Good morning. Welcome to the Sequans First Quarter 2017 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 our 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, Tony. Good morning, ladies and gentlemen. This is Georges speaking. I am with Deborah Choate, our Chief Financial Officer. Many thanks for joining the call, and welcome to our first quarter 2011 results conference call. I am pleased to report that 2017 is off to a very good start. We made significant progress in all area during the quarter. On the financial side, total revenue was in the middle of our guidance range with products revenue impacted by seasonality, as expected. Gross margin was 47.1%, and we managed to hold OpEx to $10.1 million, which enabled us to exceed expectations for earning per share in the first quarter. If we assume the midpoint of our guidance for the second quarter, the first half of 2017 will be up 40% over the first half of 2016. We feel good about the second-half of the year, so we continue to believe we are on track to grow more than 40% in 2017, with further acceleration in 2018. On the customer side, we added a new OEM/ODM customer in both our broadband and our IoT businesses. The CAT-1 revenue ramp is beginning, and we are especially pleased with the design wins and overall traction our LTE Cat-M platform is gaining in the market; more about this in a moment. We have a new project with a very high profile customer in our Vertical Markets business. This new customer is Lockheed Martin, a major global security and aerospace company. For the time being we can say only that it's a multi-million dollar project that will occur over the next 18 to 20 months. On the technology front, we continue to demonstrate our leadership by making available the most advanced and optimized LTE solutions, including the first ever carrier-certified Cat-M solution with our…

Thanks, Georges, and hello to everyone on the call. As I have some more details about our Q1 results and discuss the outlook including our guidance for Q2 of 2017. Reflecting the typical seasonal pattern, revenue declined sequentially from Q4 that increased 34% compared to first quarter of 2016. In the quarter, we had 4% to 10% customers ranging from 11% to 19% eleven each, but two of them are distributors distributing a total of 10 Asian OEM/ODM customers. Gross margin increased to 47.1% reflecting higher project gross margin lead to a more favorable mix and sequential increase in other revenues which included a license that had slipped from Q4. Operating expenses were $10.1 million in the quarter down from $10.2 million in Q4. Our first quarter operating loss was $4.2 million compared to an operating loss of $4.9 million in the fourth quarter and $5.2 million in the first quarter of 2016. Net loss was $5.6 million in Q1 compared to $5.4 million in Q4 and significantly increased compared to $9.2 million loss in the first quarter of 2016 which had included the non cash effect from the change in the fair value of the convertible debt embedded derivative. Basic and dilutive loss per Share was $0.07 in the first quarter of 2017 based on 75 million average shares outstanding compared net losses of $0.07 in the fourth quarter based on 74.5 million shares and $0.16 in the first quarter of 2016 based on 59.2 million shares. Net increase in weighted average shares outstanding which led to the equity offering in September of 2016 as well as some stock option exercises. To facilitate comparisons, we have also reported our results on a non-IFRS basis which excludes from net loss but non-cash items related to stock based compensation expense and…

Thanks, Deborah. So to solid let now highlight you know few things first the business is moving very well as planned for broadband and IoT businesses and then as well the vertical markets business is becoming significant as we explained previously. The other important factors that we remain the leader of CAT-1 LTE for our UT with our Monarch CAT-1 platform establishing as I mentioned before this be hopefully, when you look to the long list of design ones we have and the type of engagements we are working with. Going with this in the same time what's interesting to note that the market for CAT-1 is developing as expected and moving fast with Verizon AT&T launching this quarter, or end of this quarter for AT&T. And then going forward, going beyond the U.S. on the worldwide basis to all the country obviously and all carriers. The other important element to keep in mind is that thanks to this leading position, this is attracting a lot of partners for us, and we are developing new areas I will say for this kind of collaboration. So, all this let me feel like we are feel very, very positive about our future and let me feel like we will be able to create and generate value that we will return to our shareholders. Thank you. We can take it now for questions. Operator?

Thank you very much. [Operator Instructions] First question will come from Mike Walkley with Canaccord Genuity. Please go ahead.

Great, thanks. Great to see you guys keep your guidance and run rates. Maybe just starting with the broadband business, can you just talk about maybe the puts and takes that would get you to north of that 10 million run rate? And I think you said it could reach as high as 12 million. And I think that excluded China and India, so maybe you could discuss the ramp in that business, and what you are seeing if there is any improvement for China and India that are contributing to revenue this year?

