sequans investor presentation€¦ · • refarming of 2g/3g spectrum and expansion of cat m1/nb...

Dr. Georges Karam, CEO

Sequans Investor Presentation

October 2020

©2020 Sequans Communications 2

Safe Harbor

This presentation 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 presentation, including any statements regarding our expected revenue fourth quarter of 2020, future results of operations and

financial positions, business strategy and plans, expectations for Massive IoT and Broadband and Critical IoT sales, the ability to continue to operate remotely (as required) at high levels of

productivity, increasing backlog of orders, the impact of the coronavirus on our manufacturing operations, and on customer demand, 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). 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 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, 2019, 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, including manufacturing expenses, (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 fluctuation 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) our ability to remediate material weaknesses in our internal controls relating to the impact of accounting changes relating to deferred tax assets and deferred tax liabilities related to

the application of IFRS to deferred taxes on debt instruments with equity components, (xiii) the impact of the coronavirus on the ability to operate our business and research, production of our

products, or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders, and (xiv) other

factors detailed in documents we file from time to time with the Securities and Exchange Commission. This presentation also contains estimates and other statistical data obtained from

independent third parties related to market size and growth. You are cautioned not to give undue weight to such estimates and data.


We focus on cellular connectivity for the Internet of Things (IoT):

• Massive IoT

• Broadband & Critical IoT

Sequans Overview

Sequans (NYSE: SQNS) is the only company offering a complete range of cellular IoT solutions fully-optimized for non-smartphone applications.


Investment Highlights

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Expecting > 60% y/y revenue growth in 2020, driven by Broadband IoT demand and the ramp of Massive IoT business.

Mature, comprehensive 4G/5G product portfolio focused on IoT with a growing pipeline of opportunities reflecting technology leadership.

New go-to-market channels with module, microcontroller and distribution partners will have game-changing implications for Sequans over the next several years.

Pursuing aggressive 5G product roadmap for Broadband and Critical IoT partially funded by a premier strategic partner.

Unique cellular connectivity assets and knowhow position Sequans for long-term success.


• Mature, comprehensive portfolio for IoT From low-power to high-throughput apps

• Exposure to entire value chain: IP/chips/modules Expertise and scarce know-how in all areas

• Advanced 5G road map 5G-compatible products sampling now

• Cutting-edge technology collaboration SiP is world’s smallest/thinnest LTE solution

• Unique next-gen Cat 1 solution For apps requiring higher throughput, voice and audio, plus low power

• Optimized solution for new U.S. CBRS market Proven technology for new market opportunity

Technology and Product Leadership

Massive IoT Broadband/Critical IoT


Rapidly Growing Market – Reaching >$4 Billion by 2024

240

650

130

48

Total 5G/4G IoT Market (millions of units)

2019

2024

Massive IoT Market

• Approximately 50% is captive Chinese market (mainly NB); also includes high-end smartwatches

• Growth driven by low-power applications

• Average ASP expected to decline as proportion of low-power devices grows

2019-2024 Unit Shipment = 38% CAGR

Broadband/Critical IoT Market

• Includes long-design cycle applications such as automotive

• Growth driven by growing acceptance of single-mode 4G in emerging markets and 5G use cases

• Average ASP expected to increase as proportion of high-performance 5G devices grows


Technology Leadership Foundation for Key Strategic Partnerships

High-value Strategic Relationships

• Strong technology collaborations

• Strategic investor supporting 5G roadmap

• Long-standing, supportive relationship with TSMC

Strong, In-depth Relationships with Carriers

Multi-year Non-exclusive Agreement with Strategic Partner:

• Fortune Global 500 company

• Estimated value exceeds $35M over 3+ years beginning in Q4 2019, subject to milestone achievements


Carrier Relationships Include Strategic Partnerships

Partnerships in U.S., Japan, and Europe

Images denote locations of select active evaluations, certification activities, trials or deployments as of 2Q19. Not an exhaustive listing, subject to change.


Low Power + Low Cost

Massive IoT Business – Product & End Markets

Cat 1

LTE-M/NB-IoT (Cat M1/NB1/NB2)

NB-IoT Optimized

Module Partners

OEM/ODM

Technology Partners

Traditional M2M (Replaces 2G/3G)

New and Emerging IoT Applications

Consumer Applications

Security Smart Meters Telematics

Tracker Speaker Watch

Payment

E-Health Asset Trackers Smart Cities Smart Home

Go-to-Market* End Markets

Global Distributors

* Examples of announced partners and customers


Massive IoT Revenue

Massive IoT Business – Growth Drivers

Traditional M2M (Replaces 2G/3G)

New and Emerging IoT Applications

Consumer Applications

ATM Kiosk Fleet Management Tracker

Telematics

Wearable Pet Tracker Battery Charger

Parking Meter Agricultural Monitor Pallet Tracker

End Markets Growth Drivers

• Market growth poised to accelerate in 2021 and beyond

• New Cat 1 opportunities for wearables and applications requiring voice and audio

