SEQUANS COMMUNICATIONS Q2 FY26 earnings call SQNS

Sequans has substantially concluded its Bitcoin treasury strategy, completing the full redemption of its remaining convertible debt funded through Bitcoin sales. The company ended Q2 FY26 with approximately $21 million in cash and 314 Bitcoin, valued at $18.4 million at current market prices. This leaves Sequans with a strong, debt-free balance sheet and financial flexibility. The remaining Bitcoin holdings will be monetized opportunistically, with management noting that while there is no immediate urgency, converting to cash is preferred by suppliers and shareholders.

The IoT semiconductor business continued to build momentum in Q2 FY26, with revenue of $7.5 million, exceeding guidance. Product sales increased by over 80% year-over-year and 39% sequentially. This growth is supported by strong order momentum and a growing backlog that now extends into 2027, providing increased visibility and confidence in the product growth trajectory for both the current and next year. Over 40 design win projects have reached mass production, with several expected to generate over $4 million in annualized revenue starting in 2027.

The design win pipeline, measured by potential three-year product revenue, continues to expand beyond the previously reported $300 million. At quarter's end, 55% of this figure, representing approximately $165 million of design wins, is in mass production and generating revenue, marking a more than 3x increase year-over-year. This percentage is expected to continue increasing as additional customer programs move into production. In Q2, Sequans secured 10 new project wins leveraging CAT M and CAT 1bis technologies, while transitioning a similar number of projects into mass production.

The RF transceiver business is gaining momentum with strong demand from existing customers and growing interest from new prospects in the defense and drone markets. Sequans began shipping its SQN9506 development kit platform to prospective customers and secured its first drone program, with product shipments expected early next year. This business is projected to scale to $10-20 million per year with margins exceeding 90%. Development of the 5G eRedCap solution remains on track, with test chips in-house and customer sampling targeted for H2 2027, positioning it as a key industry standard for long-term strategy.

The licensing and services business continues to be an important source of high-margin revenue. While its contribution was modest in Q2, a meaningful increase is expected in H2 FY26 as several active licensing and strategic engagements convert into signed agreements. These opportunities range from several hundred thousand dollars to well over $10 million, expanding Sequans' strategic reach into new markets and applications, providing significant upside to revenue, and supporting the path towards breakeven.

Sequans continues to navigate a challenging supply environment, with memory remaining the primary constraint and increasing pressure across silicon and packaging, expected to persist beyond 2026. To mitigate this, the company is implementing multiple sourcing options and passing through higher component costs to customers. The focus remains on disciplined cost management and reducing cash burn, with the objective of moving towards a breakeven operating run rate as revenue scales. The company aims for a recurrent OpEx level of $10 million per quarter.