6-K - SQNS - Equibles

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 October 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, excluding the section titled “Q4 2020 Outlook”,

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, 333-226458, 333-233473 and 333-239968).

EXPLANATORY NOTE

On October 27, 2020, Sequans Communications S.A. issued a press release announcing its financial results for the third quarter 2020 ended September 30, 2020. A copy of the press release is attached to this Form 6-K as Exhibit 99.1 and is incorporated herein by reference.

Effective October 20, 2020, Sequans Communications S.A. (the “Company”) modified its organizational structure. Didier Dutronc, previously Chief Marketing Officer, will now be Executive Vice President and General Manager of the Massive IoT business and Bertrand Debray, previously Chief Operating Officer, will now be Executive Vice President and General Manager of the Broadband IoT business. Danny Kedar, previously vice president in charge of the Massive IoT business, joins the executive management team in the role of Chief Operating Officer, with the engineering, technology and operations teams reporting to him. The roles and responsibilities of the remaining members of the executive management team, the CEO, CFO and EVP Worldwide Sales, are unchanged.

EXHIBIT INDEX

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

Exhibit	Description
99.1	Press release dated October 27, 2020

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: October 27, 2020	By:	/s/ Deborah Choate
		Deborah Choate
		Chief Financial Officer

Document

NEWS

Sequans Communications Announces

Third Quarter 2020 Financial Results

PARIS - October 27, 2020 - Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G chips and modules, today announced financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights:

Revenue: Revenue was $14.1 million, an increase of 15.5% compared to the second quarter of 2020 and an increase of 116.6% compared to the third quarter of 2019.

Gross margin: Gross margin was 42.0% compared to 48.3% in the second quarter of 2020, and compared to 30.3% in the third quarter of 2019.

Operating loss: Operating loss was $5.9 million compared to $5.6 million in the second quarter of 2020 and $8.6 million in the third quarter of 2019.

Net loss: Net loss was $9.0 million, or ($0.30) per diluted ADS, compared to $19.0 million, or ($0.70) per ADS, in the second quarter of 2020 and $9.8 million, or ($0.41) per ADS, in the third quarter of 2019. Net loss in the third quarter of 2020 includes a $1.5 million gain on revaluation of the embedded derivative arising from the amendments to the convertible debt made in March 2020. The revaluation was a $9.1 million loss in the second quarter of 2020.

Non-IFRS Net loss and diluted loss per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, the non-cash impact of convertible debt amendments, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $8.4 million, or ($0.28) per ADS, compared to $7.5 million, or ($0.28) per ADS in the second quarter of 2020, and $8.6 million, or ($0.36) per ADS, in the third quarter of 2019. The non-IFRS net loss includes foreign exchange losses of $0.9 million, or ($0.03) per ADS, in the third quarter of 2020 and $0.5 million, or ($0.02) per ADS, in the second quarter of 2020 and a foreign exchange gain of $0.9 million, or $0.04 per ADS, in the third quarter of 2019.

Cash: Cash, cash equivalents and short-term deposits at September 30, 2020 totaled $25.3 million compared to $35.5 million at June 30, 2020.

In millions of US$ except percentages, shares and per share amounts	Key Metrics
			%*				%*				%*
Revenue	14.1				12.2				6.5
Gross profit	5.9	42.0		%	5.9	48.3		%	2.0	30.3		%
Operating loss	(5.9)	(41.8)		%	(5.6)	(45.4)		%	(8.6)	(131.6)		%
Net loss	(9.0)	(63.7)		%	(19.0)	(155.0)		%	(9.8)	(150.6)		%
Diluted earnings per ADS	(0.30)				(0.70)				(0.41)
Weighted average number of diluted ADS	30,275,352				27,150,562				23,770,644
Cash flow from (used in) operations	(7.9)				(2.3)				(1.0)
Cash, cash equivalents and short-term deposits at quarter-end	25.3				35.5				6.3
Additional information on non-cash items:
- Non-cash stock-based compensation included in operating result	0.5				0.6				0.4
- Non-cash interest on convertible debt and other financing	1.6				1.7				1.2
- Non-cash change in the fair value of convertible debt embedded derivative	(1.5)				9.1				—
- Non-cash impact of deferred tax expense (benefit)	—				—				(0.3)
Non-IFRS diluted earnings per ADS	(0.28)				(0.28)				(0.36)

All values are in US Dollars.

