sequans investor briefing: 5g and iot · 2021. 1. 8. · sequans focus: 4g/5g iot sequans’ focus...

Dr. Georges Karam, CEO

Sequans Investor Briefing: 5G and IoT

January 2021

Capitalizing on Important Trends of the Decade

©2021 Sequans Communications 2

Interactive Q&ADial-in numbers:

1 (800) 263 0877 1 (720) 543 0197


Safe Harbor

This presentation 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 presentation, including any statements regarding our expected revenue for the fourth quarter of 2020, future revenue

potential, 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. Except as required by law, we assume no obligation to update any forward-looking statements publicly, whether as a result of new information,

future events or otherwise. 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 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 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, and (xiv) other

factors detailed in documents we file from time to time with the Securities and Exchange Commission. This presentation also contains estimates and other statistical data obtained from

independent third parties related to market size and growth. You are cautioned not to give undue weight to such estimates and data.


Welcome & Agenda

Market & Strategy – Georges Karam

Financial Model – Deborah Choate

Questions & Answers


We are Capitalizing on Two Major Technology Trends


We are Capitalizing on Two Major Technology Trends

~$8 Billion Opportunity

2021-2025


Enabling IoT with Cellular Connectivity

• Internet of Things is key to “Digital Transformation” mega-trend.

• IoT is connecting all things in the world in real time to leverage AI for better decisions.

• Goal is improving efficiency and productivity, and enabling key environmental/social responsibility objectives.

• To realize these objectives, cloud/edge computing and AI must also have global, reliable and secure wireless (cellular) connectivity.

Cloud/Edge Computing & AI

WirelessConnectivity

Industry 4.0 Productivity

SustainableDevelopment

OptimizedEnergy


What Makes Sequans Different?

We are the only chip company with a complete range of cellular IoT solutions fully-optimized for non-smartphone applications

©2021 Sequans Communications | Proprietary & Confidential 9

Cellular Technology Evolution

Voice Oriented Technology Adding Data Data Oriented Technology Adding More Data

2000s 2010s1990s 2020s

2G 3G 4G 5G

40-384 kb/s

Voice SMS Voice SMS www

Voice SMS www

LPWA Video

Voice SMS www

LPWAHighly

ReliableLow

Latency

56 Mb/s 150 Mb/s 5 Gb/s


4G/5G IoT 2G/3G IoT

Sequans Focus: 4G/5G IoT

Sequans’ Focus

Source: Ericsson Mobility Report November 2020

Cellular IoT Connections (billions)


8 Technology Generations of 4G/5G Leadership

Sequans Technology Maturity

2003

Foundersbegan developing 4G WiMAX chips

2005-2009

Introduced 3 generations of 4G WiMAX chips for broadband and mobile apps

2011

Introduce first 4G LTE-only (FDD/TDD) chip

2015

Introduced first 4G LTE Cat 1 chip optimized for IoT

2016

Introduced world’s first LTE-M/NB-IoT chip

2019

Introduced 2nd

generation LTE-M/NB-IoT platform for IoT(5G-compliant)

2022

Plan to introduce first 5G NR solution for Broadband & Critical IoT

2021

Introduced 2nd

generation Cat 1 solution for IoT (5G-compliant)


IoT Vision in the Coming 5G World

5G

Massive IoTCritical IoT

Broadband IoT


Evolving and Diverging Technical Priorities

EnterpriseRouter

Indoor/OutdoorCPE

Smart Meters

High Speed/Bandwidth Efficiency

HighReliability

LowLatency

Low Power Consumption/Cost

Broadband IoT Critical IoT Massive IoT

Robotics E-Health

AR/VR

Cloud Gaming

Security


Technology Choice Depends on Use Case

Industrial Applications

Indoor/OutdoorCPE

Security Advanced Robotics

CloudGaming

PetTracking

HealthMonitoring

GasMeter

Fleet Management

Air QualitySensor

AssetTracking

AutonomousVehicle

Consumer Applications


Technology Choice Depends on Use Case

Industrial ApplicationsConsumer Applications

Cat 1 LTE-M LTE-M 5G NR Cat 1 5G NRNB-IoT

5G NR LTE-M 5G NR Cat 1


Key Strength: Fully-Optimized ProductsSequans 5G/4G Product Portfolio Video


SAM excludes:• Smart phones/tablets

• Operators asking for 2G/3G fallback

• China

SAM growth by category:

5-yr CAGR Units 5-yr CAGR $

Broadband/Critical IoT 32% 47%

Massive IoT 51% 36%

Total 46% 42%

Our Served Market

0

500

1000

1500

2000

2500

2020 2021 2022 2023 2024 2025

Served Cellular IoT Market($ millions)

Broadband/Critical IoT Massive IoT

Source: ABI Research, Techno Systems Research and Sequans’ estimates


Dan Shey – Vice President Enabling Platforms, ABI Research

Industry Outlook

Dan Shey, Managing Director and Vice President at ABI Research, manages the M2M/IoT, digital security and wearables research services, which cover the telecom, industrial, IT and OT ecosystems with a focus on devices, connectivity, platforms, applications, big data/analytics, convergence, and strategic analysis of the entire IoT value chain extending from devices through value-added services. He plays an essential role in helping clients decipher the complex relationships and opportunities across the “digital first” and “physical first” domains.

With more than 25 years of industry experience, Dan frequently authors reports and insights that extend across the IoT, industrial, consumer and enterprise segments. Dan is frequently quoted in major industry trade and business media, including The Wall Street Journal, Forbes, CNN, Wireless Week, PC World, Cellular-News, and Network World.


