SQNS

Good day, ladies and gentlemen, welcome to the first quarter 2026 Sequans earnings conference call. My name is Howard, I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question, you will need to press star one one on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Mr. David Hanover, Investor Relations. David, you may begin.

Thank you, operator. Thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are Georges Karam, CEO and Chairman, and Deborah Choate, CFO. Before turning the call over to Georges, I would like to remind our participants of the following important information on behalf of Sequans. First, Sequans issued an earnings press release this morning. You'll find a copy of the release on the company's website at www.sequans.com under the Newsroom section. Second, this conference call contains projections and other forward-looking statements regarding future events or 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 our business strategy, cost optimization plans, strategic options, the ability to enter into new strategic agreements, expectations for sales, our ability to convert our pipeline to revenue, 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 current beliefs and expectations with respect to future events and are based on assumptions and subject to risks 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 of 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. Now I'd like to hand the call over to Georges Karam. Please go ahead, Georges.

Thank you, David. Good morning, everyone. I'd like to begin with a brief update on our capital allocation strategy, including how we are approaching the management of our digital asset holdings alongside the continued execution of our IoT semiconductor business. Our priority remains clear. We are focused first and foremost on executing our IoT strategy, scaling our product business, and advancing our 5-year roadmap in a disciplined way to create long-term shareholder value. In parallel, we have continued to manage our Bitcoin holdings with a pragmatic and opportunistic approach. In light of current market conditions, we made the decision earlier this year to eliminate all debt-related risk by negotiating an early redemption agreement with our debt holders.

This allows us to fully redeem the $94.5 million of convertible debt by June 1, 2026, funded through the sale of Bitcoin that had been held as collateral. As of today, we have already redeemed approximately 62% of this debt, and the remaining balance will be redeemed in the coming weeks. By June 1, we expect to have a near debt-free balance sheet with at least 600 Bitcoin held as unencumbered asset. Looking ahead, we do not intend to further pursue our treasury strategy. Instead, our objective will be to monetize these holdings over time in a disciplined manner, balancing market conditions with our broader capital needs. Importantly, we remain focused on maintaining a strong cash position to support operations, invest in our 5G IoT roadmap, and provide stability as we scale the business. Turning now to the operational side of the business.

Our IoT semiconductor business continues to demonstrate solid underlying momentum. For the first quarter, we generated $6.1 million revenue. This performance is broadly in line with our expectations and reflects continuous strength in product revenue despite supply challenges, partially offset by variability in the timing of services revenue. Looking ahead, we continue to benefit from a strong backlog, which provides good near-term visibility. Get on Sorry, guys. Looking ahead, we continue to benefit from a strong backlog, which provides good near-term visibility. Our order backlog continues to build with approximately $22 million in revenue, primarily product-related, already secured for the year, along with early indications of orders extending into the first quarter of next year.

This provides us with increasing confidence in the trajectory of the business as we move through 2026 and confirms the healthy nature of our design win pipeline and related KPI we track. Our full-year outlook continues to be supported by an increasing number of design win projects transitioning to production. We entered the year with more than EUR 300 million in potential three-year product revenue from design win projects. Of these, 44% had already reached the production phase and are generating revenue. During the first quarter, three additional design win projects transitioned into production, and we expect additional projects to follow in the second quarter. As a result, we continue to anticipate that more than half of our current design win pipeline will be in production by the end of June, representing approximately EUR 150 million in potential three years revenue.

We are also seeing strong momentum with the new customer engagements. In the first quarter, we engaged more than 12 new customer projects, with 6 already confirmed as design wins. These programs are expected to contribute to growth beginning in 2027 and beyond. Our product pipeline remains primarily driven by our 4G Cat M and Cat-1bis technologies. It also includes our RF transceiver product, which supports a wide range of software-defined radio applications, including defense and drone use cases. In addition, we have initiated early engagements around 5G eRedCap, which will be the future successor to 4G and cellular IoT deployments. Smart metering, telematics, and asset tracking continue to represent our strongest verticals, followed by security, e-health and medical, and other industrial applications. Turning now to product ramps and key drivers.

Cat M continues to be a meaningful growth driver in 2026, led primarily by asset tracking and smart metering deployments. This business is scaling in line with expectation, supported by strong visibility and steady ordering patterns, as many Cat M design win projects are now in production with key customers deployment underway. Cat-1bis is positioned for a breakout year, supported by multiple customer ramps across telematics, security, and some metering use cases. We are already seeing revenue contribution from several design wins, with additional projects expected to enter production in the second half of the year. We are also seeing incremental opportunities driven by current market dynamics, which are creating opening for Sequans to gain share. In our RF transceiver business, we continue to see stable demand from existing customers, supported by committed backlog, and we expect additional contribution in the second half of the year.

At the same time, we are engaging with a number of new prospective customers, particularly in defense and drone applications, and we expect to begin securing some of these opportunities in the near term. We are also advancing discussions around licensing and collaboration opportunities, which could further expand the reach of our RF portfolio. More broadly, our product pipeline continues to mature with several design win programs progressing toward production. We are also seeing new generation product opportunities with existing customers, which provide incremental upside with our installed base. At the same time, we are actively preparing for the next major transition in IoT connectivity, which is the migration from 4G to 5G. Market demand for our 5G eRedCap solution continues to strengthen, particularly as mobile network operators look to reform 4G spectrum and accelerate broader 5G deployment.

Importantly, IoT applications represent the final phase of this 4G to 5G transition. These applications require long device life cycle, often 10 years or more, making a seamless and future-proof migration path essential. Unlike the 4G era, where the market became fragmented across multiple cellular technology categories, we expect the 5G IoT landscape to be more streamlined, centered around eRedCap as the primary standard. This creates a more efficient and scalable ecosystem for both customers and suppliers. Sequans is well-positioned in this transition. We already have an established customer base across our 4G portfolio. We expect to leverage these relationships as we introduce our 5G solutions. In many cases, customer will be able to transition using solutions designed to be compatible with existing deployments, enabling a smoother upgrade path. We continue to make strong progress on our 5G eRedCap program.

During the quarter, we received our first engineering test chips, which are now in-house and under evaluation. This represents an important milestone as we advance toward customer sampling, which we continue to target for the second half of 2027. Looking ahead, we believe 5G IoT will represent a significant long-term growth opportunity, both in terms of market size and value per device, supporting improved pricing dynamics relative to 4G. Turning to services and licensing. Our services and licensing business continues to represent an important source of high margin revenue, although timing of revenue recognition can vary from quarter to quarter. On this front, we have several ongoing discussions that could contribute to revenue over the course of 2026. These include engagements with large global partners, licensing and collaboration opportunities, leveraging our RF and 5G IP portfolio, as well as a range of smaller service agreements.

These opportunities provide potential upside to our product-driven revenue base while also expanding our reach into new markets and applications. We remain focused on converting these discussions into revenue while managing expectation around timing. On the supply chain side, we continue to operate in a dynamic cost and supply environment. We are seeing significant increases in memory pricing, which are impacting the cost of both our chips and modules. We are actively working to address these cost pressures while ensuring we can meet customer demand. At the same time, we have taken proactive steps to secure supply, including multi-sourcing across key components such as memory and packaging. Based on our current plan, we believe supply for our 2027 baseline demand is secure, although we continue to monitor potential upside scenarios. Overall, while cost pressures and supply challenges are real, they are manageable and consistent with the broader industry trends.

As we move through 2026, we remain focused on disciplined cost management and reducing cash burn. Our objective continues to be re-reaching a break-even run rate by the end of the year as revenue scales. We implemented a cost reduction plan at the end of last year, and while the full benefits will not be realized until mid-year, we are confident in achieving our expense targets in the second half. Working capital dynamics will continue to evolve alongside growth, particularly as we support production ramps and manage supply chain requirements. These dynamics may create short-term variability, but they are aligned with long-term revenue growth. Overall, our performance underscores the progress we are making in strengthening our core IoT business, improving financial discipline, and maintaining flexibility in our capital stretch.

Regarding our outlook for the second quarter, we currently expect revenue to be in the range of EUR 6.8 million to EUR 7.4 million, driven predominantly by product revenue, with potential upside if new licensing deals are closed. Based on our backlog and continued momentum across our design win pipeline, we expect revenue to build sequentially throughout the remainder of the year. We also remain focused on reducing cash burn and continue to believe we can approach cash flow break even by the end of the year as the business scales. Looking ahead, we continue to evaluate strategic alternatives that could accelerate profitability and unlock additional value for shareholders. What's clear to us is that we are operating from a position of strength.

We have a solid balance sheet, a growing and increasingly productive IoT business, and a differentiated 5G and RF IP portfolio that we believe will be a key driver of long-term value. As we discussed earlier, the transition from 4G to 5G in IoT represents a fundamental shift in the market. With eRedCap expected to become the primary standard, we believe this will create a larger, more unified, and more scalable market than what we saw in the 4G cycle. Sequans is uniquely positioned to benefit from this evolution. We expect to leverage our existing 4G customer base as a natural entry point into 5G, enabling a more efficient transition for customers while accelerating our own time to market. Combined with the expected premium pricing and expanded market opportunity, we believe this positions us to drive meaningful long-term growth and improved profitability.

In parallel, we will complete the redemption of our debt by June 1st and continue to manage our capital allocation with discipline, maintaining a strong cash position while preserving flexibility to act opportunistically as conditions evolve. Overall, we remain focused on scaling our IoT business, advancing our 5G roadmap, developing our new RF transceiver business, and executing against the key drivers that we believe will unlock the full value of Sequans over time. With that, I will now turn the call over to Deborah to review our financial results in greatern detail. Deborah?

Thank you, Georges, and hello, everyone. I'll begin by reviewing our first quarter financial results and then provide an update on our balance sheet and digital asset holdings.

During the first quarter, our financial results continued to reflect the underlying momentum in the IoT business, along with the impact of actions taken earlier this year to strengthen our balance sheet and simplify our capital structure. For Q1 2026, total revenue was $6.1 million compared to $6.9 million in the fourth quarter. As George mentioned, revenue in the quarter was primarily driven by product sales, with ongoing variability in licensing and service revenue timing. Gross margin for the quarter was 37.7% compared to 41.4% in the fourth quarter, and reflects the ongoing impact of supply chain dynamics, but especially revenue and product mix. Operating expenses in the quarter, including R&D and SG&A expenses, were $11.8 million compared to $12.3 million in the fourth quarter.

We continue to make progress on our cost reduction plan and remain on track to achieve lower operating expense levels in the second half of the year. During the quarter, we reported $29.3 million, I'm sorry, $29.3 million of non-cash charges related to the mark-to-market valuation of our Bitcoin holdings, compared to a loss of $56.3 million in the fourth quarter. As a reminder, these charges are driven by market price movements and do not reflect underlying operating performance. We also recorded $11.7 million of realized losses on the sale of Bitcoin during the quarter compared to $6.1 million of losses in the fourth quarter, primarily associated with the ongoing redemption of our convertible debt.

As discussed previously, the convertible debt and associated embedded derivative continue to be remeasured each reporting period, resulting in non-cash impacts to the P&L. In addition, IFRS accounting requires us to recognize non-cash interest expense associated with this 0% coupon instrument. Reflecting these factors, we reported an IFRS net loss of $54.3 million for the quarter compared to an IFRS net loss of $76.4 million in the fourth quarter. On a non-IFRS basis, excluding significant non-cash items, we reported a net loss of $20.7 million or $1.42 per ADS, compared with a non-IFRS net loss of $16.2 million or $1.04 per ADS in Q4. The comparative numbers for Q4 and Q1 2025 have been adjusted from the unaudited figures published in February 2026 and May 2025.

In finalizing the 2025 audit, we made adjustments related to the timing and amount of revenue recognized, the accounting for the compound financial instruments issued in July 2025, and related embedded derivatives, finalization of the ACP purchase accounting, and other adjustments attributable to normal year-end closing procedures, audit adjustments, and the completion of management review. We are currently still finalizing with our auditors the documentation and disclosure of the impairment test for ACP, goodwill, and other acquired intangibles on the balance sheet. The ongoing discussions regarding determination of the cash generating unit to be evaluated and the most appropriate valuation models resulted in delays in issuance of the audit report, and therefore we filed a statement indicating we would need to extend our filing deadline. We expect to file our Form 20-F this week.

