Sequans (SQNS) Q4 2025 Earnings Call Transcript

Image source: The Motley Fool.

Date

Tuesday, Feb. 10, 2026 at 8 a.m. ET

Call participants

• Chairman and Chief Executive Officer — Georges Karam
• Chief Financial Officer — Deborah Choate
• Investor Relations — David Hanover

Need a quote from a Motley Fool analyst? Email pr@fool.com

Takeaways

• Revenue -- $7 million in Q4, primarily from product sales, representing a 72.6% sequential increase.
• Full-year revenue -- $27.2 million for 2025, with adjusted core business revenue closer to $20 million after excluding nonrecurring Qualcomm-related amounts.
• Product mix -- Over 94% of Q4 revenue came from product sales, with approximately 6% from services.
• Gross margin -- 37.7% in Q4, impacted by inventory provisions; excluding provisions, margin would have been about 43%, compared to 42.4% in the prior quarter.
• Operating expenses -- SG&A and R&D were $11.5 million in Q4, down from $13.6 million in Q3, with a goal to reduce further in 2026.
• Net cash position -- Net cash equivalents exceeded $68 million at Q4-end, after accounting for Bitcoin and convertible debt.
• Bitcoin holdings -- 2,139 Bitcoin with a year-end market value of $187.1 million, and $141.5 million pledged as collateral for $94.5 million in convertible debt.
• Digital asset treasury strategy -- $8.4 million net realized loss on the sale of Bitcoin in Q4 used for redeeming debt and repurchasing ADSs.
• Impairment charges -- Noncash impairment charge of $56.9 million in Q4 related to Bitcoin mark-to-market value.
• Net loss -- IFRS net loss of $87.1 million in Q4; non-IFRS net loss of $18.5 million or $1.19 per ADS, compared to a Q3 non-IFRS net loss of $11.3 million or $0.81 per ADS.
• ADS repurchase -- Repurchased approximately 9.7% of outstanding ADSs in Q4; board approved an additional buyback authorization for up to 10% of ADSs.
• Q1 2026 guidance -- Expected revenue around $6.5 million, with a risk that about $1 million could be deferred into Q2 due to shipment timing.
• 2026 revenue outlook -- Internal plan targeting $40 million to $45 million in global revenue, supported by order backlog and design win pipeline.
• Design win pipeline -- Over $550 million three-year product revenue potential, including over $300 million from projects with 44% already in production.
• Design win progress -- 44% of design win projects in production at year-end, up from 38% in Q3; aim to reach over 50% by June 2026.
• Product drivers -- 4G Cat M, Cat 1 Bis, and RF transceivers are primary pipeline drivers; Cat 1 Bis positioned for growth in 2026.
• Key customers -- Expanded production programs with Honeywell and Itron in metering; multiple asset tracking customers shipping over 200,000 units per project per year.
• RF transceiver revenue -- Expected 2026 revenue of $7 million or more from RF transceivers, with potential upside in subsequent years.
• 5G eREDcap roadmap -- First test chips expected in Q1 2026, with customer sampling set for mid-2027 and revenue projected for mid-2028.
• IP licensing and services -- Pipeline includes opportunities ranging from $2 million to $10 million per deal, with $5 million to $6 million conservatively expected to close during 2026.
• Cash burn -- Q4 normalized operating cash burn was approximately $7.7 million.
• Breakeven target -- Aim to achieve cash flow breakeven in Q4 2026 by rightsizing expenses and increasing high-margin service revenue.
• Supply chain -- Memory and substrate price and capacity pressures impacting costs, with price increases being passed to customers where possible; little impact expected on shipments in 2026.

Summary

Sequans Communications (NYSE:SQNS) announced a significant sequential revenue increase for the quarter, with product shipments driving earnings and strong pipeline visibility into 2026. Management authorized additional ADS repurchases and outlined a commitment to disciplined capital allocation, integrating its Bitcoin treasury strategy and increasing shareholder value focus. The company exited the period with a robust order backlog, elevated design win conversion rates, and a clear operational path toward breakeven supported by anticipated growth in core and emerging product lines. Multiple sources of margin expansion and risk mitigation were highlighted, including diversified end markets, cost control initiatives, and strategic customer engagements across the IoT ecosystem.

• Chairman and CEO Georges Karam said, "Our outlook is further supported by the strength of our design win pipeline and the increasing percentage of projects now in production."
• Management reported, "our net cash equivalent position exceeds $68 million," after accounting for financial assets and debt.
• Chief Financial Officer Deborah Choate noted, "We recorded a noncash impairment charge of $56.9 million related to the mark-to-market value of our Bitcoin holdings in the fourth quarter."
• Management stated their 5G eREDcap program will be "sampling to customer midyear or, let's say, the 2027" and anticipates revenue beginning mid-2028.

