Good morning, ladies and gentlemen, and welcome to the Sequans Communications Fourth Quarter and Year-End 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, February 11, 2025. I would now like to turn the conference over to Kim Rogers, Investor Relations at Sequans. Please go ahead.

Thank you, operator, and thank you to everyone participating in today's call. Joining me on the call today from Sequans Communications is Georges Karam, Chairman and CEO 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 can find a copy of the release on 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 plans, strategic options, the ability to enter into new strategic agreements, expectations for Massive IoT 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 and 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, Kim. Good morning, everyone. I would like to thank you all for joining us today. I'm excited to review our remarkable transformation in 2024, a year that demonstrated our resilience, showcased the strength of our cellular IoT intellectual property and product portfolio, and positioned us for sustained growth. A key milestone was the successful completion of the $200 million Qualcomm deal. This transaction ensures the future of our 4G IoT business and advancement of our 5G RedCap and eRedCap solutions, while also significantly improving our financial position. Energized by the momentous event, we doubled product revenue in the fourth quarter compared to the previous quarter. We delivered $11 million in total revenue, representing a 9% sequential increase in line with our guidance. Notably, product revenue in the fourth quarter increased to $4.7 million from $2.4 million in the prior quarter and $4 million in the fourth quarter of 2023. Also, we are highly encouraged by the positive response from our customers and partners following the Qualcomm deal. The strengthening of our financial position has been a catalyst in securing our design win pipeline, new customer acquisition, and new project wins. The deal also validates our technology leadership and reinforces the superiority of our products, which are fully optimized for IoT application, where power efficiency, radio performance and costs are critical factors. I'm gratified to conclude 2024 with the strong fundamentals that position Sequans on a robust trajectory toward growth and sustainable long-term success. Switching gears to discuss the factors we believe will drive product revenue growth over the next 2 years, let me walk you through the 2 main drivers. The first is our design win pipeline and how the corresponding project wins will move into mass production in 2025 and 2026, converting into Monarch 2 and Calliope…

Thank you, Georges, and good morning, everyone. Before we get started, please note that the financial results released today are preliminary. Our final results are subject to finalization of audit procedures and preparation of full disclosures to be filed in our annual report on Form 20-F in April. Revenues for the full year 2024 increased 9% from $33.6 million in 2023 to $36.8 million. Gross margin for 2024 remained strong at 75.5% versus 71.8% in 2023 primarily due to a product mix weighted more toward chipset sales than modules compared to 2023. Product gross margin for the year was 35.1% compared to 6.2% in 2023. Over time, we expect product gross margins to be in the mid-40s as we transition from more module sales to chipset sales. In addition to lowering our operating expenses, we benefited from the $152.9 million gain from the Qualcomm transaction in 2024, which was the main driver behind our achieving an IFRS operating profit of $69.5 million, up from an operating loss of $29.8 million for the full year of 2023. On a non-IFRS basis, our net profit was $77.5 million in 2024, or $2.73 per diluted ADS compared with the non-IFRS net loss of $30.6 million, or $1.36 loss per diluted ADS in 2023. Turning to our fourth quarter results. Revenues for the fourth quarter of 2024 increased 130% to $11 million, up from $4.8 million in the fourth quarter of 2023, and increased sequentially by 9%. Product revenue reached $4.7 million in the quarter and accounted for 43% of total revenues compared to 83% in the fourth quarter of 2023 and 23% in the prior quarter. Product revenue doubled sequentially and increased 19% from the year ago period. Licensing and other revenue was $6.2 million, an increase compared to $802,000 in the prior…

Thank you, Deborah. Operator, we are ready to open the call for Q&A, please.

[Operator Instructions] Your first question comes from the line of Scott Searle with ROTH Capital Partners.

Nice to see the design activity starting to reaccelerate. Georges, maybe to just dive in on the $250 million preexisting wins. I thought I heard you say $50 million to $60 million of that should start to be the annualized number as we get out to '26 and beyond. Just wanted to clarify that. And then in terms of the ramping pipeline leading up to CAS and post-CES of $200 million plus, can you give us an idea in terms of some of the applications that you're starting to see that inbound interest on. It sounds like they are faster turn design cycles. So maybe if you could talk a little bit about some of the applications, some of the design cycles as well as the technology implementations right now? Is it mostly Cat 1bis? Are you starting to have those RedCap discussions?