Yes, hi, Mike. So the broadband business, I mean it's as I said it's going as expected. We saw that we have the -- and if we consider Verizon, it's -- the momentum continued, because we already knew the design on the Jetpack, so it is moving forward. And as I mentioned without naming and mentioned about another almost similar in terms of revenue for the company, where we are moving from production now we received order. We have backlog, so everything is done just only I am not able to give you more detail about this, waiting for the announcement that will be done by Verizon and our major OEMs in this product. So, you see now this is one foundation. The other component is obviously as I mentioned the virtual market and another for the emerging market going well with many carriers. So with the established -- we are as I said for active customer and full shipment mode for this market, and this was moving well, and we are adding -- we added the OEM in Q4 and Q1. There will be large projects and they should turn to mass production in the second half of this year. So this will boost our emerging market and [indiscernible] China and India. More important to note here that we are there are other businesses there coming from the -- from even developed carriers, where in fact set-top-box or inside devices that they are turning to be at home like security box, or you want to back-up even fiber or cable with wireless. And we have few products like this that not even factored in on which we are quite advanced as well. So, all in all, things let me feel like we are really heading towards this spending and that will exceed beyond -- at the end of Q4.

Great. Thanks, Georges. And just looking to the IoT, I know a lot of investors have focused on your module wins such as Gemalto, Huawei, SIMCom and others; however, can you discuss maybe larger opportunities directly to customer such as alarm panels or wearables and just maybe discuss the overall pipeline it sounds like, CAT-1s ramping through the year-end and you might get some patent exiting the year?

I mean, on the -- I'll take from the starting with the CAT-1 products, as I said, the good news about it that we have visibility, we have orders, we have all our direct customers using our CAT-1 module, they finish the product and say approval on Verizon and many of them are moving as well to get this approved as well on key mobile and some of them work on AT&T. So this is really I will say half-a-dozen of customers engaged with Sequans moving in full production and building up some of those are quite big so significant I tend to say, and that will be really the foundation of our CAT-1 module business. Obviously not to neglect on top of this, we have the Gemalto business with whom we have engagement in Japan and in the U.S. and the product is really to have -- can sort of customer behind and moving well as well in production. So all this is moving nicely, after I'll see waiting more than expected, because this business explained the last time takes always longer than what you think to be established, but once it's there its quite sticky and this is for long term and we have projects where the people selected Gemalto or selected us its for three four years project. So, it's really gives us a lot of visibility and confidence that the revenue will be there for the CAT-1. And obviously when we had all this in the CAT-M, now the CAT-M is really amazing you know when you look we are talking about a dozen of mobile maker and this speaks I mean we look to the name people like Huawei, other guys, and they select us it's really tough comparison between us and the other competitor…

Okay thanks, last question from me for Deborah. Just the comments about fully funded cash flow break even, on Q2 should we expect some of the working capital maybe to reverse with DSOs coming down, just trying to get a feel for the cadence of cash burn between now and the year end when you make the breakeven? Thank you.

Hi, well we are definitely working on that so we are as we go on to more volume production we are expecting we can be able to ship more evenly over the course of the quarter and that should help us in terms of the DSOs and in trying to only build inventory on to the just in time basis. But I think it continues to be something we manage day to day to try to optimize the cash in hand.

Right, thanks for taking my questions.

Thank you. The next question in queue will come from Quinn Bolton with Needham & Company. Please go ahead.

Just sort of take a step back. You guys obviously have a very strong position in CAT-M; wondering if you could comment on CAT-B or for CAT-MB1 and whether the delays on that technology especially around the TGG spectrum, and if so, is that giving -- are you seeing growing interest now in the CAT-M solutions as a result? And then I got a follow-up. Thanks.

