 31 million dollar, equivalent, they don't give the same weight in front of your supplier as when you say I have them in cash.

Speaker #2: So for this reason, we have really a lot of interest in converting this as soon as possible. Others as well—as well, I heard many shareholders, they don't like to have this dependence.

Georges Karam: Other as well, I heard many shareholders, they don't like to have this dependence, and volatility on the stock, they get it to cash. For us, the fact that we don't need this money ASAP, and based on the history of Bitcoin and whatever you could predict, we believe is not maybe the best timing and better to wait. We will not keep this on board forever. Sometime 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. The Bitcoin were not available because they were in the collateral, we have to conclude the transaction.

Speaker #2: And volatility on the stock, so they get it to cash. For us, the fact that you don't need this money ASAP 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.

Speaker #2: But we will not keep this on board forever. At some time, when the price is decent—much better than where it is today—we'll convert and take it all to cash.

Speaker #2: Unfortunately, we missed the window because when we closed the when we redeemed the debt, my idea was to sell all, to be honest. But the Bitcoin were not available because they were in the collateral.

Speaker #2: So we have to conclude the transaction. And the time to conclude the transaction, Bitcoin went down. And we lost immediately like 15,000 dollar per Bitcoin due to the volatility.

Georges Karam: The time to conclude the transaction, Bitcoin went down, and we lost immediately, like EUR 15,000 per Bitcoin due to the volatility. We waited on this, and we didn't convert, that's the story. The strategy for the company really Take it all to cash as soon as possible, even if we don't need this money now. Factor in a little bit, be patient in a few months to see where we have the best price, and sell.

Speaker #2: Then we waited on this and we didn't convert. So that's the story. But the strategy for the company is really to take it all to cash.

Speaker #2: As soon as possible, even if we don't need this money now, but factor in a little bit, be patient in the couple few months to see where we have the best price and sell them.

Speaker #4: Thank you, Georges, for your perspective. And continue best of luck.

Fedor Shabalin: Thank you, Georges, for your perspective, and continue. Best of luck.

Speaker #2: Thank you.

Georges Karam: Thank you.

Speaker #1: Thank you once again, ladies and gentlemen. If you do have a question at this time, please press *11. Our next question comes from the line of Jacob Stephen from Lake Street Capital Markets.

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

Speaker #1: Your question, please.

Speaker #6: Hey, guys. Appreciate you taking the questions. I'd like to extend the congratulations to Norm as well. Maybe just first, on the margin front, maybe you could kind of quantify for us or give a little bit more color on product mix versus kind of the memory input cost pressure in kind of what impact they had on margins.

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

Speaker #6: And maybe looking forward, how can we expect the gross margin line to trend?

Georges Karam: Hi, Jacob. A few things I would say. As you know, we have the licensing business when it's there. This has very high margin. Obviously, depending on this contribution, it pushes sometimes our gross margin to be higher than 50% globally, because obviously it helps all the product. If we focus only on the product, the rule for us is, let's say, what we are trying to achieve is to be on the chip gross margin above 50%, on the module gross margin to be above 30%. This is more or less the rule of the industry. Then it depends on the mix of the two, because we sell in our product, we have the two. It can give us some gross margin on product that can vary around 35% to 40% if you want, if you project. This is in normal days.

Speaker #2: Yeah. Hi, Jacob. I mean, the few things I would say. As you know, we have the licensing business when it's there, this has very high margin.

Speaker #2: And obviously, depending on this contribution, it push sometimes our gross margin to be higher than 50% globally. Because obviously, it helps all the product.

Speaker #2: If we focus only on the product, the rule for us is, let's say, what we are trying to achieve is to be on the chip gross margin above 50%.

Speaker #2: On the module gross margin, we aim to be above 30%. This is more or less the rule of the industry. And then it depends on the mix of the two, because we sell in our product.

Speaker #2: We have the two. It can give us some gross margin on product that can vary around 35 to 40% if you want. If we project.

Speaker #2: This is a normal days. Now, if you add to this, you need to factor there is another component which should improve over time, which is the fixed cost.