Competition in 4G/5G IoT Served Market

Massive IoT Broadband IoT

LTE-M/NB-IoT Cat 1 Cat 4/Cat 6 5G NR

Not Optimized

NB-IoT Only

Chinese Vendors not included


Smart Home and Consumer IoT Video


Recent Developments


New Markets - Private Networks

Stadium

College Campus

Factory

Train Station

Airport

Utility


CBRS in the U.S.


CBRS ModulesNick Taluja – EVP Worldwide Sales


New Go-To-Market Initiatives

MCUPartners

Reps

Distributors

• Reps

• Distributors

Scale Sales Capability

• MCU Vendors

Scale Channel Partners


• Almost all IoT devices integrate an MCU

• Partners strengthen our position with Tier#1 customers

• Partners help us accessing the “dark pipe” of the IoT funnel

• Various approaches integrating Monarch Platform

• Joint development kits

• Branded module

• More integrated solutions can follow

Current Relationships Cover 55-60% of Microcontroller Market

MCU Partners


Next Generation ProductsMonarch 2


Next Generation ProductsCalliope 2

In Development: Taurus for 5G Broadband & Critical IoT


Critical IoT(Automotive, Surveillance Camera, AR/VR, Drones)

FixedWireless Access

(Home, Business)

Private 4G/5GDeployment

(Vertical Sectors, Harbors, Airports, Mining, Campus)

Industrial(Factories, Robotic, Power

Plants, Wireless Machinery)

MobileRouters

(MiFi, Mobile Computing)


• Unique team delivering superior solutions compared with competitors with much larger teams

• Sustained our R&D investment level to be aligned with Cellular IoT market potential and maintain technology leadership

• In 2021 shifting substantial resources from 4G to 5G Broadband IoT

Moderate Increase in Headcount Relative to Opportunity Being Created

Valuable R&D Resources

0

100

200

300

400

2013 2015 2017 2019 2021 2023 2025

R&D Headcount

0

500

1000

1500

2000

2500

2013 2015 2017 2019 2021 2023 2025

Served Market Opportunity($ millions)

Source: ABI, Sequans estimates

40% Secured by Design Wins


• Represents specific customer projects where unit demand can be estimated

• Assumes 3 years of revenue from initial production – some projects in production and some will be in 2021-2023

• Revenue from services not included

~ $500M of Potential Product Revenue

Large Business Pipeline

Engagements and Qualified Opportunities

Product Design Wins


Software Services for Vertical Markets

* Examples of announced partners and customers

Satellite

Avionics

Public Safety,Military


• 2019 – major $35+ million strategic partnership with Fortune Global 500 company

• 2020 – recently announced a technology access and license agreement with Renesas

• 2021 – leading a consortium in 5G project funded by French government, just awarded

• Ongoing discussions with multiple potential strategic partners

Relationship with Sequans Addresses Multiple Challenges for Partners

5G Partnerships

Sovereignty

Avoid Single

Vendor

Extensive Cellular

Expertise

IoT Focus 5G


Financial Discussion


Annual Revenues ($MM)

Revenue Trends – Reacceleration of Annual Growth Expected in 2020

$6.0

$7.0

$8.0

$9.0

$10.0

$11.0

$12.0

$13.0

$14.0

$15.0

$16.0

Q3:19 Q4:19 Q1:20 Q2:20 Q3:20 Q4:20G

(unaudited)

(1)

Quarterly Revenues ($MM)

0

10

20

30

40

50

60

2018 2019 2020 Target

Massive IoT Vertical Broadband IoT

(1)

$40.3

$30.9

>60% y/y growth

(1) Q4:20 target of 10% sequential revenue growth from Q3


% of Revenue 2019 YTD 2020 At Scale

Gross Margin 40% 46% 50%

Research & Development 75.5% 63.1% 15-20%

SG&A 49.4% 33.1% 10-15%

Operating Income (Loss) Margin (84.8%) (49.7%) >20%

At End of Period ($millions) 2019Sept 30, 2020, on proforma basis *

Cash & Equivalents, Short-term Deposits $14.1 $25.3

Short-term receivables financing $4.1 $14.4

Government advances & loans $19.9 $23.4

Convertible debt $30.7 $24.6

Key Financial Metrics and Long-term Model (non-IFRS)

* Reflects conversion of notes in December 2020, reducing convertible debt from $35M reported at Sept. 30; no other changes to previously published numbers.


• Fabless semiconductor model is highly scalable

• Required growth in opex is much lower than target revenue growth rate

>20% Operating Margin at Scale (non-IFRS)

Highly Scalable Business Model

0

50

100

150

200

Breakeven At Scale

Revenue & Operating Leverage

Gross Profit Opex Operating Income

($M)

>20%

* Assumes no investment in new technology


Investment Rationale

• We excel at developing vital, but difficult and complex technology

• Served market expected to show strong growth sustainable for years

• We have the right products and go-to-market strategy

• High barriers to entry for potential competitors

• Strategic partners partially funding 5G development

• Unique collection of very valuable assets – IP, knowhow, platforms, relationships

• The current market valuation does not fully reflect the company’s intrinsic value


Interactive Q&ADial-in numbers:

1 (800) 263 0877 1 (720) 543 0197


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sequans investor briefing: 5g and iot · 2021. 1. 8. · sequans focus: 4g/5g iot sequans’ focus...

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