Hi, Quinn. On the CAT-M, I mean indeed you know a year ago it was this position of the two technology which may have replaced both of them in the market as I explained many times because one will give you higher speed, but also mobility, voice, and then B1 will give you maybe better price, cost structure without all those features with limited messaging I would say communication. But what happens in the market as you have seen that the U.S. decided to go, essentially AT&T and Verizon. Both of them would work on MB1 but they push it really down the road; I don't believe MB1 has a full launch nationwide coverage will happen in years before 2019 between Verizon and AT&T. We may see sometime next year in 2018, but [indiscernible]. This obviously boosts the ecosystem of the CAT-M1 to accelerate, and many carriers were agitating mainly in Europe. They said we are not going to go on B1 I would look at one because this was the ecosystem first, I will start with this, still on other some carrier, they are really firm and they will be one like Vodafone and China even if in China you mentioned the problem of Spectrum, so they are talking about TDD on M1, but they a new frequency, which is to get FDD frequency China Mobile fuse NB1. So for us as a conclusion along this, M1 is now and happening, NB1 it will happen, it will have kind of one year built on my opinion. In terms of real NB1 massive deployment that is something for 2018. In the meantime, Sequans and this is important. We are not, we think because our shift is able to support and M1 and NB1 monarch and even if we put the focus at the beginning on M1, since last quarter in Q1, we put a dedicated teamwork on the NB1 software along the NB1 engagement and we have already so engagement with few carriers interested only in NB1 with all start testing, even this quarter you know, in second quarter, we should have some initial testing this quarter and have certification and so on maybe in Q3. So this is really you know, aligning well for us with kind of six months Delta in terms of moving this to mass production and the market and maybe have more than six months and this is with the and I certainly expect and we want to happen as a market, it's not like it disappears and that is not under.

Okay, great. And second question, I just kind of longer term obviously a lot of the Cat M1 and NB1 applications you know, things like tracking devices, variables, alarm panel. Wondering if you are seeing any interest from some of the bigger devices such as smart phones to use Cat M as sort of a low power connectivity solution that would enabled under turn off the baseband during times and we don't need to use the full base band and application processor. Then I put a sort of provide better battery life, but still connected services, better market you think would develop for Cat M overtime?

Let me, I mean I could imagine that something maybe in the smart phone purpose and a kind of mode where your phone backup is the time when you to reduce power but you know, and the smart phone still have the screen you have many other stuff and so on. So the application their however whether I believe the M1 has a big place similar to a smart phone is really in the wearable because you could imagine all those watches you know, essentially if you are able to put walls on the watch and get the speed of few 100 kilometers for all the application, so we have it all and then you can imagine as long some kind of feature phone, let's say low cost feature phone for some application running on the M1, if you don't need anymore because you have a little risk few 100 kilometers to get some data and then we get your voice. So definitely M1 will go beyond, I will say that you will call it cracking or listening application that can offer a little bit more and that has good production indeed.

Great. And then, just one quick one for Deborah, you mentioned the cash payments from the government brands and R&D cash credit in the third quarter, can you guess some rough estimate of how large do you think those payments will be?

These typically run about $2 million.

Is that 2?

That's about $3 million.

$3 million, okay. Great. Thank you.

Yeah.

Thank you. Our next question will come from Scott Searle with Benchmark. Please go ahead.

Hi, good morning. Nice to continue to see the positive outlook building for 2017 and 2018; Georges, maybe just two quickly follow-up, I just wanted to clarify on the earlier china question. So it sounds like at this point China is continuing to march down the NB1 and IoT fund as oppose to maybe pause and reconsider for M1, is that correct?

Well, the two are moving. First of all, when we are talking about China you need to talk about China mobile and China telecom. So only China mobile has the problem of the TDD spectrum you know, so the others they have a TDD spectrum. So in principle they can go NB1 straight forward. So the China mobile, China telecom or sorry China mobile because they have a TDD spectrum, they have the problem, they cannot move quickly on NB1. They need to have the new spectrum and they need to deploy maybe some really old one so on so it's a bit more complex, that's why they are considering TDD CAT-M1. So we are seeing if you want a two demand, you want to change Cat M1 TDD and we are still seeing as a lot of the NB1 at least whether for trials or for the future or for China telecom because they have FDD spectrum.

Okay and just to follow-up on an earlier wearables question for it to clarify, it sounds like there is certainly design activity. But you actually have design winds on the wearable's front this time with smart watches et cetera?

Well, allow me not to comment much on this. We have on the wearables we announced one which is public, which is Orion, which is a push-to-talk button for security reason, where the people, they have the button on them, and if they have a problem, they push on the button. And this is really for a senior person and so on. So this is moving well. This is the design win we have, and it's public. For the watches, wearable and so on, we have a lot of engagement. I cannot say more for the 10 year.