Industry glossary

• ADS: American Depositary Share; U.S.-traded equity representing foreign company shares.
• eREDcap: Enhanced Reduced Capability, a 5G standard for IoT devices requiring lower power and data rates than traditional broadband users.
• Cat M: Category M, a low-power LTE technology optimized for machine-to-machine and IoT communications.
• Cat 1 Bis: Variant of LTE Cat 1 supporting single-antenna devices, cost-optimized for massive IoT deployments.
• RF transceiver: Radio frequency device enabling wireless data transmission and reception, integral to cellular modules.
• Design win: Secured customer project where the company's technology is selected for integration, often leading to recurring revenue.
• IP licensing: The practice of authorizing external companies to use proprietary technology, generating non-product revenue streams.

Full Conference Call Transcript

Operator: Welcome to the Fourth Quarter and Full Year Sequans Earnings Conference Call 2025. My name is Shannon. I'll be your operator for today's call. After the speaker's presentation, there will be a question and answer session. To ask a question on the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please note that this conference is being recorded. I will now turn the call over to David Hanover, Investor Relations. David, you may begin.

David Hanover: 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 Deborah Choate, CFO. 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. Second, this conference call contains projections and other forward-looking statements regarding future events or our future financial performance and other 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 of revenue, and our objectives for future operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, section 27 a, of the Securities Act of 1933 as amended, and section 21 e of the Securities Exchange Act of 1934 as amended.

These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risks and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, 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. More information on factors that could affect our business and financial results are included on our public filings. Made with the Securities and Exchange Commission.

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

Georges Karam: Thank you, David, and good morning, everyone. I'd like to start with a brief update on our capital allocation framework and how we are balancing execution of our IoT semiconductor business with the management of our digital asset treasury. All in support of long-term shareholder value creation. First and foremost, we remain focused on executing our IoT strategy and advancing our 5G product roadmap in a disciplined manner. Our objective is to unlock the full strategic value of the IoT business for our shareholders, and that remains our top operational priority.

At the same time, we continue to manage our Bitcoin digital asset treasury thoughtfully with the goal of extracting the full value underlying our Bitcoin holdings and our treasury structure. Since launching our Bitcoin strategy, we have been deliberate in how we assess market conditions, and the tools available to us always with a focus on actions we believe can create pressure value in an accretive way. In the current environment, where many digital asset treasury peers are trading below an MNav of one, we believe the most value accretive lever available to us has been repurchasing ADS when our share price implies a significant discount to our net cash and net digital asset value.

During the fourth quarter, we repurchased approximately 9.7% of the company's outstanding ADSs. In addition, our board has approved a new ADS repurchase program authorizing the buyback of up to an additional 10% of the outstanding ADSs. Overall, we are taking a balanced and disciplined approach to capital management. This includes rightsizing our operating expenses, continuing to invest in our most important R&D program, which is our 5G eRedcap chip, and allocating capital to the treasury only when it's clearly accretive. While maintaining flexibility to evaluate our options as market conditions evolve. To provide some context around our balance sheet, with Bitcoin Holdings end of Q4, and Bitcoin currently at approximately $70,000. Our Bitcoin NAV is about $150,000,000.

After adding our end of Q4 cash balance, and netting out convertible debt, our net cash equivalent position exceeds $68,000,000. Importantly, beyond our Bitcoin and cash assets, the company's valuation should also reflect the significant value represented by our IoT revenue pipeline and our 5G and RF transceiver IP portfolio. We intend to remain patient and optimistic, staying disciplined, and focused on actions that we believe can drive long-term per share value. Turning now to the operational side of the business. Our IoT semiconductor business continues to build momentum. In the fourth quarter, it generated $7,000,000 in revenue, which was in line with our prior expectations.

Revenue in the quarter was predominantly product-based, with more than 94% coming from product sales, and roughly 6% from services. Reflecting strong incremental growth in the product shipments. For the full year 2025, total revenue was approximately $27,200,000. This figure includes a meaningful amount of nonrecurring Qualcomm-related revenue, resulting from the deal we closed with them in 2024. On an adjusted basis, the underlying business was closer to $20,000,000, and our fourth quarter run rate clearly demonstrates the ramp we have been driving throughout the year. Looking ahead to 2026, our internal plan currently targets approximately $40,000,000 to $45,000,000 of total global revenue supported by improving visibility and a significant order backlog.

Our outlook is further supported by the strength of our design win pipeline and the increasing percentage of projects now in production. We are exiting 2025 with the revenue funnel exceeding $550,000,000 in a potential three-year product revenue, including over $300,000,000 from design win projects. Of those design wins, 44% have already reached production and are generating revenue, up from 38% end of Q3. Assuming no changes to customer forecast, this represents approximately $132,000,000 of potential three-year revenue from production stage projects alone. During the fourth quarter, we added nine new customer projects to our design win pipeline, and three existing projects transitioned into production.

We expect this momentum to continue through 2026, with the target of having over 50% of our current design win projects in production by June. Our product pipeline continues to be driven primarily by our 4G Cat M and Cat 1 BIS technologies, as well as our RF transceiver product, which supports a wide range of software-defined radio applications. We are also seeing early engagements around 5G eRAD cap, which we view as the successor to 4G in IoT deployments. Smart metering, telematics, and asset tracking remain our strongest verticals, followed by security, e-health and medical, and other industrial applications.

