Sequans Communications S.A. (SQNS) Q2 2026 Earnings Report, Transcript and Summary

Welcome to the Second Quarter 2026 Sequans Earnings Conference Call. My name is Jonathan, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I would now like to turn the call over to David Hanover, Investor Relations. David, you may begin.

Thank you, operator, and thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are Georges Karam, CEO and Chairman; and Norman Brodt, 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, and you'll find a copy of the release on the 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 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 uncertainty 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, David, and good morning, everyone. Before discussing our core business, I'd like to begin with an update on our capital structure as we have now substantially concluded our Bitcoin treasury strategy. As we have announced on May 28, we completed the full redemption of our remaining convertible debt, funded through the sale of a portion of our Bitcoin holdings. Since then, we have continued to systematically reduce our Bitcoin position in a disciplined and opportunistic manner. The Bitcoin market has been volatile over the past several months. And throughout that period, we have remained patient, strategic and deliberate in managing our digital assets. During June, despite a challenging price environment, we made the decision to sell a portion of our holdings to further strengthen our cash position. As a result, we ended the second quarter with approximately $21 million in cash and 314 Bitcoin remaining on our balance sheet. At current market prices, those remaining Bitcoin represent approximately $20 million of additional value. With our IoT business continuing to perform well and our balance sheet in a strong position, we have the flexibility to monetize these remaining holdings opportunistically and when it's the best interest of the company to do so. Our priority going forward is squarely on executing our IoT semiconductor strategy, scaling our product business, expanding our presence in the defense and drone markets and advancing our 5G eRedCap roadmap to create long-term shareholder value. As we enter the second half of 2026, we do so with a strong debt-free balance sheet and the required financial flexibility to support our operations and invest in future growth. Now turning to our IoT semiconductor business. We continued to build momentum in the second quarter. Revenue for the quarter was approximately $7.5 million, exceeding the guidance we provided last quarter and representing a 23% increase from the first quarter. The vast majority of that revenue came from product sales, which increased by more than 80% year-over-year, demonstrating the continued acceleration of our core business. We also saw strong order momentum across our customer base with several key accounts scaling meaningfully into the second half of the year and beyond. To date, we have more than 40 design win projects that have reached mass production. several of which we expect will each generate more than $4 million in annualized revenue beginning in 2027. These programs are contributing to a strong and growing backlog that now extends into 2027, providing us with increasing visibility and confidence in our product growth trajectory for both this year and next. More importantly, this reflects the continued conversion of our design win pipeline into projects in production with committed orders to come. Our design win pipeline measured by potential three-year product revenue also continues to expand beyond the more than $300 million reported at the end of 2027. We'll provide an updated figure at year-end. But today, 55% of that figure is in mass production and generating revenue, representing approximately $165 million of design wins in production at quarter's end, a more than 3x increase year-over-year. We expect that percentage to continue increasing as additional customer programs move into production. Across our product portfolio, we continue to see encouraging momentum across each of our key technology families. CAT M remains a core growth driver for the business, led by asset tracking and smart metering applications. Multiple design win projects are now in production and continue to perform ahead of plan, supporting the strong product revenue growth we delivered during the quarter. CAT 1bis this is also gaining traction with customer ramps across telematics, security and industrial applications expected to continue building through the second half of the year. We remain encouraged by the level of customer engagement and the new IoT opportunities we see as existing design win projects move towards production. During the second quarter, we secured 10 new project wins, leveraging our CAT M and CAT 1bis technologies, while transitioning a similar number of projects into mass production. Design activity across our pipeline remains healthy, and we expect to add additional wins throughout the remainder of the year. Our RF transceiver business is also gaining momentum. We continue to see strong demand from existing customers, while interest from new prospects in the defense and drone markets continue to grow. During the quarter, we began shipping our SQN9506 development kit platform to several prospective customers evaluating our RF technology for these applications. I'm also pleased to report that we secured our first drone program with product shipments expected to begin early next year. While still at an early stage, we believe this represents an important milestone as we continue to expand into this new market. Development of our 5G eRedCap solution also remains on track. Our test ship is now in-house, and we continue to target customer sampling during the second half of 2027. As the IoT market transitions from 4G to 5G, we continue to believe eRedCap will become a key industry standard and an important pillar of our long-term strategy. Beyond the product opportunity itself, we believe our investment in eRedCap further strengthens our technology leadership, enhances the value of our intellectual property portfolio and creates additional opportunities for future licensing and services revenue. Although product revenue from our eRedCap platform is expected to begin in 2028, we believe meaningful services and licensing revenue can be generated well in advance of commercial