Sequans Communications 6-K, filed Feb 11, 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934

For the month of February 2020

Commission File Number: 001-35135

Sequans Communications S.A.

(Translation of Registrant’s name into English)

15-55 boulevard Charles de Gaulle

92700 Colombes, France

Telephone : +33 1 70 72 16 00

(Address of Principal Executive Office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F R Form 40-F £

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes £ NoR

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes £ NoR

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

The information in this report, furnished on Form 6-K, shall be incorporated by reference into each of the following Registration Statements under the Securities Act of 1933, as amended, of the registrant: Form S-8 (File Nos. 333-177919, 333-180487, 333-187611, 333-194903, 333-203539, 333-211011, 333-214444 and 333-215911. 333-219430 and 333-226458).

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EXPLANATORY NOTE

On February 11, 2020, Sequans Communications S.A. issued a press release announcing its financial results for the fourth quarter and full year ended December 31, 2019.  A copy of the press release is attached to this Form 6-K as Exhibit 99.1 and is incorporated herein by reference.

EXHIBIT INDEX

The following exhibit is filed as part of this Form 6-K:

Exhibit	Description
99.1	Press release dated February 11, 2020

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SEQUANS COMMUNICATIONS S.A.<br><br>(Registrant)
Date: February 11, 2020	By:	/s/ Deborah Choate
		Deborah Choate
		Chief Financial Officer

		Exhibit

NEWS

Sequans Communications Announces Preliminary

Fourth Quarter 2019 and Full Year 2019 Financial Results

PARIS - February 11, 2020 - Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G chips and modules, today announced preliminary financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter and Fiscal Year 2019 Highlights:

Revenue: Revenue was $9.2 million, an increase of 25.2% compared to the third quarter of 2019 and an increase of 50.9% compared to the fourth quarter of 2018. Higher other revenue reflects license and service revenue from new strategic deals closed during the fourth quarter. Full-year revenue for 2019 was $30.9 million, a decrease of 23.3% compared to $40.3 million for 2018 caused mainly by a delay in the ramp of the IoT market and issues encountered in the Cat1 business.

Gross margin: Gross margin was 47.0% compared to 37.8% in the third quarter of 2019, and compared to 43.3% in the fourth quarter of 2018. Full-year gross margin increased from 39.5% in 2018 to 40.1% in 2019.

Operating loss: Operating loss was $5.6 million compared to $7.5 million in the third quarter of 2019 and $9.3 million in the fourth quarter of 2018. Full year operating loss for 2019 was $28.0 million compared to $31.5 million for 2018.

Net loss: Net loss was $8.5 million, or ($0.36) per diluted ADS, compared to $8.8 million, or ($0.37) per ADS, in the third quarter of 2019 and $9.9 million, or ($0.42) per ADS, in the fourth quarter of 2018. Full year net loss for 2019 was $36.1 million, or ($1.52) per ADS, compared to $36.2 million, or ($1.55) per ADS, for 2018.

Non-IFRS Net loss: Excluding the non-cash stock-based compensation, the non-cash impact of convertible debt amendments, effective interest adjustments related to the convertible debt and other financings, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $7.2 million, or ($0.30) per ADS, compared to $7.5 million, or ($0.32) per ADS in the third quarter of 2019, and $9.1 million, or ($0.39) per ADS, in the fourth quarter of 2018. Full year non-IFRS net loss for 2019 was $30.9 million, or ($1.30) per ADS, compared to $32.3 million, or ($1.38) per ADS in 2018.

Cash: Cash and cash equivalents at December 31, 2019 totaled $14.1 million compared to $6.3 million at September 30, 2019.

"2019 was a year of both frustrating delays and gratifying strategic accomplishments,” said Georges Karam, Sequans CEO. “Now, we are entering 2020 with strong momentum on several fronts: the ramp in Cat M is picking up, with more Monarch-powered devices entering mass production; the inventory issue with one Cat 1 customer is expected to be fully resolved in Q1; and the broadband business is beginning to recover. Meanwhile, we are ready for volume shipment of the Monarch SiP, our joint solution with Skyworks, and we have made additional progress with our go-to-market by signing two major distributors.

"Finally, the most significant testaments to our leadership in 5G/4G chips and modules are the important partnerships we’ve closed in 2019, including an $8.4 million strategic investment, as well as two non-exclusive multi-year licensing and services deals with strategic partners totaling over $40 million that will help accelerate our road map. We intend to build on this momentum and make 2020 a year of significant progress, further reinforcing our leadership by offering a complete portfolio of 5G chips and modules fully-optimized for IoT applications.”