From a product family perspective, Cat M remains a meaningful growth driver in 2026, led by asset tracking and smart metering deployments, including expanded programs now entering production with customers such as Honeywell and iDrop. Cat 1 Bis is positioned for a breakout year in 2026, supported by multiple customer ramps in telematics and security. In RF transceivers, we have committed backlog in place, with additional demand expected in the second half of the year. We also expect to begin seeing meaningful revenue from our 5G licensee partner in China. Demand for 5G eRAD cap continues to strengthen.

Mobile network operators in the US are accelerating the transition from 4G to 5G to reform spectrum, and IoT applications remain the final bottleneck completing that transition. This is why having a 5G eRED cap solution as early as possible is critical. We continue to make strong progress on this program and expect to receive our first test chips this quarter, with customer sampling beginning in mid-2027. Our IP licensing and services business is now fully integrated into our go-to-market strategy and represents attractive high-margin upside in 2026. We are currently engaged in discussions with multiple potential partners, with individual opportunities ranging from approximately $2,000,000 to $10,000,000 or more, depending on scope.

Beyond revenue, these opportunities expand our reach into new markets and regions. On the supply chain side, we continue to operate in a dynamic environment. While not indicative of demand, these factors can influence shipment timing and costs quarter to quarter. We're addressing substrate constraints by adding suppliers to reduce single-source exposure and improve resilience. We are also seeing memory pricing and capacity pressures, which affect both our product and our customer's device. We are working to pass through these cost increases where appropriate while maintaining strong customer relationships. Also, we are coordinating closely with customers on ordering and delivery schedules.

At this stage, we expect little to no impact on our business in 2026 and limited impact in the second half. Looking ahead, we are focused on reducing cash burn over the course of the year, with the objective of reaching a breakeven run rate by Q4. We are taking a disciplined approach to operating expenses, rightsizing where appropriate, while protecting the innovation that underpins our differentiated position. Working capital dynamics may create short-term cash flow variability, but these effects are tied directly to long-term growth.

Overall, the fourth quarter underscores our progress in strengthening the core IoT business, improving financial discipline, and maintaining flexibility in our capital strategy as we position the company for sustained growth in 2026 and beyond. For Q1 2026, we currently expect revenue to be around $6,500,000, reflecting normal seasonality with the risk that approximately $1,000,000 of revenue could shift into Q2 due to manufacturing and shipment timing planned for the end of Q1. Based on our backlog and design win pipeline, we expect revenue to ramp through the remainder of the year and continue to believe we can approach cash flow breakeven in Q4.

We continue to evaluate strategic alternatives that could enhance profitability and unlock additional value across both the IoT business and our treasury strategy. The board is actively reviewing options, and we remain committed to unlocking shareholder value without rushing decisions, particularly at a time when the company is in its strongest position today. I will now turn the call over to Deborah to review our fourth quarter and full year 2025 financial results in greater detail. Deborah?

Deborah Choate: Thank you, Georges, and hello, everyone. I'll begin by reviewing our fourth quarter financial results and then discuss our Bitcoin holdings. During the fourth quarter, we experienced several significant events that impacted our financials. These included a substantial increase in product revenues, a reduction in operating expenses, the early redemption of half of the convertible debt issued in July 2025, the launch of our ADS buyback program, and the sale of Bitcoin to finance these two non-operating initiatives. In Q4 2025, revenues increased 72.6% sequentially, driven primarily by growth in product revenue. Gross margin for the quarter was 37.7% and was impacted by provisions for slow-moving inventory.

Excluding these provisions, gross margin would have been approximately 43% compared to 42.4% in the prior quarter. R&D and SG&A expenses declined to a combined total of $11,500,000 in Q4, down from $13,600,000 in the third quarter. We maintain our goal of continuing to reduce operating expenses over the course of 2026 in order to support our breakeven goals for operating results and cash burn. We recorded a noncash impairment charge of $56,900,000 related to the mark-to-market value of our Bitcoin holdings in the fourth quarter, compared to an $8,200,000 charge in Q3. We also recorded an $8,400,000 net realized loss on the sale of Bitcoin.

This sale funded the redemption of half of the convertible debt and the repurchase of 9.7% of our ADS. The July issuance of convertible debt and warrants resulted in the recognition of an embedded derivative, which is remeasured at each reporting period. Changes in its value affect our P&L that are entirely noncash. Similarly, while the convertible debt carries a 0% coupon in the first year, IFRS accounting requires us to recognize significant noncash interest expense. At the October, we redeemed half of the outstanding convertible debt ahead of its normal July 2028 maturity. This resulted in a $29,100,000 loss on early redemption of debt that was primarily noncash.

