Welcome to the Sequans Third Quarter 2016 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 conference 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 risk 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, Mitchell. Good morning, ladies and gentlemen. This is Georges Karam speaking. I am with Deborah Choate, our chief financial officer. Welcome to our third quarter 2016 results conference call. We are very pleased with the progress during Q3 in all aspects of our business. I will mention a few highlights before getting into specific developments. The third quarter revenue grew 26% sequentially, to around the mid-point of our guidance, and our non-IFRS loss was smaller than we expected . . . so, it was better than our guidance. If we assume the mid-point of our Q4 guidance, we are on track to grow revenue about 40% in 2016 versus last year. And we continue to expect our growth to accelerate in 2017, driven by the growth of Cat 4 and Cat 6 routers and the continued ramp of the Cat1 shipments for M2M and IoT market and again the year after as more solutions for more applications continue to ramp on a growing number of global LTE networks, including Cat M1 and NB1 for IoT applications. We have now the balance sheet to support our near-term growth after a successful equity offering in September. As discussed on our last call, we had been evaluating a variety of options for removing the funding gap, being mindful of our shareholders’ concern over dilution. Ultimately, the decision was driven by business matters, i.e. the importance of removing the balance sheet discussion from our business interactions and avoid impacting our leadership position in the IoT space. Given the excellent reception and high level of interest in the offering from both new and existing institutional investors, we are convinced it was the right path. We now have a fully-funded business, and our strategic relationships can proceed as pure win-win partnerships. On this front…

Thank you George and hello everyone. I would like to add some details about our Q3 financial results and the recent equity offering and also discuss the outlook, including our guidance for Q4. Revenue in the third quarter of 2016 was $12.5 million, a 26% percent sequential increase from Q2, and a 33.1% increase compared to the third quarter of 2015. The sequential improvement represented across-the-board strength on all platforms. Our JetPack business continues on track and revenue increased somewhat from Q2; revenue from emerging markets increased, and our Cat1 ramp continued. We had one 10% customer in the quarter which technically accounted for 40% of revenue, but this is a distributor serving a growing group of Asian ODMs who each represent multiple operators. Our customer concentration is actually beginning to lessen overall. Chip sales were similar to Q2 levels, but we had a significant sequential increase in module sales, which impacted our product gross margin. We realized non-IFRS total gross margin of 46.8%. Operating expenses were $9.8 million in Q3, a slight decrease from the neighborhood of $10 million per quarter, where we expect to remain with only gradual increases over the coming quarters. Our third quarter operating loss was $4.0 million, compared to an operating loss of $5.7 million in the second quarter, and $4.2 million in the third quarter of 2015. Net loss was $5.1 million in Q3, the same as in Q2 and compared to $2.4 million in the third quarter of 2015, which had included a large non-cash gain on the fair value of convertible debt embedded derivative. Basic and diluted loss per share was $0.08 in the third quarter of 2016, based on 61.6 million average shares outstanding, compared to net losses of $0.09 in the second quarter based on 59.3 million shares, and…

Thanks, Deborah. So to recap now our call just three points so the first point is - as I said the quarter was very good in all aspects. So whether, in terms of design win, preparing the future, as well executing all say on the projects and further going in the current quarter. So, really a buzz quarter for us and in summary when you look to two businesses where our strategy of single mode as we play is really delivering results on the two segments. In the broadband business this is moving very well. Strong market share, the vast is growing in the emerging market definitely is going in the right direction. But on top of this more opening in the U.S. market beyond Verizon and more and more still to come. We are very, very confident and more confident that the expectation for the revenue that would be generated from this segment. Next year is really kind of secured, I’ll say beyond very, very limited risk on this segment. So this is really nice cash cause developing for the $100 million, I’m promising there in the mid-term. And if you go to the IoT business segment, this is really very excited segment with potential, I will say financial growth there for the company obviously everything is emerging that happening now, but when you look to the situation. Sequans is the leader of this space, with no doubt we proved this not only in Cat 1, but as well now with Cat M1 and NB1. We have more than I will say many design win on the Cat 1 space as one on the Cat M now. Huge pipe of customers and module makers selecting our platform, engaged not only with the number of carriers, but all the carriers of theirs in Japan, in Europe more opening even some other places like China. So this is really very, very promising and we feel we are in a good position as to have the revenue growth from the Cat 1 business, support to the Cat 1 business happening in 2017 and accelerating in 2018. Thanks to the business coming from M1 and NB1 category. So with this, I would like to thank you all for listening. And I will turn now the call for question. Operator.