Turning to cash flow, normalized cash burn for the quarter was just under $10 million compared to approximately $7.7 million in the fourth quarter, including working capital movements. As Georges mentioned, working capital can fluctuate as we support production ramps and secure supplies. During the quarter, we continued to execute on our balance sheet strategy. As of March 31, 2026, we had redeemed $28.3 million of the $94.5 million face value debt that was outstanding on December 31, 2025. As of April 30, we had redeemed approximately 62% of this convertible debt funded through the sale of 800 Bitcoin, leaving a balance of approximately $35.9 million due, which we expect to redeem in full by June 1, 2026.

At the end of Q1, we held cash and cash equivalents of approximately EUR 10.6 million compared to EUR 13.4 million at the end of 2025. As of the end of Q1, we held 1,514 Bitcoin compared to 2,139 Bitcoin at year-end 2025. As of April 30th, we held 1,114 Bitcoin and expect that we will hold at least 600 Bitcoin after full redemption of the debt, all of which will be fully available for sale. Following completion of the debt redemption, we expect to have a near debt-free balance sheet with a simplified capital structure and increased financial flexibility. Overall, our financial results for the quarter reflect continued progress in scaling the IoT business, improving cost discipline, and strengthening the balance sheet.

Before turning the call back to Georges Karam to conclude, I'd like to cover a few housekeeping matters. We expect to conclude the final audit procedures with our auditors this week and be in a position to file our annual report on Form 20-F. Since we filed an extension notification last week, as long as we file by May 15th, we will still be considered a timely filer. We are currently preparing for our annual shareholders meeting on June 30th, 2026. You should expect to see voting materials by early June. Most of the resolutions will be our normal recurring resolutions that you see each year. One of these resolutions is to ask for authorization for a capital increase. This year, we will ask for authorization to issue up to 7.5 million ADSs, including up to $15 million in the form of convertible debt.

We would like to clarify that we are asking for this authorization only to provide flexibility in the event that we have a strategic opportunity that would require issuance of convertible debt or equity. We currently have no plans to do any equity raise to finance operations. In fact, the shelf registration statement and ATM program that we filed in August 2025 were filed when we had the market cap to be an accelerated filer and were automatically effective. Upon the filing of the 2025 annual report on Form 20-F, we will no longer satisfy the requirements for using an automatic shelf, and therefore we can no longer issue equity under that August shelf registration or the ATM program. With that, I'll turn the call back to George.

As we close, I want to reiterate that our primary focus remains on executing and scaling our IoT business and expanding to software-defined markets such as drones and defense. We are seeing solid momentum across the portfolio, supported by a growing backlog, a maturing design win pipeline, an increasing number of projects transitioning into production, and several advanced licensing and services deals. With continuous strength across Cat-M, Cat-1bis, and RF transceivers, and with early engagement around 5G eRedCap, we believe the business is well-positioned to drive sequential growth while maintaining a clear path toward cash flow breakeven. At the same time, we have taken decisive steps to simplify and strengthen our balance sheet. By eliminating our convertible debt and transitioning away from the treasury strategy, we are increasing financial flexibility and sharpening our focus on the core business.

Going forward, our priority is to monetize our remaining Bitcoin holding in a disciplined way while ensuring we maintain the liquidity needed to support operations and invest in our 5G roadmap. Overall, we believe we are entering an important phase for the company with a stronger financial foundation, improving operational visibility, and a clear path to long-term value creation. Thank you for listening. We can move now, operator, to the questions, if you don't mind.

Yes, sir. Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star one one again. Again, if you have a question or comment, please press star one one on your telephone keypad. Please stand by while we compile a Q&A roster. Our first question or comment comes from the line of Scott. I'm sorry. Our first question or comment comes from the line of Luke Horton from Northland. Your line is open.

Hey, guys. This is Luke on for Mike Grondahl. Just wanted to touch kind of on the 5G roadmap and pipeline you have there, and I guess specifically with RedCap. I guess how large do you expect this opportunity to be relative to the existing kind of Cat-M, Cat 1 business?

Hi, Luke. I mean, just not to be confused, you said RedCap. I'm talking about eRedCap. eRedCap is really the standard.

Yes

that is going to replace literally Cat-M and Cat 1bis. When you look to the 4G, the 4G IoT, we had like 4 technology used in 4G. NB-IoT, mainly in China, you have some in Europe and even in Australia and other place. Cat-M, mainly U.S., Japan and half of Europe, I would say. Cat 1bis is and Cat 1, which is the fourth one. As you see, this is really because IoT cellular was for the first time entering IoT. For the good and the bad, you know, they ended by having almost competing technology, not 100% competing, covering some application, there is also a piece of it competing. This fragmented the market.

Obviously, now the carriers, starting in the U.S., obviously this will be followed by other region of the world. The carrier, they would like to finish their deployment of 5G. In other words, they need to reform the 4G spectrum to use it on 5G and one day switch off the 4G. To do this, you can do it today for all application on the phone, but you cannot do it for IoT because all the IoT runs on 4G. That's why, you know, there is a push to come with the IoT, 5G IoT. This is the eRedCap. eRedCap, by definition, will come and replace all those Cat-M, NB, Cat 1 and Cat 1bis. You will have like kind of supporting low speed and medium speed. The same technology is able to do this.

Because it supports 5G, it will have a little bit higher ASP, and because it supports the low speed and the high speed. It will be really benefiting from the continuation of the IoT business in cellular, and it will be expanding over time, as well increasing in the price and increasing the size. Definitely the opportunity will be, let's say, at least the sum of the 4 opportunity of Cat 1, Cat 1bis, Cat-M and NB-IoT today, plus some premium, let's say 10%, 15% related to ASP increase because of the 5G.

Okay. Got it. I appreciate the color there. I guess on the kinda $300 million pipeline that you called out with about 50% of that expected in the next 3 years. Just kinda given the sequential growth acceleration, kind of quarterly cadence throughout this year, I guess, where does that confidence come from? Could you provide any other color around those?

Sure, look, I mean, you know, the EUR 300 million, this is what we had, let's say, on January this year as design win in hand. We said like 44% of them were in production, which means generating revenue. We expect to be by June, 50% of them in production, which will be EUR 150 million. In other words, if you take EUR 150 million in average over three years, this is EUR 50 million yearly revenue in average. Obviously, there will be a ramp depending on the project, year 1, year 2, year 3. The confidence there, you know, continue to build.

Literally when you look to our backlog, if you compare this to beginning of the year, this year in Q1 as I'm speaking, we have backlog securing close to EUR 22 million for the year, you know, this year in product revenue. We have even portion like EUR 2, EUR 3 million already in hand for Q1 next year. This backlog is coming from existing design win in production. This means all our analysis on the fact of our design win pipeline is really true and accurate, if you want, reflected in the ramp of our customers. That's why we have really strong confidence on this. Obviously, we need to continue the conversions from design win to full mass production. That will happen in the second half of the year.

I will say in June and beyond June, let's say for the second half of the year. To some extent, if you look to Cat M business, Cat M business today is really versus our target, we feel almost secure. I don't, you know, I don't want to say 100%, but maybe 90% of our plan is already in hand. Why? Because all the Cat M is really, big portion of the Cat M is design win in production. The Cat 1bis, we have design win, not all of them in production. This is the piece where we're still working on to ensure the ramp is going to continue in the second half of the year in terms of product value.

Okay, great. Just lastly from me on the digital asset strategy, after the June first redemption, how do you think about Bitcoin holdings on the balance sheet and kind of capital allocation strategy, I guess, kind of specifically in different crypto market situations, like if there were to be another bull run in crypto versus kind of digital asset pricing pulling back again?

I mean, you know, I mean, look, I mean, you know, we went through digital asset, you know, thinking seriously that we can develop this business and we can trade above mNAV. Then after this, maybe separate the two business, which is the core business, IoT, from the digital assets because they cannot live together forever. I mean, it was really, my plan was if the digital asset is working in addition to the IoT, knowing that IoT will be working, we'll have at some time to separate them and do something there.

Unfortunately for many, many reasons, the digital asset didn't work, in a sense like, we were not able really to create, to benefit from the leverage of the debt and be able, you know, to get an mNAV higher than when allowing us to keep scaling. Any digital asset strategy needs to have the ability to scale, in number of Bitcoin and so on. Unfortunately, because we realized on top of this, the pressure on the Bitcoin put us almost at risk, you know, and I believe many people were nervous at the beginning of the year if this can hurt the IoT business as well. For all those reasons, you know, we decide really to take out the risk by redeeming the debt. Obviously from there, have a balance sheet which is clean, no debt.

We'll have there obviously Bitcoin, after in June 1st. From there, the question becomes, are we going to go and buy Bitcoin? I don't believe so. Today, this is what I'm clear on it. Now, we will have a holding more than 600 Bitcoin. Are we going to sell them on June 2nd? I don't believe we'll be doing this on June 2nd, but we will be taking our time to monetize those Bitcoin, you know, in the, in the, in the coming, I would say, a couple of quarters. You know, knowing that the purchase price of this Bitcoin, I mean, is higher and obviously the trend we are seeing today that the Bitcoin is going into the, you know, growing into the right direction, so we would like to benefit from this if we can.

In any case, we'll not sacrifice IoT. In other words, we secure enough cash on the balance sheet to be sure that the company can operate independent of the variability that we could see on the Bitcoin.

Got it. Great. Well, thanks for taking the questions, you guys. Appreciate it.

Thank you.

Luke.

Thank you. Our next question or comment comes from the line of Scott Searle from Roth Capital Partners. Mr. Searle, your line is now open.

Hey, good morning, good afternoon. Thanks for taking the questions. Deborah and George, thanks so much for the color on the call. Maybe just to dive in, George, on the RF business, it sounds like there's a lot of momentum building. Could you calibrate us in terms of where that is from a current revenue standpoint, what the backlog and opportunity looks like as you think about 2026 and 2027? Then as it relates to the RedCap, eRedCap licensing opportunity, it sounds like there are a number of opportunities in the pipeline. I wonder if you could provide a little bit more color in terms of the magnitude and timeline that you could see some of these deals materializing, maybe a little bit in terms of how you're thinking about different vertical markets on that licensing front.

Hi, Scott. Thanks for the question. Indeed, you know, as you know, one of the nice surprise we saw this year, which is, we acquired, you know, the ACP. By acquiring ACP, the original goal was there to get the IP of the RF and accelerate our 5G eRedCap roadmap. This is really executed on. As I said, we have already a chip in-house, has all the RF and all the analog and everything is working well as we are speaking. This is we did it. At the same time, we have, let's say, as a bonus on top of this, a product, RF product that can be sold on standalone to existing customer.

When we dig in, we realize that this product is really great product to go to drone market and defense market, where you have very high ASP, very high margin, and the market is booming. From this, we obviously secure the existing customer we have. I could say today, around those customer, we could be doing, you know, close to maybe this year, EUR 5 million or EUR 4 million-EUR 5 million. They are not, you know, they are I'm putting inside this as well, the royalty we collect with our Chinese RedCap. Let's call it, outside of this regular IoT business, we have around EUR 5 million almost secured for the year, and maybe we can do a couple more depending in the second half, if the backlog will confirm versus forecast.

The good news as well there is like we expanded to go to this defense market and drone market. Here, since we announced the Iris family, this product, we had like 12 of leads across the world, really from many, many country. We realized that we have really great product, very competitive in terms of feature set, and people are really happy to use it and test it and engage projects. As I'm speaking, I have at least several, you know, a few of them very advanced to consider it a design win. I don't qualify it yet a design win, but few of them are there. The potential of this RF business, honestly could be, you know, we're talking about the market.