Reflecting these factors, we reported an IFRS net loss of $87,100,000 in Q4 compared with an IFRS net profit of $900,000 in the prior quarter. On a non-IFRS basis, excluding significant noncash items, we reported a non-IFRS net loss of $18,500,000 or $1.19 per ADS, compared with a non-IFRS net loss of $11,300,000 or $0.81 per ADS in Q3. The realized loss on the sale of Bitcoin of $8,400,000 is included in the non-IFRS net loss, so we would have been just over $10,000,000 non-IFRS net loss without this element. Normalized operating cash burn in Q4, including primary working capital movements in inventory and trade payables and receivables, was approximately $7,700,000.

After completing Bitcoin purchases totaling $3,400,000 early in the quarter, we later sold Bitcoin to fund $101,000,000 of debt redemption and a $9,400,000 ADS buyback. At year-end 2025, we held 2,139 Bitcoin with a market value of $187,100,000. Of this, 1,617 Bitcoin, valued then at $141,500,000, were pledged as collateral for the remaining $94,500,000 of convertible debt due in July 2028. The remaining 522 Bitcoin, valued at year-end at $45,600,000, are unencumbered. And with that, I'll turn it back over to Georges.

Georges Karam: As we close, I want to reiterate that our primary focus remains on executing the IoT business. The fourth quarter reflected continued momentum with revenue predominantly driven by product shipments. We are encouraged by the depth and quality of our design win pipeline, with more than 44% of projects now in mass production and additional ramps expected throughout the year. With solid demand across Cat M, Cat 1 Bis, RF transceivers, and early engagement around 5G eRedcap, we believe the IoT business is positioned to continue scaling while our cost discipline supports a clear path toward cash flow breakeven by 2026. At the same time, we have taken a disciplined and value-driven approach to capital allocation.

During the fourth quarter, we took actions to repurchase shares where we believe our valuation does not reflect underlying asset value, and we continue to have board authorization in place to pursue additional repurchases as appropriate. These actions reflect our focus on unlocking value on a per-share basis while maintaining flexibility to evaluate additional capital allocation options as market conditions evolve. With that, let's now begin with the Q&A session. Operator? If you don't mind.

Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Scott Searle with Roth. Your line is now open.

Scott Searle: Hey, good morning, good afternoon. Thanks for taking the questions. And thanks for all the detail on the call related to some of the product development activity ongoing. Hey, Georges. Just to quickly dive in on the guidance, I'm wondering how you're thinking about licensing in terms of that $40,000,000 to $45,000,000 figure. And I'm wondering if you could reiterate again what you expect, the percentage of design wins to be in production at that point in time? I missed that number. And it looks like just at a quick first cut, $1,516,000,000 exiting the year is kind of what gets you to cash flow breakeven, and then I had a couple of follow-ups.

Georges Karam: Yeah. Hi, Scott. Thanks. Thanks for being on the call. And so just to start with one, the guidance, I believe you're reflecting about the guidance for the year, you know, we continue as you see, like Q4 was as I said, mainly product. I believe Q1 is going to be very close as well, you know, in our guidance. We are not expecting except surprises, I will say, because we have many deals and depends which one will close. You know? We have really currently in the backlog, I should say maybe a couple of million dollars over the year if you want. Of secured licensing.

However, we have, as I said, you know, four, five, and more, each one ranging between $2,000,000 and $10,000,000. So it's very, very hard to make a projection if you want on the numbers. So we're taking a very conservative approach. Assuming like, maybe get another $5,000,000 of all this in the year, five to six. They could be secured and bring like technically, $2,000,000 to $3,000,000 per quarter in the remainder of the year if you want. After Q1, Q2, Q3, and so. So this is a little bit our guidance.

So the number I gave in terms of production for the year, this in percentage just means we will have, like, 80-85% or so, eighty to eighty-five percent product and only 15% services on this basis. 20% services, something like this. And then the other question was regarding the convergence of the percentage of product. So what you know, when I exit the year, you need to keep in mind, you know, we're giving those percentages. But as you know, each year each quarter, we are the design win is increasing. So we're not updating the metric on a quarterly basis. Just know, convenience, we will be updating this like every six months, you know, to avoid every quarter.

Having you know, sometimes to explain some the variation, maybe not linear and so on. But we are very comfortable that design win pipeline, the $3,000,000 is today above 300 and we continue growing towards the year. And on those 300, our estimation, at least 50% of them will be in production in June. In June this year. So, obviously, we project year-end, you need to add, you know, I could say maybe 75% towards the year-end. There's no guidance on this, but for mid-year, it's like more than 50 for sure.

Scott Searle: Gotcha. Very helpful. And Georges, just in terms of the breakeven then in terms where you guys are reducing the OpEx, it sounds like it's in the mid to high teens. And would be the exit rate and trajectory? Okay.

Georges Karam: I remain on the number, which is essentially, honestly, the mix of services and product can give you a different number. Obviously, you understand the margin. In our model, assuming, like, you know, the fifteen sixteen, you know, number where $3,000,000 of this is services. And the remaining your product.