* Percentage of revenue

(1) Updated from the prior earnings release

Sequans reports third quarter 2020 financial results

Page 2

“Revenue in Q3 grew 15.5%, well above our target," said Georges Karam, CEO of Sequans. "During the quarter, supply chain issues eased, enabling us to serve the high level of demand related to remote learning in our Broadband IoT business, and our Massive IoT business performed in line with expectations. We expect sequential growth again in the fourth quarter, driven by the ramp of our Massive IoT business as well continued strong performance of our Broadband IoT business. As a result, we are targeting over 60% growth for 2020 as a whole, an improvement from our original target of 50% year-over-year growth.

“An important recent development is adding a new microcontroller (MCU) partner to reinforce our go-to-market strategy and expand our reach to all corners of the Massive IoT market. Momentum continues to build in our Massive IoT business, and we are very excited about the customer acceptance of Monarch 2, our second-generation LTE-M/NB-IoT platform as demonstrated by new design wins in Q3. Also, we have added a new module partner for CBRS, an area expected to make an important contribution to our Broadband IoT business as this new market begins to ramp. Finally, we are making excellent progress with our 5G solutions and related strategic business engagements."

Q4 2020 Outlook

The following statement is based on management’s current assumptions and expectations and assumes no increase in the severity or duration of the COVID-19 pandemic. This statement is forward-looking and actual results may differ materially. Sequans undertakes no obligation to update this statement.

Sequans is targeting a sequential increase in revenue of 10% for the fourth quarter of 2020, which would cause revenue for 2020 to be more than 60% greater than the revenue for 2019. The backlog of orders and indications regarding customer demand support this goal, but the company also sees ongoing risks related to COVID-19.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the third quarter of 2020 today, October 27, 2020 at 8:00 a.m. ET /13:00 CET. To participate in the live call, analysts and investors should dial 800-289-0571 or +1 720-543-0206 if outside the U.S. When prompted, provide the event title or access code: 9909270. 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 November 4, 2020 by dialing toll free 888-203-1112 or 719-457-0820 from outside the U.S., using the following access code: 9909270.

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 contained in this release, including any statements regarding expected revenue for the fourth quarter of 2020, future results of operations and financial positions, business strategy and plans, expectations for Massive IoT and Broadband and Critical IoT sales, the ability to continue to operate remotely (as required) at high levels of productivity, increasing backlog of orders, the impact of the coronavirus on our manufacturing operations, and on customer demand, and our objectives for future operations, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risk and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not rely on or place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. In addition to the risk factors contained in our Form 20-F for the fiscal year ended December 31, 2019, some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are sold, (ii) unexpected increases in our expenses, including manufacturing expenses, (iii) our inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject due to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers, (viii) our inability to achieve new design wins or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, (ix) our inability to enter into and execute on strategic alliances, (x) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain, (xii) our ability to remediate material weaknesses in our internal controls relating to controls over the accounting and presentation of complex, non-routine and certain other transactions, including certain revenue arrangements, (xiii) the impact of the coronavirus on the ability to operate our business and research, production of our products or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders, (xiv) the impact of the

Sequans reports third quarter 2020 financial results

Page 3

coronavirus on capital markets and our ability to raise debt and equity financing, and (xv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission.

