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Sequans Communications S.A. (NYSE:SQNS), a 4G chipmaker supplying LTE
and WiMAX chips to equipment manufacturers for mobile operators
worldwide, today announced financial results for the fourth quarter and
full year ended December 31, 2012.
Fourth Quarter 2012 Highlights:
Revenue: Revenue of $3.1 million decreased 60.8% sequentially
from the third quarter of 2012, reflecting a decrease in shipments of
WiMAX products, partially offset by increased LTE shipments. Revenue
decreased 72.8% compared to the fourth quarter of 2011, due to lower
sales of WiMAX products, following changes in the WiMAX market in the
United States beginning in the second half of 2011.
Gross margin: Gross margin was 9.4%, including a provision for
excess inventory totaling $0.9 million. This compares to gross margin of
48.0% in the third quarter of 2012 and 52.0% in the fourth quarter of
2011. Excluding this provision, gross margin in the fourth quarter would
have been 36.6%.
Operating income (loss): Operating loss was $9.8 million compared
to an operating loss of $6.0 million in the third quarter of 2012 and an
operating loss of $5.0 million in the fourth quarter of 2011.
Net loss: Net loss was $9.9 million, or ($0.29) per diluted
share/ADS, compared to a net loss of $5.8 million, or ($0.17) per
diluted share/ADS in the third quarter of 2012 and a net loss of $5.6
million, or ($0.16)per diluted share/ADS in the fourth quarter
of 2011.
Non-IFRS Net loss: Excluding stock-based compensation, non-IFRS
net loss was $9.7 million, or ($0.28) per diluted share/ADS, compared to
a non-IFRS net loss of $5.0 million, or ($0.15) per diluted share/ADS in
the third quarter of 2012, and a non-IFRS net loss of $4.3 million, or
($0.12) per diluted share/ADS, in the fourth quarter of 2011.
Key Metrics
In millions of US$ except percentages, shares and per share amounts
Q4 2012
%*
Q3 2012
%*
Q4 2011
%*
Full year 2012
%*
Full year 2011
%*
Revenue
$3.1
$8.0
$11.5
$22.3
$93.7
Gross profit
0.3
9.4%
3.8
48.0%
6.0
52.0%
10.3
46.3%
47.3
50.5%
Operating income (loss)
(9.8)
-314.2%
(6.0)
-74.7%
(5.0)
-43.4%
(32.8)
-147.2%
1.1
1.1%
Net profit (loss)
(9.9)
-316.7%
(5.8)
-72.2%
(5.6)
-48.9%
(33.0)
-148.4%
(0.4)
-0.5%
Diluted EPS
($0.29)
($0.17)
($0.16)
($0.95)
($0.01)
Number of diluted shares/ADS
34,683,839
34,683,839
34,626,501
34,680,227
32,610,680
Cash flow from (used in) operations
(6.8)
(3.3)
(3.1)
(22.9)
2.8
Cash and cash equivalents at quarter-end
28.8
36.4
57.2
28.8
57.2
Additional information:
Stock-based compensation included in operating result
Revenue of $22.3 million in 2012 decreased 76.3% from 2011; gross margin
declined to 46.3% in 2012 compared to 50.5% in 2011, primarily due to
lower absorption of fixed costs resulting from decreased revenue.
Operating loss was $32.8 million in 2012 compared to operating income of
$1.1 million in 2011, while the net loss was $33.0 million ($0.95 loss
per diluted share/ADS) in 2012 compared to a net loss of $0.4 million
($0.01 loss per diluted share/ADS) in 2011. Excluding stock-based
compensation, non-IFRS net loss was $29.8 million, or $(0.86) per
diluted share/ADS in 2012, compared to a non-IFRS net profit of $3.7
million, or $0.11 per diluted share/ADS in 2011.