Scott Searle: Gotcha. And if I could follow-up on the transceiver front, this seems like it's one of the hidden gems in the business. I think in the past, you've talked about that maybe being north of $5,000,000 on an annual basis. I'm wondering what the current thoughts are, design activity, and how that momentum is looking into the back half of 'twenty-six and into 'twenty-seven? How big could that opportunity be?

Georges Karam: You know what? We have, you know, as you know, the acquisition of ACP gives us exact directly a couple of customers to whom today, you know, they move into production. And we have genetic revenue from them every quarter. So have even a backlog in 2026 from them for the first half. So we'll see, you know, sometimes the forecast for the full year, you know, with Chinese customers could be a little bit you know, I don't want to give guidance on this. We believe, like, we could be doing this year maybe in the other business, $7,000,000 or so. I mean, in case more in the north of five. For sure.

And can be, you know, getting out if some upside, then we'll go beyond the $7,000,000. This is how we see it. And also, as you know, this the RF technology, we launched this with many customers, new customers. To those new customers, we're something now are the board and something, you know, chips, and they're designing product. And we have really a few tier one already worked on this, it's more, to be honest, us being able to support them and help them is what we're working on this.

But I don't expect big revenue in '26 from them because they are all in the application like drone, defense, and it takes time to build those products and come to market. This could be meaningful, you know. This could be a business, you know, for sure, you know, maybe in the $1,520,000,000 dollar, you know, run rate. This is doable. If we are successful, we're keeping the Chinese customer and add those customers that you can get for defense and public safety application and other software-defined radio application.

Scott Searle: Gotcha. And lastly, if I could, Georges, you had some comments on the memory side of the business. It sounds like indirectly, you guys are managing that well and you're not seeing too much in terms of headwinds from your end customers. I'm wondering if you could provide some expanded thoughts on that. And then just the competitive landscape. You guys certainly have a strong position with Cat 1 BIS. It seems like running the table is the right expression, but you guys are certainly winning a lot of business on that front and gaining some momentum. And so I was just wondering if you could comment on the competitive landscape for Cat 1 Bis.

And then as it relates to eRedcap, which will be the next big cycle in '27 and beyond, kinda what you're seeing from a competitive aspect? Thanks.

Georges Karam: Okay. Well, the supply chain, just to be clear, you know, the industry is completely, you know, today I mean, it's not like the direct memory of Sequans. It's not our technology because as you know, our technology is not an AI. But AI and geopolitics as well. Combined with geopolitics is obviously the demand on AI is eating most of the capacity and obviously the OSAT and all the, you know, the packaging material and all this increasing price or making constraints on supply, increasing lead time, and so on. Struggle on the substrate. We continue to watch this very closely. We managed to secure at least our Q3 production. We're in good shape on this.

But despite this, we're working on multiple sources. But we are seeing price increase. Unfortunately. And just only that's how it is. On the memory, again, we're not using the memory that you need in AI. That's how it is. All this business is connected. Right? I mean, so if the AI, you know, big memory, their prices are getting up because there is demand. This is impacting as well smaller memory and a flash. RAM and flash that we use next to our chip if you want, our module and so. So we have direct impact on this as well. In supply and pricing, unfortunately.

We are working all out the price, you know, and secure the capacity with multiple partners have double source on the memory as well. To be sure that you have the supply. But unfortunately, believe we're going to have the cost increase is happening, and we are reflecting this to our customer. We're already discussing with our customer the m and trying to pass those tasks to them. I believe we'll see more of this impact in our number in the second half of the year. The first half, we have some backlog.

And so at least Q1, we have backlog for this on all the pricing and we're not it's very hard to change the price when you are shipping in the same time. With customers. So it's something to watch. As well, you know, customers and, you know, the customer, they could be building devices where they are using the big CPU and memory. That's an old application. In some application, they need this. And obviously, could face shortage or challenge on the memory they need to get for their own device. So there is tension in the market. I don't qualify it like in the COVID days. But it's there.

You know, we're spending time on it to My team is working day and night on securing supply, talking with the customers and so on to be sure that we can pass 2627 in good shape because it seems like this will continue until 2028. What I'm hearing. Talking about the competitive landscape and the product, indeed, you know, on Cat 1 Bis, two guys that they have Cat 1 Bis is not Chinese. It's Qualcomm and Sequans. So it's really theopoly market. And most of our design win are around Cat 1 Bis outside. It's not like CAT M, we're not doing anything anymore. We still have Cat M business.

But I believe we have a big piece of the pipeline driven by the Cat 1 Bis because of the new product ramping and because also on the competitive landscape limitation. Obviously, you know, the customer has the choice between using Sequans technology or Sequans technology. Just only whether they buy it from us or from Qualcomm. That's how it is because it's the same technology behind it. It, which is good position us, I would say, to push this technology further. And on eRAD cap, I was at CS and there is really big movement. And I will have MWC in a couple of weeks.