[Operator Instructions] And our first question is from line of Quinn Bolton with Needham & Company.

Hi, Georges thank you and congratulations on the nice results. And Georges, just wanted to ask, it sounds like a number of your competitors you said are rebreeding Cat 3 devices and so they are not optimized. Can you talk to us a little bit about are they coming in them with the higher price, because of the larger dye size or are they trying to match say Sequans pricing, but therefore must be taking a much lower margin. Just talk to us a little bit about the pricing dynamics which your competitors not having optimized solutions?

Yes, hi, Quinn. I mean always when we think about the solution and with this solution not to think about the chip itself. But there is a total solution obviously, if you have an architecture bill to deliver given [Indiscernible] on the chip, you cannot change this by putting software inside the chip. So you are still holding all the I would say the cost material of the other components. So if I look to the situation today, obviously the competitors are trying to price the chip very close to all our chipset pricing otherwise it will not be competitive and they are doing this with to the expense of their gross margin or maybe leveraging their buying power or whatever they have there. But it doesn’t power because when you look to the total solution, they will end by being more expensive, far more expensive then a solution using Sequans technology. So to some extent this is even better for us, because net-net we don’t have real pressure on the pricing of our chip, because our chip is very optimized and we are pricing this as we should. And the other guys has to fight with us on the same price, but from the point of view of the customers when they end with a final solution the solution is much more expensive so this is what is happening.

And you said that's it looks like AT&T had enough and out earlier this month about their Cat M1 trial network and I think they named a couple of your competitors Qualcomm and [indiscernible] suppliers into that initial trial. Your script said that you are well engaged with AT&T and just if you can sort of give a little bit more background on that trial, is that a large trial or do you think you will have opportunity to participate in that trial ahead of the commercial launch of AT&Ts network next year?

Yes, I mean on a Sequans there is a lot of positioning in the market happening. All that I can say that the naming that was there I would say competitive solution there I'll give my view on this which is using existing platform with software and this is not ideal versus what we have. But on top of this, as I reconfirm that our engagement with AT&T is moving very well as well and I believe we will be part of that could go for AT&T as well. I don’t want to see more, just everything is - some of the stuff is under R&D, but obviously I'm not having much, but our first move was with Verizon, because there is some timing and some relationship playing there. But it doesn’t mean that we are not moving with the other guys and today there are carrier that would like to move with whatever solution available and obviously if you have solutions like Sequans solution quite optimized, you cannot be ignored from those kind of pilot test.

And just one last one for George and one for Deborah. George you sort of in the script you talked about the home router, portable router business approaching 10 million of revenue by Q4 2017. And I think you gave a similar metric for the IoT business, just as we look forward in thinking about our models out into next year, it sounds like you are sort of targeting around the $20 million run rate exiting 2017. Just wondering if there is any other revenue stream that weren’t included in either the 10 million for emerging markets or home portable router and 10 million for IoT or is 20 million kind of the rate target to be thinking about is as we look to 2017?

I mean obviously, just so to be short then the answer of how I positioned is, I consider that all mobile router will be always higher than IoT next year, because as we said we have something in the good shape today and growing and the other one is really emerging. So we will be exceeding 10 with home mobile router and we are approaching the 10 on the IoT. But obviously in this we didn’t include what I would call it other revenue or non-product revenue which is some [indiscernible] and some licensing as you know that we have always kind of couple of million dollar in average per quarter. Sometimes we have even a little bit more or little bit less but this is not included [indiscernible].

And your next question is from the line of Mike Walkley with Canaccord Genuity. Please go ahead.

Great, thank you very much. Just building on Quinn's last question, when you look at kind of your run rate and all those things that you guys talked about it in your pipeline. How should we think about your growth investments to support all these different products and then kind of cash flow break even targets as kind of that end of Q4 2017 when you are over 20 million in revenue or you will see cash flow breakeven. Thank you.

