Ladies and gentlemen, thank you for standing by and welcome to the Sequans Third Quarter 2015 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions will be given at that time. As a reminder, this conference is being recorded. Before I turn the call over to our host, Mr. Georges Karam, I would like to remind you of the following important information in behalf of Sequans. This call contains projections and other forward-looking statements regarding future events or our future financial performance. All statements other than present and historical facts and conditions discussed in this call, including any statements regarding our future results of operations and financial positions, business strategy and plans, sources of funding, 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 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 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. Please go ahead, sir.

Thank you, Craig. Good morning, ladies and gentlemen. This is Georges speaking. I’m with Deborah Choate, our Chief Financial Officer and both of us are very pleased to welcome you to our third quarter 2015 results conference call. Before giving more details on our business by segment and by region, I would like to start by summarizing some of our major accomplishment this quarter. The first is in terms of revenue growth. In the third quarter, we reported a 25% sequential increase and a 45% year-over-year increase in revenue. Looking at year to date comparisons as another indicator of our momentum our LTE revenue in the first nine months of 2015 increased by more than 85% over the same period last year, when we still had significant amount of WiMAX related revenue. The second point to highlight is that our shipments accelerated in all geographies. Q3 revenues were fairly evenly split between the United States and emerging markets reflecting the acceleration in shipments for the successful JetPack portable router. Shipment for the two new Android tablets and sales to a growing list of customers serving emerging markets with some of them addressing also India and China. Also we are happy to see that we continue to diversify our customer base. In the third quarter, we had significant revenue from more than half a dozen different customers, which indicates a broader base of customers. For example, we sold two M2M routers shipping in the third quarter, one CAT 4 and another one CAT 1 LTE. We expect to farther diversify our list of customers each quarter as we being to ship for several new devices in the fourth quarter and beyond. Another point to highlight is that we are shipping the broader single mode product portfolio. We have established our leadership…

Thanks, George, and hello everyone. I’d like to add some details about our Q3 financial results and discuss the financial outlook including our guidance for Q4. Revenues in the third quarter 2015 were $9.4 million, a 25% sequential increase from Q2 and a 45% increase compared to the third quarter of 2014. We had three 10% customers in the quarter, a distributor for several aging customers with 28.8% of the total, a Taiwanese ODM with 27.4%, and a Taiwanese OEM with 13.8%. We realized an overall non-IFRS gross margin of 41% due mainly to a more favorable revenue mix. Operating expenses were $8.1 million in Q3, a slight decrease from Q2 reflecting ongoing cost control measures as well as Q3 being our lowest quarter for R&D expense seasonally. Our third quarter operating loss which included stock-based compensation expense was $4.2 million compared to an operating loss of $6 million in the second quarter and an operating loss of $8 million in the third quarter of 2014. Net loss was $2.4 million in Q3 which included the benefit of re-measuring the embedded derivate in our convertible debt. This compared to losses of $7 million in Q2 and $8.1 million in the third quarter of 2014. Basic and diluted loss per share was $0.04 in the third quarter 2015 based on 59.1 million shares outstanding compared to net losses of $0.12 in the second quarter and $0.14 in the third quarter of 2014. To facilitate comparisons we have also reported our results on a non-IFRS basis, which excludes for net loss, the non-cash fair value and effective interest rate adjustments related to the convertible debt and its embedded derivative which were issued in April 2015, the impact of the revaluation of the interest rate government loan issued in September 2015 and as…

Thanks Deborah. So, before taking your question, just to conclude, I would like to summarize and say really I’m very happy with the progress of execution of the company, things are really moving extremely great, momentum is accelerating and I’m looking really to have a great 2016 year obviously closing a good Q4, and go beyond Q4 for a great 2016. The foundation of this belief, as explained previously, essentially is based on two cornerstone and two major segments that are building in the company, the first one which is the home and portable router which is really moving very well in the emerging market, but continuous as well that our success in the U.S. is accelerating after the JetPack and we expect to see more devices launches in this segment in the United States on multi-operator next year and this should really keep it growing and bring to us more revenue next year. The other segment, major segment, as I mentioned, which is very exciting one and it has huge potential this is the M2M/IoT whereas you see the whole ecosystem is really moving in the direction that we thought and we initiated somehow by explaining to the people that IoT and M2M can go LTE, now the full standard is really focusing on this if you go to the 3G, we all want to talk about is about new releases for this segment of the market. We are happy there by having already few devices launching in the U.S. and more to come in the fourth quarter and the first quarter next year, device that they are just only finishing certification and they will be ramping in terms of revenue, extremely excited about the partnership we built with module partners on their side as well accelerating and leading the market in terms of - with our Category 1 solution to generate more business and build for us revenue for next year. And obviously, we are really there on the forefront keeping investing in R&D to come first with our CAT M technology, which is going to be the next wave for M2M/IoT that will bring other than the cost advantage it will bring a competitive solution to 2G with very low cost, but on top of this, it gives you very low power solution and delivers extended reach technology. So, this will be really a huge, I will say a great technology for this IoT application. So with all this, we cannot be more than pleased and we hope to keep going in the same direction and deliver more and more results next year. Thank you for listening and I will be very happy now to take your questions.