Meeting with the carriers AT&T, Verizon, and T-Mobile, all of them, they are really eager to get the 4G frequency band and move them to the 5G. In other words, they need and they have the obligation to get those frequencies. And as you know, the existing 5G network for any category for the IoT. The IoT remains on the 4G. And the broadband and the phones are moving to 5G. So it's easy on this side. Idea is more complicated mainly because there is also commitment for ten years, business and metering and so on. So it's really becoming a very, very hot topic. A lot of discussion at CS were around this.

The carrier would like to see the ecosystem moving faster because the soonest they have eRAD cap, the soonest they can transition the new devices to eRAD cap technology even if it's falling back to 4G. So you'll have 5G falling back to 4G, but at least the technology will be the product will be future-proof. And this gives the freedom to the carrier to switch off the 4G sooner or at least on time as they plan it and not to drag this longer and they can recover the frequency to put them on the 5G. And here again, you know, we are I believe we are in leading position.

From, you know, it's very early not to it's very hard to talk about it when the customer didn't announce product yet. But we started the 5G as you know, many years before. Working on the broadband. We licensed the 5G to a partner. So we have a lot of those pieces of the puzzle already in hand. When we kick off our eRAD cap chip last year, we use a lot of this. And here we go after one year of the work we have is this chip coming to the company this quarter, end of this quarter. And from there, we start the testing and continue development.

And we believe we'll be ready for what we call it the IUDT testing with the infrastructure vendor at all 2027. And we'll be sampling to customer midyear or, let's say, the 2027. This is our timeline, and we're executing on this. And we're getting a lot of push to accelerate this. Carriers would like us even to do it faster if you want. I believe we are in leading position with this family.

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

Operator: Thank you. Our next question comes from the line of Mike Grondahl with Northland. Your line is now open.

Mike Grondahl: Yeah. Thank you. Georges, with 44% of those design wins in mass production, could you talk a little bit about the breadth of customers and just sort of like average order size?

Georges Karam: Yeah. Hi, Mike. You know, it's essentially gross 44. You know, in other words, as I said, this is like more than $130,000,000 all three years revenue. So obviously, you divide by three, you know, it gives you a little bit where we stand above $40,000,000 in linear. It's something year one, year two, year three for the new projects. For all the projects, they are there in their second year. Like, for example, the tracking business is moving very well. We have customers there, and it's like buying again, you know, if I take in the million units, 400 k unit, 300 k unit, you know.

The skip or the space, we are really in a good shape, you know, where we have matured the product shipping. Few metering finally entering into production. With Honeywell and Itron. And a lot in the tracking device. Tracking, we have many customers. We have some of them, you know, as I said, they do million units a year and more than million units a year. And others, they do 200 k. Know? So it's really right of order. But when you sum them all up, Mike, to get the order of magnitude, it's not like, first of it's many, many projects.

I mean, I don't have the number in mind, but if I don't want to give you a wrong number, but it's more than 30 for sure. Project. It's diversified. On many applications, as I said, already that all the segments we are talking about. Some of them are in CAT M, some of them are in CAT 1. And we have tier one customers, and we have some small customers, but not too small. I mean, it's too small in a sense they ship they work well. They do 50,000 units per quarter, and they are there buying every quarter. And moving.

Mike Grondahl: Got it. In terms of your breakeven cash goal by April, do you expect a lot of progress on the $11,500,000 you got to for R&D and SG&A combined?

Georges Karam: Yeah. I mean, we continue driving this down. You know, we put the guide you know, see on the OpEx point of view. We'll be a little bit, you know, we believe in the second half of the year around $10,500,000. Is our target. Obviously, this includes depreciation, you know, so you need to take off the depreciation. When we're talking about, you know, cash flow you know, breakeven, we're counting on a cash basis if you want. So we'll be somehow you have, like, in this 10.5, maybe around $1,500,000 depreciation. So the company will be, like, using, $9,000,000 if we speak in cash, I would say.

Per quarter, and obviously, you add, like, $3,000,000 in service, this gives you like, you know, $6,000,000 left because service will be 100% margin. Or less, I mean, very close to a hundred. So then you will the product revenue needs to cover, like, the $6,000,000. And if you have a gross margin around on the product, 45%, you can do it with $13,000,000,000 it gives you a little bit the number where we are there. Obviously, this can vary because the mix can change. We can have a gross margin.

Higher or a little bit lower, and obviously, the service could be higher and then we can accelerate the breakeven or the product could be higher than this number as well.

Mike Grondahl: Got it. And then just lastly, it sounds like the progress on 5G the eRedcap chip is going well. Revenue, do you still sort of have that penciled in mid-twenty-eight? What any updated thoughts on there?

Georges Karam: Yeah. I believe, honestly, the yeah. I mean, the revenue is mid-twenty-eight. Why? Because you need to think about how it's going to work, Mike. Ericsson and all the infrastructure vendors are building their software release to support eRAD cap and bring it to the network. Without giving too much detail. But this is targeted, I will say, to be in the network towards the end of this year, beginning of next year in testing. Then the carrier will deploy it, and then from there, you do when they are ready, we can test end to end. Right? I mean, in other words, if I have it ready today, it doesn't matter. No. I need to have the infrastructure working.