Okay. And just lastly to follow-up on two things, character certifications you are on that task right now with M1 with Verizon AT&T, is there and expectation or target by the end of this year. How many characters you would expect to be certified and just to clarify as well it sounds like for NB IoT you will have some certifications by the end of this year as well and lastly Europe, it seems like it's starting to finally build some momentum. When did that really start to ramp up? When you look at 2018, who are the key carriers, who are going to turn this on for instance start to get aggressive? Thanks guys.

Just to - I'm glad you see as I said indeed will but our target is to get certification this year we will start testing in June with carriers identified because we have already, we could do them on today you know, we have already the software because essentially choosing the same hardware, they just told me the software to involve with the support and we run future and this will be you know, fully complete and comprehensive, I will say next quarter. So the target is definitely to get certified and here we are engaged obviously we will have some Chinese, but mainly the focus is really on Europe where you have people like Vodafone, but you have like other carriers like this telecom or carriers like auto engines and so on. Some of them they need Cat M as well you know, not for the NB1. So I am engaged in Europe, is definite enlarged, we have a lot of demand, same by the way in Japan and Korea and even Canada. I want to understand the call. So really we are getting a lot of traction from all the carrier around us. So, all of them they want to move fast. I believe, Europe very frankly I don't see them you know, any network on a nationwide coverage before next year. Before 2018, we may have end of 2018 some trial activity, some acknowledgement, some certification but to get full launch I see it's more 2018, which is fine it's kind of six to nine months behind U.S. which is in my opinion normal. Yes, there is only question about the M1 certification yeah how many, I mean definitely obviously on Verizon we already did this certification at the beginning of the year at CS and now…

Great. Thank you.

Thank you. Next in queue is Thomas Sepenzis with Northland Securities. Please go ahead.

Hey, thank you for taking my questions. First one George, I think you mentioned at the very beginning of your prepared remarks, you have a new either aerospace or military customer. Can you talk a little bit more about that, give us some color, is that a broadband or an IoT type win CAT-M or CAT-1 through 10…

So, essentially Lockheed Martin, indeed we have this new project, with all of the technology -- I could not share now for the time being but because cannot to be color on what we are doing but if I say about the chips, the deal we have with them give them access to the all our technology whether it's a I would say screen rich and screen light and I will also UT or broadband. It's a little bit complicated to for me to give you an answer without saying more about what type of system we are working on.

Okay, thank you. And then Deborah, are you -- you mentioned the government grant 3 million in Q3 and I believe you also mentioned that you have the new credit facility that you there correct.

We're putting that in place. It's not finalized as of today.

Okay, great thanks and then in terms of CAT-M timing you have been consistently saying that you expect to revenue to come in Q4 just curious with Verizon launching their network in Q1 is there an opportunity to may be see that start to hit the model earlier in the year or as you visibility such that you know that you won't really see anything until the first quarter.

I think Tom I think there is obviously they'll ask that will can and didn't have need to credit and as you see all the customer of Verizon, tests to Sequans customers but when you look, to the profile of those customer they are small volume so, it's not like we are not shipping at all in Q2 or some CAT-M chips I mean we could be shipping thousands of those chips but that is not having to be significant gross of revenue and for a Tier I customer which is big volume and so those are guys are mainly they tend to take more time to get their product off and already, and launch and specified as on and this take longer for them to be ready that's why our project more to see them ready beginning of 2018 hence the beginning for revenue for us in Q4.

That's very helpful. Thank you.

Thank you. Our next question in queue will come from Craig Ellis with B. Riley and Company. Please go ahead.

Thanks for taking the question and congratulations on the start of the year. As you were talk wanted to follow up on one of your comments regarding your module partners. You have 12 an hour which is a very nice long list, can you help characterize that group of partners and how you assemble them that whether be on a geographic basis those with perhaps particular end markets specialties and as we look ahead through 2017 and 2018 should we expect that number to stay fairly stable are you looking to grow that number in if so to what degree.