product launches. That brings me to our broader licensing and services business. Our licensing and services business continues to represent an important source of high-margin revenue, although the timing of individual engagements can vary from quarter-to-quarter. While it represented a modest contribution to revenue in the second quarter, we expect a meaningful increase in the second half of the year as one or more of the significant license opportunities currently under discussion converts into signed agreements. Today, we have several active licensing and strategic engagements under discussion with global customers and partners across a range of end markets and geographies. The potential revenue contribution from these opportunities ranges from several hundred thousand dollars to well over $10 million, underscoring the significance of this part of our business. Beyond their potential financial contribution, these engagements continue to expand our strategic reach into new markets and applications while providing meaningful upside to revenue and supporting our path towards breakeven. Because many of these discussions involve confidential commercial relationships and sensitive end markets, we are not in a position to provide customer-specific details at this time. However, we remain encouraged by the level of activity across our licensing pipeline and we'll provide updates as we reach definitive agreements. As our product business continues to scale, maintaining a reliable supply chain remains equally important. We continue to operate in a challenging supply environment. While memory remains the primary constraint, we are increasingly seeing pressure across the broader semiconductor supply chain, including silicon and packaging. Based on what we are seeing today, we expect these supply constraints to persist beyond 2026. To address these challenges, we have continued to strengthen our supply chain strategy. Apart from wafer fabrication at TSMC, we are implementing multiple sourcing options across key components and manufacturing materials. This reduces our dependence on individual suppliers, improves supply security and better positions us to support our expected growth in the years ahead. We also remain focused on managing cost pressures. Where appropriate, we continue to pass through higher component costs to our customers while working closely with our supplier to adapt to changing market conditions. This remains particularly important with memory chips, where pricing continues to be volatile and can change significantly even from month to month. Based on our current planning assumptions, we believe supply is secured for our baseline demand through the remainder of 2026. Our focus is now shifting towards securing the capacity we will need to support continued growth in 2027. As our financial priority remains focused on disciplined cost management and reducing cash burn with the continued objective of moving towards a breakeven operating run rate as revenue continues to scale. We made some progress this quarter and expect to make more in the second half of the year. Overall, the second quarter reflected continued progress across the business. We strengthened our balance sheet, continued to grow our semiconductor business, advanced our product roadmap and further simplified our capital structure, positioning Sequans for continued growth. Regarding our outlook for the third quarter, we currently expect revenue to be in the range of $8.5 million to $10 million, reflecting continued momentum in our core product business with the upper end of the range, further supported by the potential contribution from closing one of the significant licensing opportunities currently under discussion. Based on our growing backlog, continued production ramps and the strength of our design win pipeline, we continue to expect the business to build through the second half of the year. While the timing of licensing revenue can vary from quarter-to-quarter, we remain encouraged by the level of activity across our sales pipeline and continue to believe we are well positioned to deliver sequential growth as we execute our strategy. Looking ahead, we believe the fundamental building blocks of the business continue to strengthen. We have a simplified near debt-free balance sheet with meaningful liquidity and the financial flexibility to support our long-term strategy. Our IoT semiconductor business continues to demonstrate a strong underlying momentum, supported by a growing backlog and a design win pipeline that continues to grow and convert into production revenue. Finally, our differentiated portfolio of 5G and RF technologies remains one of Sequans' most important long-term strategic assets, creating opportunities across both products and licensing revenue. Our priorities remain clear. We continue scaling our IoT semiconductor business, advancing our 5G eRedCap roadmap, expanding our licensing opportunities and executing against the initiatives we believe will unlock the full long-term value of Sequans. Before handing the call over to Norman, I'd like to take a moment to recognize an important leadership transition that took place at the end of June. After 19 years with Sequans, Deborah Choate retired as our Chief Financial Officer. Deborah has been part of Sequans through many of the company's most important milestones. She played a significant role in strengthening our financial foundation and supporting the strategic initiatives that have positioned the company for where it is today. On behalf of our Board of Directors and everyone at Sequans, I would like to sincerely thank Deborah for her many contributions over the years and wish her all the best in her retirement. I'm also pleased to welcome Norman Brodt as our new Chief Financial Officer. Norman joined Sequans as Vice President of Finance in January 2025 and has been deeply involved in our financial planning, capital allocation strategy, and operational initiatives over the past 1.5 years. Many of the decisions and initiatives we have discussed on today's call, have benefited from his leadership and involvement, making this a natural transition for the company. I'm confident that Norman's experience, financial discipline and knowledge of our business will serve Sequans well as we continue executing our strategy. With that, I will now turn the call over to Norman to review our second quarter financial results in greater detail. Norman?