It's very hard to size this market around defense and drones, you know, if you take only the transceiver business. We are talking about, you know, maybe EUR 100 million plus per year potential market. As you know, this is really very high margin. We're talking about 99% the gross margin. We believe like it makes sense for us, you know, to capture a nice market share from that. Whether 20%, 30%, we'll see how good we are. This is really very nice potential for the company. Coming almost with very minimum investment. The only investment we are doing is really in support, marketing, because the R&D is already done. This is on the RF.

If I look to the licensing and in general, those opportunity, licensing remains very important for us, specifically if we want really to achieve our cash flow breakeven in Q4. Even if the product revenue is really growing nicely, if you look to our number in Q1, 90% plus is product and my guidance for the Q2, same. We are really moving to a almost product revenue. We still have several deal under discussion, maybe more than 5 of advanced discussion covering RF, covering the eRedCap or let's say the modem portion, as well as the protocol for satellite communication. On those, we are advanced with many of them. We hope we'll close something in Q2.

We're not, you know, timing sometimes it's not obvious how much revenue you can take it if you close it end of June. We are looking to close at least 1 deal this quarter and maybe another 1 or 2 in the second half. Those deals, you know, they vary. I mean, there is obviously we have some smaller 1. I'm not mentioning this. It could be few hundred thousand EUR, but those are really associated with the product revenue in general. Pure service revenue, we're talking about deals here, they could be from a couple of million EUR up to 15 million EUR, 1 5, that we are contemplating there. Potential is big, but obviously, you know, they are binary. I mean, if you get them, you get the 15 million EUR.

If you don't get them, you get zero. We have, as I said, several of them quite advanced. That's why we are optimistic that we can secure something this year that can help us support that add to the product growth in the second half of the year.

Georges, looking to the second half of this year, you're talking about getting cash flow breakeven. That obviously implies that the product revenue ramps considerably in the second half of this year. Could you expand a little bit on your confidence level on that front? Certainly, that EUR 300 million pipeline is helping, but it sounds like new wins are starting to ramp as well. Could you give us an idea about where you expect product to ramp to by the end of this year? You know, the backlog supports some of that current visibility, but just kind of maybe help us out a little bit with some end markets and the competitive landscape as well. Cat-1bis is very hot right now.

Kind of where you guys stand from a win rate on that front.

You know, it's really, you know, the confidence is coming with the, with the maturity of the design win. It means those design win are already in production. Everything which is in production today, and we start to have sizable number of projects, and as I mentioned, mainly in metering and tracking. These are the two markets where we are very good at in a matured way. All those are coming. Scaling. You know, last year we did some number, this year we plan to do something that's already secured. The confidence level is really coming very strong from everything in production. If I look to my ramp for everything in production, I'm more than 90% sure about it. Everything really shipping, it's really good.

That we have backlog and we have forecast from customer and we should have no big surprise in the second half on this. The other piece, which is really where the risk is, or let's say where the we have a little bit of challenge of timing, not to lose the customer, but if we are planning obviously and mainly in the Cat 1bis space because the Cat M is much more mature. Today, more than 90% of the Cat M, of our Cat M plan this year is already done, as I said. While maybe in terms of Cat 1bis, we are at 30%, let's say, if I give it a number. Why?

The Cat 1bis, it's a product that we introduced after the Cat M, which means, the design wins we have there, came later, and those guys are not yet all in full production. Some are in full production, we continue to win in security and telematics, and they start moving, and we start getting orders. Obviously we're expecting to have more in the second half. This is the risk really, or let's say the point to observe, if those Cat 1bis projects come on time in terms of moving to production in the second half of the year. We are optimistic because they are happening and the customer is serious, the projects are moving.

If there is a shift, it will be really minor delay with the customers taking a month or 2 delay, but this will happen at the end of it. Then if I look to the RF, I told you already, I mean, we are in good shape there because all of that we have in hand, we secured maybe 60% our plan in RF already. Still the remaining needs to happen in the second half based on forecast. Not yet an order, but based on forecast. All this give us strong confidence, to be honest. When you compare to the last year, it has nothing to do. I mean, the company really now, we talk about many, many customer, many project, repeating order, established customers to whom we ship, you know.

We ship to them maybe, in the last 2 years already, maybe a little bit, and growing. Some we start shipping last year and now growing, strongly this year. That's why we are really, you know, very, very positive on the ramp of our product revenue in the, in the coming quarters.

Yeah. Very helpful. Georges, maybe just quickly, the competitive landscape right now for Cat-1bis and kind of what your win rate is. Deborah, if you could remind us, I know that you've got cost reduction efforts, but there are a lot of moving parts in the world today with currency fluctuations, et cetera. What should we be thinking about in terms of where that OpEx is in the second half of this year and therefore the break even? Thanks.

You know the competitive.

Oh, yeah. I mean, on the competitive landscape, you know, there is not a big change, to be honest, Scott. It's the same thing. Even if I saw in the Cat 1bis, Nordic announcing a product, I believe they get it through IP licensing from somewhere without saying more on this. You need to understand that Cat 1bis in the U.S. is closed. There is no more certification of new module in Cat 1bis. Any new Cat 1bis will be coming more to address Europe and not in the U.S., not North America. There, if you go to North America, it's left between Qualcomm and us, to be straight on this.

The challenge of all this, again, you need to imagine that starting in 2029 and maybe not that far, you know, maybe 2030, if this shift a little bit, you're going to see all the market will be pushing to get eRedCap support, 5G support, and you will not be able to deploy new product with 4G without having the 5G. Here, obviously the competitive landscape is who has 5G technology. As you know, we benefit from all the investments we have done in the 5G, and we believe we'll be leading in the eRedCap in the market and take a strong position there.

Yeah. On operating expenses, we expect those to, you know, keep coming down. We're targeting to have cash operating expenses below EUR 10 million, you know, targeting EUR 9 million by the end of the year.

Great. Thanks so much.

Thank you, Scott.

Thank you. Our next question or comment comes from the line of Jacob Stephan from Lake Street Capital Markets. Your line is now open.

Yeah. Hey, guys. Thanks for taking the questions. Maybe first, I want to touch on the balance sheet kind of post June 1. You know, obviously EUR 10.6 million in cash. Just kind of help walk us through that a little bit. I know you're going to have, you know, roughly 600 Bitcoin, but the collateralized number of 817 that you guys cited in the press release, I guess, you know, when you kind of subtract the current holdings from that number, you get like 300. Can you kind of walk us through that a little bit?

Yeah, I mean Hi, Jacob. Yeah, indeed, I mean, you're right. I mean, it's a little bit tricky because, you know, we have some Bitcoin already free. We have around 300 Bitcoin in hand. They are free. They are not part of the 800 that Deborah was mentioning. When we talk about the 800, we're talking about the piece which is in the collateral. Obviously, the deal we have it with our debt holders is we're keeping all the amount of Bitcoin in collateral until we redeem all the debt. Obviously, once we redeem all the debt, we get all what's left in there. The more than 600, it will be at least 600, I believe.

We should have more, mainly if the Bitcoin stays where it is today, maybe we'll have, you know, nicer number. It's just only the fact that you pay what's left, you sell the Bitcoin, you pay what's left, and then when you combine what's left from the collateral plus what we have already in hand, free Bitcoin, we'll end above 600 Bitcoin. In very simple way, you know, you don't matter the detail there. On June 1st, we'll pay all the debt. We'll have more than 600 Bitcoin, and we'll have almost debt-free company. Maybe we have EUR 1 million or EUR 2.

Yeah. The only remaining debt after that will be related to.

Government

government, like R&D funding that's, you know, 0 or 1, low interest.

More short-term debt.

Yes. Yeah.

Got it. The actual collateral, the EUR 62 million or so, is really just security for the EUR 36 million of debt. Once you pay the EUR 36 million of principal off.

Yeah

that's the remaining.

Yeah.

Okay. I got you. Second, I just wanna touch on the supply chain. I know you guys talked a lot about it, with the memory costs increasing, but, you know, what's kinda your confidence level you can procure any additional supply, should any of the kinda upside opportunities that you mentioned to the full year present themselves?

I mean, you know, you're absolutely mentioning a good point, Jacob. On one side, what I said, like for our, what I call it, baseline, we are good today. Last quarter, we were a little bit worried about Q4. Now we are fine. I mean, maybe we'll not. However, we are short in terms of, you know, covering upside. You know, depending how big is the upside, right? I mean, if we have a big deal and we need to serve it in Q4, we'll be short if I look to the number today. However, we have capacity to increase. We will be paying more in reality, you know. There is always some supply capacity, but will cost you more. Like, you lose on margin and so on.

We are contemplating this. We are working on those angle. We believe there is a potential of upside that we can cover it, but maybe this will come with a reduced margin if we have to get it because you'll be paying more. On the memory supply, as you know, this is an industry problem today and mainly driven by AI demand. Just to make it very simple for me, you know, even if AI is taking all the capacity of memory, if this is true, at the end of the day, AI will not work neither, right? Because you cannot have all the electronic only running with the AI processor, right? I mean, you need a lot of things around it from communication and so on, and you need memory.

There is availability of memory, just only, you know, people benefiting off the cycle. I can tell you have crazy price increase. We're not talking in percentage. You talk about multiple, you know, you can talk about 2x, 3x, some memory, you know, sometimes more than this. That, that's what we are seeing. Obviously, this is the industry trend. We cannot fight for it. However, we have good relationship with the supplier, and we are securing our capacity. We are not missing capacity. We also introduced some second sources on some of them. We have one memory which was really key. We have already a second source already available and shipping to some customer, not to everybody.

Obviously, over time, this give us chance as well to secure supply, but also keep pressure on the pricing not to pay, you know, at least to pay based on what's the market is setting as a price for memory.

Okay. Got it. Very helpful. I appreciate the color. Thank you.

Thank you.

Thank you. Our next question or comment comes from the line of Fedor Shabalin from B. Riley. Your line is now open.

Good morning, everyone. Good afternoon, everyone. Georges, once the convertible debt is fully redeemed, how should we think about the preferred use of the proceeds from the sale of remaining Bitcoin? How would you rate funding operational expenses versus maybe share buybacks? Thank you.

Hi, Fedor. I mean, it's a good point, you know, to mention on this. Obviously, we still have the share buyback plan in hand, we can execute on it. In Q1, we did some share buyback already. Honestly, we don't need all this money, you know, on our balance sheet. We don't need it in a sense to, for operation, you know, for cash burn. Our cash burn should be reduced and be limited, and this will put the company in very strong position in terms of, you know, balance sheet. The option of buying opportunistically, we could be looking to this. You know, we're not giving up on this, making some buyback.

Obviously, it depends on the business evolution in the second half on the licensing deal we secure. Let's assume we secure a big licensing deal and we add, because, you know, maybe on revenue will not take all the deal now, but this can add a lot of cash because in the licensing deal you have always some upfront payment that could be significant. With that, maybe we'll feel like we have enough cash to, and if the share is not performing, to come and support the share and make some buyback. This is really on the agenda of the board, and we can execute on it opportunistically based on the market condition.

Thank you. That's helpful. My follow-up is about Georges, you did a great job outlining revenue pipeline and timing and cadence for 2026, and the same for operating expenses. I would like to dig a little bit deeper into details on operating expenses side. You mentioned that you would expect decrease in OpEx for the year. I remember you mentioned EUR 9 million, something like that, the number by the end of 2026. Where most of the savings come from on the OpEx side? That's the question. Thank you.

Yeah, I mean, Fedor, you know, last year, to be honest, now the company is in a, I'll say, efficient mode, you know. As you remember last year with all the movement of the company, you know, with the deal we did with Qualcomm, and we had the acquisition of ACP. You know, we have a lot of even exceptional item related to Bitcoin, digital strategy in general as well. All this, let's say, get cleaned, we clean it in Q4. Some of it was not effective in Q1. Some will be effective in Q2, and for sure by end of Q2, we'll get the full benefit of what we have. We continue watching this.

In general, the focus was really, if I take in terms of R&D, our 4G product is maturing. There is only need for support on the 4G product. In other words, we moved all the spending in R&D to 5G and with very minimum, you know, 4G, just all what we need for the support. This was an angle of saving. The investment into the 5G was aligned with time to market. We could go much faster if we want. We can go slower. This was the decision based, we need to be just in time. We don't want to be with our eRedCap 1 year ahead of time because this will not benefit for the company and we don't want to be late.