Georges Karam: If you add to this, you need to factor, there is another component which should improve over time, which is the fixed cost. In our gross margin today, we have 3, 4 points related to fixed cost. Obviously, when you are making EUR 7 million product revenue, the fixed cost is high for this number. If we go next year to the EUR 15+ million, and going to EUR 20 million, we can gain just only by, on the pro forma basis, because this fixed cost doesn't scale. It's really the number of people we use to run our operation and amortization of the masks and so on. There is 3, 4 points impacted there. This is how we should think about it going forward. If we factor into the cost increase, definitely with the supply pressure that we have, sometimes even to get access to the technology, right?

Speaker #2: In our gross margin today, we have three or four points related to fixed cost. Obviously, when you are making $7 million in product revenue, the fixed cost is high for this number.

Speaker #2: If you if we go next year to the 15 plus and going to 20, we can gain just only by on the proforma basis because this fixed cost doesn't scale.

Speaker #2: It's really the number of people we use to run our operation and amortization of the masks and so on. So there is like three, four points impacted there.

Speaker #2: So this is how we should think about it going forward. Now, if we factor into the cost increase, definitely when with the supply pressure that we have, sometimes even to get access to the technology, right?

Georges Karam: This is how we should think about it going forward. If we factor into the cost increase, definitely with the supply pressure that we have, sometimes even to get access to the technology, right? 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. We could have those variation impacting us from quarter-to-quarter, but hopefully all this will stabilize over time when we start planning.

Speaker #2: I mean, because and we didn't anticipate many things at the beginning of the year. So 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.

Georges Karam: 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. We could have those variation impacting us from quarter-to-quarter, but hopefully all this will stabilize over time when we start planning.

Speaker #2: So, we could have those variations impacting us from quarter to quarter. But hopefully, all of this will stabilize over time when we start running this.

Speaker #6: Okay. Got it. Very helpful. And then maybe just touching on guidance, eight and a half to 10 million, you said the high end is kind of more gated on potential licensing.

Jacob Stephan: Okay. Got it. Very helpful. Then maybe just touching on guidance, EUR 8.5 to 10 million. You said the high end is more gated on potential licensing agreements, maybe if you could help us think through, I guess, when would the licensing agreement need to be signed-

Speaker #6: Agreements. But maybe if you could help us think through when—I guess, when would the licensing agreement need to be signed?

Speaker #2: No, I mean, definitely. And 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.

Georges Karam: No, I mean, definitely-

Jacob Stephan: to reside.

Georges Karam: Licensing agreements, we have many, as I mentioned. We have several, I would say, they tend to be a few hundred thousand EUR to a couple of million EUR. We have other four, maybe more, that they tend to be more than EUR 10 million. Just to give you the spectrum where 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 deals take a little bit more time because there is more strategic discussion around it. 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, 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.

Speaker #2: And we have another four, maybe more, that tend to be more than $10 million. Just to give you the spectrum of where we are.

Speaker #2: Obviously, the smaller deals are much easier to convert faster, because there is less negotiation and you can get them faster. The larger deals take a little bit more time because there is more strategic discussion around them.

Speaker #2: 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.

Speaker #2: 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 of it.

Speaker #2: Even if you sign a deal for a $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 we have.

Georges Karam: Even if you sign a deal of EUR 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 we have. We can have an upside. Factoring, if you want the small deal that we have and potentially, larger or medium-sized deal, 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 EUR 10 million this quarter. It's still significant growth of our product revenue quarter-to-quarter because the low end is almost pure product, if you want.

Speaker #2: So we can have an upside. But factoring in, if you want the small deal that we have and potentially larger, medium-sized deals, we could be—that's why we said the high end assumes some services revenue, not only product.

Speaker #2: 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.

Speaker #6: Okay. Understood. I appreciate all the color.

Jacob Stephan: Okay. Understood. I appreciate all the color.

Speaker #1: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Georges for any further remarks.

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

Speaker #2: Yeah. Many thanks, operator, for handling this call. And many thanks to all of you. Looking forward to meeting you in person on another opportunity.

Georges Karam: Yeah, 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.

Speaker #2: Thank you very much.

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

Q2 2026 Sequans Communications SA Earnings Call

Request DemoDemo

Sequans Communications

Earnings