Thank you, Georges, and good morning, everyone. Before reviewing our financial results, I'd like to say a few words. I assumed the role of Chief Financial Officer at the beginning of July following Deborah's retirement after 19 years with Sequans. I want to thank Deborah for the strong foundation she built and for ensuring a smooth transition. I'm pleased to have the opportunity to speak with you today for the first time as CFO. Now let me turn to our second quarter financial results. Total revenue for the second quarter was $7.5 million, an increase of 23.2% compared to the first quarter of 2026. Compared to the second quarter of 2025, revenue declined 8.4%, primarily because the prior year quarter included a significant contribution from license and services revenue associated with the 2024 Qualcomm transaction. Excluding this impact, our revenue grew 84.2% year-over-year. Revenue in the quarter was primarily product related with product sales up 39% sequentially and almost doubling year-over-year, reflecting the continued growth of our IoT business. That reflects sustained conversion of our design win pipeline into production revenue and with more than 40 projects now in mass production and the backlog extending far into 2027, we have strong visibility into continued growth. Gross margin was 32.9% compared to 37.7% in the first quarter and 64.4% in the second quarter of 2025. The sequential and year-over-year decline primarily reflects the higher mix of product revenue relative to license and services revenue, which naturally carries a different margin profile. As a reminder, the second quarter of last year includes meaningful license and services revenue associated with the Qualcomm transaction, making the year-over-year comparison less meaningful. Operating expenses, consisting of research and development, selling, general and administrative expenses were approximately $11.9 million compared with $11.8 million in the first quarter. We continue to execute on our cost reduction initiatives and remain on track to achieve lower operating expense levels in the second half of the year. During the quarter, we recorded a noncash impairment on our Bitcoin holdings of $3 million, now down significantly from $29.3 million in the first quarter, along with a realized net gain of $5.3 million on Bitcoin sales compared to a realized net loss of $11.7 million in the prior quarter. Operating loss was $7.2 million compared to losses of $50.5 million in the first quarter of 2026 and $8.5 million in the second quarter of 2025. Net loss for the quarter was $9.6 million or $0.65 per diluted ADS compared to net losses of $76.2 million or $5.23 per diluted ADS in the first quarter and $9 million or $3.53 per diluted ADS in the second quarter of 2025. Please note that we adjusted Q1 2026 financial income and expenses to the reevaluation of the convertible debt upon the amendment in February to permit the full redemption of the debt, which resulted in an increase of the financial expenses of $21.9 million. During the past quarter, debt-related net interest expense was $2.4 million, down from $4.9 million in the first quarter, reflecting the wind down of our convertible debt. On a non-IFRS basis, excluding noncash impairments, stock-based compensation and noncash items associated with the convertible debt and its embedded derivative, non-IFRS net loss was $4 million or $0.27 per diluted ADS. This compares to a non-IFRS net loss of $20.6 million or $1.41 per diluted ADS in the first quarter and a non-IFRS net loss of $8 million or $3.14 per diluted ADS in the second quarter of 2025. Turning to the balance sheet. Cash and cash equivalents at June 30 totaled $21 million, up from $10.6 million at March 31. For the first 6 months of the year, cash used in operating activities was $23 million. Investing activities provided $127.7 million, driven primarily by the proceeds from Bitcoin sales, while financing activities used $97 million, reflecting the full repayment of the convertible debt associated with our Bitcoin treasury strategy. As of June 30, we held 314 Bitcoin valued at approximately $18.4 million, all of which is unrestricted and available for sale. This compares to 1,514 Bitcoin at March 31 valued at $103.2 million at the end of March, of which 1,217 Bitcoin was pledged as collateral for the convertible debt. With the redemption of our convertible debt completed and the repayment of our COVID-related loan during the quarter, Sequans now has a clean unencumbered balance sheet. Together with our $21 million cash position and 314 unrestricted Bitcoin, we believe the company is well positioned to support its operating and strategic priorities going forward. Before I hand the call back to Georges, I want to briefly echo his comments on our licensing pipeline. We have several discussions that are well advanced, and we believe a number of these have the potential to contribute meaningfully to revenue in the second half of the year. As Georges noted, the timing of licensing revenue recognition can be difficult to predict, and that variability is reflected in our Q3 guidance range. With that, I'll turn the call back to Georges.