This also gives us a variation, if you want, that a variable that we can play with. Obviously, in general, I would say all the G&A spending.

Yeah, I don't think that there's not one particular item, but across the board we've had some planned headcount reductions, basically people leaving that we're not replacing. We work with a fair number of contractors that gives us leverage there when we are to, you know, reduce that number as different R&D projects finish. We've also looked at just the overall structure in terms of rent. You know, basically overall, all of the G&A expenses are being reduced across the board.

Okay. Thank you very much. That's super helpful. Continue and best of luck.

Thank you.

Thank you.

Thank you. I'm showing no additional questions or comments in the queue at this time. I'd like to turn the conference back over to Mr. Georges Karam for any closing remarks.

Thank you all, for joining the call and for all your questions. Looking forward to see you in the near future. Bye-bye.

Ladies and gentlemen, thank you for participating in today's conference. Everyone, have a wonderful day.

Welcome to the Fourth Quarter and Full Year Sequans Earnings Conference Call 2025. My name is Shannon. I'll be your operator for today's call. After the speaker's presentation, there will be a question and answer session. To ask a question on the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please note that this conference is being recorded. I will now turn the call over to David Hanover, Investor Relations. David, you may begin.

Thank you, operator, and thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are Georges Karam, CEO and Chairman, and Deborah Choate, CFO. Before turning the call over to Georges, I would like to remind our participants of the following important information on behalf of Sequans. First, Sequans issued an earnings press release this morning, and you'll find a copy of the release on the company's website at www.sequans.com under the newsroom section. Second, this conference call contains projections and other forward-looking statements regarding future events or our future financial performance and other potential financing sources. All statements other than present and historical facts and conditions contained in this release, including any statements regarding our business strategy, cost optimization plans, strategic options, the ability to enter into new strategic agreements, expectations for sales, our ability to convert our pipeline of revenue, and our objectives for future operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, section 27 a, of the Securities Act of 1933 as amended, and section 21 e 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 risks 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. 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. And now I'd like to hand the call over to Georges Karam. Please go ahead, Georges.

Thank you, David, and good morning, everyone. I'd like to start with a brief update on our capital allocation framework and how we are balancing execution of our IoT semiconductor business with the management of our digital asset treasury. All in support of long-term shareholder value creation. First and foremost, we remain focused on executing our IoT strategy and advancing our 5G product roadmap in a disciplined manner. Our objective is to unlock the full strategic value of the IoT business for our shareholders, and that remains our top operational priority. At the same time, we continue to manage our Bitcoin digital asset treasury thoughtfully with the goal of extracting the full value underlying our Bitcoin holdings and our treasury structure. Since launching our Bitcoin strategy, we have been deliberate in how we assess market conditions, and the tools available to us always with a focus on actions we believe can create pressure value in an accretive way. In the current environment, where many digital asset treasury peers are trading below an MNav of one, we believe the most value accretive lever available to us has been repurchasing ADS when our share price implies a significant discount to our net cash and net digital asset value. During the fourth quarter, we repurchased approximately 9.7% of the company's outstanding ADSs. In addition, our board has approved a new ADS repurchase program authorizing the buyback of up to an additional 10% of the outstanding ADSs. Overall, we are taking a balanced and disciplined approach to capital management. This includes rightsizing our operating expenses, continuing to invest in our most important R&D program, which is our 5G eRedcap chip, and allocating capital to the treasury only when it's clearly accretive, while maintaining flexibility to evaluate our options as market conditions evolve. To provide some context around our balance sheet, with Bitcoin Holdings end of Q4, and Bitcoin currently at approximately $70,000, our Bitcoin NAV is about $150,000,000. After adding our end of Q4 cash balance, and netting out convertible debt, our net cash equivalent position exceeds $68,000,000. Importantly, beyond our Bitcoin and cash assets, the company's valuation should also reflect the significant value represented by our IoT revenue pipeline and our 5G and RF transceiver IP portfolio. We intend to remain patient and optimistic, staying disciplined, and focused on actions that we believe can drive long-term per share value. Turning now to the operational side of the business. Our IoT semiconductor business continues to build momentum. In the fourth quarter, it generated $7,000,000 in revenue, which was in line with our prior expectations. Revenue in the quarter was predominantly product-based, with more than 94% coming from product sales, and roughly 6% from services, reflecting strong incremental growth in the product shipments. For the full year 2025, total revenue was approximately $27,200,000. This figure includes a meaningful amount of nonrecurring Qualcomm-related revenue resulting from the deal we closed with them in 2024. On an adjusted basis, the underlying business was closer to $20,000,000, and our fourth quarter run rate clearly demonstrates the ramp we have been driving throughout the year. Looking ahead to 2026, our internal plan currently targets approximately $40,000,000 to $45,000,000 of total global revenue supported by improving visibility and a significant order backlog. Our outlook is further supported by the strength of our design win pipeline and the increasing percentage of projects now in production. We are exiting 2025 with the revenue funnel exceeding $550,000,000 in potential three-year product revenue, including over $300,000,000 from design win projects. Of those design wins, 44% have already reached production and are generating revenue, up from 38% end of Q3. Assuming no changes to customer forecast, this represents approximately $132,000,000 of potential three-year revenue from production stage projects alone. During the fourth quarter, we added nine new customer projects to our design win pipeline, and three existing projects transitioned into production. We expect this momentum to continue through 2026, with the target of having over 50% of our current design win projects in production by June. Our product pipeline continues to be driven primarily by our 4G Cat M and Cat 1 BIS technologies, as well as our RF transceiver product, which supports a wide range of software-defined radio applications. We are also seeing early engagements around 5G eRAD cap, which we view as the successor to 4G in IoT deployments. Smart metering, telematics, and asset tracking remain our strongest verticals, followed by security, e-health and medical, and other industrial applications. From a product family perspective, Cat M remains a meaningful growth driver in 2026, led by asset tracking and smart metering deployments, including expanded programs now entering production with customers such as Honeywell and iDrop. Cat 1 Bis is positioned for a breakout year in 2026, supported by multiple customer ramps in telematics and security. In RF transceivers, we have committed backlog in place, with additional demand expected in the second half of the year. We also expect to begin seeing meaningful revenue from our 5G licensee partner in China. Demand for 5G eRAD cap continues to strengthen. Mobile network operators in the US are accelerating the transition from 4G to 5G to reform spectrum, and IoT applications remain the final bottleneck completing that transition. This is why having a 5G eRED cap solution as early as possible is critical. We continue to make strong progress on this program and expect to receive our first test chips this quarter, with customer sampling beginning in mid-2027. Our IP licensing and services business is now fully integrated into our go-to-market strategy and represents attractive high-margin upside in 2026. We are currently engaged in discussions with multiple potential partners, with individual opportunities ranging from approximately $2,000,000 to $10,000,000 or more, depending on scope. Beyond revenue, these opportunities expand our reach into new markets and regions. On the supply chain side, we continue to operate in a dynamic environment. While not indicative of demand, these factors can influence shipment timing and costs quarter to quarter. We're addressing substrate constraints by adding suppliers to reduce single-source exposure and improve resilience. We are also seeing memory pricing and capacity pressures, which affect both our product and our customer's device. We are working to pass through these cost increases where appropriate while maintaining strong customer relationships. Also, we are coordinating closely with customers on ordering and delivery schedules. At this stage, we expect little to no impact on our business in 2026 and limited impact in the second half. Looking ahead, we are focused on reducing cash burn over the course of the year, with the objective of reaching a breakeven run rate by Q4. We are taking a disciplined approach to operating expenses, rightsizing where appropriate, while protecting the innovation that underpins our differentiated position. Working capital dynamics may create short-term cash flow variability, but these effects are tied directly to long-term growth. Overall, the fourth quarter underscores our progress in strengthening the core IoT business, improving financial discipline, and maintaining flexibility in our capital strategy as we position the company for sustained growth in 2026 and beyond. For Q1 2026, we currently expect revenue to be around $6,500,000, reflecting normal seasonality, with the risk that approximately $1,000,000 of revenue could shift into Q2 due to manufacturing and shipment timing planned for the end of Q1. Based on our backlog and design win pipeline, we expect revenue to ramp through the remainder of the year and continue to believe we can approach cash flow breakeven in Q4. We continue to evaluate strategic alternatives that could enhance profitability and unlock additional value across both the IoT business and our treasury strategy. The board is actively reviewing options, and we remain committed to unlocking shareholder value without rushing decisions, particularly at a time when the company is in its strongest position today. I will now turn the call over to Deborah to review our fourth quarter and full year 2025 financial results in greater detail. Deborah?

Thank you, Georges, and hello, everyone. I'll begin by reviewing our fourth quarter financial results and then discuss our Bitcoin holdings. During the fourth quarter, we experienced several significant events that impacted our financials. These included a substantial increase in product revenues, a reduction in operating expenses, the early redemption of half of the convertible debt issued in July 2025, the launch of our ADS buyback program, and the sale of Bitcoin to finance these two non-operating initiatives. In Q4 2025, revenues increased 72.6% sequentially, driven primarily by growth in product revenue. Gross margin for the quarter was 37.7% and was impacted by provisions for slow-moving inventory. Excluding these provisions, gross margin would have been approximately 43% compared to 42.4% in the prior quarter. R&D and SG&A expenses declined to a combined total of $11,500,000 in Q4, down from $13,600,000 in the third quarter. We maintain our goal of continuing to reduce operating expenses over the course of 2026 in order to support our breakeven goals for operating results and cash burn. We recorded a noncash impairment charge of $56,900,000 related to the mark-to-market value of our Bitcoin holdings in the fourth quarter, compared to an $8,200,000 charge in Q3. We also recorded an $8,400,000 net realized loss on the sale of Bitcoin. This sale funded the redemption of half of the convertible debt and the repurchase of 9.7% of our ADS. The July issuance of convertible debt and warrants resulted in the recognition of an embedded derivative, which is remeasured at each reporting period. Changes in its value affect our P&L that are entirely noncash. Similarly, while the convertible debt carries a 0% coupon in the first year, IFRS accounting requires us to recognize significant noncash interest expense. At the October, we redeemed half of the outstanding convertible debt ahead of its normal July 2028 maturity. This resulted in a $29,100,000 loss on early redemption of debt that was primarily noncash. Reflecting these factors, we reported an IFRS net loss of $87,100,000 in Q4 compared with an IFRS net profit of $900,000 in the prior quarter. On a non-IFRS basis, excluding significant noncash items, we reported a non-IFRS net loss of $18,500,000 or $1.19 per ADS, compared with a non-IFRS net loss of $11,300,000 or $0.81 per ADS in Q3. The realized loss on the sale of Bitcoin of $8,400,000 is included in the non-IFRS net loss, so we would have been just over $10,000,000 non-IFRS net loss without this element. Normalized operating cash burn in Q4, including primary working capital movements in inventory and trade payables and receivables, was approximately $7,700,000. After completing Bitcoin purchases totaling $3,400,000 early in the quarter, we later sold Bitcoin to fund $101,000,000 of debt redemption and a $9,400,000 ADS buyback. At year-end 2025, we held 2,139 Bitcoin with a market value of $187,100,000. Of this, 1,617 Bitcoin, valued then at $141,500,000, were pledged as collateral for the remaining $94,500,000 of convertible debt due in July 2028. The remaining 522 Bitcoin, valued at year-end at $45,600,000, are unencumbered. And with that, I'll turn it back over to Georges.