Use of Non-IFRS/non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements prepared in accordance with IFRS, we disclose certain non-IFRS, or non-GAAP, financial measures. These measures exclude the non-cash stock-based compensation and the non-cash impacts of convertible debt amendments, effective interest adjustments related to the convertible debt with embedded derivatives 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, 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

Sequans reports third quarter 2020 financial results

Page 4

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands of US, except share and per share amounts)			Sept 30, 2020			June 30, 2020			Sept 30, 2019 (1)
Revenue :
	$	11,580		$	8,774		$	5,208
	2,542			3,457			1,312
Total revenue			14,122			12,231			6,520
Cost of revenue
	7,668			5,884			4,151
	527			440			394
Total cost of revenue			8,195			6,324			4,545
Gross profit			5,927			5,907			1,975
Operating expenses :
	7,984			7,512			6,205
	1,774			1,871			1,857
	2,076			2,082			2,495
Total operating expenses			11,834			11,465			10,557
Operating loss			(5,907)			(5,558)			(8,582)
Financial income (expense):
	(3,623)			(3,717)			(2,293)
	1,522			(9,141)			—
	(885)			(505)			874
Loss before income taxes			(8,893)			(18,921)			(10,001)
Income tax expense (benefit)			98			34			(179)
Loss
Attributable to :
	(8,991)			(18,955)			(9,822)
	—			—			—
Basic loss per ADS			(0.30)			(0.70)			(0.41)
Diluted loss per ADS			(0.30)			(0.70)			(0.41)
Weighted average number of ADS used for computing:
— Basic			30,275,352			27,150,562			23,770,644
— Diluted			30,275,352			27,150,562			23,770,644
(1) Updated from the prior earnings release

All values are in US Dollars.

Sequans reports third quarter 2020 financial results

Page 5

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands of US, except share and per share amounts)			2020			2019 (1)
Revenue :
	$	25,855		$	16,093
	9,270			4,805
Total revenue			35,125			20,898
Cost of revenue
	17,449			12,169
	1,340			1,450
Total cost of revenue			18,789			13,619
Gross profit			16,336			7,279
Operating expenses :
	22,917			18,135
	5,909			6,104
	6,763			6,446
Total operating expenses			35,589			30,685
Operating loss			(19,253)			(23,406)
Financial income (expense):
	(10,831)			(6,483)
	(13,240)			—
	1,399			—
	(715)			893
Loss before income taxes			(42,640)			(28,996)
Income tax expense (benefit)			575			(409)
Loss
Attributable to :
	(43,215)			(28,587)
	—			—
Basic loss per ADS			(1.59)			(1.20)
Diluted loss per ADS			(1.59)			(1.20)
Weighted average number of ADS used for computing:
— Basic			27,120,905			23,736,950
— Diluted			27,120,905			23,736,950
(1) Updated from the prior earnings release

All values are in US Dollars.

Sequans reports third quarter 2020 financial results

Page 6

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	At Sept 30,				At Dec 31,
(in thousands of US)			2020				2019 ^(1)^
ASSETS

	$	8,748			$	8,858
	24,618				16,696
	449				401
	349				335
	34,164				26,290

	5,801				6,664
	14,084				8,390
	1,028				1,587
	1,226				901
	4,367				2,253
	3,287				3,132
	14,900				—
	10,385				14,098
	55,078				37,025
Total assets			$	89,242			$	63,315
EQUITY AND LIABILITIES

	$	2,962			$	2,403
	262,641				233,720
	41,012				43,656
	(351,948)				(308,733)
	(750)				(607)
	(46,083)				(29,561)

	11,148				6,150
	3,469				7,071
	34,984				23,342
	18,506				—
	3,978				3,204
	1,050				1,139
	1,885				1,905
	18				429
	4,341				11,572
	79,379				54,812

	17,204				8,834
	14,449				4,068
	5,694				5,109
	—				7,329
	806				900
	3,026				1,472
	8,018				5,812
	6,749				4,540
	55,946				38,064
Total equity and liabilities			$	89,242			$	63,315

All values are in US Dollars.