“Developments during the fourth quarter support our expectation that our
LTE revenue will ramp in the second half of 2013,” said Georges Karam,
Sequans CEO. “We completed Verizon’s certification process for our
high-performance StreamrichLTE product, and we are working with several
OEMs to serve the Verizon market opportunity. We won a significant
portion of China Mobile’s first bid for expanded LTE field trials in
China, and additional bids are expected to follow during this year. Our
products performed well in field tests in India, where Reliance Infocomm
is expected to launch commercial service in the second half of 2013, and
we continue to engage with more operators including Softbank in Japan
where we completed a successful trial of our LTE interference
cancellation technology. Also, WiMAX operators planning a near-term
transition to LTE have been testing our dual-mode WiMAX/LTE solution.
We expect WiMAX revenue to continue, although at a low level,
primarily in emerging markets where existing networks support the
operators’ business case, with the potential to migrate to LTE in
the future, leveraging our dual mode technology.
“We continue to expand the number of LTE projects with existing
customers, we are adding new customers and we are seeing growing
traction for LTE-only devices coming from Tier 1 operators in the U.S.,
Asia and Europe. This reinforces our decision to focus on maintaining
our leadership in 4G and increases our confidence that, once LTE
revenues begin to accelerate in the second half of 2013, we will be able
to sustain our momentum,” concluded Mr. Karam.
Outlook
The following statements are based on management’s current
assumptions and expectations.These statements are
forward-looking and actual results may differ materially.Sequans
undertakes no obligation to update these statements.
Sequans expects revenue for the first quarter of 2013 to be in the range
of $2.5 to $3.5 million, with non-IFRS gross margin around 48%. Based on
this revenue range and expected gross margin, non-IFRS net loss per
diluted share/ADS is expected to be between ($0.23) and ($0.25) for the
first quarter of 2013, based on approximately 34.7 million weighted
average number of diluted shares/ADSs. Non-IFRS EPS guidance excludes
primarily the impact of stock based compensation.
Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to discuss
the financial results for the fourth quarter and full year 2012 today,
February 7, 2013 at 8:00 a.m. EST/14:00 CET. To participate in the live
call, analysts and investors should dial 800-230-1059 (or +1
612-234-9959 if outside the U.S.). A live and archived webcast of the
call will be available from the Investors section of the Sequans website
at www.sequans.com/investors/.
A replay of the conference call will be available until March 7, 2013,
by dialing toll free 800-475-6701 in the U.S., or +1 320-365-3844 from
outside the U.S., using the following access code: 276747.
Forward-Looking Statements
This press release may contain projections or other forward-looking
statements regarding future events or our future financial performance.
All statements other than present and historical facts and conditions
contained in this release, including any statements regarding our future
results of operations and financial positions, business strategy, plans
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 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. 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, including WiMAX and LTE markets, (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, and (ix) other factors detailed in
documents we file from time to time with the Securities and Exchange
Commission. Forward-looking statements in this release are made pursuant
to the safe harbor provisions contained in the Private Securities
Litigation Reform Act of 1995.
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 non-cash charges relating to
stock-based compensation. 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.
