Sequans Communications (SQNS) Provides Business Updates

Advances on Key Business Initiatives.

Reports First Quarter 2024 Summary Financial Results.

Sequans Communications S.A. (NYSE: SQNS) ("Sequans" or the "Company"), a leading developer and provider of 5G/4G semiconductors and IoT modules, today provided updates on several key business initiatives and an overview of the first quarter financial results ended March 31, 2024.

Georges Karam, Sequans CEO, stated, "We have made significant progress on multiple fronts, beginning with the extension of our standstill agreements with our debt holders until the end of August and the signature of a $15 million licensing agreement for our Monarch2 platform with a new partner. Additionally, we are optimizing our R&D expenses by suspending the development of our 5G fixed wireless product to focus on low-power 5G for massive IoT applications, specifically RedCap and eRedCap. Furthermore, we are making progress in discussions for a strategic transaction that would dramatically improve our balance sheet."

Extension of Standstill Agreements with Debt Holders

Having met the milestones set forth in the initial standstill agreement announced in April 2024, in May Sequans secured an extension of the maturities of its debt obligations held by its three largest debt holders Lynrock Lake, Nokomis and Renesas, until August 26, 2024. Extending the debt maturities grants the Company additional time to secure a long-term solution and negotiate a strategic transaction that serves the interests of all its stakeholders.

New Licensing Deal

Sequans announced today a manufacturing licensing agreement for its Monarch2 LTE platform with a leading technology company, demonstrating the Company's ability to enhance and expand its licensing business strategy. The deal includes an initial payment of $15 million, with the opportunity for additional revenue in subsequent years.

Focus on Massive IoT and Opex Optimization

To enhance its long-term financial health while strengthening its focus on the Massive IoT business, Sequans has suspended the development of its 5G Taurus product for Fixed Wireless Access applications and reoriented its product roadmap towards low-power 5G variants for Massive IoT, specifically RedCap and eRedCap. This shift is expected to significantly reduce R&D expenses as part of the Company's plan to achieve break-even in 2025. While this decision is expected to reduce revenue recognition from the license agreement with Sequans' Chinese strategic partner by $10 million in 2024, this should be offset by revenue from the new Monarch2 manufacturing license announced today.

Advances in Strategic Discussions

Sequans confirms that it continues to be in active discussions for a long-term strategic transaction that would address its debt maturities and significantly strengthen its balance sheet.

First Quarter 2024 Financial Summary:

Revenue: Revenue was $6.0 million, an increase of 26.3% compared to the fourth quarter of 2023 and a decrease of 49.3% compared to the first quarter of 2023. Product revenue was $2.5 million, a decrease of 37.8% compared to the fourth quarter of 2023 and an increase of 5.5% compared to the first quarter of 2023. Service revenue was $3.6 million reflecting the revenue recognition profile of our agreement with a major 5G licensing partner.

Gross margin: Gross margin was 63.9% compared to 12.2% in the fourth quarter of 2023 and compared to 78.5% in the first quarter of 2023.

Operating loss: Operating loss was $8.5 million compared to operating loss of $12.8 million in the fourth quarter of 2023 and operating loss of $4.0 million in the first quarter of 2023.

Net loss: Net loss was $11.8 million, or ($0.19) per diluted ADS, compared to a net loss of $17.3 million, or ($0.28) per diluted ADS, in the fourth quarter of 2023 and a net loss of $5.0 million, or ($0.10) per diluted ADS, in the first quarter of 2023. Net loss in the first quarter of 2024 includes a loss of $36,000 on the change in fair value of the convertible debt derivative compared to a gain of $0.1 million in the fourth quarter of 2023 and a gain of $2.3 million in the first quarter of 2023.

Non-IFRS loss and diluted loss per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair value, the amendment and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, non-IFRS net loss was $8.8 million, or ($0.14) per diluted ADS, compared to non-IFRS net loss of $13.8 million, or ($0.23) per diluted ADS in the fourth quarter of 2023, and a non-IFRS net loss of $4.2 million, or ($0.09) per diluted ADS, in the first quarter of 2023. The non-IFRS net loss includes a foreign exchange gain of $0.3 million, or $0.0 per diluted ADS, in the first quarter of 2024, compared to a foreign exchange loss of $0.8 million, or ($0.01) per diluted ADS in the fourth quarter of 2023 and foreign exchange loss of $0.2 million, or ($0.00) per diluted ADS, in the first quarter of 2023.

Cash: Cash and cash equivalents at March 31, 2024 totaled $0.5 million compared to $5.7 million at December 31, 2023. This amount excludes the $5 million from issuance of an unsecured promissory note in April 2024 and the $15 million upfront payment from the licensing agreement just signed.

Note Regarding Forward Looking Statements

This press release contains projections and other forward-looking statements regarding future events and our future financial performance. All statements other than present and historical facts and conditions contained in this release, including any statements regarding potential strategic options, cost optimization and our objectives for future operations and achieving break-even, 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). 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 uncertainties and subject to change at any time. We undertake no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release. 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. Actual events or results may differ materially from those contained in the projections or forward-looking statements. In addition to the risk factors contained in our Form 20-F for the fiscal year ended December 31, 2023, some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are sold, (ii) unexpected increases in our expenses resulting from inflationary pressures and rising interest rates, including manufacturing and operating expenses and interest expense, (iii) our inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuations to which our quarterly revenue and operating results are subject due to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers, (viii) our inability to achieve new design wins or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, (ix) our inability to enter into and execute on strategic alliances, (x) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain, (xii) the impact of the Ukraine-Russia and Israeli-Hamas conflicts on our independent contractors located in Ukraine and operations in Israel, (xiii) our ability to raise debt and equity financing, and (xiv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission.

Use of Non-IFRS/non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements prepared in accordance with IFRS, we disclose certain non-IFRS, or non-GAAP, financial measures. These measures exclude the non-cash stock-based compensation and the non-cash impacts of convertible debt amendments, conversions and repayments, effective interest adjustments related to the convertible debt with embedded derivatives and other financings; deferred tax benefit or expense related to the convertible debt and other financings. We believe that these measures can be useful to facilitate comparisons among different companies. These non-GAAP measures have limitations in that the non-GAAP measures we use may not be directly comparable to those reported by other companies. We seek to compensate for this limitation by providing a reconciliation of the non-GAAP financial measures to the most directly comparable IFRS measures in the table attached to this press release.

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