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Sequans Communications S.A. (SQNS)

Q2 2012 Earnings Conference Call

July 26, 2012 08:00 AM ET


Georges Karam - President and Chief Executive Officer

Deborah Choate - Chief Financial Officer


Parag Agarwal - UBS Securities

Quinn Bolton - Needham & Company

Lee Simpson – Jefferies

Jay Srivatsa – Chardan Capital Markets

Stephane Houri – Natixis

Daniel Marquardt - Robert W. Baird

Hanna Wakim – UBS



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Welcome to Sequans’ Second Quarter 2012 Results Conference Call. At this time all participants are in a listen-only mode, later we will conduct a question-and-answer session, instructions will be given at that time. As a reminder, this conference is being recorded.

Before I turn the conference over to our host Mr. Georges Karam, I would like to remind you of the following important information on behalf of Sequans this call may contain projections or other forward-looking statements regarding future events or our future financial performances. All statements other than present and historical facts and conditions discussed in this call, including any statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for our 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 projections or forward-looking statements. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission. Please go ahead sir.

Georges Karam

Thank you, Rosanne. Ladies and gentlemen, good morning. This is Georges speaking with Deborah Choate, our CFO. We are pleased to welcome you to our second quarter 2012 results conference call.

First let me start by saying that we are very pleased with our progress during the second quarter. We reported sequential revenue growth at the high end of our guidance and with careful control of our operating expenses we limited our quarterly loss to the low-end of the range. We had a number of positive developments during the second quarter, one of the most significant was at the end of June we began volume shipments of all three chips belonging to our second generation LTE platform. I am very proud of our team’s ability to execute and achieve this important milestone according to our plan.

In addition to the increase in LTE revenues, the second quarter benefitted from WiMAX shipment to HTC which we believe are to supply operators in Japan and Taiwan, as well as Sprint’s prepaid market in the US through Boost and Virgin mobile. The fact that HTC has placed new orders is certainly a positive sign but we continue to assume that WiMAX revenue will be lumpy going forward.

Looking at our position in LTE, we continue to focus on a combination of near term and longer term strategic objectives and initiatives. We are very pleased with our progress on the technology side, as well as on the business front in penetrating customers and cultivating operators.

On the technology side, we are continuously working on retaining our technology edge, which is fundamental to our competitive positioning. During the second quarter we had several important technology developments.

First, we announced that we achieved a through sustained 150 Mbps throughput, or category 4 over a 20 MHz FDD channel with H-ARQ and encryption enabled, which are complex function that quite often competitors disable them to make similar demo. This shows that our currently shipping platform provides that highest possible LTE performance in a real world scenario. Thanks to our advanced 4G architecture and signal processing algorithm.

Second, at (inaudible), we announced Sequans AIR, which expands for Active Interference Rejection, an innovative feature that will be offered by all our 4G chips. This interference mitigation algorithm can double network capacity and extend its coverage by tripling the throughput of users at cell edge. We will be demonstrating this technology later this year and expect this to be an important differentiator with operators dealing with the growing interference problem as network traffic grows in a spectrum limited environment.

Finally, at another event in Asia, we announced the collaboration and demo of 4G voice-over-LTE. This capability will be coming increasingly important to operators as they will complete their LTE network build outs. Our advanced technology is being very well received by customers and we have now several design wins so far. We have now more than a dozen device manufacturers as customers, addressing the three market segments where we are putting most of our focus. Each customer is planning to introduce multiple devices which means at least 30 data devices with our second generation LTE chips should be coming to market.

Let me now give you some updates on our progress on the business side according to each of the main segment we are focusing on. As said on our last call, the first segment we are focusing on is the broadband wireless access and Greenfield operator segment. Here we are making very good progress. Our main customers addressing this segment have their LTE product ready and sampling to carriers for testing and trials. They are introducing a variety of device form factors, indoor CPE, outdoor CPE kind of fixed devices, and more portable devices such as USB dongle and portable routers supporting all frequency bands required. The results of testing are very encouraging and reflect the performance and maturity of Sequans’ 4G technology powering these devices. The operators of this segment in India, Russia, Middle East and other countries are doing good progress and we expect to see revenues from this segment ramping with large network launches early next year. This may be a bit slower than originally expected, but we believe that the allotment of this market is still moving in the right direction.

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