Sequans (SQNS) Q2 FY26 earnings call: guidance and Q&A

Is the target of operating breakeven in H1 FY27 still on track, given the 55% design win pipeline now in production?

Georges Karam confirmed that the company is on track to be very close to breakeven or breakeven on a yearly basis next year (FY27), supported by continued product growth, cost control, and services revenue.

“So we expect definitely sequential growth, the growth to continue on our product. And to support our breakeven is essentially, it takes two other elements, obviously, continue controlling our cost structure, which is something definitely we are committed to, and we will continue doing this as we move forward in the second half. But also, obviously, there is a second component which can a little bit play on the margin, which is the services revenue. So yes, with these 3 points, that's the target to be next year in a position very close to breakeven, if not breakeven on a yearly basis globally.”

asked by Scott Searle · answered by Georges Karam

Have licensing opportunities expanded beyond the previously discussed 2-3, and will they finance operations until breakeven?

Georges Karam stated that licensing opportunities are maturing and on track for H2 FY26, with a handful of very advanced discussions. He also mentioned government grants of $4 million+ annually, with a $3 million+ chunk expected in H2, contributing to financing operations.

“Yes, absolutely. I mean the opportunity we have in hand, they are maturing. Definitely, they are closer, I would say, as predicted, we already, from the beginning of the year, we estimated that this will happen in the second half. So we are on track on this.”

asked by Scott Searle · answered by Georges Karam

What is the revenue expectation for the RF business in '26 and '27, and is the OpEx target of below $10 million achievable in H2?

Georges Karam indicated the RF business could scale to $10-20 million per year with 90%+ margins, expecting to approach $5 million next year and $10 million+ the following year. Norman Brodt confirmed the target of $10 million per quarter for OpEx and plans to achieve it in H2.

“So I'm expecting in the second half of the year to get more and more from those designs secured. Now the potential of this, honestly, it's big if we are able to reach to all those customers. And we're still in our early phase to really estimate exactly where we can go there. But thinking like this is a business that can scale to $10 million, $20 million per year with a margin closer to 90% plus. We're talking about very high-margin sales. So this is really very important for us, and we are focusing on it every day, and we have the full team committed to this. Now where we will be next year, definitely, hopefully, maybe we should be approaching on the RF more than $5 million for sure and scale this to $10 million and plus the following year. That's what I hope at minimum.”

asked by Scott Searle · answered by Georges Karam

Is full liquidation the goal for Bitcoin holdings, and what is the timing given current market conditions?

Georges Karam stated the company's intention is to convert Bitcoin to cash as soon as possible, but there is no immediate urgency. They will be opportunistic, waiting for a 'decent' price, acknowledging that suppliers and shareholders prefer cash over Bitcoin on the balance sheet.

“The most logical way is to turn this to cash as soon as possible. On the same time, we don't need really the cash immediately, and we were talking about licensing deal that we could have as well with more money. We have money from the government coming in. So we don't really see, feel the pressure where we are today to go and liquidate at the price we are today.”

asked by Owen Rickert · answered by Georges Karam

How much of the organic growth was volume-driven versus pricing-driven, and how sustainable is this growth rate into H2?

Georges Karam indicated that price increases were below 5% in Q2, with the majority of growth coming from new projects turning to production. He expects the growth trend to continue next year at a similar level.

“But the majority of the growth is really coming from new projects turning to production. And obviously, this is where it's coming. And the growth, we are positioned to continue growing.”

asked by Owen Rickert · answered by Georges Karam

What is the expected cadence for the remaining 45% of the $300 million pipeline to convert, and does the drone defense win revise this figure upward?

Georges Karam noted that 10 points of conversion (from 44% to 55%) occurred in 6 months and aims for another 10 points by year-end. The drone defense win is part of the expanding pipeline, which will be updated at year-end.

“I should say today, our CAT M technology in general, people are moving very, very fast on the CAT M. CAT 1bis, which is really ramping, still has more room there to convert to design win. So, technically, I don't know if I should say towards the end of the year, we should add another 10 points. This will be my own target, if you like, if I look to the past.”

asked by Fedor Shabalin · answered by Georges Karam

Quantify the impact of product mix versus memory input costs on Q2 margins and provide an outlook for gross margin trend.

Georges Karam explained that high-margin licensing revenue impacts overall GM. Product-only GM target is 35-40%, with chip GM >50% and module GM >30%. Fixed costs (3-4 points) will improve as product revenue scales. Memory cost increases were below 5% in Q2 but may rise in H2.

“If we focus only on the product, the rule for us is like, let's say, what we are trying to achieve is like to be on the chip gross margin above 50% on the module gross margin to be above 30%. This is more or less the rule of the industry.”

asked by Jacob Stephan · answered by Georges Karam