Sequans reports third quarter 2020 financial results

Page 7

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW


(in thousands of US)					2020			2019 ^(1)^
Operating activities
			$	(42,640)		$	(28,996)

	Depreciation and impairment of property, plant and equipment	2,845			2,900
	Amortization and impairment of intangible assets	4,314			3,310
	Share-based payment expense	1,813			1,279
	Decrease in provisions	(55)			68
	Interest expense, net	10,831			6,483
	Change in the fair value of convertible debt embedded derivative	13,240			—
	Convertible debt amendment	(1,399)			—
	Foreign exchange loss (gain)	1,200			(1,059)
	Loss on disposal of property, plant and equipment	—			(32)
	Bad debt expense	63			635

	Decrease (Increase) in trade receivables and other receivables	(7,670)			2,031
	Decrease in inventories	863			839
	Decrease in research tax credit receivable	716			1,376
	Increase in trade payables and other liabilities	5,762			466
	Decrease in contract liabilities	(7,564)			(631)
	Increase in government grant advances	12			245
			(269)			(247)
Net cash flow provided by (used in) operating activities					(17,938)			(11,333)
Investing activities
			(5,073)			(2,888)
			(4,776)			(3,537)
			(62)			32
			(14,900)			—
			21			5
Net cash flow used in investments activities					(24,790)			(6,388)
Financing activities
			32			—
			27,496			—
			—			8,269
			10,381			(2,300)
			5,392			—
			405			1,126
			2,050			7,970
			(894)			(1,048)
			(177)			—
			(118)			(335)
			(3,775)			—
			(1,777)			(1,788)
Net cash flows from financing activities					39,015			11,894

All values are in US Dollars.

Sequans reports third quarter 2020 financial results

Page 8

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)

	Net increase (decrease) in cash and cash equivalents	(3,713)			(5,827)
	Net foreign exchange difference	—			(8)
	Cash and cash equivalents at January 1	14,098			12,086
Cash and cash equivalents at end of the period			$	10,385		$	6,251
(1) Updated from the prior earnings release

Sequans reports third quarter 2020 financial results

Page 9

SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US, except share and per share amounts)
			September 30, 2020
Net IFRS loss as reported
Add back
				521	625	362
				(1,522)	9,141	—
				1,608	1,671	1,180
				—	—	(287)
		$	(8,384)
IFRS basic loss per ADS as reported							(0.41)
Add back
				0.02	0.02	$0.02
				(0.05)	0.34	$0.00
				0.05	0.06	$0.05
				0.00	0.00	($0.02)
Non-IFRS basic loss per ADS							(0.36)
IFRS diluted loss per ADS							(0.41)
Add back
				0.02	0.02	$0.02
				(0.05)	0.34	$0.00
				0.05	0.06	$0.05
				0.00	0.00	($0.02)
Non-IFRS diluted loss per ADS							(0.36)

	Cost of product revenue	$	4
	Research and development	209
	Sales and marketing	105
	General and administrative	203

All values are in US Dollars.

Sequans reports third quarter 2020 financial results

Page 10

SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US, except share and per share amounts)
			2020
Net IFRS loss as reported
Add back
				1,813	1,279
				13,240	—
				4,507	3,093
				398	(529)
				(1,399)	—

IFRS basic loss per ADS as reported						(1.20)
Add back
				0.07	$0.06
				0.49	$0.00
				0.17	$0.13
				0.01	($0.02)
				(0.05)	$0.00
Non-IFRS basic loss per ADS						(1.04)
IFRS diluted loss per ADS						(1.20)
Add back
				0.07	$0.06
				0.49	$0.00
				0.17	$0.13
				0.01	($0.02)
				(0.05)	$0.00
Non-IFRS basic loss per ADS						(1.04)

	Cost of product revenue	$	13
	Research and development	748
	Sales and marketing	339
	General and administrative	713

All values are in US Dollars.