As we close, I want to reiterate that our primary focus remains on executing the IoT business. The fourth quarter reflected continued momentum with revenue predominantly driven by product shipments. We are encouraged by the depth and quality of our design win pipeline, with more than 44% of projects now in mass production and additional ramps expected throughout the year. With solid demand across Cat M, Cat 1 Bis, RF transceivers, and early engagement around 5G eRedcap, we believe the IoT business is positioned to continue scaling while our cost discipline supports a clear path toward cash flow breakeven by 2026. At the same time, we have taken a disciplined and value-driven approach to capital allocation. During the fourth quarter, we took actions to repurchase shares where we believe our valuation does not reflect underlying asset value, and we continue to have board authorization in place to pursue additional repurchases as appropriate. These actions reflect our focus on unlocking value on a per-share basis while maintaining flexibility to evaluate additional capital allocation options as market conditions evolve. With that, let's now begin with the Q&A session. Operator? If you don't mind.

Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Scott Searle with Roth. Your line is now open.

Hey, good morning, good afternoon. Thanks for taking the questions. And thanks for all the detail on the call related to some of the product development activity ongoing. Hey, Georges. Just to quickly dive in on the guidance, I'm wondering how you're thinking about licensing in terms of that $40,000,000 to $45,000,000 figure. And I'm wondering if you could reiterate again what you expect the percentage of design wins to be in production at that point in time? I missed that number. And it looks like just at a quick first cut, $15,000,000 to $16,000,000 exiting the year is kind of what gets you to cash flow breakeven, and then I had a couple of follow-ups.

Yeah. Hi, Scott. Thanks. Thanks for being on the call. So just to start with one, the guidance, I believe you're reflecting about the guidance for the year. You know, we continue as you see, like Q4 was, as I said, mainly product. I believe Q1 is going to be very close as well, you know, in our guidance. We are not expecting except surprises, I will say, because we have many deals and it depends on which one will close. You know? We have really currently in the backlog, I should say maybe a couple of million dollars over the year if you want. Of secured licensing. However, we have, as I said, you know, four, five, and more, each one ranging between $2,000,000 and $10,000,000. So it's very, very hard to make a projection if you want on the numbers. So we're taking a very conservative approach. Assuming like, maybe get another $5,000,000 of all this in the year, five to six. They could be secured and bring like technically, $2,000,000 to $3,000,000 per quarter in the remainder of the year if you want. After Q1, Q2, Q3, and so. So this is a little bit our guidance. So the number I gave in terms of production for the year, this in percentage just means we will have, like, 80-85% or so, 80-85% product and only 15% services on this basis. 20% services, something like this. And then the other question was regarding the convergence of the percentage of product. So what you know, when I exit the year, you need to keep in mind, you know, we're giving those percentages. But as you know, each year, each quarter, the design win is increasing. So we're not updating the metric on a quarterly basis. Just for convenience, we will be updating this like every six months, you know, to avoid every quarter. Having, you know, sometimes to explain some variation, maybe not linear and so on. But we are very comfortable that the design win pipeline, the $300,000,000 is today above 300 and we continue growing towards the year. And on those 300, our estimation, at least 50% of them will be in production in June. In June this year. So, obviously, we project year-end, you need to add, you know, I could say maybe 75% towards the year-end. There's no guidance on this, but for mid-year, it's like more than 50 for sure.

Gotcha. Very helpful. And Georges, just in terms of the breakeven then in terms where you guys are reducing the OpEx, it sounds like it's in the mid to high teens. And would be the exit rate and trajectory? Okay.

I remain on the number, which is essentially, honestly, the mix of services and product can give you a different number. Obviously, you understand the margin. In our model, assuming, like, you know, the $15,000,000-$16,000,000 number where $3,000,000 of this is services. And the remaining your product.

Gotcha. And if I could follow-up on the transceiver front, this seems like it's one of the hidden gems in the business. I think in the past, you've talked about that maybe being north of $5,000,000 on an annual basis. I'm wondering what the current thoughts are, design activity, and how that momentum is looking into the back half of '26 and into '27? How big could that opportunity be?

You know what? We have, you know, as you know, the acquisition of ACP gives us exact directly a couple of customers to whom today, you know, they move into production. And we have genetic revenue from them every quarter. So have even a backlog in 2026 from them for the first half. So we'll see, you know, sometimes the forecast for the full year, you know, with Chinese customers could be a little bit, you know, I don't want to give guidance on this. We believe, like, we could be doing this year maybe in the other business, $7,000,000 or so. I mean, in case more in the north of five. For sure. And can be, you know, getting out if some upside, then we'll go beyond the $7,000,000. This is how we see it. And also, as you know, the RF technology, we launched this with many customers, new customers. To those new customers, we're something now are the board and something, you know, chips, and they're designing products. And we have really a few tier-one already worked on this. It's more, to be honest, us being able to support them and help them is what we're working on this. But I don't expect big revenue in '26 from them because they are all in the application like drone, defense, and it takes time to build those products and come to market. This could be meaningful, you know. This could be a business, you know, for sure, you know, maybe in the $15,000,000-$20,000,000 run rate. This is doable. If we are successful, we're keeping the Chinese customer and add those customers that you can get for defense and public safety application and other software-defined radio applications.

Gotcha. And lastly, if I could, Georges, you had some comments on the memory side of the business. It sounds like indirectly, you guys are managing that well and you're not seeing too much in terms of headwinds from your end customers. I'm wondering if you could provide some expanded thoughts on that. And then just the competitive landscape. You guys certainly have a strong position with Cat 1 BIS. It seems like running the table is the right expression, but you guys are certainly winning a lot of business on that front and gaining some momentum. And so I was just wondering if you could comment on the competitive landscape for Cat 1 Bis. And then as it relates to eRedcap, which will be the next big cycle in '27 and beyond, kinda what you're seeing from a competitive aspect? Thanks.

Okay. Well, the supply chain, just to be clear, you know, the industry is completely, you know, today, I mean, it's not like the direct memory of Sequans. It's not our technology because as you know, our technology is not an AI. But AI and geopolitics as well. Combined with geopolitics is obviously the demand on AI is eating most of the capacity and obviously the OSAT and all the, you know, the packaging material and all this increasing price or making constraints on supply, increasing lead time, and so on. Struggle on the substrate. We continue to watch this very closely. We managed to secure at least our Q3 production. We're in good shape on this. But despite this, we're working on multiple sources. But we are seeing price increase. Unfortunately. And just only that's how it is. On the memory, again, we're not using the memory that you need in AI. That's how it is. All this business is connected. Right? I mean, so if the AI, you know, big memory, their prices are getting up because there is demand. This is impacting as well smaller memory and flash. RAM and flash that we use next to our chip if you want, our module and so. So we have direct impact on this as well. In supply and pricing, unfortunately. We are working all out the price, you know, and secure the capacity with multiple partners, have double source on the memory as well. To be sure that you have the supply. But unfortunately, believe we're going to have the cost increase is happening, and we are reflecting this to our customer. We're already discussing with our customer and trying to pass those costs to them. I believe we'll see more of this impact in our number in the second half of the year. The first half, we have some backlog. And so at least Q1, we have backlog for this on all the pricing and we're not it's very hard to change the price when you are shipping at the same time. With customers. So it's something to watch. As well, you know, customers and, you know, the customer, they could be building devices where they are using the big CPU and memory. That's an old application. In some applications, they need this. And obviously, could face shortage or challenge on the memory they need to get for their own device. So there is tension in the market. I don't qualify it like in the COVID days. But it's there. You know, we're spending time on it. My team is working day and night on securing supply, talking with the customers and so on to be sure that we can pass 26-27 in good shape because it seems like this will continue until 2028. What I'm hearing. Talking about the competitive landscape and the product, indeed, you know, on Cat 1 Bis, two guys that they have Cat 1 Bis is not Chinese. It's Qualcomm and Sequans. So it's really a duopoly market. And most of our design wins are around Cat 1 Bis outside. It's not like CAT M, we're not doing anything anymore. We still have Cat M business. But I believe we have a big piece of the pipeline driven by the Cat 1 Bis because of the new product ramping and because also on the competitive landscape limitation. Obviously, you know, the customer has the choice between using Sequans technology or Sequans technology. Just only whether they buy it from us or from Qualcomm. That's how it is because it's the same technology behind it. Which is good position us, I would say, to push this technology further. And on eRAD cap, I was at CES and there is really big movement. And I will have MWC in a couple of weeks. Meeting with the carriers AT&T, Verizon, and T-Mobile, all of them, they are really eager to get the 4G frequency band and move them to the 5G. In other words, they need and they have the obligation to get those frequencies. And as you know, the existing 5G network for any category for the IoT. The IoT remains on the 4G. And the broadband and the phones are moving to 5G. So it's easy on this side. IoT is more complicated mainly because there is also commitment for ten years, business and metering and so on. So it's really becoming a very, very hot topic. A lot of discussion at CES were around this. The carrier would like to see the ecosystem moving faster because the soonest they have eRAD cap, the soonest they can transition the new devices to eRAD cap technology even if it's falling back to 4G. So you'll have 5G falling back to 4G, but at least the technology will be the product will be future-proof. And this gives the freedom to the carrier to switch off the 4G sooner or at least on time as they plan it and not to drag this longer and they can recover the frequency to put them on the 5G. And here again, you know, we are I believe we are in a leading position. From, you know, it's very early not to it's very hard to talk about it when the customer didn't announce product yet. But we started the 5G as you know, many years before. Working on the broadband. We licensed the 5G to a partner. So we have a lot of those pieces of the puzzle already in hand. When we kick off our eRAD cap chip last year, we use a lot of this. And here we go after one year of the work we have is this chip coming to the company this quarter, end of this quarter. And from there, we start the testing and continue development. And we believe we'll be ready for what we call it the IUDT testing with the infrastructure vendor at all 2027. And we'll be sampling to customers midyear or, let's say, the 2027. This is our timeline, and we're executing on this. And we're getting a lot of push to accelerate this. Carriers would like us even to do it faster if you want. I believe we are in a leading position with this family.

Great. Thanks so much. I'll get back in the queue.

Thank you. Our next question comes from the line of Mike Grondahl with Northland. Your line is now open.

Yeah. Thank you. Georges, with 44% of those design wins in mass production, could you talk a little bit about the breadth of customers and just sort of like average order size?

Yeah. Hi, Mike. You know, it's essentially gross 44. You know, in other words, as I said, this is like more than $130,000,000 all three years revenue. So obviously, you divide by three, you know, it gives you a little bit where we stand above $40,000,000 in linear. It's something year one, year two, year three for the new projects. For all the projects, they are there in their second year. Like, for example, the tracking business is moving very well. We have customers there, and it's like buying again, you know, if I take in the million units, 400k unit, 300k unit, you know. The skip or the space, we are really in a good shape, you know, where we have matured the product shipping. Few metering finally entering into production. With Honeywell and Itron. And a lot in the tracking device. Tracking, we have many customers. We have some of them, you know, as I said, they do million units a year and more than million units a year. And others, they do 200k. Know? So it's really a variety of orders. But when you sum them all up, Mike, to get the order of magnitude, it's not like, first of it's many, many projects. I mean, I don't have the number in mind, but if I don't want to give you a wrong number, but it's more than 30 for sure. Project. It's diversified. On many applications, as I said, already that all the segments we are talking about. Some of them are in CAT M, some of them are in CAT 1. And we have tier-one customers and we have some small customers, but not too small. I mean, it's too small in a sense. They ship, they work well. They do 50,000 units per quarter and they are there buying every quarter. And moving.

Got it. In terms of your breakeven cash goal by April, do you expect a lot of progress on the $11,500,000 you got to for R&D and SG&A combined?

Yeah. I mean, we continue driving this down. You know, we put the guide, you know, see on the OpEx point of view. We'll be a little bit, you know, we believe in the second half of the year around $10,500,000. Is our target. Obviously, this includes depreciation, you know, so you need to take off the depreciation. When we're talking about, you know, cash flow, you know, breakeven, we're counting on a cash basis if you want. So we'll be somehow you have, like, in this 10.5, maybe around $1,500,000 depreciation. So the company will be, like, using, $9,000,000 if we speak in cash, I would say. Per quarter, and obviously, you add, like, $3,000,000 in service, this gives you like, you know, $6,000,000 left because service will be 100% margin. Or less, I mean, very close to a hundred. So then you will the product revenue needs to cover, like, the $6,000,000. And if you have a gross margin around on the product, 45%, you can do it with $13,000,000, it gives you a little bit the number where we are there. Obviously, this can vary because the mix can change. We can have a gross margin. Higher or a little bit lower, and obviously, the service could be higher and then we can accelerate the breakeven or the product could be higher than this number as well.

