Sequans Communications (NYSE:SQNS) reported second-quarter revenue of $7.5 million, up 23.2% from the first quarter, as product sales increased and more of its Internet of Things design wins moved into mass production. The company also completed the redemption of its convertible debt during the quarter, using proceeds from sales of its Bitcoin holdings.
Chief Executive Officer and Chairman Georges Karam said the company is shifting its focus fully toward its IoT semiconductor strategy, including its Cat M, Cat 1bis, radio-frequency transceiver and 5G eRedCap product lines. “Our priority going forward is squarely on executing our IoT semiconductor strategy,” Karam said.
Product Revenue Drives Quarterly Growth
Product sales rose 39% sequentially and nearly doubled from a year earlier. Karam said the company has more than 40 design-win projects in mass production, with several expected to generate more than $4 million in annualized revenue beginning in 2027.
The company said 55% of its more than $300 million three-year product-revenue design-win pipeline was in mass production and generating revenue at the end of the quarter, representing roughly $165 million of design wins in production. Karam characterized that figure as more than triple the comparable level a year earlier.
Cat M products continue to be supported by asset-tracking and smart-metering applications, while Cat 1bis customer ramps are expected in telematics, security and industrial markets. During the quarter, Sequans secured 10 new projects using Cat M and Cat 1bis technologies and moved a similar number into mass production.
Karam said most of the company’s recent growth has been driven by projects entering production rather than price increases. Product pricing increases have so far been below 5%, he said, though the company expects to continue addressing higher component costs with customers as needed.
Debt Redemption and Bitcoin Holdings
Sequans completed the full redemption of its remaining convertible debt and also repaid its COVID-related loan, leaving what Brodt described as a “clean, unencumbered balance sheet.” Cash and cash equivalents totaled $21 million at June 30, compared with $10.6 million at March 31.
The company held 314 unrestricted Bitcoin at quarter-end, valued at approximately $18.4 million, down from 1,514 Bitcoin valued at $103.2 million at the end of the first quarter. Karam said the company has moved away from its Bitcoin treasury strategy and intends ultimately to convert its remaining holdings to cash, though it does not face an immediate need to sell.
“The most logical way is to turn this to cash as soon as possible,” Karam said during the question-and-answer session. He added that Sequans would seek to sell opportunistically rather than liquidate holdings at prices management does not consider favorable.
For the first six months of 2026, operating activities used $23 million of cash. Investing activities provided $127.7 million, primarily from Bitcoin sales, while financing activities used $97 million, reflecting repayment of convertible debt.
Loss Narrows as Bitcoin-Related Charges Fall
Gross margin was 32.9%, compared with 37.7% in the first quarter and 64.4% a year earlier. Brodt said the lower margins reflected a greater proportion of product revenue, which carries a different margin profile than licensing and services revenue.
Operating expenses were approximately $11.9 million, compared with $11.8 million in the prior quarter. The company said it remains focused on cost reductions and is targeting recurring quarterly operating expenses of about $10 million.
Sequans recorded a $3 million non-cash impairment on Bitcoin holdings, down from $29.3 million in the first quarter, and a realized net gain of $5.3 million from Bitcoin sales, compared with a realized net loss of $11.7 million in the prior quarter.
Operating loss narrowed to $7.2 million from $50.5 million in the first quarter. Net loss was $9.6 million, or $0.65 per diluted ADS, compared with a $76.2 million loss, or $5.23 per diluted ADS, in the first quarter. On a non-IFRS basis, Sequans reported a net loss of $4 million, or $0.27 per diluted ADS.
Licensing, RF and 5G Roadmap
Management said licensing and services contributed modestly to second-quarter revenue but could increase meaningfully in the second half if discussions with customers and partners result in signed agreements. Karam said the potential revenue from active opportunities ranges from several hundred thousand dollars to more than $10 million, although he cautioned that revenue-recognition timing can vary.
The company also cited growing interest in its RF transceiver technology for defense and drone applications. Sequans began shipping its SQN9506 development kit to prospective customers during the quarter and secured its first drone program, with product shipments expected to begin early next year.
Karam said the RF business could approach more than $5 million in revenue next year and potentially exceed $10 million in the following year, although he described the market expansion as still being at an early stage. He said the business could carry margins above 90%.
Sequans said development of its 5G eRedCap solution remains on schedule, with a test chip now in-house and customer sampling targeted for the second half of 2027. Product revenue from the platform is expected to begin in 2028, while management said licensing and services revenue could precede commercial product launches.
Third-Quarter Outlook
Sequans forecast third-quarter revenue of $8.5 million to $10 million. Management said the lower end of the range is largely supported by product revenue, while the upper end assumes potential contribution from one of the licensing agreements under discussion.
Karam said the company expects sequential product growth to continue, supported by backlog extending into 2027 and additional production ramps. He said reaching an operating breakeven run rate next year will depend on continued revenue growth, cost control and contributions from services revenue.
About Sequans Communications (NYSE:SQNS)
Sequans Communications is a fabless semiconductor company specializing in cellular IoT and broadband connectivity solutions. The company designs and delivers a range of LTE and 5G chips, modules and connectivity platforms that enable low-power wide-area (LPWA) networking as well as high-speed broadband services. Sequans’s products are targeted at Internet of Things (IoT) applications, including smart metering, industrial automation, smart cities and consumer electronics, as well as more data-intensive use cases such as fixed wireless access and private networks.
The company’s portfolio includes single-mode LTE chipsets for narrowband IoT (NB-IoT) and LTE-M, multi-mode platforms that combine LTE and 5G New Radio (NR) support, and modules that integrate RF front-ends, power management and embedded software.