About Sequans Communications
Sequans Communications is a 4G chipmaker, supplying LTE and WiMAX chips
to equipment manufacturers for mobile operators worldwide. Founded in
2003 to address the WiMAX market, the company expanded in early 2009 to
address the LTE market. Sequans chips are inside 4G networks around the
world. Sequans is based in Paris, France with additional offices
throughout the world, including United States, United Kingdom, Israel,
Hong Kong, Singapore, Taiwan, South Korea and China. www.sequans.com
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
(in thousands of US$, except share and per share amounts)
Dec 31,
Sept 30,
Dec 31,
2012
2012
2011
Revenue :
Product revenue
2,844
7,452
10,996
Other revenue
286
530
491
Total revenue
3,130
7,982
11,487
Cost of revenue
Cost of product revenue
2,793
4,104
5,451
Cost of other revenue
44
44
64
Total cost of revenue
2,837
4,148
5,515
Gross profit
293
3,834
5,972
Operating expenses :
Research and development
7,271
6,455
5,676
Sales and marketing
853
1,470
3,094
General and administrative
2,005
1,871
2,190
Total operating expenses
10,129
9,796
10,960
Operating income (loss)
(9,836
)
(5,962
)
(4,988
)
Financial income (expense):
Interest income (expense), net
38
22
(26
)
Foreign exchange gain (loss)
(45
)
249
(469
)
Profit (loss) before income taxes
(9,843
)
(5,691
)
(5,483
)
Income tax expense
70
73
132
Profit (loss)
(9,913
)
(5,764
)
(5,615
)
Attributable to :
Shareholders of the parent
(9,913
)
(5,764
)
(5,615
)
Minority interests
-
-
-
Basic earnings (loss) per share
($0.29
)
($0.17
)
($0.16
)
Diluted earnings (loss) per share
($0.29
)
($0.17
)
($0.16
)
Number of shares used for computing:
— Basic
34,683,839
34,683,839
34,626,501
— Diluted
34,683,839
34,683,839
34,626,501
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
(in thousands of US$, except share and per share amounts)
2012
2011
Revenue :
Product revenue
19,600
91,742
Other revenue
2,654
1,972
Total revenue
22,254
93,714
Cost of revenue
Cost of product revenue
11,781
46,167
Cost of other revenue
176
247
Total cost of revenue
11,957
46,414
Gross profit
10,297
47,300
Operating expenses :
Research and development
28,408
24,935
Sales and marketing
6,562
12,963
General and administrative
8,096
8,327
Total operating expenses
43,066
46,225
Operating income (loss)
(32,769
)
1,075
Financial income (expense):
Interest income (expense), net
137
(389
)
Foreign exchange gain (loss)
(158
)
(744
)
Profit (Loss) before income taxes
(32,790
)
(58
)
Income tax expense (benefit)
234
371
Profit (Loss)
(33,024
)
(429
)
Attributable to :
Shareholders of the parent
(33,024
)
(429
)
Minority interests
-
-
Basic earnings (loss) per share
($0.95
)
($0.01
)
Diluted earnings (loss) per share
($0.95
)
($0.01
)
Number of shares used for computing:
— Basic
34,680,227
32,610,680
— Diluted
34,680,227
32,610,680
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At December 31,
(in thousands of US$)
2012
2011
ASSETS
Non-current assets
Property, plant and equipment
9,187
9,334
Intangible assets
4,184
4,233
Loan and other receivables
458
531
Available for sale assets
931
677
Total non-current assets
14,760
14,775
Current assets
Inventories
7,443
11,660
Trade receivables
5,528
8,373
Prepaid expenses and other receivables
2,873
2,571
Recoverable value added tax
415
2,008
Research tax credit receivable
8,632
4,423
Cash and cash equivalents
28,751
57,220
Total current assets
53,642
86,255
Total assets
68,402
101,030
EQUITY AND LIABILITIES
Equity
Issued capital, euro 0.02 nominal value, 34,683,839 shares
authorized, issued and outstanding at December 31, 2012 (34,667,339
at December 31, 2011)
912
912
Share premium
129,309
129,283
Other capital reserves
12,556
9,368
Accumulated deficit
(87,715)
(54,691)
Other components of equity
409
(628)
Total equity
55,471
84,244
Non-current liabilities
Government grant advances and interest-free loans
287
385
Finance lease obligations