Okay. [Operator Instructions] And one moment please for the first question. Your first question comes from the line of Anthony Stoss from Craig-Hallum, please go ahead.

Hi guys, congrats on all the progress, it’s really exciting to see for you guys. Three questions, George could you talk or give us a little more color on the European public safety win, maybe some help on what it does, what vertical it’s going into, secondly the Gemalto ramp if you can lay out again next year how you see that playing out and then Deborah if you don’t mind telling us or sharing with us what your new breakeven point is on revenue per quarter, thanks.

Hi, Anthony. So, on the first question on the public, on the European I can’t, obviously it’s still confidential, so if you don’t mind it’s very hard for me to comment on this without really giving indication, but obviously it’s a vertical market. It’s Tier 1 name, I mean in Europe so it could be almost obvious to know who is the guy, but this will become public soon and we’ll be able to talk about it I believe maybe in Q4 when the customer will be talking about major application, but the first project there is really a major application that they have and as I said this is really more about a lot of service revenue and NRE and sophisticated technology that they are bringing there. Going to the second question regarding Gemalto, I’m very pleased and extremely happy with the progress with them. As you’ve seen, they announced their product, the first module CAT 1 ready for the U.S., they are sampling this and also said CTIA, so, and we - this is one of a series. So we have other stuff as well in the pipe to address other regions, and also the engagements with many customers, we see many, many projects where Gemalto is moving well and again I cannot speak for them, but I hope this is really going to be major revenue stream for us starting next year. Obviously, will see trends extending ramp up because we are talking here about the U.S. first or let’s say Verizon first module, customer related to this and the end to end market you need dollars to keep in mind you know it better than me Anthony that this is really kind of sales cycle, it is a little bit slow because from winning the design and launch the project you could have some time to go, but I’m expecting the second to start shipping to Gemalto in Q1 and have accelerated revenue in the second half next year.

And in terms of breakeven, at this point we haven’t revised our expectations. We still believe again depending on mix that we should be in the range of between $17 million $19 million depending on the mix of the modules and chipsets.

Okay. Thanks, congrats guys.

Thanks.

Thanks Anthony.

Your next question comes from the line of Quinn Bolton from Needham & Company. Please go ahead.

Hi George and Deborah, congratulations on the nice results. Just wanted to follow up on the IoT and Gemalto ramp, you talked about a number of IoT or M2M wins that you have secured directly, as well as the Gemalto relationship, if you look at 2016 do you have a sense of how the revenue splits between the designs that you secure directly versus those that you secured with Gemalto?

Well, for sure, I mean it’s just I’m thinking how I can comment on this. Obviously, I announced about - we have design win and you know directly and those design wins that will go to all our modules so because we are in position with some of the customers taking directly our modules, some for example like Encore has launched their CAT 1 router, you saw as well the NetComm routers and I mentioned that we have four to come between Q4 and Q1, some of them are big volume as well and some are for the CAR application. And obviously all this business will continue because we have some businesses going like this where the people prefer to buy the module from us and we have all these old relationships developing with Gemalto on many angles, customer that Gemalto [indiscernible] I will say they used to sell to them 2G 3G and customer that they would like to take from their competitors, but Gemalto business will be more chipset business obviously because they will be selling the modules themselves. So, it’s very hard to give an indication for the time being or give any percentage, I’m afraid that it can more confuse you than give you something clear on this, but definitely we will have a direct customer which is quite solid next year in the M2M related to the module and could be more than two digit number in terms of dollar amount in terms of million.

Understood and then the second question just speaking of the mix between chipsets and modules, the Gemalto the Verizon Jetpack those are chipset wins where some of the direct IoT, those tend to be more modules, give us some sense what the mix between chipsets and modules might be if you look out to next year?