Got it. And then just lastly, it sounds like the progress on 5G the eRedcap chip is going well. Revenue, do you still sort of have that penciled in mid-2028? What any updated thoughts on there?

Yeah. I believe, honestly, the yeah. I mean, the revenue is mid-2028. Why? Because you need to think about how it's going to work, Mike. Ericsson and all the infrastructure vendors are building their software release to support eRAD cap and bring it to the network. Without giving too much detail. But this is targeted, I will say, to be in the network towards the end of this year, beginning of next year in testing. Then the carrier will deploy it. And then from there, you do when they are ready, we can test end to end. Right? I mean, in other words, if I have it ready today, it doesn't matter. No. I need to have the infrastructure working. So I'm synchronizing with Ericsson. To come on time doing the testing if you want soon. Once we have the testing, we have the proof that the chip is working. From there, you can have your first alpha customer engaging with us. And if you get depending on what they are doing, if it's definitely a replacement on existing product, this could be fast. Because it's not a new design. We'll give them a much which is pin to pin compatible with the previous one. And it will be running in Cat M or Cat 1 Bis plus 5G. So they can go fast and in 2028 can introduce product. If you have other customers or they are building completely new products, that takes two years or two years and a half to develop, and they start with 5G, obviously, you don't see that revenue in '28. You see it in '29. But more or less, the way we are seeing the push to have the customer adopting 5G faster, we feel good about seeing revenue in 2028.

Got it. Okay. Thank you.

Thank you. Our next question comes from the line of Fedor Shabalin with B. Riley.

Good morning, good afternoon, everyone. Georges and Deborah, thanks for the detailed review of your quarter. You already talked about near-term guidance, but I wanted to touch a little bit for maybe midterm on 2027. How should we think about the revenue cadence heading into 2027? Specifically the base at which the remaining year remaining 60% of the pipeline converts to production revenue and whether the combination of material LTE and CAT 1 Bis programs, alongside early 5G engagements position the company to meaningfully inflect beyond the cash flow breakeven milestone that is targeted for 2026?

Yeah. Maybe they're yeah. You're absolutely right. I mean, the pipeline is there. And when you talk about those design wins converting, they are there. Right? When they convert, they bring revenue and they stay there. They don't disappear over one year or two years. This is really long-term business when we talk about metering, tracking, I mean, there is no project in the company that doesn't live five years. If you want, then some of them, they live ten years, seven years, eight years. All those metering segments. So what we are winning will continue to be there. The pipeline continues converting and bringing revenue. So just only if we take what we have in hand, and if you talk about, you know, we have 44% that's founded, I would say, this means we still have the other half. So by definition, we can double. You know? That's how it is. The growth is big. Right? I mean, if you assume all this only converts and they will be we don't choose anything lose not the customer will go to someone else. But like you could have, I'll say some accidents, some customers planning for some big forecast and they do less and so on. But it's a diversified pipeline that gives me confidence. Our business will continue growing. Not to give guidance of saying it's going to be I mean, the doubling is not it's built in the model. Obviously, you could argue how this is can be developing every quarter and we'll continue growing. And maybe we'll be in a 60, 60% plus growth. That's at least what I in terms of seven, that will continue to 28. And in '28, where we have really I believe, really, the eRAD cap, if we execute well, you need to imagine that the eRAD cap 5G, it's over. There is no Chinese at all competing. You have only a couple of players that they can bring this to the market. And this gives us an opportunity to increase our market share as well. Because, you know, we have now an established customer base. We're not going to win a new customer with the 5G. We're going to go to the same customer and support them with a new product line and expect expand our market share with the new customer. So I'm very I believe as well that the 5G will be a great catalyst in 2028 to add another growth driver to our revenue. Year over year.

Thank you. This is very helpful. And my follow-up is about buybacks. So we just stopped trading at where it is trading now and given the authorization to repurchase an additional 10% of outstanding ADSs. Can you provide color on the expected pace and cadence of buybacks in Q1, specifically Q1 2026? I mean, specifically, whether the current share price level has accelerated repurchase activity quarter to date and how you balance your urgency of buying back stock at these levels against preserving liquidity? Thank you.

You know, obviously, very I mean, we have the authorization. We are, you know, free on doing this. Obviously, we were when we are in the window, which is locked, we cannot do it. We can do it when the window's open. And, essentially, we're assessing really this versus because you need to assess two things. You need to assess what's happening as well on the Bitcoin to become price. And the value of the share versus the net cash. So the two together are going to drive our I'll say the pace. But if you want the intention there is clear. You know, we believe if our share price is not appreciated, it's good things to do but to buy back shares and I would say reduce the number of shares outstanding. So it's like giving cash, giving money to all our shareholders sticking with us. So then the decision is there. We'll be executing on it. I'm not going to tell you if in Q1 we'll buy all the 10% or only 3% or 5% because it depends really how many dynamics I'm observing now with the Bitcoin price and so on. So we need to watch this carefully and make decisions based on this as well.

Thank you very much, Georges. Appreciate the color, and continue. Best of luck.

Thank you, Fedor. Thank you. Thank you. As a reminder, to ask a question at this time, please press 11 on your touch-tone telephone. Our next question comes from the line of Jacob Stephan with Lake Street Capital Markets. Your line is now open.

Hi, guys. I appreciate you taking the questions. Maybe since a lot of questions have been asked, maybe help me unpack Q1 guidance a little bit. I know you said $6,500,000. Sounds like some of that could shift, but without affecting the balance of the year. What I guess, what, you know, portion of that is subject to shifting later into the year? And maybe just help us walk through that.

Yeah. I mean, Jacob, hi. And essentially, you know, it happens like, you know, again, going to the condition of the market, you know, even on TSMC, even on the wafer side, there is we have the capacity. It's all fine, but it's really stretched in timing. You know? It's like you pulling in stuff, getting this, you know, accelerating even a week. It's a little bit complicated. You know, the fiber loaded. And technically, what I'm saying is that we have orders. Right? I mean, we have orders covering Q1 and Q2, and have backlog even covering Q3 and Q4, some of our backlog. And in our guidance, you know, some of those orders, we should be able to ship them Q1. But they are really on the edge of Q1. And as I'm speaking, some of those dates are not 100% confirmed. You see the work in progress. So in theory, they are there. But you're not at risk you are at risk of having slippage of a few days. You know, we're not talking about, you know, it could be really weak. And, unfortunately, I have a few orders decent order happening there. But they're not lost. It's just only And if they don't come in the quarter, they shift to Q2. You know, this will beef up if you want my guidance. I mean, you should sum Q1 and Q2 to look to the performance on the company. This is where we are. So just to be cautious on this. If I do the math today, I believe should manage it. The guidance I gave, the 6.5, but there's a little bit of risk, so I will try to respond here with the market.

Okay. Very helpful. And then maybe touch on the price increases a little bit. You know, for your customers. You know, how susceptible have or, I guess, how receptive have they been to, you know, overall price increases?

Well, you know, to be honest, surprisingly, I should say the customer I don't know how much no one is for the pricing fees in general. But what I like is the standard then that's relearning what happened in the COVID. And the customer are reacting positively, if you will, around what's going on. In other words, they appreciate that you go and tell them that we have we have we could have supply problem. We could have price problem. And sit down with the customers and talk about the issues and so. Everyone is taking for granted the memory. The memory is really everyone knows and clear, you know, because the memory, by the way, people always prepared of the memory. It gets up and down all the time. So when it's up, read it in the news, they read it everywhere. When you go to the material, the, you know, the cost of the gold, even if it's everything is clear. Right? I mean, when you give the number, so it's a little bit more challenging. But that's okay. You know? I mean, I don't call it like you know, we're managing this customer by customer. You know, we have sometimes obligation. We have and but it's the reception is positive. It's not like no way. Because at the end of the day, that is it's not the choice of Sequans. Right? I mean, we're not trying to abuse the system. We're trying just only to be transferred to our customer and secure supply and this force us somehow to pay a little bit more. Because that's how it is the industry in Asia today. If you take, for example, all the geopolitical push many guys outside of China. So you have less competition in the packaging from China. So everything is happening outside of China between Taiwan mainly, but you have others obviously country around Taiwan. And now, obviously, those guys, they have demand for to get more, you know, to secure all the a thing. We can take all the other fab big customer willing to give them check-in advance and so on. And then the same time, you have good reason that the material, you know, as well as the packaging material is getting up. So all this combined, is pushing the price of the packaging up, you know, the substrate and the packaging as well. TSMC is still okay. You know, TSMC they remain on they didn't change anything. They are not giving signs that will do any change for now. At least for those geometry, which is the regular one, we use the flat, I would say. $40.22 and even the high FinFET 16, 12, and so on.

Okay. And just last question for me. On the Bitcoin treasury strategy, you know, obviously, 2026, you know, the actual interest rate, goes up materially on the convertible debt. I'm just wondering how you're kind of thinking about, you know, overall the debt repurchase or redemption.

I'll figure what I mean. You know, obviously, we're evaluating this. Specifically as well with the price of the Bitcoin. What I could say we have, you know, good relationship with the main debt holder. And as you saw in the past, redeemed 50% of this. So we're considering all our options. Nothing yet decided. Today. We'll look into the option, but you know, if you ask me my view on this, like, in general, the way we are seeing things if Bitcoin is not rallying and going to the moon, there is no interest, I will say, keep the debt forever. And better to redeem it sooner than later if you want. Like, if I have to look to the picture today, there's not too much value creation to be done there. But we are factoring all this, obviously, and discussing with the board, you know, based on all our options and what we should do and what.

Okay. Very helpful. I appreciate it.

Thank you. And I'm currently showing no further questions at this time. I would now like to hand the conference back over to Georges Karam for closing remarks.

Thank you very much all. Thanks for the questions and being on the call. And happy to see you next opportunity or discuss with you on next opportunity. Thank you very much.

Thank you, operator. You're welcome. This concludes today's conference call. You may now disconnect, and everyone have a great day.

Welcome to the Third Quarter 2025 Sequans Earnings Conference Call. My name is Jonathan, and I will be your operator for today's call. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to turn the program over to David Hanover, Investor Relations. David, you may begin.

Thank you, Jonathan, and thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are Georges Karam, CEO and Chairman; and Deborah Choate, CFO. Before turning the call over to Georges, I would like to remind our participants of the following important information on behalf of Sequans. First, Sequans issued an earnings press release this morning, and you'll find a copy of the release on the company's website at www.sequans.com under the Newsroom section. Second, this conference call 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 our business strategy, cost optimization, strategic plans, the ability to enter into new strategic agreements, expectations for sales, our ability to convert our pipeline to revenue and our objectives for future operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1999, 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 risks 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. 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. And now I'd like to hand the call over to Georges Karam. Please go ahead, Georges.