Thank you, Norman. So as we close, our priorities remain clear. We are focused on executing and scaling our IoT semiconductor business while expanding our presence in software-defined radio applications, including drones and defense. We continue to see encouraging momentum across the business, supported by a growing backlog, a growing design win pipeline, an increasing number of design win projects transitioning into production and a maturing pipeline of licensing and services opportunities. Together with continued strength across our CAT M, CAT 1bis and RF product families and the progress we are making with 5G eRedCap, we believe Sequans is well positioned to deliver continued growth while moving steadily towards cash flow breakeven. At the same time, we have taken important steps to strengthen our financial foundation. With the redemption of our convertible debt and the successful transition away from our Bitcoin treasury strategy, we have significantly improved our financial flexibility and sharpened our focus on our core semiconductor business. Going forward, we'll continue to manage our remaining Bitcoin holdings in a disciplined and opportunistic manner while maintaining the liquidity needed to support operations, invest in innovation and execute our long-term growth strategy. Overall, we believe Sequans is entering an important new chapter. We have a stronger balance sheet, improving visibility into future product revenue, a differentiated technology portfolio and multiple avenues for growth. We remain focused on disciplined execution and believe we are well positioned to create long-term value for our shareholders. Thank you for listening, and we can now open the call for questions.

And our first question for today comes from the line of Scott Searle from ROTH.

Georges, congrats on the product momentum kind of going in the right direction. And Norm, congrats on the new role. Maybe to start, Georges, in terms of 55% of the design win pipeline now ramping into production and it continues to grow beyond that $300 million mark implies $13 million, $14 million plus at full production. I think you've been targeting the first half of next year is when you'll be getting to operating breakeven. Is that still the plan? And given how things are rolling into production, are you on track for that mark?

Yes. Scott, indeed, your remarks, I mean, honestly, when you compare to last year, as we said, we have like 3x improvement in projects in production. So they are solid, and we have visibility, as we mentioned many times, even towards the first half of next year 2027 from all those projects in production. So this is really becoming much more, I would say, predictable, if you want, like when the projects are moving and ordering, so we can predict much easier. So we expect definitely sequential growth, the growth to continue on our product. And to support our breakeven is essentially, it takes two other elements, obviously, continue controlling our cost structure, which is something definitely we are committed to, and we will continue doing this as we move forward in the second half. But also, obviously, there is a second component which can a little bit play on the margin, which is the services revenue. So yes, with these 3 points, that's the target to be next year in a position very close to breakeven, if not breakeven on a yearly basis globally.