We’re still targeting very honestly to keep our business, majority of it is chipsets and this is really from the deep belief that we’d like to have Gemalto winning more accounts than us competing with them, and some application it makes sense for us because you can have some applications, they are more consumer oriented if you are on in the IoT space then Sequans can play there because Gemalto they play much more the M2M space. So, depending on the segment of the market we can have there and our plan today the way we see that may be the mix between revenue module in general and chipsets should be maybe 70% 30%, 25% 75% something like this, the biggest portion is obviously for chipsets.

Got it. And then two for Deborah, Deborah you mentioned in the 2016 outlook where you expect significant growth versus 2015, you made a comment about seasonality in Q1, can you talk a little bit about what the seasonal factors are, is that sort of a ramp down of tablet business, which of course I certainly could expect, but is there any seasonality in the JetPack business or other seasonal factors we should be thinking about as we think about the models?

I think the seasonal factors are more business - general for our business, so for example, in Asia with the Chinese New Year or the Lunar New Year we typically have lower manufacturing activity going on and obviously following on a lower business activity with as we pass the holiday season. So, I think what we’re - typically we expect the first quarter to be more or less flat compared to the fourth quarter, reflecting the seasonality.

Got it. And then you guys did a very nice job managing cash in the third quarter, you talked about some of the additional sources of funding that you already have or already expect to secure or to receive in 2016, is there a funding gap that you still think you’re looking to close with some of these strategic relations relationships that you can talk about or is it difficult to give us a range just because that might imply sort of a forecast for profitability your revenue next year?

Our working extension right now is that were funded. We are funded to do the business plan that we are working towards. Obviously as we said in the past quarter, it will be tight that hasn’t changed. So anything we can add on top of that is helpful but right now we are not assuming something that’s not concluded in terms of being able to fund the company.

Got it. And so there is a significant change in just overall economic environment or perhaps a significant delay in the IoT ramp we should think you’re funded and the strategic relationships to the extent their secured come in and give you extra cushion before you’re breakeven?

That’s right.

Great, okay. Thank you.

Your next question comes from the line of Jaeson Schmidt from Lake Street Capital. Please go ahead.

Hi guys, thanks for taking my questions. George, first of all, wondering if you could talk a little bit about the pricing environment you’re seeing in the home and portable router market?

Yes. Hi, Jaeson. Obviously depending silicon and year-after-year you have always [indiscernible] you have as well pressure from competitive landscape some people lead, essentially the impact is with China. Depending on the region, I tend to say in China you see more pressure, you see less pressure one outside China, but there is another angle on this on the home portal router which is coming from the fact that they are moving in terms of high speed moving from category 4 to category 6. The CAT 6 is more expensive product so this composite if you want a little bit of price erosion and to some extent give us better ASP. I spoke about three customer turning to CAT 6, one of them will be shipping already in Q4, obviously this is nice to see because the CAT 6 product has more value and you sell at a higher price, and it’s going to save some of the pressure you could have on other regions. But in general, we don’t see any capacity condition if you will or we are not able really to sustain, be aggressive in pricing, break the price down as it needs to be and maintain a good gross margin for our product line.

Okay, great. And then knowing that you guys are the only vendor shipping CAT 1, wondering what sort of lead-time you guys think you have over the nearest competition?

Essentially all those – you have customer moving quickly, any guy moving quickly today and engaging you want to certify the product and so on. So lesser choice will be for them to go with us. It’s very, very hard to predict things but originally we said from chipset – if I look on the positioning of the chipset, we had close to nine months advance in terms of chipset if you put it in personally we have six months and depending on the acceleration of the other guys they can catch up that will be nine months.

Okay, great. And last one for me, now that the M2M and IoT segment is becoming a bigger part of the narrative, wondering if you are willing to share how much of a revenue contribution that is currently?

For this quarter, we are obviously – we are still in the initial as you saw, really shipping product and term today remains small. So any number I give is meaningless but I can give you more what’s our target. I believe next year hopefully we will be in the zone where M2M IoT making maybe minimum 40% of our year, not to say 50% just to be cautious I’ll say 40:60 this should be the split next year.

All right. Thanks a lot guys.

Thank you.

[Operator Instructions] Your next question comes from the line of Tom Sepenzis from Northland. Please go ahead.

Good morning and I’ll echo Tony’s congratulations on the quarter. I was just wondering if you could talk a little bit or expand a little bit upon the voice over LTE comment you made and specifically what type of application demand that? You’re not enhancing, so is this for tablets or who is actually asking you for this kind of capability?