Hi, Craig, I mean just to be what with to we are very close to 12, we are not 12 today because we were closing few of them and if close them we'll get up to 12. If you go to the list little bit today, little bit below in almost two vision so, now to characterize those guys first of all, you need to look to them as some of them are ODM parts, some are OEM. The OEM people like a [indiscernible] there on business and its sends like - those guys they have their own I'll say market, their own customer, their own specialty, some of them they are stronger and something. We can something else and so on so, the good things about those guides that they bring the existing base of customer and capture it, because they have their all existing customer. They sold to them in the past, they are well known for them and so and so as soon as they have product they can turn those product to them and we will get them as the customer so, this is very, very good because we can capture all the market share of say they have the have with the existing technology whether 2G or CAT-1 or so on and we turn it to CAT-M with us. Then we have other guys like the ODM guys, like Foxconn, like Wistron. And here you -- those guys could have some special relationships sometimes will be carry a so make kind of special, access to market but the good things are all those guys is that all kind of application mainly want they are big volume application. They tend to be then in terms of the price and they tend to go to the ODM…

And that's very helpful, and then just following up in -- and may be just flipping to the other side of the go to market strategy, can you just summarize where you are with your direct engagement process for chip sales and its creative which you are in a position that you are happy with or if you would like to grow your capability see their what sales people in a particular region to increase direct access or if that model is where you, to be for the next 12 to 18 months? Thank you, Georges.

Thanks, Craig. Well, I mean in terms I mean first of all I'm very happy we did very good work last year by rebuilding or adding more or expanding our sales team because we strengthen the U.S. we have strength from China we are adding one more in China this quarter and obviously to look to get all the footprint between Asia and the U.S. and Europe as well we have to add one in Europe but you need to keep in mind the go to market strategy is essentially for us. We engage almost with many, many deals whether we have big names coming to us directly and at the end maybe they will not buy the chip from us, they will buy a module because when we talk with those partner we tell them okay these are our customer, you can work with Gemalto, you can work with Huawei, you can work with Fibocom, you can work with Foxconn. Based on the projects we are, we give them recommendation. I know this that they will make their own decision and I want to said or tell them we can do chip on both review because your case makes sense to make chip on board looking to the volume hence on and engage with them. So this engagement comes with people coming to us or sometimes quite often people growing to the carrier and carrier send them to us, now also we have a lot of leads coming from the Verizon AT&T as well as, all the carriers around the world that they talk, they come to us because when they talk to the carrier, they tell them all ready this technology, it is Sequans. So they end by coming to us. So, we don't have a problem to…

Very helpful, good luck in Q2. Thank you.

Thank you, Craig.

Thank you. [Operator Instructions] Next in queue is Wes Cummins with Nokomis Capital. Please go ahead.

Hey, Georges, you might have already answered this, but just a couple of quick questions; just your views on opportunities with CBRS here potentially in the second half in the U.S. and then also on FirstNet maybe that's more of next year.

Yes, so obviously, on FirstNet you know we are engaged with this and it's public that Motorola is part of this so Motorola being our customer. So we are obviously happy to see that finally FirstNet is moving for the time being, we see it more next year in terms of version. So far things are going very well with Motorola. I mean we have other projects and so on. So we believe this will grow up, we grow more next year, the FirstNet will develop as planned. On CBRS, we will keep in mind that CBRS is 3.5 frequency unit. Everyone knows with a little bit of positioning the different we do it outside the U.S; outside the U.S., the license is banned. In the U.S., it's going to be kind of a license banned, I will say, not fully unlicensed, but to kind of license banned. Many people are discussing in the U.S. to test this 3.5 gigahertz by calling Sequans and get products from Sequans. So we provided many Tier 1 customers in the U.S., products, you know, dozens of devices and so on, so they can make their own study and their own trials with the 3.5. So we have the 3.5 gigahertz frequency and as I said, because we sold this to the emerging market and we got -- we used to have close to 100% market share, I mean we are the first guys to come with this, and we did very, very good business with the 3.5 gigahertz. So, turning what we have today to become a CBRS if you aren't ready it will require a little bit of software just because you need to detect the spectrum before sending the spectrum. So it is more on the software than really the radio. So the radio is ready. We believe in the CBRS that this has good potential. Some people right away they talk about it obviously for broadband, but you can think about it has one for the IoT some people even think why not choosing this as well for some Cat-M CBRS and so on. Either way I mean we are ready for this. We are just more waiting for the market before pushing final product direct to market, but the technology is in house and we can be first on this, and this will be part of our 5G evolution as well.

Great, thank you.

Thank you. At this time, I would like to turn the conference back over to the management team.

Okay, thanks very much for attending, and hope to see you, obviously, in any visit to the U.S. Thank you.

Thank you. And ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.