Thank you, David. Good morning to everyone. We announced this morning that Sequans has taken a proactive approach to reduce its debt by 50% through its strategic asset reallocation of its Bitcoin treasury. We remain fully committed to our Bitcoin treasury strategy, which we continue to believe will deliver meaningful long-term value for our shareholders. This is why we executed our major financing deal in July as the starting foundation of our Bitcoin strategy. As you know, the financing deal included both equity and convertible debt components that introduced approximately 50% leverage into our treasury structure. Initially, we thought the shares would appreciate following the deal announcement and the debt would convert due to share price appreciation. While there is no urgency for us as we are not paying interest on the debt for the first 12 months, we have chosen to act proactively given current digital asset treasury market conditions. With many of our peers currently trading significantly below an mNAV of 1. We find ourselves constrained by the lack of available options to meaningfully advance our treasury strategy at this time. Thus, we have opted to move forward and negotiate with our debt holder to reduce our debt exposure and provide us with greater flexibility moving forward. As a result, we announced today that we are reducing by half our convertible debt via a tactical sale of a portion of our Bitcoin holdings. We undertook this action for the following reasons: First, it has lowered our debt-to-NAV ratio closer to the 35% range, a more appropriate level while still maintaining decent leverage on the remaining portion of the convertible debt. This puts us in a better position for issuing preferred shares in the future. Second, we have reduced some of the debt covenant constraints, increasing our ability to use all of the treasury tools at our disposal, including buying back ADS and executing on the ATM based on market conditions. With respect to our ADS buyback program, factoring in the current valuation, selling Bitcoin on a tactical basis makes sense in this environment to fund the repurchase of our ADS, which are trading at a significant discount to our Bitcoin net value plus our net cash. Note that our current valuation does not reflect the value-creating opportunities we believe are available to us through our IoT business, which I will discuss shortly. And lastly, we have freed up some of the Bitcoin we hold, enabling us to generate some yield with minimum risk. Such yield can be deployed to buy Bitcoin. So to summarize this move -- to summarize, this move was undertaken to unlock shareholder value and put us in a better position to execute on our treasury strategy. We intend to continue to follow a disciplined and opportunistic approach to Bitcoin accumulation. We'll be patient with market conditions, but we remain proactive. Ongoing Bitcoin purchases could be funded by issuance of debt, equity or preferred as well as IoT business monetization and operating cash flow. We have the tools or option in place to execute the strategy. An ATM, which provides us with the option that when our share price is much higher than where it is today, we'll be able to execute opportunistically on our Bitcoin accumulation strategy in an accretive manner. We have also an ADS buyback program in place, which has been approved by the Board. And given the current share price, we'll execute on this as soon as we are able to. We have reduced our debt exposure, which affords us the option to consider other new instruments like preferred shares in the future. Returning to my earlier point about the large valuation discrepancy in our shares, I wanted to stress that our current net equivalent cash position that includes equivalent cash of Bitcoin net asset value minus debt is above $170 million. This is approximately $12 per outstanding ADS. You can see the deep discount our shares are trading at on this basis alone. This ignores any IoT business value we are creating and expect to create in the future. It also ignores the leverage we can create with our Bitcoin treasury strategy. While Bitcoin treasury companies as a whole may be in a transition phase that has affected current equity valuations, we continue to be fully committed to the Bitcoin treasury strategy we have initiated and are exploring all opportunities to unlock shareholder value through our Bitcoin treasury alongside our IoT operations. Our goal remains to create long-term value to our shareholders. As for our IoT business itself, it's moving in the right direction. Our pipeline remains healthy, representing about $550 million in a potential 3 years product revenue across our 4G and RF product lines. In Q3, we won 6 new projects, and I'm pleased to announce that around $300 million of this pipeline are design win projects, a 20% increase versus our last reported figure. Some of the design win projects are in mass production phase currently generating revenue and others are under development by our customers with revenue potential in 2026 and beyond. Our execution remains focused on increasing the design win pipeline, but more importantly, on helping our customers with projects not yet in production, finishing the development and certification of their products and turning them to revenue-generating design wins. In Q3, 3 design win projects transitioned to production. In Q4, we expect to add 5 more, positioning us to enter 2026 with over 45% of our design win projects in production and generating revenue. This aligns with the target we set at the beginning of 2025 and represents a more than 2x improvement of this key business metric. We anticipate this positive trend to continue into the first half of 2026, supporting our revenue growth in the second half of 2026. Our design win projects span multiple verticals. Tracking, fleet management and smart metering remain the strongest verticals for us with good presence in security and e-health and medical. Looking at smart metering, we are now shipping product for 3 projects of Honeywell and 2 of Itron and should have 2 new metering customers ramping early 2026. In fleet management, Geotab is ramping, and we will have another customer ramping in early 2026. We continue to have strong business with AsiaTEL, a channel partner addressing auto tracking and other vertical applications. Now I will briefly review the third quarter business and discuss our fourth quarter outlook. Let me start by highlighting that Q3 was the first quarter without any remaining revenue -- revenue recognition tailwind from the Qualcomm deal closed last year. While this has an optical impact on the licensing and services revenue component, it does not affect cash flow. Q3 product revenue was impacted by minor delays as some customer projects shifted their ramp-up scheduled to Q4. While this has postponed our expected Q3 revenue growth, we remain confident that the ramp will materialize in Q4 as planned. In addition, we faced some late production challenges with our OSAT partner and revenue fell short of our target due to substrate availability issue. The impact was around $1 million in Q3. Substrate lead times became extended last quarter due to industry demand from AI leaders. We mitigated this by working with suppliers and anticipating orders. However, our execution timing was right on the edge of the quarter end. This ended up delaying some of our shipments by a couple of weeks. However, this issue is now under control for our fourth quarter shipments. Given our Q4 visibility, our current Q4 view is that product revenue will exceed $6 million with around $1 million incremental revenue of services and IP licensing. We aim to finish the Q4 with revenue above $7 million by adding the 2 components. On the product development front, we launched our 4G Cat1 bis worldwide SKU module and have made very good progress on our 5G IoT. In this regard, I'm pleased to announce that we have just taped out our 5G eRedCap test chip as planned. This is a major milestone in our 5G IoT project. This program will enable us to sample our third generation of IoT chips supporting 5G eRedCap late 2026. This is an extremely advanced technology that we believe has significant value. In summary, our 4G IoT business will grow and generate positive cash flow in 2026, becoming a profitable business line for us with the potential to grow further in 2027 by around 50% year-over-year. This business is helping to fund our ongoing investment in 5G R&D, which can start generating product revenue in 2027 and licensing revenue in 2026. We expect the IP created with this 5G investment could result in strategic deals with significant near-term value creation as we have successfully demonstrated in the past with 4G. More generally, we have launched new IP initiatives and announced a portfolio of IP that we are willing to license. We have done a few licensing deals in the past, but here, we are shifting from an opportunistic approach to a proactive go-to-market strategy, maximizing our customer reach and accelerating the monetization of our IP portfolio, all without additional investment. Currently, we have several opportunities under discussion, and we hope to conclude a few of them in the coming quarters. We believe services and IP licensing should contribute high-margin revenue in 2026. We further expect longer-term product revenue strength based on current design wins and order backlog of 4G chips and module and radio transceivers. Considering the $300 million product design win pipeline, we currently have in hand and factoring that we will enter 2026 with 45% of the design win projects generating revenue, this could generate [ $45 million ] average annual product revenue over the coming 3 years. This doesn't include the growing number of projects that are expected to enter into production in 2026, the new projects we are working on to win or IP licensing and services contribution. On the operating expense front, our goal is to limit cash burn in 2026 in order to reach breakeven in Q4. To support this, we are implementing a 20% cost reduction program across functions while safeguarding core innovation. This approach provides downside protection and preserves flexibility to scale up if upside revenue opportunities materialize. I will now take a moment to discuss some of the IoT-related strategic alternatives we are currently evaluating. Since launching our Bitcoin treasury, we have been actively reassessing how best to position our IoT business to ensure shareholders benefit from its full value potential. Our Board is currently evaluating a range of strategic alternatives we have. While several options being explored, I can share that we are in serious discussions regarding a few strategic partnership opportunities for our IoT business. The objective is to accelerate the path to breakeven, enhance the business overall value and strengthen its cash flow generating capability. I will now turn the call over to Deborah to review the third quarter 2025 preliminary financial results in greater detail. Deborah?

Thank you, Georges, and good morning, everyone. I'll cover our third quarter financial results and then speak more about our Bitcoin holdings. Total revenues in Q3 2025 were $4.3 million, a decrease of 47.3% compared to the second quarter of 2025 as the last license revenues from Qualcomm finished in Q2 2025. Gross margin was 40.9% compared to 64.4% in Q2, again, reflecting much lower high-margin license revenue in the mix in Q3. Operating expenses in Q3 2025, excluding the unrealized loss on the marked-to-market of the Bitcoin treasury asset were $14 million, stable compared with Q2 2025. Both quarters included a number of nonrecurring expenses related to various legal and advisory fees related to our strategic transactions. Operating expenses in Q3 included nearly $800,000 in noncash stock compensation expense and $1.6 million in amortization and depreciation expense. As Georges mentioned, we are putting in place cost reduction measures to reduce cash operating expenses, meaning excluding stock comp and depreciation expense to be below $10 million per quarter in 2026. Operating loss was $20.4 million in Q3 compared to an operating loss of $8.7 million in the second quarter of 2025. The operating loss in the third quarter of 2025 included an $8.2 million unrealized loss on impairment of the value of our Bitcoin asset, which was mark-to-market. For the third quarter of 2025, our net loss was $6.7 million or $0.48 per diluted ADS compared to a net loss of $9.1 million or a loss of $3.59 per diluted ADS in Q2 2025. Net loss in the third quarter of 2025 included a noncash $20.6 million gain on the change in value of the embedded derivative related to the convertible debt issued in July and included net interest expense of $6.9 million that was also primarily noncash and related to the IFRS accounting for the convertible debt issued in July. Our non-IFRS loss in Q3 2025 was $11 million compared to a non-IFRS net loss of $8.1 million in Q2 2025. Cash and cash equivalents at September 30, 2025, totaled $13.4 million compared to $41.6 million at June 30, 2025. The September 30 balance does not include the $10 million final payment from the 2024 Qualcomm transaction that was released from escrow in October 2025, giving us a pro forma ending cash of $23.4 million. At September 30, 2025, the company held 3,234 Bitcoin with a market value of $365.6 million, all of which was pledged as security for the $189 million of convertible debt issued in July. Following the recently announced amendment of the debt agreement, 1,617 Bitcoin are being released from the pledge and the company has sold 970 Bitcoin in order to reimburse half of the debt. The remaining 647 unpledged Bitcoin remain in our treasury but are -- that are available for the previously announced ADS repurchase program if needed. I'd also like to refer you to our Bitcoin dashboard on our website at sequans.com/bitcoin-treasury, where investors can find our Bitcoin-related statistics in one location. We now have many tools in place to pursue our Bitcoin treasury strategy and strategic options for our IoT business. We will use these to maximize shareholder value based on our own specific circumstances. And now I'll turn the call back to Georges before we begin Q&A.

Thank you, Deborah. So to conclude this call before the Q&A, I would like to stress like the 2 points. On the Bitcoin, we continue to be committed to the Bitcoin treasury strategy we've launched. Given the current digital asset treasury market condition, we decided to adjust our treasury structure and redeem half of the debt in order to be in a better shape to execute on our Bitcoin treasury strategy. With this move, we have now a more appropriate debt-to-NAV ratio while still maintaining decent leverage, also put ourselves in a stronger position to execute on the ADS buyback program as well as other financial instruments. On the IoT business, our design win pipeline is growing well, and we remain on track to have by end of this year, more than 45% of the projects -- of the customer projects moving to mass production and generating revenue. In parallel, we are taking all actions needed to control our OpEx and limit cash burn with the target to reach breakeven in Q4 2026. And finally, we are seriously considering a few strategic alternatives to ensure shareholders benefit from the full value potential of our IoT business. With that, let's now begin the Q&A session. Operator?

[Operator Instructions] our first question comes from the line of Scott Searle from ROTH.

Deborah, maybe just to dive in quickly. In the third quarter, were there any licensing or service revenues a part of the $4.3 million, trying to understand if there was a sequential uptick in the product revenues. Also, I just want to clarify the timing on the OpEx going below $10 million. And Georges, from a high level, kind of looking at where the net asset value of the company is relative to the current stock price. How aggressive will you be on the buyback? If you got another 600 Bitcoin available to pursue that strategy, given the stock is trading at $7 versus net asset value around $12, would seem like it's a pretty good arbitration move to do that. So how quickly and how aggressively do you plan to tackle that?