Tom, sorry, I missed the beginning of the question. For the VoLTE, the VoLTE obviously you have this if we could have demand everywhere in the Smartphone and so on but putting in the application we are addressing where I was referring in a discussion here, I was talking about the M2M application. The M2M application when you have application where you have everything related to security and alarm panels and all this would require voice capability. So any kind of application like this needs voice. I’m not saying all M2M needs voice but if you have a nice portion of the market it’s a nice market, the security market, the technology requirements. And obviously you having a CAT 1 supporting voice becomes critical and important for those kind of application.

Great. Thank you. And can you give us an update, I know that CAT 0, could you expect that specification to get done sometime early in 2016? I was wondering if you could narrow the timing down on that and provide us with one for CAT M.

Yes, sure. This is an interesting point maybe to highlight on. Under sound adapter, the CAT 1, they invented the CAT 0 and then the CAT M and now there is NB-IoT and there is a lot of development in the ecosystem and is funded there. The CAT 0, this is what we call the Release 12, which was not doing any major improvement are really shrinking a little bit their customers. You don’t improve the performance that much and to some extent you lose a little bit in coverage even performers versus CAT 1 because [indiscernible] and the main advantage of the CAT 0 was that this is easy, it’s ready, this is Release 12 published already and hey guys you can use it and reduce your cost. I can tell you today without really being specific on the carriers but when looking to across the – maybe a quarter ago people were questioning if they move to CAT 0 or they go straight to CAT M, some of the carriers adopted directly to second position moving directly to CAT M, some they were hesitant, they were still talking about CAT 0. The way I’m speaking today 100% sure not to say 100% maybe 99% sure that CAT 0 will not be really deployed in a larger scale because all the carrier realize that the CAT M is moving fast and then they don’t have to wait much, they can move from – they keep CAT 1 for high speed M2M 10 megabit video voice all the application that require something like this and develop their CAT M networks to add value for launch not next year, launch in 2017. So the workforce today is really on CAT M and the strongest for CAT M is 95% done, the release will be officially frozen in Q1 but today you can develop your chip with CAT M and keep some softer programmability if you have the software to find radio, you’re able to move the product that will work on CAT M even if the release is not 100% frozen. So as you can sense on this, CAT M is the technology that Sequans will finalize in Q1 and we should see chipsets and network all come on to this next year. And following the CAT M, the stronger [ph] as well as is debating another version, another narrow-band technology where you reduce the bandwidth to 200 hertz and here again to get lower cost, lower power and extended coverage, this technology – it was a big fight between two version of the standard but we had a kind of 90% conversions on this and now they call it one standard and NB-IoT, narrow-band IoT. There is a push to insert it somehow as soon as possible. My feeling is going to be a Release 14 and it will be a year delta between CAT M and this one.

Thanks very much George. And then Deborah did you say that the seasonality for Q1 you expect that to be flat sequentially or would it be lower?

Should be more or less flat. I think that we do have – we have the normal seasonality offset to a small extent by new product launches. So I wouldn’t expect us any sort of significant drop it could go down a little bit but we are looking more at that pretty much flat.

Okay, great. Thanks very much. Appreciate it.

Your next question comes from the line of Wes Cummins from Nokomis Capital. Please go ahead.

Hey, George, one thing really quickly on the VoLTE for CAT 1, just your thoughts on wearables like watches that we are seeing with LTE starting to hit the market. Do you think CAT 1 with VoLTE fits that more or you think that’s more of a CAT 4 device and would you guys do any work with partners there? Do you think that’s too much integration work for the risk?

Hi, Wes, obviously I believe there is an application for watches with VoLTE and their CAT 1 will be an ideal solution. I don’t believe you need CAT 4 very honestly because in a watch 10 megabits is more than enough. CAT 1 technology is really great. So having CAT 1 able to give you 10 megabit and voice you put this in a watch, it’s cheaper and lower power than putting a CAT 4. So definitely it’s a case that makes sense. You could as well even expect in watches a CAT M solution, even maybe there the voice is a question mark on the CAT M, but if you – because when you talk about watches, you have variety of application of watches whether it’s something for kids or sometime to staff or for sport or whatever. But you can even imaging CAT M, the beauty about the CAT M will be that the low power is extremely low power and it can give you a watch where you don’t need to charge it for a long period of time. But still even with CAT 1 and either more this is really an ideal position because even the power consumption could be a bit acceptable there and can still give you voice on high speed. So definitely this is a case and if we have VoLTE on this, yes indeed this is part of things that we are engaging with partners. I cannot comment more than this, but definitely this is something of interest for Sequans.

Okay. Thank you.

And at this time, there are no further questions.

Okay, no more question. Thank you very much all of you. Thanks for the question and for listening for the call and hope to see you as soon as possible maybe during some of my trips to New York. Take care.