And if I could follow up then, Georges, on the licensing front, it sounds like there are more opportunities or irons in the fire at this point in time. I think previously, we've been talking about two or three. It sounds like it may have expanded beyond that. Wide range of opportunities. Is that the correct interpretation? And I think you've hinted at it in the past as well, given where the balance sheet is today that some of these licensing opportunities, given how they tend to be front-end cash loaded, that would finance operations until the anticipated breakeven. Is that still the expectation?

Yes, absolutely. I mean the opportunity we have in hand, they are maturing. Definitely, they are closer, I would say, as predicted, we already, from the beginning of the year, we estimated that this will happen in the second half. So we are on track on this. Now obviously, what's important is really signing the deal. Revenue itself, depending on the timing, you could take some revenue in any quarter or the other based on the revenue recognition rules. But we definitely have a handful of projects very, very advanced in discussion. And hopefully, we can conclude one or more in the second half to meet our target. This is really the only point we see it for the year, if you want, and we'll be completely on our plan that we set at the beginning of the year. In addition to this, we should mention as well when we are talking about breakeven as well, is like there is always the cash from the government, which is the grant from the government, which as you know, it's a little bit -- we have technically around $4 million plus on a yearly basis. But this amount is not smooth every quarter, and we have a chunk of $3 million plus that should happen in the second half as well when you complete the cash.

And lastly, if I could, just on the RF front, very exciting opportunity now that's starting to ramp up. I'm wondering if you could frame the size of the opportunity, maybe in terms of revenue expectations in '26 and '27. And a quick one for you, Norm. Just in terms of the OpEx running over $11 million this quarter. I'm wondering if you could remind us where the target is. I think it was below $10 million, but just are you comfortable to get to that bogey in the second half of this year?

I mean on the RF, definitely, we have very solid RF portfolio. And this is somehow related to the acquisition we did boosted, I would say, the position of the company. We always had this technology in the company. The acquisition of ACP that we did a year ago boosted us, put us in a very strong position where we have a couple of customers with whom we do a couple of million dollars, $3 million in a predicted way, I will say, every year. But we took this product really to address larger space of software-defined and more focused on drone and defense. Today, the pipeline of this, we're talking about more than 20 opportunities that we are dealing with. I mean, not to give exact number, but really, we have a large number and many people interested in our technology. All the feedback we are getting is extremely positive. And we already signed one deal and to whom we will start shipping beginning of next year. I believe their product is quite advanced. We have many others in the evaluation process to whom we start shipping to them the development kit, the technology that they need for them to conclude their design win and move on. So I'm expecting in the second half of the year to get more and more from those designs secured. Now the potential of this, honestly, it's big if we are able to reach to all those customers. And we're still in our early phase to really estimate exactly where we can go there. But thinking like this is a business that can scale to $10 million, $20 million per year with a margin closer to 90% plus. We're talking about very high-margin sales. So this is really very important for us, and we are focusing on it every day, and we have the full team committed to this. Now where we will be next year, definitely, hopefully, maybe we should be approaching on the RF more than $5 million for sure and scale this to $10 million and plus the following year. That's what I hope at minimum.

Scott, so on the OpEx, as you certainly have seen, we've made some progress on the OpEx already. We had last year at the same time, about $13 million, but more than that, we are down to $11.9 million this quarter. So there is progress on the reduction of that. Now we are still targeting on a $10 million per quarter OpEx on a recurrent level. So we're having plans on our page and working on that towards that target.

And our next question comes from the line of Owen Rickert from Northland Capital Markets.

Just quickly on the Bitcoin holdings. What's the intended end state for that? Is this full liquidation the goal? And how are you thinking about timing given the current market conditions?

Yes. I mean thanks for the question. Honestly, as you know, obviously, we are out of the strategy. So the intention of the company is not really, I would say, to build any strategy around this. So it's an asset in hand. The most logical way is to turn this to cash as soon as possible. On the same time, we don't need really the cash immediately, and we were talking about licensing deal that we could have as well with more money. We have money from the government coming in. So we don't really see, feel the pressure where we are today to go and liquidate at the price we are today. Now obviously, you can say where this is going to go and is it going to go lower or higher. I mean we remain opportunistic there. And definitely, you will hear at some time that the idea is really to clean it and get the balance sheet where we don't have dependence on Bitcoin. So timing for this, nothing definitive, if you want. We are more opportunistic looking to the best we can do for the interest of the company.