Yes. I mean, Scott, first of all, and just to take your last point, as aggressive as needed and as the rational makes sense, right? I mean our Bitcoin value, the Bitcoin get acquired with the share at $14. So technically, if the share is at $7, you will be making 50% gain by selling a Bitcoin that you purchased at $14 and you recover the price you paid for it at $7, right? I mean, which is your share. So we have all in place. Board resolution is there. We were not able to execute on it in this period because, as you know, we were on the window. I mean, we were restricted and we could not act on this. But I don't know any 1 or 2 days, we will be free and we'll be moving on this. And obviously, consider depending where the stock is, but it makes full sense for shareholders today to buy back the shares of the company if it's trading low. And for the people staying with the company, we'll get the value of the NAV we have there. So we are completely committed to be aggressive on this if needed.

Scott, on the revenue side, we are about 2/3 product, 1/3 licensing and services in Q3. And in terms of the OpEx reduction, this is being put in place now. We expect it will be mostly realized in Q1, and we're looking at it fully in place by Q2, but with an overall for the year being below $10 million a quarter. And that includes the new cost of managing the Bitcoin treasury.

Okay. Very helpful. And then, Georges, maybe to follow up in terms of the pipeline building for the IoT business. It's a lot of momentum in 1 quarter where you're growing about 20% in terms of your design wins. I guess, you'll kind of enter 2026 at almost double-digit revenues, right, somewhere in that $10 million to $11 million, I guess, is the run rate off of that 45% that go into production. I think in the past, you talked about what you might be exiting 2026. Is there a figure that you're thinking about right now because it sounds like that gets you to breakeven, particularly given the OpEx reductions that you have ongoing, so we should see that by the fourth quarter of '26.

I mean, Scott, and the business, the IoT business, as you know, is many, many projects, and each project is not huge. So that mix, if you want like at the beginning, when you're ramping, it's a little bit slow and frustrating to some extent. But once the products are in shipment, our customer is shipping, it's there for 7 years in average, like if you take meters, sometimes even more than this. So -- and give us very good visibility for the future. We are -- I'm very happy as we are exiting this year close to our range of 50%. But this will continue because, as you know, the design win project I don't qualify them like 100% secured, but we could have the risk on what we have a win in hand is very, very minimum. More than 90% based on the history of the project continue, I mean, except really some small projects or small company that you could have over the execution of projects, some surprises, but we are dealing with Tier 1 players that are there when you decide to launch a project they are in. It may take them longer than what we thought to be ready for production, but they get it there. So we -- I believe 2026 will continue ramping, and we should be -- because the pipeline will continue, I could not say what we have in hand today, maybe close to 90% plus will be in production. But obviously, in the meantime, we'll be adding new projects. So when we exit, the pipeline should be more than [ 300 ] exit '26. And obviously, the percentage will be less than 90%. But this is what will be funding the growth we'll have in 2027, which I predict to be at minimum 40% to 50% year-over-year, thanks to this.

Just one point on Q1, we do tend to have a little bit of seasonality in.

I mean in that case, the average -- your number, you're right. I mean just to talk about the digital, I'm giving you the [ $45 million ] 3 years average, right? I mean all this is ramping. You imagine the shape because the new projects starting today is not going to yield that full revenue in the first quarter. It takes like 2 quarters or 3 quarters to go to the full revenue. So there is a ramp-up phase, obviously, with every project adding up.

And a couple of follow-ups, if I could then. Congrats on getting the tape-out on the RedCap front. I know that's a big milestone for the company. I think you've talked about licensing opportunities for RedCap. I wondered if you could elaborate on that in terms of what might be in the pipeline, kind of frame in terms of size and opportunities. And IRIS has been ramping up as well, I think, in terms of the potential opportunities. I'm wondering where that fits into the overall design win pipeline that you've talked about, the magnitude of those opportunities, particularly ramping into 2026.

Yes. I mean, obviously, in IPR licensing, we have some piece of this, which is established even in our revenue next year. We have already in the backlog revenue of royalty that we are collecting from a couple of customers to whom we did licensing with them, and we'll have other words of design win with licensing and now we're collecting a royalty in 2026. We collect even with one a little bit this year as well. But since we launched this IP strategy, we realized like at least we had more than a dozen of leads talking with us. It doesn't mean that they need the full RedCap -- the full eRedCap or RedCap solution from us. As you know, we have a very advanced radio transceiver technology. We have layer 2, layer 3 protocol that no one have it. And obviously, we have a lot of IP in the modem. And as well, we have the full solution. So you could have customers whether looking for a full solution of modem, mainly to adapt to move from a cellular to something else, if you want, like to satellite or defense application, other radio environment. And some other, they want just only a piece of the technology what we have. So we're talking about licensing deal that could be, I would say, $3 million to $5 million license. I'm not talking about royalty like upfront. Up to these, they could be equal to $15 million, $20 million and all those under discussion, and we have really nice number in discussion. And for sure, next year, we'll have something converging and helping to feed our IP licensing revenue next year.

Got you. And lastly, if I could, George, just to follow up on the strategic comments. Can you frame that a little bit more? Are you talking about more partnerships? Or are you talking about potential outright sale of the IoT business at the current time?

Yes. Scott, I don't want to comment much on this. Obviously, the question -- take the problem like this, like, okay, the company has a serious IoT business, which is extremely valuable, in my opinion. It has as well a nice Bitcoin holding, which is extremely valuable as well. And from there, we're moving as a company to hopefully succeed on both front, building more Bitcoin and building the treasury and buying more -- accumulating more Bitcoin. And on the other side, scale the revenue and the IP potential of the IoT. For the time being, they are not conflicting to each other. They are manageable. But if you project down the road, you could say maybe for shareholders, you can give more value by separating the tool, by doing something different, I would say that. And obviously, this take the factor as well discussing with other partners on the business front to do some strategic partnership and maybe more together. I cannot say more, Scott, I mean, allow me, but you have serious discussion there. And hopefully, when things will be close to sign or signed, we'll be able to announce it to market.

And our next question comes from the line of Mike Grondahl from Northland.

George, talk a little bit about your confidence in $7 million of revenue in 4Q and this $45 million kind of annual run rate you're striving to?

Yes. Mike, obviously, for Q4, I mean, you never say I'm 100% sure, right? I mean we're giving a number that we believe it's in the backlog, if you want, and secure out of, I would say, extraordinary accident, we are very confident about it. If we talk about the annual revenue, I want just again to stress the math I did is I took 45% of the $300 million, which will be in production divided by 3, give you $45 million over 3 years. So this is the average. Obviously, this doesn't mean necessarily that it's flat first year, flat second year, flat third year. It's the reverse. It will start lower and it will go up over 3 years because you have the ramp of those products. And obviously, it's quite -- I'm quite comfortable with the number, even if the projection here, you're talking about longer program. You need to know that in our design win today, when I look, for example, to product shipping, I spoke, for example, about Honeywell. I can name even a smaller guy like Withings, like Coyote, like -- customer like this, that -- they are smaller, but very steady because they ship since more than 1 year. So we have history about their ramp. We know that they are -- how much they do, and we have extreme confidence in their future projection, forecast and so on. Obviously, we can -- we take our, I would say, optimization there. We -- maybe cut 10% for the risk things, but we are very confident. When you have a new project coming in, like even a Tier 1 customer saying, okay, now my product is shipping and I'm planning to ship like per year, let's say, to do 0.5 million units. Obviously, you are going to compute the ramp. First year, maybe 200, the second 350 and then we ramp up to 500. There is still some risk not factored in, which is related to the fact if this customer, we have, if you want, experience about his previous shipment, previous forecast and so on. So in other words, in this number, already more than half of those 4%, 5% are already in production. I'm extremely confident about them. The other half are ramping now like Q3 and Q4. There will be a little bit of risk, but measurable risk. That's why we're presenting this one.

Got it. And the cost reduction efforts, have you started those? Or do those start later this year?

We started many things. And again, cost reduction, we have a lot of stuff. We have -- even I can tell you, for example, our offices, we shave like -- we had the chance to renegotiate pieces of the OpEx, third party and so on. And obviously, some reduction here and there when it's needed. We started a little bit and some of it, not everything is implemented, but some is defined. As I'm speaking, I know what we are going to do if you want in Q4 and Q1. And all this is set without impacting, if you want our innovation and investment into the 5G R&D. A lot of this as well, like our 4G, if you want, product line is becoming fully, I would say, mature because we were still working on some development during the year, we finished it. So we have even some reduction of effort there. And more general, I would say, on the G&A and so on controlling the spend.

Got it. Got it. And then have you disclosed what you -- what price you got per Bitcoin for the 970 you sold?

We didn't. It will be on our -- it will be showing up on our website, but I can give it to you, it will be [ $108,600 ]. Unfortunately, we didn't have the best period to sell, started selling at [ $115,000 ] ended by selling at [ $106,000 ].

Our next question comes from the line of Fedor Shabalin from B. Riley Securities.

Georges and Deborah, I completely understand the rationale behind the Bitcoin sale. You mentioned that this transaction enables our company to pursue a wider set of strategic initiatives to develop and grow the treasury. So could you provide more details on what additional initiatives you're considering beyond the ATM program and share buybacks? And any color on your strategic priorities here would be helpful.

Fedor, thanks for the question. I mean, essentially, and again, I want to stress one point. The company when -- one of the issues, if you want or the structure of the debt, there is -- it was not the risk even some people -- I don't know if people were -- because the collateral was fixed. We didn't have to readjust the price of the Bitcoin. It was just not the collateral is all the Bitcoin that we have and they are sitting there, we cannot do anything with them. If you cannot do anything with your Bitcoin, obviously, your -- the original plan was like the debt will convert at least over the first 6 months and so. And then by definition, some of those Bitcoin will be free and from there, we can use them. So we took this initiative really not under the pressure because we have interest rate to pay or because we are afraid about having the Bitcoin at $100 and have to face any issue. The company will not face any issue even if we stay on this Bitcoin longer. However, the company was stuck. In other words, I could not do anything. I cannot buy Bitcoin. I cannot generate yield on the Bitcoin. I cannot be aggressive on buyback because you can do a buyback, but at the end of the day, I have cash, but this cash needs as well to serve the operational business and the G&A even to manage the treasury. From this situation, we felt like even if it's not -- I will say, maybe we are the first treasury doing this, and we took the decision to act to be proactive. Maybe some people, they don't like it because no one sells Bitcoin in principle in the treasury. I mean, this is -- our aim was as well, but we felt it makes absolute sense now to change the ratio of debt, this often obviously preferred other structure of debt, which is today, I mean, it's not unusual topic for the company. But now they are possible because if your debt is around 30%, it's easy to have 10% preferred next to it. And if you reduce the debt further, you can do more. So this is one option. If we have free Bitcoin, those can be generating yield depending on the risk you want to take there. But if you want to take a very low risk, you can generate like 4% yield, and this will be nice cash that you can use to buy Bitcoin or to fund the G&A of serving the treasury. And obviously, the buyback that gives us -- that boosts the program because we don't need to sacrifice anything on the operation. If really the share stays low, the rational means sell Bitcoin and buy shares and support the shareholders staying with us. So that's the whole logic around it. This is really on the topic that we have. Now I know that there are other topic, if maybe you're raising for this, which is like consolidating and something with other treasury. I know that one happened in the market today and everybody saw this, I don't believe there is urgency on this. For me, honestly, there is not a clear idea currently what's the issue of the treasury strategy in general, why all this is trading below our NAV, which is not logical at the level where it is. And this is not for us, for all our peers. So we're trying to unlock it from where we are by taking -- put ourselves in a position where we are much stronger. And from there, we'll see how things will develop in the coming 6 months or so.

That is helpful. And you already partially answered my follow-up question on debt-to-NAV ratio. But I just want to understand what will be different in the treasury approach going forward? I heard you plan to issue preferred, but if you can just throw some time line on this would be helpful.

Yes. I mean, Fedor, obviously, I mean, the first priority now is really the buyback program. This is what I have on my table, if you want to execute on this and see how things will develop there. And obviously, the second one will be the preferred and the yield on the Bitcoin. These are the 3 options. No time line. Honestly, the option is there, but I don't want to give more time line when we'll do something like this because it depends on negotiation and so on.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Georges Karam for any further remarks.

Thank you, Jonathan, for helping us with this. Thank you, everybody, staying on the call and for all your questions and looking forward to see you in the next opportunity. Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.