So I'm synchronizing with Ericsson. To come on time doing the testing if you want soon. Once we have the testing, we have the proof that the chip is working. From there, you can have your our first alpha customer engaging with us. And if you get depending on what they are doing, if it's definitely a replacement on existing product, this could be fast. Because it's not a new design. We'll give them a much which is pin to pin compatible with the previous one. And it will be running in Cat M or Cat 1 Bis plus 5G. So they can go fast and in 2028 can introduce product.

If you have other customers or they are building completely new products, that takes two years or two years and a half to develop, and they start with 5G, obviously, you don't see that avenue in '28. You see it in '29. But more or less, the way we are seeing the push to have the customer adopting 5G faster we feel good about seeing revenue in 2028.

Mike Grondahl: Got it. Okay. Thank you.

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

Fedor Shabalin: Good morning, good afternoon, everyone. Georges and Deborah, thanks for the detailed review of your quarter. You already talked about near-term guidance, but I wanted to touch a little bit for maybe midterm on 2027. How should we think about the revenue cadence heading into 2027? Specifically the base at which the remaining year remaining 60% of the pipeline converts to production revenue and whether the combination of material LTE and CAT 1 Bis programs, alongside early 5G engagements position the company to meaningfully inflect beyond the cash flow breakeven milestone that is targeted for 2026?

Georges Karam: Yeah. Maybe they're yeah. You're absolutely right. I mean, the pipeline is there. And when you talk about those design win converting, they are there. Right? When they convert, they bring revenue and they stay there. They don't disappear over one year or two years. This is really long-term business when we talk about metering, tracking, I mean, there is no project in the company that doesn't live five years. If you want, then some of them, they live ten years, seven years, eight years. All those metering segments. So what we are winning will continue to be there. The pipeline continues converting and bringing revenue.

So just only if we take what we have in hand, and if you talk about, you know, we have 44% that's founded, I would say, this means we still have the other half. So by definition, we can double. You know? That's how it is. The growth is big. Right? I mean, if you assume all this only convert and they will be we don't choose anything lose not the customer will go to someone else. But like you could have, I'll say some accidents, some customers planning for some big forecast and they do less and so on. But it's a diversified pipeline that gives me confidence. Our business will continue growing.

Not to give guidance of saying it's going to be I mean, the doubling is not it's built in the model. Obviously, you could argue how this is can be developing every quarter and we'll continue growing. And maybe we'll be in a 60, 60% plus growth. That's at least what I in terms of seven, that will continue to 28. And in '28, where we have really I believe, really, the eRAD cap, if we execute well, you need to imagine that the eRAD cap 5G, it's over. There is no Chinese at all competing. You have only a couple of players that they can bring this to the market.

And this gives us an opportunity to increase our market share as well. Because, you know, we have now an established customer base. We're not going to win a new customer with the 5G. We're going to go to the same customer and support them with a new product line and expect expand our market share with the new customer. So I'm very I believe as well that the 5G will be a great catalyst in 2028 to add another growth driver to our revenue. Year over year.

Fedor Shabalin: Thank you. This is very helpful. And my follow-up is about buybacks. So we just stopped trading at where it is trading now and given the authorization to repurchase an additional 10% of outstanding ADSs. Can you provide color on the expected pace and cadence of buybacks in Q1, specifically Q1 2026? I mean, specifically, whether the current share price level has accelerated repurchase activity quarter to date and how you balance your urgency of buying back stock at these levels against preserving liquidity? Thank you.

Georges Karam: You know, obviously, very I mean, we have the authorization. We are, you know, free on doing this. Obviously, we were when we are in the window, which is locked, we cannot do it. We can do it when the window's open. And essentially, we're assessing really this versus because you need to assess two things. You need to assess what's happening as well on the Bitcoin to become price. And the value of the share versus the net cash. So the two together are going to drive our I'll say the pace. But if you want the intention there is clear.

You know, we believe if our share price is not appreciated, it's good things to do but to buy back shares and I would say reduce the number of shares outstanding. So it's like giving cash, giving money to all our shareholders sticking with us. So then the decision is there. We'll be executing on it. I'm not going to tell you if in Q1 we'll buy all the 10% or only 3% or 5% because it depends really how many dynamics I'm observing now with the Bitcoin price and so on. So we need to watch this carefully and make decisions based on this as well.

Fedor Shabalin: Thank you very much, Georges. Appreciate the color, and continue. Best of luck.

Georges Karam: Thank you, Fedor. Thank you. Thank you. As a reminder, to ask a question at this time, please press 11 on your touch-tone telephone. Our next question comes from the line of Jacob Stephan with Lake Street Capital Markets. Your line is now open.

