Response to my question from Sequans IR - my email and response below
Hello Claudia - I have been a shareholder of Sequans for over 4 years with a great deal of capital allocated in the company. I was recently reviewing some of the past CC transcripts and came across the following quotes from the Feb 2017 CC - see below
Can you perhaps provide more color on the shortfall in the $10M IoT business in Q4-17 as from the last CC, George made it sound like company was only doing $1-$2M in IoT and I don't recall company addressing the reason for the big shortfall in relation to the projected Feb. ~$10M number. I realize you can't disclose much on Q4 numbers and I'm not asking for that, but Q4 guidance was provided for and my questions are simply an extension of that guidance.
Thanks so much,
"Based on our customers’ Cat1 launch plans, we continue to believe the IoT business will produce a run rate approaching $10 million per quarter by the end of this year." This was 9 months ago and he was taling $10M for IoT business."
Okay. And then, the mix, sounds like -- and again apologize, if Georges, you addressed this. It sounds like in 2017, the ramp of revenue sort of through the year was driven both by broadband and the Cat 1 business. Just wondering if you can kind of give us where do you see the mix between sort of the broadband home routers, portable routers versus Cat 1 devices but exiting 2017?
Quinn this was actually in part of George’s prepared remarks. On the broadband business, we’re seeing this to go to at least $10 million and could go as high as $12 million, and we see the IoT business approaching the $10 million as we exit the year.
I can certainly address the spirit of your question, although I won't be able to give actual numbers because we aren't giving an exact breakout of our revenue between broadband and IoT and we gave a range in our guidance for Q4.
In contrast to the broadband business, the IoT business IS growing in the short term. Inherent in our recent Q4 guidance is an expectation that IoT revenue will indeed grow sequentially in Q4 from Q3 (when it was greater than your $1-$2M assumption), while broadband is expected to decline sequentially in Q4. At the same time, we would acknowledge that even at the high end of the guidance range, the IoT business will probably not reach a level that could be said to "approach" $10M exiting the year. We didn't discuss this in the context of being part of the revenue problem on our most recent call because there is no particular "problem" to explain -- it's just a question of timing.
The IoT business is developing very well, with enthusiastic Cat 1 customers moving as rapidly as they can to launch new devices. Meanwhile, in a given Cat 1 project, issues such as taking a couple of weeks longer to complete field trials, changing priorities for which operator's network to launch on first, or taking a bit longer to get access to the testing lab or complete module or device certification, can affect the exact launch date and, as a result, Sequans' revenue in a particular quarter . . . but it doesn't affect the ultimate success of the device or the demand.
So, the answer to your question is: the pace of progress in a few Cat 1 projects is slightly slower than the customers' original plan, but they ARE happening and there is no single "problem" that we need to explain and fix. Minor delays are typical of a nascent market, and we continue to expect the Cat 1 ramp to gain momentum during 2018 and the Cat M ramp to begin. We are being a bit cautious about making specific predictions for the Cat M ramp for the very reason you highlight -- i.e. it's very difficult to predict the pace of the ramp for a new product area, and we don't want to be in a situation at the end of 2018 where there is a perceived "problem" when, in fact, everything is moving very well with many encouraging signs as is currently the case with our Cat 1 IoT business.
14 hours ago
@Majestic Thanks for posting this. Remember that they consider Cat 1 as IoT revenue. Back in Q2 there was no Monarch revenue to speak of so all IoT revenue came from Cat 1. In the Q2 call they said that the revenue split between broadband and IoT was 60/40. That would place Cat 1 revenue around $4 million in Q2.
My rough estimate for Q4 would be:
Cat 1 - $5 million
Monarch $1 - $2 million
Services Revenue - $2 million
Which would place broadband revenue around $3-$4 million in order to meet Q4 guidance of $11-$13.
It's a far cry from the $20+ run rate they were predicting for the end of the year. If they had met those targets and we were close to break-even I think we would be in the $4-$5 range. Lets hope we can get there before the end of 2018.
NORTHLAND SECURITIES comment forwarded by Majestic:
2 days ago
This is very reassuring, I think. Northland just released a report citing positive developments for SQNS medium to long term due to Gemalto acquisition, primarily due to scale and expansion by new company. They also say to buy aggressively ahead of CES in Jan. as new development are expected - their target is $5. I'll take it as it seems from the report they had recent contact with the company conversation seems positive.