Got it. Got it. Super helpful. And then secondly for me, can you just give us a quick sense of how much of the organic growth was volume-driven versus pricing driven? And how sustainable that growth rate is into the second half of the year?

Yes. I mean it's a good question because, obviously, there is an impact of cost, which means we have some price increase. To be honest, our price increase was not too big in Q2 because the impact for us was it's a little bit more complicated to implement this rapidly, I would say, overnight, I would say, with all those memory issues. So, we have a little bit to deal with every customer to impact this in the second half. So we'll see it more in the second half. But still, we didn't have an increase similar to what you see in memory where the people are doubling and tripling. So we're talking about, I believe, we don't have an exact number, but it's really below 5%. That's so far what we impacted our product pricing. But there is more maybe to come in the near future because it continues to increase. It's very painful because you cannot set a policy once forever with your customer. You need to deal with this almost on a quarterly basis. But the majority of the growth is really coming from new projects turning to production. And obviously, this is where it's coming. And the growth, we are positioned to continue growing. Back to the simple rule. I know that many shareholders in the past when we were talking about our pipeline, me and all the shareholders were extremely nervous and we would like, I would say, we wanted to be not too much patient, I would say, to convert those design wins to revenue. And unfortunately, in the IoT business, it takes time because customers take a lot of time to move from design win to get their product ready, certified and shipping. But what's good about it is once it's there, it's there and it's sticky and stays for many years, 5, 6, 7 years. So we have many projects in this situation, and this is what the 55%, $165 million three years revenue. So in average, we are talking about $55 million as a product revenue on a yearly basis. And this will continue to grow because in the second half of the year, more projects convert and this 55% will go higher. And if you put this into perspective where we are in product revenue and next year, so the growth trend should continue next year at least at similar level.

Great , Thank you.

And our next question comes from the line of Fedor Shabalin from B. Riley.

Norman, congratulations on the appointment. My question is kind of follow-up questions for previous ones. Georges, you cited many design win projects now in mass production, and I have a question about this 55% of $300 million three year product pipeline. What would be the expected cadence for the remaining 45% to convert? And does that pipeline figure get revised upward with the new drone defense win? Or was that already embedded in this guidance?

Yes. I mean, just if I take it like at the beginning of the year, we were like at 44% of $300 million. And in 6 months, we turned the 44% it becomes 55. So added like 10 points. Obviously, it's not a rule, but I'm giving it here if you want. But just to give you, I don't know if the future will be like the past because it all depends on the project, right? I mean, we have some customers, surprisingly, they move fast. Some others could be slow and take longer. I should say today, our CAT M technology in general, people are moving very, very fast on the CAT M. CAT 1bis, which is really ramping, still has more room there to convert to design win. So, technically, I don't know if I should say towards the end of the year, we should add another 10 points. This will be my own target, if you like, if I look to the past. But obviously, we're pushing to converge much more than this.

And my follow-up is about Bitcoin remaining holdings. I know you want to monetize it opportunistically, but if you can confirm the year-end target for this? And also, what are the immediate needs for financing your core semiconductor business? And if is it kind of urgent or not urgent? So just trying to figure out when you are dependent on monetizing these Bitcoin holdings near term or not?