236
-
Provisions
369
259
Deferred tax liabilities
85
55
Total non-current liabilities
977
699
Current liabilities
Trade payables
6,038
8,580
Government grant advances and interest-free loans
515
717
Finance lease obligations
129
-
Other current liabilities
4,133
5,846
Deferred revenue
609
869
Provisions
530
75
Total current liabilities
11,954
16,087
Total equity and liabilities
68,402
101,030
SEQUANS COMMUNICATIONS S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
(in thousands of US$)
2012
2011
Operating activities
Profit (loss) before income taxes
(32,790
)
(58
)
Non-cash adjustment to reconcile income before tax to net cash from
(used in) operating activities
Depreciation and impairment of property, plant and equipment
4,442
4,066
Amortization and impairment of intangible assets
1,758
1,836
Share-based payment expense
3,188
4,174
Increase (decrease) in provisions
1,861
(31
)
Financial expense (income)
(137
)
471
Foreign exchange loss (gain)
(57
)
(508
)
Interest free financing benefit
-
178
Working capital adjustments
Decrease (Increase) in trade receivables and other receivables
3,678
5,144
Decrease (Increase) in inventories
3,369
(2,870
)
Decrease (Increase) in research tax credit receivable
(4,208
)
(2,422
)
Increase (Decrease) in trade payables and other liabilities
(3,317
)
(6,274
)
Increase (Decrease) in deferred revenue
(260
)
(24
)
Increase (Decrease) in government grant advances
(292
)
(521
)
Income tax paid
(104
)
(398
)
Net cash flow from (used in) operating activities
(22,869
)
2,763
Investing activities
Purchase of intangible assets and property, plant and equipment
(5,955
)
(11,042
)
Purchase of financial assets
(181
)
709
Net cash flow used in investments activities
(6,136
)
(10,333
)
Financing activities
IPO proceeds, net of costs
-
59,934
Proceeds from exercise of stock options and founders' warrants
26
579
Proceeds from borrowings and finance lease liabilities
382
-
Repayment of borrowings and finance lease liabilities
(17
)
(3,479
)
Interest received (paid)
136
(656
)
Repayment of interest-free loans
-
(1,321
)
Net cash flows from financing activities
527
55,057
Net increase (decrease) in cash and cash equivalents
(28,478
)
47,487
Net foreign exchange difference
9
(6
)
Cash and cash equivalent at January 1
57,220
9,739
Cash and cash equivalents at end of the period
28,751
57,220
SEQUANS COMMUNICATIONS S.A.
UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
Three months ended
(in thousands of US$, except share and per share amounts)
Dec 31,
Sept 30,
Dec 31,
2012
2012
2011
Net IFRS profit (loss) as reported
(9,913
)
(5,764
)
(5,615
)
Add back
Stock-based compensation expense according to IFRS 2
222
744
1,324
Non-IFRS profit (loss) adjusted
(9,691
)
(5,020
)
(4,291
)
IFRS basic earnings (loss) per share as reported
($0.29
)
($0.17
)
($0.16
)
Add back
Stock-based compensation expense according to IFRS 2
$0.01
$0.02
$0.04
Non-IFRS basic earnings (loss) per share
($0.28
)
($0.15
)
($0.12
)
IFRS diluted earnings (loss) per share
($0.29
)
($0.17
)
($0.16
)
Add back
Stock-based compensation expense according to IFRS 2
$0.01
$0.02
$0.04
Non-IFRS diluted earnings (loss) per share
($0.28
)
($0.15
)
($0.12
)
SEQUANS COMMUNICATIONS S.A.
UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
Year ended December 31,
(in thousands of US$, except share and per share amounts)
2012
2011
Net IFRS profit (loss) as reported
(33,024
)
(429
)
Add back
Stock-based compensation expense according to IFRS 2
3,189
4,174
Non-IFRS profit (loss) adjusted
(29,835
)
3,745
IFRS basic earnings (loss) per share as reported
($0.95
)
($0.01
)
Add back
Stock-based compensation expense according to IFRS 2
$0.09
$0.12
Non-IFRS basic earnings (loss) per share
($0.86
)
$0.11
IFRS diluted earnings (loss) per share
($0.95
)
($0.01
)
Add back
Stock-based compensation expense according to IFRS 2
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