Jacob Stephan: Hi, guys. I appreciate you taking the questions. Maybe since a lot of questions have been asked, maybe help me unpack Q1 guidance a little bit. I know you said $6,500,000. Sounds like some of that could shift, but without affecting the balance of the year. What I guess, what, you know, portion of that is subject to shifting later into the year? And maybe just help us walk through that.

Georges Karam: Yeah. I mean, Jacob, hi. And essentially, you know, it happens like, you know, again, going to the condition of the market, you know, even on TSMC, even on the wafer side, there is we have the capacity. It's all fine, but it's really stretched in timing. You know? It's like you pulling in stuff, getting this, you know, accelerating even a week. It's a little bit complicated. You know, the fiber loaded. And technically, what I'm saying is that we have orders. Right? I mean, we have orders covering Q1 and Q2, and have backlog even covering Q3 and Q4, some of our backlog.

And in our guidance, you know, some of those orders, we should be able to ship them Q1. But they are really on the edge of Q1. And as I'm speaking, some of those dates are not 100% confirmed. You see the work in progress. So in theory, they are there. But you're not at risk you are at risk of having slippage of a few days. You know, we're not talking about, you know, it could be really weak. And, unfortunately, I have a few orders decent order happening there. But they're not lost. It's just only And if they don't come in the quarter, they shift to Q2.

You know, this will beef up if you want my guidance. I mean, you should sum Q1 and Q2 to look to the performance on the company. This is where we are. So just to be cautious on this. If I do the math today, I believe should manage it. The guidance I gave, the 6.5, but there's a little bit of risk, so I will try to respond here with the market.

Jacob Stephan: Okay. Very helpful. And then maybe touch on the price increases a little bit. You know, for your customers. You know, how susceptible have or, I guess, how receptive have they been to, you know, overall price increases?

Georges Karam: Well, you know, to be honest, surprisingly, I should say the customer I don't know how much no one is a for the pricing fees in general. But what I like it, the standard then that's relearning what happened in the COVID. And the customer are reacting positive, if you will, around what's going on. In other words, they appreciate that you go and tell them that we have we have we could have supply problem. We could have price problem. And sit down with the customers and talk about the issues and so. Everyone is taking for granted the memory.

The memory is really everyone knows and clear, you know, because the memory, by the way, people always prepared of the memory. It gets up and down all the time. So when it's up, read it in the news, they read it everywhere. When you go to the material, the, you know, the cusp of the gold, even if it's everything is clear. Right? I mean, when you give the number, so it's a little bit more challenging. But that's okay. You know? I mean, I don't call it like you know, we're managing this customer by customer. You know, we have sometimes obligation. We have and but it's the reception is positive. It's not like no way.

Because at the end of the day, that is it's not the choice of Sequans. Right? I mean, we're not trying to abuse the system. We're trying just only to be transferred to our customer and secure supply and this force us somehow to pay a little bit more. Because that's how it is the industry in Asia today. If you take, for example, all the or the geopolitical push many guys outside of China. So you have less competition in the packaging from China. So everything is happening outside of China between Taiwan mainly, but you have others obviously country around Taiwan.

And now, obviously, those guys, they have demand for to get more, you know, to secure all the a thing. We can take all the other fab big customer willing to give them check-in advance and so on. And then the same time, you have good reason that the material, you know, as well as the packaging material is getting up. So all this combined, is pushing the price of the packaging up, you know, the substrate and the packaging as well. TSMC is still okay. You know, TSMC they remain on they didn't change anything. They are not giving signs that will do any change for now.

At least for those geometry, which is the regular one, we use the flat, I would say. $40.22 and even the high FinFET 16, 12, and so on.

Jacob Stephan: Okay. And just last question for me. On the Bitcoin treasury strategy, you know, obviously, 2026, you know, the actual interest rate, goes up materially on the convertible debt. I'm just wondering how you're kind of thinking about you know, overall the debt repurchase or redemption.

Georges Karam: I'll figure what I mean. You know, obviously, we're evaluating this. Specifically as well with the price of the Bitcoin. What I could say we have you know, good relationship with the main debt holder. And as you saw in the past, redeemed 50% of this. So we're considering all our options. Nothing yet decided. Today. We'll look into the option, but you know, if you ask me my view on this, like, in general, the way we are seeing things if Bitcoin is not rallying and going to the moon, there is no interest, I will say, keep the debt forever. And better to redeem it sooner than later if you want.

Like, if I have to look to the picture today, there's not too much value creation to be done there. But we are factoring all this, obviously, and discussing with the board you know, based on all our options and what we should do and what.

Jacob Stephan: Okay. Very helpful. I appreciate it.

Operator: Thank you. And I'm currently showing no further questions at this time. I would now like to hand the conference back over to Georges Karam for closing remarks.

Georges Karam: Thank you very much all. Thanks for the questions and being on the call. And happy to see you next opportunity or discuss with you on next opportunity. Thank you very much.

Operator: Thank you, operator. You're welcome. This concludes today's conference call. You may now disconnect, and everyone have a great day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.