Hi Mike. Obviously we have the lot of good news and we feel really the mood is very, very positive on company and we have a lot of demand and I tend to see that push us somehow to maintain to push more our OpEx. So believe we will need - as we are going in 2017 we will be increasing a little bit some hiring here and there to support the increasing number of customer and the new business we have. But obviously at the same time, we will maintain our set out investment in new platform and new next generation chips to maintain the leadership. So our way of thinking about it is that, until the first half of next year, we are going to stay more or less flat versus what we are doing today. And we will need to start to really increasing our OpEx in on the business of supporting to growth when we feel it like it’s really accelerating farther to go beyond may be where we are today. But it's not guided to be expediential, we should think about may a 10% increase in the second half in terms of OpEx. And from there in terms of breakeven point. Obviously, we need to factor in the gross margin a number here. The gross margin view, we remain confident that in terms of chips will be between 50% to 45% worst case. So this is under control and we feel good about it. And the margin we already said that this is something around 25. So the only variable is that we have some business coming from the IoT and the module element of the sale, because there you see will be mix, it will be half of it we could say coming from chip. The other half or may be less will be coming from module and overtime we will even less and less modules. Because with the Cat M1 and NB1 will be more and more chip business in my opinion. So all this can you know take us towards a 40% gross margin. So if you want to think about breakeven point on the basis of between 40% to 45% on average. Just think as a little bit above 20 before you think about the pure breakeven points.

Great, that's helpful. And George juts building on the new Cat 1 module win. Can you update us on the major module suppliers just how you see their business practices, couple of module suppliers have pointed out Intel’s short coming causing them not to be able the ship their Cat 1 shift as expected earlier this year. so do you think a lot of this module suppliers are going to dual source and if so in how do you feel about your position work with somebody other modules suppliers in addition to Gemalto?

One, as I said on the call, I mean we had two module guys in this quarter. One is more focusing on Cat 1 first it will come may be more. And I believe he will be coming in an addition to Gemalto in the market. And another one more going with Cat M, NB1 selection. Now going in Gemalto and when you look to the existing module guys. They made their choices around the Cat 1. Many factor their choice were they didn’t want to invest R&D by getting new platform. So they find easy to stay on the existing Intel or Qualcomm platform and just on the previous software to go to this market. Which is I can’t agree is not huge may be in terms of size. Obviously, they have some issue, they were not competitive, no matter what they are trying to figure it out of their side and in front of other guys who did better choices, but I tend to believe that it's somehow too late for those guys to come with double source on the Cat 1. However, their discussion is much more open in the Cat M and NB1, because obviously it’s much bigger market and here it from the start so they can make the right decision this time and this is what I mentioned, have secured one and we have another one in the pipe as well under discussion. So things are going very well for us on this front.

[Operator Instructions] And from the line of Tom Sepenzis with Northland Capital Market. Please go ahead.

Hey congratulations. Just curious in terms of the run rate moving forward, which we still do expecting some traditional weakness and seasonality in the March quarter or do you think that you can run this right through?

Typically we are believing that the first quarter continues to be seasonally slow. So we are expecting it to be fairly flat compared to the fourth quarter.

Great. And then in terms of Cat M, Georges, given your competitors particularly someone like Qualcomm that has much better ability to source components at lower prices and fact that Cat M is going to be not going to rollout until the end of next year. How confident are you, that you are going to be able to continued to under price their solution when its available?

Yes, Tom I mean my game is not really underpriced solution, I’ll be the last guy to enter into this game, because I don’t believe it’s even useful for us or for them by the way. They are forced to previous game they are late and they are optimized solution and they are working on optimized solution for 2017 in any case. So the advantage I have is more on the other component, in other words, something that Qualcomm doesn’t send. To give you an example, this in your solution you have a big memory, because your design has been optimized to support 2G, 3G whatever platform and you need the big size memory in the chip. And your memory there comes to you $3 or $1 when my solution is costing $0.20 this is where you get the advantage. When you have a solution, which is the frontend is optimized with the Skyworks, we have a single [Indiscernible] So this is what we said and by the way its publically known, we’re talking about bill of material on the Cat M solution using Sequans that this is in $6, which is all the components you need. Not only the chip of Sequans, the chip of Sequans and all the other chips of Sequans. The other guys seems to be still higher, little bit more higher than this and even if they price the chip equal to Sequans price. So for this they have very little leverage on this, because even if they have to drop more the chip price, that’s really selling below cost at the end the rates will match the total cost of the solution of Sequans and we have leverage to reduce our chip price, so this is their only gain. At the end of the…

Okay.

And there are no further questions. Thank you .

Okay, with no more questions. Thanks very much for all your questions and listening and hope to see you on certain time in the future if not I'll give you an appointment for our next conference call in February beginning of February. Thank you very much.