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Sequans reports fourth quarter and full year 2019 financial results

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In millions of US$ except percentages, shares and per share amounts	Key Metrics
	Q4 2019		%*		Q3 2019 ^(1)^		%*		Q4 2018		%*		Full year 2019		%*		Full year 2018		%*
Revenue		9.2				7.3				6.1				30.9				40.3
Gross profit	4.3		47.0	%	2.8		37.8	%	2.6		43.3	%	12.4		40.1	%	15.9		39.5	%
Operating loss	(5.6		(61.0	)%	(7.5		(103.0	)%	(9.3		(153.7	)%	(28.0		(90.6	)%	(31.5		(78.3	)%
Net loss	(8.5		(93.1	)%	(8.8		(119.9	)%	(9.9		(162.9	)%	(36.1		(116.9	)%	(36.2		(90.0	)%
Diluted earnings per share		(0.09				(0.09				(0.10				(0.38				(0.39
Diluted earnings per ADS **		(0.36				(0.37				(0.42				(1.52				(1.55
Weighted average number of diluted shares	95,189,022				95,082,574				94,599,554				95,008,518				93,767,005
Weighted average number of diluted ADS **	23,797,256				23,770,644				23,649,889				23,752,130				23,441,751
Cash flow from (used in) operations	16.3				(1.0				(7.5				4.9				(22.8
Cash, cash equivalents and short-term deposit at quarter-end	14.1				6.3				12.1				14.1				12.1
Additional information on non-cash items:
- Stock-based compensation included in operating result	0.5				0.4				0.3				1.8				1.8
- Non-cash interest on convertible debt and other financing	1.3				1.2				0.8				4.4				3.0
- Non-cash impact of convertible debt amendment	—				—				—				—				0.3
- Non-cash impact of deferred tax expense (benefit)	(0.5				(0.3				(0.4								(1.2
Non-IFRS diluted earnings per shares (excludes non-cash stock-based compensation, impact of convertible debt amendments, effective interest adjustments related to the convertible and other debt and embedded derivative, impact of revaluation of interest-free government loan) and related deferred tax benefit (expense)		(0.08				(0.08				(0.10				(0.33				(0.34
Non-IFRS diluted earnings per ADS **		(0.30				(0.32				(0.39				(1.30				(1.38

All values are in US Dollars.

* Percentage of revenue

** Reflects the November 29, 2019 adjustment in the ratio of shares to ADS : each ADS represents 4 ordinary shares

(1) Updated from the Q3 2019 earnings release provided on November 6, 2019

Q1 2020 Outlook

The following statement is based on management’s current assumptions and expectations. This statement is forward-looking and actual results may differ materially. Sequans undertakes no obligation to update this statement.

Sequans expects revenue for the first quarter of 2020 to be flat to slightly up from the fourth quarter, reflecting seasonal factors, followed by sequential improvement in the remaining quarters of the year. This outlook does not include any potential impact from the coronavirus on the company’s direct supply chain, its manufacturing partners in the region, or demand from its customers with manufacturing partners located in China. Sequans is taking steps to help ensure the well-being of its employees and is actively monitoring the situation and communicating with customers and its supply chain in order to assess and mitigate the effects, but it is too early to make an accurate assessment of the potential impact.

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 of 2019 today, February 11, 2020 at 8:00 a.m. EST /14:00 CET. To participate in the live call, analysts and investors should dial 888-394-8218, or 323-701-0225 if outside the U.S. When prompted, provide the event title or confirmation code 9106200. A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/. An audio replay of the conference call will be available until February 18, 2020 by dialing toll free 888-203-1112or 719-457-0820 from outside the U.S., using the following access code: 9106200.

Forward Looking Statements

This press release 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

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Sequans reports fourth quarter and full year 2019 financial results

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contained in this release, including any statements regarding our future results of operations and financial positions, business strategy and plans, expectations for Massive IoT and Broadband and Critical IoT sales, the expected value of a recent strategic agreement, the potential for new strategic transactions, the potential impact of the coronavirus on our manufacturing operations in China 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 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, (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 potential impact of the coronavirus on the production of our products in China or demand for our products by customers whose supply chain is impacted, (xiv) our ability to extend the maturity of our convertible note due April 2020, and (xv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. We have not filed our Form 20-F for the year ended December 31, 2019. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect the completion of our audit and any necessary adjustments or changes in accounting estimates that are identified prior to the time we file the Form 20-F.

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, effective interest adjustments related to the convertible debt and other financings, and 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.

About Sequans Communications

Sequans Communications S.A. (NYSE: SQNS) is a leading developer and provider of 5G and 4G chips and modules for IoT devices. For 5G/4G massive IoT applications, Sequans provides a comprehensive product portfolio based on its flagship Monarch LTE-M/NB-IoT and Calliope Cat 1 chip platforms, featuring industry-leading low power consumption, a large set of integrated functionalities, and global deployment capability. For 5G/4G broadband and critical IoT applications, Sequans offers a product portfolio based on its Cassiopeia 4G Cat 4/Cat 6 and high-end Taurus 5G chip platforms, optimized for low-cost residential, enterprise, and industrial applications. Founded in 2003, Sequans is based in Paris, France with additional offices in the United States, United Kingdom, Israel, Hong Kong, Singapore, Sweden, Taiwan, South Korea, and China.