Yes. I mean, honestly, there is no urgency if we take it like this, from the end of the year, we're not in a rush on this. So we'll be opportunistic. I would like here to highlight one point. Obviously, we are a small company. We're dealing with suppliers, and suppliers would like to look to us and wash the balance sheet. And unfortunately, for many of those suppliers, Bitcoin doesn't count. So to some extent, saying that you have $20 million in Bitcoin, even if the Bitcoin could be at $25, it could be at $100 and you say I have $31 million equivalent, they don't give the same weight in the front of your supplier as when you say I have them in cash. So for this reason, we have really a lot of interest of converting this as soon as possible. Other as well, like as well, I heard many shareholders, they don't like to have this dependence on volatility on the stock, so they get it to cash. For us, the fact that you don't need this money for S&P, and based on the history of Bitcoin and whatever you could predict, we believe it's not maybe the best timing and better to wait. But we will not keep this on board forever. At some time when the price will be decent, much better than where it is today, we'll convert and take it all to cash. Unfortunately, we missed the window because when we redeemed the debt, my idea was to sell all, to be honest. But the Bitcoin was not available because they were in the collateral. So we had to conclude the transaction. And at the time to conclude the transaction, Bitcoin went down, and we lost immediately like $15,000 per Bitcoin due to the volatility. Then we waited on this, and we didn't convert. So that's a story. But the strategy for the company is really to take it all to cash as soon as possible, even if we don't need this money now, but factor in a little bit, be patient in a couple of few months to see where we have the best price, and sell.

[Operator Instructions] Our next question comes from the line of Jacob Stephan from Lake Street Capital Markets.

I'd like to extend the congratulations to Norman as well. Maybe just first on the margin front, maybe you could kind of quantify for us or give a little bit more color on product mix versus kind of the memory input cost pressure and kind of what impact they had on margins? And maybe looking forward, how can we expect the gross margin line to trend?

Jacob, I mean, a few things, I would say. As you know, we have the licensing business when it's there; this has a very high margin. And obviously, depending on this contribution, it pushes sometimes our gross margin to be higher than 50% globally because, obviously, it helps on the product. If we focus only on the product, the rule for us is like, let's say, what we are trying to achieve is like to be on the chip gross margin above 50% on the module gross margin to be above 30%. This is more or less the rule of the industry. And then it depends on the mix of the two because we sell our product, the two, it can give us some gross margin on the product that can vary around 35% to 40%, if you want, if we project. This is in normal days. Now, if you add to this, you need to factor there is another component, which should improve over time. Which is the fixed cost. In our gross margin today, we have like three, four points related to fixed cost. Obviously, when you are making $7 million product revenue, the fixed cost is high for this number. If we go next year to the 15 plus and going to 20, we can gain just only on the pro forma basis because this fixed cost doesn't scale. It's really the number of people we use to run our operation and amortization of the masks and so on. So there are like three, four points impacted there. So this is how we should think about it going forward. Now if we factor into the cost increase, definitely with the supply pressure that we have, sometimes even to get access to the technology, right? I mean, we didn't anticipate many things at the beginning of the year. So, and we are trying to catch up; sometimes we are not able to impact the price of our customer immediately while the supplier is impacted immediately. So we could have those variations impacting us from quarter to quarter. But hopefully, all this will stabilize over time when we start planning.

Okay. Got it. Very helpful. And then maybe just touching on guidance, $8.5 million to $10 million. You said the high end is kind of more gated on potential licensing agreements. But maybe if you could help us think through, like I guess, when would the licensing agreement need to be signed?

In licensing agreements, we have many, as I mentioned. We have several, I would say; they tend to be a few hundred thousand dollars to a couple of million dollars, and we have other four or maybe more that tend to be more than $10 million, just to give you the spectrum where we have. Obviously, the smaller deals are much easier to convert faster because they are less negotiation, and you can get them faster. The larger deals take a little bit more time because there is more strategic discussion around it. So that's where we are. Definitely, if we put something in the guidance is that we believe that something could happen this quarter somehow. The challenge about it, like when you sign something, let's say, if you sign something at the end of September, you may sign it, and you will not take too much revenue of it. Even if you sign a deal of $20 million in license, it will be hard to take any revenue. If you sign it earlier, you can take much more than the guidance that we have. So we can have an upside. But factoring if you want the small deal that we have and potentially a larger, medium-sized deal, we could be, that's why we said that the high end assumes some services revenue, not only product. But if we do only product, it will be hard to reach the $10 million this quarter. But there's still significant growth of our product revenue quarter-to-quarter because the low end is almost pure product, if you want.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Georges for any further remarks.

Yes. Many thanks, operator, for handling this call, and thanks to all of you. Looking forward to meeting you in person on another opportunity. Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.