Scott, thanks for the questions. Starting on the $250 million, your understanding is right. I mean we're talking about -- because the pipeline of $250 million, as we said, it represent 3 years revenue for each project from the launch date. As all of them are Latin production, so we cannot talk about $250 million to do over 3 years. Reality is more than 4 years if you look to the details of the project. And I mentioned that more than 50% of this is coming from metering and those are projects that they tend to have quite long time to revenue, I'll say, ramp. So as such, if you divide $250 million over 4 years, 4 years plus, we're talking about an average of $60 million, which obviously, we see it in the second half of this period of 4 years, which means our planning -- and again, I'm giving those guidance to help investors understanding how the company -- why we are confident about our financial goal for 2026 is essentially the design win in hand, which is very solid and customer committed, and we sold ups and downs with Sequans. We are on it, and they are real. Unfortunately, it took longer than expected for many, many reasons that I explained, but they are happening. And once they turn to production, they will be there for many, many years. And on this basis, if you compute all this, you will see like the company has in hand an average $60 million over 4 years. Obviously, we are not there today. We'll be there and approaching in 2026 and will exceed it beyond 2026. That's what I was saying. And obviously, this helped one input, I would say, for the breakeven point. The other one is the one…

That's very helpful. And Georges, if I could follow up on your comments, both on China and Ublox. I'm wondering how many of those conversations are a direct result of the geopolitical environment with China? And as it relates to Ublox, is the opportunity there for you to pick up those design wins going forward from a module perspective? Or are you looking to attack it from a couple of different angles with your existing module partners?

Yes. I mean, Scott, definitely, it's always hard to say why a customer is coming to you, but the dynamic around China and the dynamic around Ublox. So I call it like the limited number of OEM or let's say, even the sustainable business model of those guys where they are stuck a little bit between the chip price and the EMS and the value that they can offer to this is positioning Sequans really in a unique position. And customer understood that they need to play with Sequans to have a real double sourcing strategy, if I have to call it like this or at least an angle of innovation and flexibility of what we are providing. Yes, definitely, on the deals we are talking, it's not like they are new customers, and we didn't know those guys, but the tension around it and the position of Sequans in the short list and so on, obviously, is influenced by what's happening around or helping us. So I don't want to cry victory before getting them design win, but we feel very good about this, and this is helping us indeed.

Great. And maybe lastly, if I could, licensing, it sounds like there are discussions cropping up on that front again. And not to get too far ahead of any culmination of new relationships, but RedCap puts you guys in a very unique position going forward versus the competitive landscape. How are licensing deals progressing on that front? How is RedCap doing in general? I think it's very important in terms of the product and differentiation road map for you guys. But it sounds like customers are responding to that. And lastly, Deborah, from a cash flow perspective, it sounds like you guys are tightening up a little bit. Just want to get your thoughts in terms of cash burn until breakeven in '26.

Okay. Scott, I mean, obviously, this is a very important element for us. And I'm talking even beyond licensing. We'll develop this more as soon as we have more, I would say we'll be in a position to talk about it. But we are attacking -- we did very good deals in the past on vertical and licensing. And we are really learning from our lessons to make it much more sustainable and stable there. So definitely, we are progressing on this front. And we'll have more to say to the market this year about the results hopefully, we'll be able to achieve. That helps, obviously, not only the cash burn but help us -- as I said, we have market that we do know how to address it or segment market, we do know how to address it today other than through partnership. And we have technology that can go to a market, which is not the cellular market, where customers are happy to pay customization of the software around it and buy the product, this is because it's not only licensing by chips and modules at high ASP or higher margin. So this is something definitely we want to develop to create like a second leg for the company that obviously will help our breakeven points, if you want, going forward and the growth of the company down the road. And obviously, the fact that we have a RedCap, you need to keep in mind that all our investment in 5G that we have done in the past, 5G broadband, we didn't throw this away. I mean we have this IP and we own it. And this is really our RedCap but also what the acquisition of ACP helping us to accelerate mainly the RF investment IP, but other IP as well. to bring the RedCap in an efficient way to market, I would say, right on time, but also with minimum effort and R&D spending. So this is really very positive, and I'm very optimistic about bringing good news to market with those elements. And on cash, Deborah?

Yes, on the cash. So Scott, we've sized the company and the operating structure so that we feel comfortable that even in a conservative scenario, we have adequate cash to take us to the breakeven point even if that is in the second half of 2026. As I mentioned, we're looking now at an operating cash structure that's less than -- or on average, $10 million per quarter. We also have -- continue to have good financing coming in from the government projects and expect that in 2026 as well. And we're also expecting to collect all of the escrow amount from the Qualcomm deal at the end of September, which is $10 million coming in as well. So I think we feel pretty comfortable about the cash position.

Great. Look forward to seeing the product revenue continue to ramp.

[Operator Instructions] And I'm showing no further questions at this time. I would like to turn it back to our CEO, Georges Karam for closing remarks.

So thank you again for joining the call all. We remain confident, as I said, in our ability to achieve operating income breakeven by 2026. Our optimism is fueled by key design wins in our pipeline moving to mass production as seen in Q4 and the addition of new customers in 2025. We are focused on increasing our market share in underpenetrated IoT markets with faster time to revenue. We are developing new vertical markets and delivering the best next-generation products. This strategic focus on product differentiation, innovation and market expansion will drive growth in the years ahead. I extend my heartfelt thanks to our team, partners and investors for their unwavering support and dedication. Thank you very much. Operator, we can close the call.

Presenters, and ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.