• Cat M/NB ramp in 2020 after long delay

• Multiple design wins close to launch

• Strong pipeline of opportunities

• Expanding go-to-market through distributors

• Refarming of 2G/3G spectrum and expansion of Cat M1/NB networks in U.S., Japan, then Europe and worldwide

• Increasing focus on health and wellness products post COVID-19

• Development of new low-power cellular IoT applications

• Cat 1 expansion with new markets (Europe) and apps requiring more than Cat M speed, e.g. voice, audio streaming


Speed + Features

Broadband IoT Business – Product & End Markets

Cat 4 / Cat 6

Cat 18 / 5G NR

Partners

Devices

Emerging Markets, Tier 2/3 Carriers

Developed Markets, Tier 1 Carriers

Enterprise, Private Networks, CBRS

Enterprise Router

Indoor/Outdoor CPE

Gateway

Worldwide Deployment* End Markets*


Millions of CPE, Gateways, and Mobile Routers are Deployed Worldwide


Broadband IoT Revenue

Broadband IoT Business – Growth Drivers

Emerging Markets, Tier 2/3 Carriers

Developed Markets, Tier 1 Carriers

Enterprise, Private Networks, CBRS

End Markets* Growth Drivers

• Long-lived 4G portable router in U.S. with strong demand being driven by reaction to COVID-19 work/study conditions

• 4G in emerging markets resuming growth with new customers

• Strong position in CBRS with many design wins; engaged with a new module partner and Tier1 carriers

• Strategic customer engagement on 5G broadband IoT

• 5G use cases driving long-term broadband IoT revenue growth potential

• Customer diversification in emerging markets

• Improving 4G single-mode demand in developed markets due to network coverage improvement and switch-off of 3G

• Increasing focus on working, studying and operating remotely post COVID-19

• Enterprise, CBRS applications

• Cellular fallback for wired home gateways

• 5G fixed wireless and industrial IoT (IIoT) low latency apps



Vertical Revenue

Vertical Market Business

Satellite

Avionics

End Markets Adaptation of Technology


Adaptation of Cellular Technology to Meet Requirements of Vertical

Market Applications

Public Safety, Military

• Primarily high-margin service revenue

• Series of projects with existing and new customers

• Project revenue recorded based on percent of completion

• Revenue can vary from quarter to quarter.


Annual Revenues ($MM)

Revenue Trends – Reacceleration of Annual Growth Expected in 2020

(1) Massive IoT decline reflects delay in Cat M market ramp/temporary Cat 1 inventory issue

$6.0

$7.0

$8.0

$9.0

$10.0

$11.0

$12.0

$13.0

$14.0

$15.0

$16.0

Q3:19 Q4:19 Q1:20 Q2:20 Q3:20 Q4:20G

(unaudited)

(2)

Quarterly Revenues ($MM)

0

10

20

30

40

50

60

2018 2019 2020 Target

IoT Vertical Broadband

(1)

$40.3

$30.9

>60% y/y growth

(2) Q4:20 target of 10% sequential revenue growth from Q3

(1)


Key Financial Metrics and Long-term Model (non-IFRS)

At End of Period ($millions) 2018 2019 Sept 30, 2020

Cash & Equivalents, Short-term Deposits $12.1 $14.1 $25.3

Short-term and Long-term Debt Obligations(3) $48.9 $54.7 $72.8 (3)

% of Revenue 2018 2019 YTD 2020 At Scale

Gross Margin 39%(1) 40%(1) 46% 50%(2)

Research & Development 68.0% 75.5% 63.1% 15-20%

SG&A 45.3% 49.4% 33.1% 10-15%

Operating Income (Loss) Margin (73.8%) (84.8%) (49.7%) >20%

(1) Reflects higher proportion of modules in product revenue mix (2) Assumes >80% of product revenue from chips (3) Includes $35.0M of convertible debt issued in 2015, 2016, 2018, and $9.2M of venture debt issued in 2018 (payable over 3.5 years); $14.4M of

short-term financing of accounts receivable and $14.2M in government advances and loans, and excludes IFRS 16 “lease liabilities”


Summary

• Technology and market leader in 5G/4G for massive, broadband & critical IoT

• Most mature, comprehensive and advanced product portfolio; scarce IP and know-how

• Long-standing relationships with carriers and top-tier enterprises

• Strong design win momentum in all business segments

• Significant improvement in go-to-market capabilities via MCU/distribution partners

• Attractive as a strategic and/or technology partner to capitalize on high-growth market


Appendix


IFRS to Non-IFRS Reconciliations

(Millions) 2017 2018 2019 YTD 2020

IFRS Operating Income (Loss) (19,525) (31,517) (27,958) (19,253)

Stock-based Compensation Expense 1,638 1,812 1,797 1,813

Non-IFRS Operating Income (Loss) (17,887) (29,705) (26,161) (17,440)

sequans investor presentation€¦ · • refarming of 2g/3g spectrum and expansion of cat m1/nb...

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