Visit Sequans online at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans

Media Relations: Kimberly Tassin, +1.425.736.0569, Kimberly@sequans.com

Investor Relations: Claudia Gatlin, +1 212.830.9080, Claudia@sequans.com

Condensed financial tables follow

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Sequans reports fourth quarter and full year 2019 financial results

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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, 2019			Sept 30, 2019 ^(1)^			Dec 31, <br>2018
Revenue :
	$	5,054		$	6,008		$	3,856
	4,112			1,312			2,217
Total revenue	9,166			7,320			6,073
Cost of revenue
	4,507			4,159			2,943
	349			394			503
Total cost of revenue	4,856			4,553			3,446
Gross profit	4,310			2,767			2,627
Operating expenses :
	5,665			6,205			6,488
	1,864			1,857			2,179
	2,374			2,245			3,294
Total operating expenses	9,903			10,307			11,961
Operating loss	(5,593		)	(7,540		)	(9,334		)
Financial income (expense):
	(2,491		)	(2,293		)	(1,631		)
	—			—			(400		)
	(822		)	874			332
Loss before income taxes	(8,906		)	(8,959		)	(11,033		)
Income tax expense (benefit)	(374		)	(179		)	(1,139		)
Loss	$	(8,532	)	$	(8,780	)	$	(9,894	)
Attributable to :
	(8,532		)	(8,780		)	(9,894		)
	—			—			—
Basic loss per share		($0.09	)		($0.09	)		($0.10	)
Diluted loss per share		($0.09	)		($0.09	)		($0.10	)
Weighted average number of shares used for computing:
— Basic	95,189,022			95,082,574			94,599,554
— Diluted	95,189,022			95,082,574			94,599,554
Basic loss per ADS*		($0.36	)		($0.37	)		($0.42	)
Diluted loss per ADS*		($0.36	)		($0.37	)		($0.42	)
Weighted average number of ADS used for computing:
— Basic	23,797,256			23,770,644			23,649,889
— Diluted	23,797,256			23,770,644			23,649,889

All values are in US Dollars.

(1) Updated from the Q3 2019 earnings release provided on November 6, 2019

* Reflects the November 29, 2019 adjustment in the ratio of shares to ADS : each ADS represents 4 ordinary shares

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Sequans reports fourth quarter and full year 2019 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Twelve months ended Dec 31,
(in thousands of US, except share and per share amounts)	2019			2018
Revenue :
	$	21,947		$	28,938
	8,917			11,312
Total revenue	30,864			40,250
Cost of revenue
	16,684			21,957
	1,799			2,405
Total cost of revenue	18,483			24,362
Gross profit	12,381			15,888
Operating expenses :
	23,800			27,909
	7,968			9,411
	8,570			10,085
Total operating expenses	40,338			47,405
Operating loss	(27,957		)	(31,517		)
Financial income (expense):
	(8,974		)	(5,376		)
	—			(400		)
	—			(265		)
	71			366
Loss before income taxes	(36,860		)	(37,192		)
Income tax expense (benefit)	(783		)	(968		)
Loss	$	(36,077	)	$	(36,224	)
Attributable to :
	(36,077		)	(36,224		)
	—			—
Basic loss per share		($0.38	)		($0.39	)
Diluted loss per share		($0.38	)		($0.39	)
Weighted average number of shares used for computing:
— Basic	95,008,518			93,767,005
— Diluted	95,008,518			93,767,005
Basic loss per ADS*		($1.52	)		($1.55	)
Diluted loss per ADS*		($1.52	)		($1.55	)
Weighted average number of ADS used for computing:
— Basic	23,752,130			23,441,751
— Diluted	23,752,130			23,441,751

All values are in US Dollars.

* Reflects the November 29, 2019 adjustment in the ratio of shares to ADS: each ADS represents 4 ordinary shares

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Sequans reports fourth quarter and full year 2019 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	At Dec 31,			At Dec 31,
(in thousands of US)	2019			2018
ASSETS
	$	8,821		$	6,271
	16,733			12,409
	401			394
	335			337
	26,290			19,411
	6,664			8,243
	8,390			13,177
	1,587			2,707
	2,556			3,237
	534			565
	3,132			3,148
	14,098			12,086
	36,961			43,163
Total assets	$	63,251		$	62,574
EQUITY AND LIABILITIES
	$	2,403		$	2,384
	233,720			225,470
	43,653			39,768
	(308,113		)	(272,036		)
	(605		)	(605		)
	(28,942		)	(5,019		)
	6,150			5,674
	7,071			11,811
	23,342			19,723
	7,983			808
	3,204			—
	1,139			—
	1,905			1,689
	429			691
	51,223			40,396
	8,769			9,412
	4,068			10,295
	5,109			823
	7,329			—
	900			—
	1,472			688
	8,782			973
	4,541			4,654
	—			352
	40,970			27,197
Total equity and liabilities	$	63,251		$	62,574

All values are in US Dollars.

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Sequans reports fourth quarter and full year 2019 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

		Twelve months ended Dec 31,
(in thousands of US)		2019			2018
Operating activities
		$	(36,860	)	$	(37,192	)
	Depreciation and impairment of property, plant and equipment	3,815			3,060
	Amortization and impairment of intangible assets	4,498			3,103
	Share-based payment expense	1,798			1,812
	Increase (decrease) in provisions	(244		)	431
	Financial expense (income)	8,973			5,376
	Other financial expenses	—			400
	Convertible debt amendment	—			265
	Foreign exchange loss (gain)	(313		)	(497		)
	Loss on disposal of property, plant and equipment	15			13
	Bad debt expense	515			1,782
	Decrease in trade receivables and other receivables	6,610			4,003
	Decrease (Increase) in inventories	1,579			(867		)
	Decrease in research tax credit receivable	622			559
	Decrease in trade payables and other liabilities	(767		)	(3,899		)
	Increase (decrease) in contract liabilities	14,984			(252		)
	Increase (decrease) in government grant advances	72			(857		)
		(369		)	(78		)
Net cash flow provided by (used in) operating activities		4,928			(22,838		)
Investing activities
		(4,870		)	(5,373		)
		(4,276		)	(3,835		)
		(5		)	24
		—			347
		51			71
Net cash flow used in investments activities		(9,100		)	(8,766		)
Financing activities
		—			30
		—			20,841
		—			13,595
		8,269			—
		(6,227		)	2,882
		1,126			1,574
		7,967			4,388
		(1,299		)	—
		(801		)	—
		(447		)	(589		)
		—			(1,186		)
		(2,405		)	(791		)
Net cash flows from financing activities		6,183			40,744
		2,011			9,140
		1			(2		)
		12,086			2,948
Cash and cash equivalents at end of the period		$	14,098		$	12,086

All values are in US Dollars.

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Sequans reports fourth quarter and full year 2019 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US, except share and per share amounts)		Three months ended
Net IFRS loss as reported		$	(8,532	$	(8,780	$	(9,894
Add back
		517		362		308
		1,265		1,180		831
		(489		(287		(361
		$	(7,239	$	(7,525	$	(9,116
IFRS basic loss per share as reported			(0.09		(0.09		(0.10
IFRS basic loss per ADS as reported *			(0.36		(0.37		(0.42
Add back
			0.01		0.00		0.00
			0.01		0.01		0.00
			(0.01		0.00		0.00
Non-IFRS basic loss per share			(0.08		(0.08		(0.10
Non-IFRS basic loss per ADS *			(0.30		(0.32		(0.39
IFRS diluted loss per share			(0.09		(0.09		(0.10
IFRS diluted loss per ADS*			(0.36		(0.37		(0.42
Add back
			0.01		0.00		0.00
			0.01		0.01		0.00
			(0.01		0.00		0.00
Non-IFRS diluted loss per share			(0.08		(0.08		(0.10
Non-IFRS diluted loss per ADS *			(0.30		(0.32		(0.39
	Cost of product revenue	$	4	$	2	$	—
	Research and development	136		110		147
	Sales and marketing	100		54		6
	General and administrative	277		196		155

All values are in US Dollars.

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Sequans reports fourth quarter and full year 2019 financial results

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SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US, except share and per share amounts)		Twelve months ended Dec 31,
Net IFRS loss as reported		$	(36,077	$	(36,224
Add back
		1,797		1,812
		4,358		3,008
		—		265
		(1,018		(1,178
		$	(30,940	$	(32,317
IFRS basic loss per share as reported			(0.38		(0.39
IFRS basic loss per ADS as reported *			(1.52		(1.55
Add back
			0.02		0.02
			0.05		0.03
			0.00		0.00
			(0.01		0.00
Non-IFRS basic loss per share			(0.33		(0.34
Non-IFRS basic loss per ADS *			(1.30		(1.38
IFRS diluted loss per share			(0.38		(0.39
IFRS diluted loss per ADS*			(1.52		(1.55
Add back
			0.02		0.02
			0.05		0.03
			0.00		0.00
			(0.01		0.00
Non-IFRS diluted loss per share			(0.33		(0.34
Non-IFRS basic loss per ADS *			(1.30		(1.38
	Cost of product revenue	$	10	$	8
	Research and development	508		529
	Sales and marketing	282		225
	General and administrative	997		1,050

All values are in US Dollars.